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Reports Europe

European stock market, economy and companies update (January 03, 2014)

January 3, 2014, Friday, 11:04 GMT | 06:04 EST | 15:34 IST | 18:04 SGT
Contributed by Trade The News

- Tough start for 2014 in equities
- China Dec Non-manufacturing PMI posts its 2nd consecutive decline to hit a 4-month low (54.6 v 56.0 prior)
- China money rates ease but remain elevated as another squeeze feared as dealers note PBOC to maintain its tight money stance to force banks to de-leverage their interbank business
- The 10-year Spanish and Italian spreads against the German Gov't bond moves below 200bps (first time since Mid-2011)
- Spain Dec Net unemployment registers its largest decline for the month of December and second largest of any month
- UK Nov Mortgage Approvals beat expectations to almost a 6-year high
- Euro Zone Private sector loans register its 19th month of decline (-2.3% v -2.1% prior)

Indices [Stoxx50 +0.4%, FTSE 100 +0.1% at 6,725, DAX +0.2% at 9,421, CAC-40 +0.5% at 4,247, IBEX-35 +0.5% at 9,806, FTSE MIB +0.9% at 19,098, SMI -0.1% at 8,197, S&P 500 Futures +0.1% at 1,827]

- Market Focal Points: European equity markets trade slightly higher following losses seen on Thursday, FTSE MIB outperforms on Telecom Italia and banking sector, UK retailer Next raises forecast, Shares of Fiat see profit-taking, Mixed trading in the banking sector as Commerzbank and HSBC underperform, Hong Kong's Hang Seng ends lower by over 2%

By Sector
- Consumer Discretionary [Next NXT.UK +9.5% (raised outlook, special dividend); Remy Cointreau RCO.FR -2% (CEO change), Fiat F.IT -1% (profit-taking)]
- Telecom [Telecom Italia TIT.IT +5% (renewed speculation related to Brazilian unit)]
- Industrials [Sacyr SYV.ES -5% (concerns related to contract in Panama)]
- Stoxx50 sectors [Consumer Cyclical +0.7%, Consumer Non-Cyclical +0.5%, Telecom +0.5%, Industrials +0.4%, Energy +0.4%, Financials +0.3%, Utilities +0.2%, Basic Materials +0.1%; Technology -0.3%]

- German govt will not increase taxes (**Note: The report is in line with comments from Chancellor Merkel and Fin Min Schaeuble from late 2013)
- Sweden Central Bank Gov Ingves reiterated concerns about rising household debt; says commission is needed on sector
- Indonesia Central bank (BI) Gov Martowardojo hoped for 2013 current account to GDP ratio to be below 3.0%. He conceded that the 2014 current account to GDP ratio to be above 3% due to lower commodity prices and mineral export ban
- India PM Singh confirmed that he would not seek third term. He noted that following the May general elections he would hand over the job to a new PM.Congress party would announce PM candidate at the appropriate time

Currencies/Fixed Income:
- FX markets saw improved liquidity conditions
- The JPY currency continued to firm into 2014 after hitting 5-year lows late last year. The yen price action following the Asia markets as they traded lower for a second consecutive day (**Note Nikkei remained closed for holiday). China's December services PMI was at a 4-month low adding to risk aversion and profit-taking in equities.
- Continued improvement in Europe's periphery helped to send bond yields and key spreads lower. Both Spanish and Italian spreads against the German Gov't bond moved below 200bps level for the first time since Mid-2011. Spain Dec Net unemployment registers its largest decline for the month of December and second largest of any month

Political/In the Papers:
- Senate Aide: Yellen confirmation vote set for Monday at approx. 17:30 ET (22:30 GMT)
- (EU) EU officials Rehn and Reding see the EU recovery accelerating in 2014 - German Press
-According to IMF paper, haircuts could be required in western countries to deal with high levels of sovereign debt - Telegraph's Ambrose Evans-Pritchard
-(PT) Portugal's government is looking to expand tax on pension income and also reduce contribution for public sector employees' medical coverage requiring public employees to pay for part of their coverage - press
- (IT) Italy centre-left leader Renzi called for swift reform of an electoral system
- (UK) Former BoE inflation hawk Sentance reiterates that rates should gradually rise in 2014 - London Telegraph; Says he would welcome a rise in the pound in 2014, as the currency looks undervalued vs the Euro
- (CN) PBoC official Sheng: Sees benefit from yuan's gain; Yuan's modest appreciation can help China's economy shift away from exports reliance to depend more on domestic demand

**Looking Ahead***
All times listed for economic events are denominated in Eastern Standard Time (Add 5 hours for GMT equivalent)
- (RO) Romania Dec International Reserves: no est v $35.5B prior
- 06:10 (UK) DMO to sell combined £3.0B in 1-month, 3-month and 6-montn Bills
- 06:30 (IN) India Forex Reserves w/e Dec 27th: No est v $295.5B prior
- 06:45 (US) Daily Libor Fixing
- 08:30 (US) Weekly USDA Net Export Sales
- 09:00 (US) Detroit bankruptcy hearing
- 09:30 (BR) Brazil Fin Min Mantega on budget balance
- 09:45 (US) Dec ISM New York: No est v 69.5 prior
- 10:00 (DK) Denmark Dec Foreign Reserves (DKK): 489Be v 489.3B prior
- 10:15 (UK) Bank of England's Haldane at AEA meeting in Philadelphia
- 10:30 (US) Weekly EIA Natural Gas Inventories
- 11:00 (US) Weekly DOE Crude Oil Inventories
- 12:45 (US) Fed's Plosser Speaks at Economics Conference in Philadelphia
- 13:30 (US) Fed's Lacker Speaks on the Economy in Baltimore
- 14:30 (US) Fed's Bernanke Speaks at Economics Conference in Philadelphia
- 16:00 (CO) Colombia Dec PPI M/M: No est v -0.3% prior; Y/Y: No est v -1.3% prior
- 17:00 (US) Dec Total Vehicle Sales: 16.00Me v 16.31M prior; Domestic Vehicle Sales: 12.55Me v 12.62M prior
- (CO) Colombia Monetary Policy Minutes

***Economic Data***
- (UK) Retailer John Lewis reports weekly LFL sales for week ending Dec 28th (y/y): 13.3%
- (UK) Dec Nationwide House Prices M/M: 1.4% v 0.7%e; Y/Y: 8.4% v 7.1%e
- (CN) Shanghai Futures Exchange (SHFE) Weekly Copper Stockpiles: 125.6K v 125.8K prior
- (ES) Spain Dec Net Unemployment M/M: -107.6K v -2.5K prior; second largest monthly decline on record
- (ES) Spain Dec Preliminary CPI Y/Y: 0.2% v 0.2% prior; CPI EU Harmonized Y/Y: 0.3% v 0.4%e
- (CH) Swiss Dec KOF Leading Indicator: 1.95 v 1.92e
- (HU) Hungary Nov Unemployment Rate: 9.3% v 9.8%e
- (TR) Turkey Dec CPI M/M: 0.5% v 0.3%e; Y/Y: 7.4% v 7.3%e; CPI Core Index Y/Y: 7.1% v 7.2%e
- (TR) Turkey Dec PPI M/M: 1.1% v 0.6% prior; Y/Y: 7.0% v 5.7% prior
- (EU) ECB €325M borrowed in overnight loan facility vs. €301M prior; €79.5B parked in deposit facility vs. €85.7B prior - Daily Eurosystem Liquidity Conditions
- (CH) Swiss Dec PMI Manufacturing: 53.9 v 56.3e
- (EU) Euro Zone Nov M3 Money Supply Y/Y: 1.5% v 1.5%e; M3 3-month average: 1.7% v 1.7%e
- (UK) Dec PMI Construction: 62.1 v 62.0e
- (UK) Nov Net Consumer Credit: £0.6B v £0.7Be; Net Lending: £0.9B v £1.3Be
- (UK) Nov Mortgage Approvals: 70.8K v 69.7Ke; highest since Jan 2008
- (UK) Nov M4 Money Supply M/M: 0.0% v 0.1% prior; Y/Y: 2.7% v 2.4% prior; M4 Ex IOFCs 3M Annualized: 4.9% v 4.8%e
- (CY) Cyprus Dec CPI M/M: -0.3% v -0.7% prior; Y/Y: -2.3% v -2.1% prior
- (IT) Italy Dec Preliminary CPI NIC incl. tobacco M/M: 0.2% v 0.4%e; Y/Y: 0.7% v 0.8%e
- (IT) Italy Dec Preliminary CPI EU Harmonized M/M: 0.3% v 0.3%e; Y/Y: 0.6% v 0.6%e
- (GR) Greece Oct household and business bank deposits €160.4B v €161.3B prior

Fixed Income:
- (IN) India sold total INR150B in 2020, 2027, 2030 and 2042 bonds