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Reports Europe

European stock market, economy and companies update (January 27, 2014)

January 27, 2014, Monday, 18:42 GMT | 14:42 EST | 00:12 IST | 02:42 SGT
Contributed by Trade The News

- Japan Dec Trade Balance records its record 18 straight monthly deficit. The overall 2013 trade gap of ¥11.47T was a record deficit
- China Credit Trust investors said to have received principal related to trust, but will not receive 3rd year's interest payment amounting to approx CNY300M
- Challenges to risk appetite expected to continue to impact currency markets
- Germany Jan IFO Business Climate registers a slight beat (110.6 vs. 110.0e)
- Emerging markets currencies remain on wobbly footing. Turkish Lire hots fresh record lows against USD and Euro. South African rand at fresh 5-year lows; Russian, Indian currencies also softer in session
Indices [Stoxx 50 -0.1%, FTSE 100 -1.1% at 6,592, DAX -0.2% at 9,370, CAC-40 -0.2% at 4,154, IBEX-35 -0.6% 9,814, FTSE MIB -1% 19,172, SMI -0.8% at 8,138, S&P 500 Futures +0.3% at 1,786]
- Market Focal Points: Equity markets resume sell-off following mixed open as Eurostoxx50 volality index rises and peripheral spreads continue to widen, DAX little initial reaction to better IFO data, Capital concerns weigh on Italian banks Telecom Deal Activity (AT&T denies interest in Vodafone, Liberty confirms acquisition of Ziggo, Patent agreement between Ericsson and Samsung), European corporte earnings pick up this week, Fed meeting later this week (Jan 28-29th), Upcoming US corporate earnings (Caterpillar-BMO, Apple- AMC), China Credit's troubled trust products remains in focus
By Sector
- Financials [Banco Popolare BP.IT -15% (capital concerns)]
- Consumer Discretionary [Prosieben SAT PSM.DE -2.5% (broker commentary), ITV ITV.UK -1% (broker commentary)]
- Basic Materials/Resources [Lanxess LXS.DE (new CEO, broker commentary)]
- Healthcare [Merck KgaA MRK.DE -10% (CFO change, broker commentary)]
- Telecom [Vodafone VOD.UK -5% (AT&T denied interest)]
- Energy [BG Group BG.UK -14% (cut production outlook)]
- Stoxx50 Sectors [Telecom -1.2%, Consumer Cyclical -0.7%, Utilities -0.6%, Financials -0.5%, Energy -0.4% Consumer Non-Cyclical -0.2% ; Technology +0.8%, Basic Materials +0.3%, Industrials flat]
- ECB's Knot (Netherlands) stated that he did not see adverse shock that would warrant ECB action and would have some concern about narrowing the interest rate corridor further. ECB would remain on hold for the foreseeable future in absence of further negative surprises
- UK PM Cameron stated that the country must stay on long-term economic plan as it was experiencing a balanced recovery that was creating jobs
- France Fin Min Moscovici stated that cutting unemployment was top priority and needed faster economic growth to cut unemployment
- German IFO Economists stated that the German economy had promising start to 2014 and saw Q1 GDP higher to +0.5% from +0.3% q/q. EMU member States were not yet providing a boost to Germany and was not expected too until H2. Volatility in emerging market currencies was not yet affecting the Survey but could be a medium term risk
- OECD: Hungary should be extremely cautious with more Base rate cuts citing FX concerns . It forecasted 2014 GDP 2.0% with 2015 GDP at 1.7%. Govt should come to aid of Fx mortgage debtors most in need
- Argentina implementing a 20% tax on foreign currency purchases
- India Economic Affairs Sec Mayaram: INR currency (rupee) depreciation is not a matter for concern
- China 7-day Repo Rate revised from 6.00% to 4.65% (**Note: No reason provided for the adjustment)
Currencies/Fixed Income:
- Challenges to risk appetite were expected to continue to impact currency markets with emerging markets continued to be affected. Analysts debated whether the emerging markets were only a number of flare-ups or the start of potential contagion. Volatility remained on the rise. South Africa ZAR currency (rand) hit a fresh 5-year low as pair traded above the 11.20 level. The Turkish TRY currency (Lira) reversed earlier gains and hit fresh record lows against both USD and EUR. This was would be the 11th straight session of Lira currency loses (longest such streak since 2001)
- The EUR/USD hovered around the 1.37 area, Dealer noted that for the time being they strategy would be to re-establish bearish positions on rallies. The 5-year financial crisis downtrend line comes in around 1.3880 area
- USD/JPY recovered from its Far-East session low of 101.76 as it initially reacted to continued weakness in equity markets in Asia
Political/In the Papers:
- (EU) ECB's Draghi: not saying whether or not the ECB should use QE. ECB might be able to buy securitized bank loans if they could be packaged as asset-backed securities in a transparent manner. Would be prepared for ECB to fight deflation in Europe by buying packages of bank loans to household and companies
- (EU) IMF's Lagarde: Reiterates Eurozone inflation is "way below target"; Deflation poses a risk for EMU - press citing comments from Davos
- (FR) Moody's affirmed France rating at Aa1; outlook remains negative. Moody's made no comment on the UK
- (DE) Germany Federal Constitutional Court to rule in April on whether or not ECB bond buying program is unconstitutional - press; Decision taking longer time than expected because the issue is very controversial and complex.
- (UK) BOE Gov Carney: Not signaling exit from current monetary policy - Davos comments
-(CN) Certain reports are indicating that ICBC's "China Credit Trust" may not be able to repay CNY3.0B due on loans this Friday, leading to an "unprecedented default" in China's shadow banking system. Later reports stated China Credit Trust investors said to have received principal related to trust, but will not receive 3rd year's interest payment amounting to approx CNY300M
**Looking Ahead***
All times listed for economic events are denominated in Eastern Standard Time (Add 5 hours for GMT equivalent)
- (TR) France President Hollande in Turkey
- 05:30 (BR) Brazil Central Bank Weekly Economists Survey
- 05:30 (DE) Germany to sell €2.0B in 12-month BuBills
- 06:00 (TR) Turkey to sell 2018 and 2023 bonds
- 06:00 (IL) Israel to sell 2016, 2023 and 2024 bonds
- 06:45 (US) Daily Libor Fixing
- 07:00 (PT) ECB's Constancio (Portugal) on banking union
- 07:00 (RO) Romania to sell RON500M in Bonds
- 07:30 (TR) Turkey Jan Real Sector Confidence: No est v 102.1 prior
- 07:30 (TR) Turkey Jan Capacity Utilization: no est v 76.0% prior
- 08:00 (ES) Spain Debt Agency (Tesoro) announces size of 3-Month and 9-Month Bills
- 08:50 (FR) France Debt Agency (AFT) to sell combined €8.4B in 3-month, 6-month and 12-month Bills
- 09:00 (EU) Eurogroup Meets in Brussels
- 09:00 (MX) Mexico Nov Economic Activity Y/Y: 0.8%e v 1.3% prior
- 09:00 (MX) Mexico Dec Preliminary Trade Balance: $819.5Me v $339.1M prior
- 09:30 (EU) ECB calls for bids in 7-Day Main Refinancing Tender at fixed 0.25%
- 09:30 (EU) ECB announces prior settlements in SMP program to offset bond purchases
- 10:00 (US) Dec New Home Sales: 455Ke v 464K prior
- 10:30 (IL) Israel Central Bank Interest Rate Decision: expected to leave Base Rate unchanged at 1.00%
- 10:30 (US) Feb Dallas Fed Manufacturing Activity: 3.3e v 3.1 prior
- 11:00 (US) Fed to purchase $1.00-1.50B in Notes
- 11:30 (US) Treasury to sell $53B in 3-Month and 6-Month Bills
- 12:00 (FR) France Dec Net Change in Jobseekers: +1.1Ke v +17.8K prior; Total Jobseekers: 3.294Me v 3.293M prior
- 13:00 (DE) German Fin Min Schaeuble with Spain Fin Fin De Guindos and Sweden Fin Min Borg in Brussels
- 16:00 (KR) South Korea Feb Manufacturing Business Survey: No est v 79 prior; Non-Manufacturing Survey: No est v 70 prior
***Economic Data***
- (FI) Finland Jan Business Confidence: -12 v -9 prior; Consumer Confidence Index: 9.9 v 9.0e
- (TW) Taiwan Dec Leading Index M/M: 0.5% v 0.5% prior; Coincident Index M/M: 0.6% v 0.6% prior
- (EU) ECB €179M borrowed in overnight loan facility vs. €133M prior; €44.0B parked in deposit facility vs. €37.5B prior - Daily Eurosystem Liquidity Conditions
- (NL) Netherlands Dec Producer Confidence Index: 0.7 v 0.4e
- (HK) Hong Kong Dec Trade Balance (HKD): -54.4B v -46.8Be; Exports Y/Y: 0.0% v +3.6%e; Imports Y/Y: +1.8% v +3.0%e
- (DE) Germany Jan IFO Business Climate: 110.6 v 110.0e; Current Assessment: 112.4 v 112.4e; IFO Expectations: 108.9 v 108.0e
Fixed Income:
- None Seen