Reports » Europe

European stock market, economy and companies update (February 18, 2013)

Contributed by Trade The News

*** SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM ***

***Equities***
Indices: (as of 5:15 ET): FTSE 100 -0.2% at 6313, DAX +0.1% at 7,600, CAC-40 -0.4% at 3,644, IBEX-35 -1.3% at 8046, FTSE MIB -0.9% at 16,347, SMI -0.2% at 7,483

- European equities were in negative territory by mid-session for the third straight of losses after failing to extend multi-year highs. Political uncertain in Italy ahead of its elections at the end of the week was one factor for the lack of risk appetite. Peripheral yields rose in the session as a result. Financial stocks which headed the recent rally on the back of falling macro tail risks, were lower as investors banked some profits.

- UK movers : Phytopharm [PYM.UK] Shares decline by over 80% after Cogane had no effect in phase II Parkinson's Disease Clinical Trial; Bumi [BUMI.UK] at 6-month highs after shareholder Roselani said to have found buyer for £117M stake Costain COST.UK: JV project awarded £110M Crossrail contract with Skanska
- Germany movers: Deutache Telekom DTE.DE: Major shareholder Paulson & Co not in favor of plans to merge with T-Mobile USA
- France movers: Natixis [KN.FR]: higher by over 15% after announcing exceptional payment of €2B, or €0.65 per share, to its shareholders Eurofins [ERF.FR] higher by over 5% after announcing special package that combines tests for horsemeat and detection of Phenylbutazone in samples of meat products in response to the ongoing meat contamination scandal in Europe
- Italy movers: Banca Monte Paschi [BMPS.IT} More resignations
- Dutch movers: TNTE.NL +2% following Q4 results and CEO comments on strategy with no breakup seen
- Danish movers: Carlsberg [CARLB.DK] was off over 4% following disappointingQ4 results and concerns over its Russia markets; Co. scraped Medium-Term Margin Goal

Speakers:
- S&P analyst Ogawa commented that Japan govt effort against deflation could push up interest rates and that its increase in borrowing was not good for sovereign rating. He did add that sovereign downgrade risk was lower under Abe's tenure than if DPJ stayed in power. Lastly he added that S&P wanted to examine more how PM Abe's policies will impact economy and markets
- German Bundesbank's Dombret commented that one must exit extraordinary monetary policy when appropriate. He saw no residential housing bubble in Germany but it did require continuous monitoring
- France Fin Min Moscovici stated that he did not see France losing credibility if exceptional circumstances push back deficit targets. France should not add austerity to recession but will have more clarity ifmore budget savings were needed once EU Commission released the winter forecasts on Feb 22nd.
- France European affairs Min Cazeneuve: Govt determined to reduce deficit
- Hungary PM Orban might combine Central bank and financial regulator. Current central bank member Matolscy poised to become next central bank chief while IMF negotiator Varga would to replace Matolscy as Econ Min.
- Poland PM advisor Filar commented that Poland GDP to expand 1.5% in both 2013 and 2014 period and noted that interest rates should not be blamed for the slowdown of growth in the country. Central bank CPI forecast should decide interest rates although the Jan CPI reading was not enough to call for additional rate cuts. He saw Polish rates unchanged on 1.5-3.5% CPI forecast; with meed more easing if CPI forecast was below 1.5%. Positive real rates helped to stabilize Polish currency
- IEA Chief Economist Birol: Oil prices were high for global economy and acting as a brake. He expected the gap between US and European gas prices to narrow

Currencies:
- The European session was extremely quiet following the G20 meeting, which issued its communiquas largely as-expected. Interest was minimal with holidays in both the US and Canada coupled with little in terms of data
- GBP falls below the 1.5450 level for a 7-month low. The GBP weakness attributed to comments from BOE's Weale noted that weaker GBP might be necessary for narrowing UK current account deficit
- The JPY maintained a soft tone follow G20. Japan PM Abe said if the BoJ was unable to achieve the 2% inflation target that it has set that would be a condition for changing BoJ law. Analysts believe the currency will spend some time consolidating and would not rise to 100 as fast as it rose to 94, but will get there nonetheless
- Focus on periphery had dealers continue to watch the upcoming elections in Italy and observe the pick up in strike activity in Spain. Airline Iberia planned to start a huge strike this week that would result in 1000's of flights being cancelled. German 10-year Bund hit a 3-week low

Weekend G20 communiqu:
- The G20 agreed to avoid competitive devaluation of their currencies, but left countries able to pursue aggressive monetary policy to stimulate their own economies as long as that policy leads to domestic price stability. The countries also agreed to draft credible medium-term fiscal strategies ahead of the G-20 meeting this Sept.

***Looking Ahead***
***All times listed for economic events are denominated in Eastern Standard Time (Add 5 hours for GMT equivalent)
- 06:00 (IS) Israel to Sell Bills and Bonds
- 06:00 (TR) Turkey to sell 2018 and 2022 bonds
- 06:30 (BR) Brazil Central Bank Weekly Economists Survey
- 06:30 (US) Daily Libor Fixing
- 08:00 (EU) Van Rompuy Speaks to EU Parliament on EU Budget Proposal
- 08:00 (PL) Poland Jan Avg Gross Wages M/M: -10.2%e v +8.8% prior; Y/Y: 1.0%e v 2.4% prior
- 08:00 (PL) Poland Jan Avg Employment M/M: +0.5%e v -0.4% prior; Y/Y: -0.9%e v -0.5% prior
- 08:00 (RO) Romania to Sell T-Bills
- 08:50 (FR) France Debt Agency (AFT) to sell €7.2B in 3-month, 6-month and 12-month Bills
- 09:00 (MX) Mexico Q4 GDP Q/Q: 0.6%e v 0.5% prior; Y/Y: 3.5%e v 3.3% prior; 2012 GDP Annual Growth Rate: %
- 09:00 (MX) Mexico Dec Global Economic Indicator: 1.6%e v 4.1% prior
- 09:30 (EU) ECB's Draghi Speaks in Brussels at Quarterly Hearing on ECB
- 09:30 (EU) ECB calls for bid in 7-day Refi Tender and 1-month MRO at fixed 0.75%
- 09:30 (EU) ECB announces prior settlements in SMP bond buying plan Tender
- 11:00 (DE) German Chancellor Merkel to address Chamber of Commerce in Mainz
- 11:00 (EU) EU's Ashton Meets Russian, Norwegian, Icelandic Officials
- 11:30 (EU) ECB's Draghi speaks in Brussels at Quarterly ESRB Hearing
- 13:30 (DE) German SPD Steinbrueck, Di Rupo Speak at Socialist Event in Brussels
- 18:50 (JP) BOJ Minutes for Meeting on Jan. 21-22
- 19:30 (AU) Australia Central bank (RBA) Minutes

***Notes/Observations***
- G20 communiquagreed to avoid competitive devaluation of their currencies, but left countries able to pursue aggressive monetary policy to stimulate their own economies as long as that policy leads to domestic price stability.
- Shanghai Composite traded for the first time in a week, closed down 0.4%
- Niikei225 Index +2.1% after G20 did not name Japan as a currency manipulator
- S&P affirms Japans sovereign rating at AA-
- Former BoJ Dep Gov Muto still seen as the frontrunner to head the BOJ
- Japan PM Abe continues to put pressure on the BOJ to ease aggressively to boost the Yen and inflation
- Bank of Spain Dec Bad Loans at 10.4% v 11.4% prior (first monthly improvement in over a year but due to transfer of assets to the bad bank (SAREB)
- Spanish 10-year gov't yield at 5.25% for 1-week high vs. pre-European open level of 5.17%
- Sugar short positions reach record high levels
- US equity and fixed income markets closed for holiday

***Economic Data***
- (JP) Japan Jan Final Machine Tool Orders Y/Y: -26.4% v -26.1% prelim
- (EU) ECB: €1.8B borrowed in overnight loan facility vs. €122.0M prior; €131.9B parked in deposit facility vs. €124.3B prior
- (EU) Euro Zone Dec Current Account nsa: €27.0B v €20.8B prior; Current Account Seasonally Adj: €13.9B v €15.9B prior
- (ES) Bank of Spain Dec Bad Loan Ratio: 10.4% v 11.4% prior (1st MoM improvement in over a year)

Fixed Income:
- (SK) Slovakia Debt Agency (ARDAL) sold total €400.2M in 2015 and 2017 bonds
- (NL) Netherlands Debt Agency (DSTA) sold total €3.2B vs. €4.5B indicated in 3-month and 6-month Bills
- Sold €2.09B vs. €1.5-2.5B indicated in 3-month bills; Yield: 0.07% v 0.000% prior; Bid-to-cover: 1.96x v 1.64x prior
- Sold €1.11B vs. €2.0B indicated in 6-month Bills; Avg Yield: 0.026% v +0.021% prior; Bid-to-cover: 2.66x v 3.17x prior