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Reports Europe

European stock market, economy and companies update (January 29, 2013)

January 29, 2013, Tuesday, 11:43 GMT | 07:43 EST | 17:13 IST | 19:43 SGT
Contributed by Trade The News


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

***Equities***
Indices: FTSE 100 +0.20% at 6,306, DAX -0.10% at 7,826, CAC-40 -0.10% at 3,776, IBEX-35 -0.24% at 8,651, FTSE MIB -0.10% at 17,876, SMI -0.60% at 7,437, S&P 500 Futures -0.10% at 1,496

- European equity indices are current mixed, in line with Monday's US trading session, ahead of theTuesday-Wed FOMC meeting and Friday's jobs and GDP data out of the US. Additionally, Germany's Jan prelim inflation data is due to be released on Thursday. European banks are mostly lower led by declines in shares of RBS and Credit Agricole. Resource-related firms are mostly higher, in line with the gains in commodity prices. US companies due to report earnings during the morning session include Eli Lilly, Ford, Pfizer and US Steel.

- UK movers [William Hill +4% (FY guidance),3i +1% (Sherborne acquired stake),Glaxo +0.50% (broker commentary); Firestone Diamonds -13% (disclosed police probe), RBS -2.5% (concerns related to Libor probe), Aquarius Platinum -1.2% (production update), PZ Cussons -1% (H1 earnings report), National Grid -0.30% (reaffirmed FY guidance)]
- Germany movers [Aixtron +3.5% (results from Philips), Sartorius +1% (FY12 results); Software AG -8% (Q4 results),Bayer -1.5% (broker commentary)]
- France movers [NiCox +9% (started phase III program for glaucoma treatment),Technicolor +3% (broker commentary);Sanofi -1.5% (broker commentary)]
- Italy movers [Unicredit +1% (broker commentary); Seat Pagine -45% (suspends interest payment due in 2013),Saipem -2.5% (share placement)]
- Switzerland movers [Addex +2% (data presentation)]
- Dutch movers [CSM +4% (Q4 earnings), Philips flat (Q4 results)]

Speakers:
- Germany Industry Association (BDI) forecasted Germany's economy growing 0.8% in 2013 and saw no need for stimulus measures. German exports up at least 3%
- German ruling CDU party parliamentary group chairman Fuchs stated that the Euro rate was not hurting exporters at current time. He stressed that the debt crisis was not over until primary deficits erased in the Euro Area. He added that France had yet to begin overhaul measures and hoped the next Italian Govt maintained Monti's reforms. He noted that Cyprus was not a systemic risk for Euro area and sqw no near term bailout
- Poland Central Banker Zielinska-Glebocka commented that a Feb Base Rate cut was "nearly certain" and that more cuts would be likely needed afterwards. She noted that both Q4 2012 and Q1 2013 GDP growth might be below 1%
- Turkey Central Bank inflation report: To keep flexible and cautious monetary policy stance
- IMF commented on Romania and agreed to extend precautionary credit line by two-months> IMF forecasted the country's 2013 GDP growth around 1.5% vs. 0.0% y/y; CPI was seen slowing to 3.5% in H2 2013 towards upper end of the target band. It did note that Romania did reduce its 2012 budget deficit as planned but missed its cash deficit and arrears target due to technical issues
- India Central Bank (RBI) Gov Subbarao post rate decision press conference noted that the Repo and Cash Reserve (CRR) cuts were taken to ensure policy transmission into lending rates and it did see improvement in global economic prospects. The Gov reiterated there were upside risks to inflation due to food prices (Inflation excluding food prices was about 8%). India's current account deficit was the largest risk to inflation and macroeconomic management. If inflation and current account deficit moderated there would be room for more Monetary policy action
- India PM Economic Adviser Rangarajan commented that the RBI might again cut interest rates further and that the central bank now had a balanced view. India needed to cut the current account deficit and noted that inflation might ease by 1% in FY14
- Japan Ministry of Finance (MOF) stated that the Gov approved FY13/14 General Account budget of 92.612T (cuts spending for the first time in 7 years). New JGB issuance expected at 42.851T with tax revenues of 43.096T. The budget cut new bond issuance y/y and below tax revenues for first time in four years
- Philippines Fin Sec Purisima: To maintain 2% deficit target for 2013
- Bank of Korea Minutes showed that the vote to keep rates steady was 6 to 1 in January. Ha Sung-keun was the dissenting member and sought called for a 25-basis-point rate cut citing delayed economic recovery and the rising won. The majority saw improvements in domestic and global economic conditions
- Taiwan Central Bank commented on the recent weakness in the Japanese JPY currency and noted that a weaker yen helped Taiwan importers cut costs. Taiwan added that it would step into currency market if necessary. JPY currency (yen) decline might discourage Japanese investment in Taiwan but the JPY decline had limited impact on Taiwan inflation. It noted that the Yen's decline had larger impact on South Korea.

Currencies:
- FX markets were in listless in a quiet European morning as markets await the Fed decision Wednesday and a slew of data reports at the back end of the week.
- The EUR/USD remained contained within a 100 pip range between 1.34-1.35 area ahead of the ECB 7-day Refi Announcement and remained so after the MRO allotment came within market expectations with no large pickup in banks participating. The markets continue to decipher the likely impact of repayments of special ECB LTRO funding for banks. There remained the 3-Month MRO operation on Wednesday (Jan 30th) to further gauge the health of the European banking sector.
- The JPY currency consolidated within the upper end of its trading range. Japanese officials continued to deflect some of the criticism incurred at the Davos summit against Japan engaging in a currency war.
- The GBP/USD was a touch firmer and back above the 1.57 handle against the USD.

Political/ In the Papers:
-EUR/USD: France Pres Hollande: EUR at "significant" level; Current level shows investors are returning.
- EUR/USD: JP Morgan strategist John Normand said short covering has continued for the euro as traders price out ECB rate cuts - FT
- (EU) Russia's Premier Medvedev reiterated that the country has no plans to buy any euro zone sovereign debt - Telegraph's Ambrose Evans-Pritchard
- (GR) Greece Govt extends ban on short selling of financial shares through to April 30 - financial press
-(ES) Commissioner Rehn: Spain economy to turn the corner in 2013; Could consider relaxing some of the goals for Spain if the economy deteriorates; EU will make assessment of Spain budget targets in February
- (UK) UK BoE Miles: UK economy to remain below avg cruising speed for the next year or so - financial press
- (CN) Nomura: China Jan export data to be distorted by holiday - financial press
- (CN) IMF Dep Dir Zhu Min: Internationalization of CNY has a long way to go - financial press

***Looking Ahead***
***All times listed for economic events are denominated in Eastern Standard Time (Add 5 hours for GMT equivalent)
- (IT) Italy Fin Min Grilli to address Parliament on Monti Paschi
- 06:00 (EU) ECB member Praet (Belgium) in Copenhagen
- 06:00 (EU) OECD Dec Annual Inflation: No est v 1.9% prior
- 06:00 (NO) Norway to sell Bonds
- 06:30 (US) Daily Libor fixing
- 07:00 (EU) ECB allotment in 7-day Term Deposit Tender to offset Govt Bond purchases
- 07:45 (US) Weekly ICSC Chain Store Sales
- 08:00 (HU) Hungary Central Bank Interest Rate Decision: Expected to cut the Base Rate by 25bps to 5.50%
- 08:55 (US) Weekly Redbook Retail Sales
- 09:00 (US) Nov S&P/CaseShiller 20 City M/M: 0.70%e v 0.66% prior; Y/Y: 5.5%e v 4.31% prior; Home Price Index: No est v 146.08 prior
- 09:00 (EU) Weekly ECB Forex Reserves
- 09:30 (EU) ECB calls for bids in 3-month LTRO
- 10:00 (MX) Mexico weekly International Reserves
- 10:00 (US) Jan Consumer Confidence: 64.0e v 65.1 prior
- 10:30 (UK) DMO announces size of 0.125% I/L 2024 Gilt
- 11:00 (US) Fed to purchase $2.75-3.50B in Notes
- 11:30 (US) Treasury to sell $30B in 4-Week Bills
- 13:00 (US) Treasury to sell $35B in 5-Year Notes
- 13:00 (DE) ECB member Asmussen (Germany) in Germany
- 13:00 (EU) ECB member Praet (Belgium) in Belgium
- 13:00 (DE) German Chancellor Merkel speech at BDI event in Berlin
- 14:00 (AR) Argentina Dec Supermarket Sales Y/Y: No est v 11.9% prior
- 16:30 (US) Weekly API U.S. Crude Oil Inventories


***Notes/Observations***
- RBI cuts reo rate by 25bps (as expected) and also cuts CRR by 25bps
- Australia business confidence hits 4 month high.
- New Zealand Dec Trade Balance registers first surplus in 5 months
- EU Commission Rehn hints that EU could consider relaxing some of the goals for Spain if the economy deteriorated
- Spain Dec Retail Sales data decline steeper than expectations
- ECB 7-day MRO allotment in line at 124B; no pickup following recent repayment of 3-year LTRO funds
- Italy Bill auction solid with lower yield and higher bid-to-cover
- FOMC begins 2-day meeting

***Economic Data***
- (DE) Germany Feb GfK Consumer Confidence Survey: 5.8 v 5.7e
- (DE) Germany Dec Import Price Index M/M: -0.5% v -0.1%e; Y/Y: 0.3% v 0.9%e
- (FR) France Jan Consumer Confidence Indicator: 86 v 86e
- (HU) Hungary Dec Unemployment Rate: 10.7% v 10.7%e
- (ES) Spain Dec Adjusted Real Retail Sales Y/Y: -10.7% v -8.9%e; Real Retail Sales Y/Y: -10.2% v -7.8% prior
- (TR) Turkey Jan Consumer Confidence: 75.8 v 89 prior
- (EU) ECB: 526M borrowed in overnight loan facility vs. 2.0M prior; 211.8B parked in deposit facility vs. 207.2B prior
- (PL) Poland 2012 Annual GDP: 2.0% v 2.0%e
- (CN) China Dec Leading Index: 100.5 v 100.4 prior
- (IC) Iceland Jan CPI M/M: 0.3% v 0.1% prior; Y/Y: 4.2 v 4.2% prior

Fixed Income:
- (EU) EFSF opened book on new 5-year Euro-denominated bond; guidance seen at +18bps over mid-swaps
- (UK) DMO opened book on 3.25% 2044 Gilt via syndication; guidance seen 9.25-9.75bps over 2042 Gilts
- (ZA) South Africa sold total ZAR2.1B vs. ZAR2.1B indicated in 2026, 2036 and 2031 Bonds
- (EU) ECB allotted 124.1B vs. 135Be in 7-day Main Refi Operation at fixed 0.75%; 74bids recd vs. 71 prior
- (IT) Italy Debt Agency (Tesoro) sold 8.5B vs. 8.5B indicated in 6-month Bills; Avg Yield 0.0731% v 0.949% prior; Bid-to-cover: 1.65x v 1.57x prior
- (CH) Switzerland sold CHF771.2M in 3-Month Bills: Yield: -0.087% v -0.103% prior
- (HU) Hungary Debt Agency (AKK) sold HUF55B vs. HUF50B indicated in 3-Months Bills; Avg Yield 5.42% v 5.43% prior; Bid-to-cover:2.02 x v 1.82x prior

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