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Reports Europe

European stock market, economy and companies update (January 24, 2014)

January 24, 2014, Friday, 11:18 GMT | 06:18 EST | 15:48 IST | 18:18 SGT
Contributed by Trade The News

- Emerging markets concerns promote safe haven flows; fresh bout of risk aversion continued to weigh down equity markets
-Fitch affirms Germany at AAA, outlook stable
- Debate rages on BOE forward guidance following Carney comments
Indices [Stoxx50 -0.5%, FTSE 100 -0.2% at 6,757, DAX -0.2% at 9,613, CAC-40 -0.4% at 4,263, IBEX-35 -1.7% at 10,053, FTSE MIB -0.9% at 19,629, SMI -0.9% at 8,332, S&P 500 Futures -0.3% at 1,819]
- Market Focal Points: Equity markets open mixed amid widening in peripheral and emerging debt spreads, Spain IBEX-35 underperforming, Spain banks underperform amid LATAM concerns, Technology sector supported by ASML and earnings from Microsoft, Nikkei225 -1.9%, Upcoming US corporate earnings (Xerox, Procter and Gamble, Honeywell, Bristol-Myers)
By Sector
- Consumer Discretionary [RTL RTL.BE -2.5% (share placement); Celesio CLS1.DE +5% (resumed merger with McKesson)]
- Basic Materials/Resources [Wacker Chemie WCH.DE -4% (broker commentary)]
- Healthcare [Novartis NOVN.CH -1% (unfavorable EU decision on heart failure treatment)]
- Stoxx50 sectors [Financials -1%, Consumer Non-Cyclical -0.8%, Consumer Cyclical -0.7%, Energy -0.7%, Telecom -0.4%, Basic Materials -0.4% Industrials -0.3%, Utilities -0.2%; Technology +1%]
- BoEs Weale stated that lowering unemployment threshold won't achieve forward guidance's key aim of greater certainty. New threshold could quickly be overtaken by events.
- ECB's Visco (Italy) commented at Davos that Italy had overcome the worst of the crisis but more needed to be done on the labor front. Euro was being supported by EU current account surplus but not seeing strong signs of additional EUR appreciation. He reirterated that Eurozone was not facing deflation threat
- CNBC panel at Davos with UK's Osborne, BOJ's Kuroda, Brazil's Tombini and SNB's Jordan
- Chancellor Osborne stated that talking about potential exit from QE was a remarkable success and showed that monetary worked. Recovery was underway and supported by the consumer and unemployment is falling (income not debt led). BOE was independent; forward guidance was not a trigger but a threshold. He rejected the idea that BOE's forward guidance was a failure (**refers to FT article)
- BOJ gov Kuroda reiterated that its planned sales tax hike will not cause additional problems in Japan
- SNB's Jordan stated that it was in a complex situation and it must be careful with forward guidance not to confuse the markets. CHF currency remained a safe haven and would maintain the EUR/CHF floor and increase its balance sheet if necessary
- Italy Fin MIn Saccomanni commented that the Italy cabinet to discuss privatization today
(**Note: Italy looking to raise €8B-€10B via privatizations over next two years)
- France Fin Min Moscovici: Need to move faster and further on the reform front
- IMF's Shinohara commented that Japan might reach 2% price stability target in 2017 and that more Japan easing would be unnecessary if prices rose to 2%. He reiterated IMF view that Yen was moderately undervalued and did not feel that a weak JPY currency (yen) was seen as a big problem by the US govt
- BOE and ECB announce they would phase out USD liquidity operations. ECB to cease to conduct its 3-month USD Liquidity Tender operations as of Apr (**Note: Facilities had been seldom used
- Fitch affirmed German sovereign rating at AAA; Outlook Stable
- Mexico Fin Min Videgaray: Mexico has a free floating currency that works well, peso weakness currency is inline with emerging market currencies
- Former PBOC advisor Li Daokui: China to struggle to maintain GDP growth at 7.5% unless reforms were properly implemented. Shadow banking was not a major risk. CNY currency (yuan) was far from undermining the USD role as a reserve currency
- Thailand Constitutional Court stated that the Election Commission had the authority to delay the scheduled Feb 2nd election
- IAEA Chief Amano stated that still a long way to go to achieve comprehensive solution to Iran nuclear dispute. IAEA needed an additional €6M in funds to verify that Iran was implementing the Nov agreement with P5+1 powers
Currencies/Fixed Income:
- Risk aversion remained the theme and weighing upon equity markets and emerging market currencies. Dealers were blaming the contraction in the China PMI Manufacturing as the latest catalyst but others noted that bond market had been signaling all was not well for the global economy despite expectations of a Fed taper. Safe-haven flows into core country govt bonds were again noted. Front-month Bund futures hit fresh contract high above 142.45
- The EUR/USD briefly tested above the 1.37 level ahead of the European session but could not sustain the move. The EUR/JPY cross seemed to derail the Euro's momentum.
- Various analysts noted that the current environment favored JPY currency strength while Australia was most exposed to a China-centric economic slowdown. USD/JPY tested below the 103 level while EUR/JPY cross approached 140.50
- The AUD remained vulnerable and RBA's Ridout comments torpedo the Aussie below the $0.87 handle; 3 1/2 year AUD/USD lows. Ridout: AUD has not fallen enough; AUD at $0.80 is fair deal for the economy
Political/In the Papers:
-(UK) BOE's Carney: MPC has a broad range of options on its forward guidance, reiterates there is no pressing need for rate increases - BBC; cannot assume the unemployment threshold will be lowered.
- (UK) FT article suggested that BoE Gov Carney signaled that forward guidance could be ended
-(EU) European Commission (EC) warned against threatening the universal banking model by strengthening restrictions on bank trading - press; Germany, Italy and France all warn against overly onerous regulations that could hurt the model
- (GR) Troika wants to pre-agree to terms with Greece before their return to Athens - press
-(IT) BOI's Visco: Must deal with the issue of non performing loans (NPL) in Italy, BOI has called on banks to increase their provisions - Davos comments; Sees manufacturing sector as a strong point for the Italian economy
-(IT) Italy PM Letta: Supports PD leader Renzi's electoral law, changes needed as soon as possible - financial press interview; Cabinet to act on labor costs.
- (JP) Japan Fin Min Aso: Deflationary conditions have nearly ended in Japan; Must consider overall perspective for corporate tax cut
**Looking Ahead***
All times listed for economic events are denominated in Eastern Standard Time (Add 5 hours for GMT equivalent)
- (SY) Syria Govt and opposition meet in Geneva
- (EU) Eurogroup chief Dijsselbloem in Davos
- (AR) Argentina Jan Consumer Confidence Index: No est v 46.15 prior
- 05:30 (DE) German Fin Min Schaeuble at Davos
- 05:45 (IT) Italy Lower House confidence vote on Italy decree law
- 06:00 (IS) Iceland to sell Bonds
- 06:00 (EU) ECB announcement on 3-year LTRO repayments vs. €1.8Be
- 06:10 (UK) DMO to sell combined £3.0B in 1-month, 3-month and 6-month Bills
- 06:30 (IN) India Forex Reserves w/e Jan 17th:
- 06:45 (US) Daily Libor Fixing
- 07:00 (CL) Chile Dec PPI M/M: No est v -0.1% prior
- 07:05 (UK) BOE Gov Carney at Davos
- 07:30 (BR) Brazil Dec Current Account Balance: -$6.7Be v -$5.2B prior; Foreign Direct Investment (FDI): $5.5Be v $8.3B prior
- 08:30 (CA) Canada Dec CPI M/M: -0.2%e v 0.0% prior; Y/Y: 1.3%e v 0.9% prior; Consumer Price Index: No est v 123.0 prior
- 08:30 (CA) Canada Dec CPI Core M/M: -0.4%e v +0.1% prior; Y/Y: 1.3%e v 1.1% prior
- 08:30 (CA) Canada Dec CPI Seasonally adj M/M: No est v 0.2% prior; CPI Core Seasonally adj M/M: No est v 0.0% prior
- 09:00 (BE) Belgium Jan Business Confidence: -5.7e v -6.4 prior
- 09:00 (MX) Mexico Nov Retail Sales Y/Y: +0.8%e v -1.1% prior
- 09:30 (PT) Portugal Econ Min Lima in Parliament
- 11:00 (US) Fed to purchase $2.50-3.50B in Notes
- 12:00 (EU) ECB's Draghi in Davos on path to stability
- 14:00 (AR) Argentina Dec Industrial Production M/M: No est v -3.4% prior; Y/Y: -3.7%e v -4.7% prior
***Economic Data***
- (RU) Russia Narrow Money Supply w/e Jan 20th (RUB): 8.22T v 8.37T prior
- (UK) Retailer John Lewis reports weekly LFL sales for week ending Jan 18th (y/y): 23.4% v 9.5% prior
- (FI) Finland Dec PPI M/M: -0.1% v -0.3% prior; Y/Y: -0.8% v -0.9% prior
- (FI) Finland Dec Preliminary Retail Sales Volume Y/Y: -1.5% v -0.3% prior
- (CN) Shanghai Futures Exchange (SHFE) Weekly Copper Stockpiles: 141.0 v 131.6K prior
- (CZ) Czech Jan Business Confidence: 8.2 v 9.2 prior; Consumer Confidence Index: -5.3 v -9.5 prior; Composite: 5.5 v 5.5 prior
- (ES) Spain Dec PPI M/M: +1.1% v -0.8% prior; Y/Y: % v -0.6% prior
- (AT) Austria Nov Industrial Production M/M: -1.0 v -0.3% prior; Y/Y: -0.9% v -0.6% prior
- (EU) ECB €133M borrowed in overnight loan facility vs. €141M prior; €37.5B parked in deposit facility vs. €34.7B prior - Daily Eurosystem Liquidity Conditions
- (TW) Taiwan Dec M2 Money Supply Y/Y: 5.8% v 6.1% prior; M1 Money Supply Y/Y: 8.5% v 8.9% prior
- (NL) Netherlands Nov Consumer Spending Y/Y: +0.2 v -1.0% prior
- (IT) Italy Nov Retail Sales M/M: 0.0% v 0.0%e; Y/Y: +0.1% v -1.6% prior
- (PL) Poland Dec Unemployment Rate: 13.4% v 13.5%e
- (PL) Poland Dec Retail Sales M/M: +19.1%e ;Y/Y: 7.0%e
- (GR) Greece Nov Current Account Balance: -€0.7B v -€0.4B prior
- (UK) Dec BBA Loans for House Purchase: 46.5K v 47.3Ke; highest since Sep 2007
- (BR) Brazil Jan FGV Consumer Confidence: 108.9 v 111.2 prior
Fixed Income:
- South Africa sold total ZAR800M in I/L 2025, 2038 and 2046 bonds