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Reports Europe

European stock market, economy and companies update (January 29, 2014)

January 29, 2014, Wednesday, 11:46 GMT | 06:46 EST | 16:16 IST | 18:46 SGT
Contributed by Trade The News


***Notes/Observations***
- Turkish central bank acted aggressively in its extraordinary policy meeting overnight, hiking rates by almost twice what was expected; emerging market currencies fade from best levels. Thus 'these are the times that TRY men's souls'
- Euro zone M3 growth slows sharply, private loans contract for 20th straight month
- Dealer observation: Turkey's rate hike to 12 % was good for global markets but if the FED moves by just 25bps it would be catastrophic for the world economy..hummmm
- Italy 6-month Bill auction was solid with lower yields and better bid-to-cover
- Fed to maintain its current pace of tapering despite volatile in emerging markets
 
 
*** SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM ***
***Equities**
Indices [Stoxx50 +0.6%, FTSE 100 +0.7% at 6,620, DAX +0.9% at 9,492, CAC-40 +0.7% at 4,214, IBEX-35 +1% at 9,988, FTSE MIB +0.9% at 19,632, SMI +0.6% at 8,231, S&P 500 Futures +0.3% at 1,792]
 
- Market Focal Points: Equity markets open higher following moves by Turkey's Central Bank but later pare gains, UK luxury retailer Mulberry warns, Novartis reaffirms outlook, Swedish bank earnings continue to disappoint (Nordea), UK copper producers rise after production reports, US Fed decision in focus, Upcoming US corporate earnings for morning session (Biogen, Dow Chemical, Boeing)
 
By Sector
- Consumer Discretionary [Luxotica LUX.IT +3% (FY sales +3%); Mulberry MUL.UK -26% (profit warning), Sainsbury SBRY.UK -2% (CEO change)]
- Basic Materials/Resources [Anglo American AAL.UK +6% (Q4 copper production +24%), Antofagasta ANTO.UK +7% (2013 copper production at record high); Svenska Cellulosa SCAB.SE -5% (Q4 results below ests)]
- Technology [Osram OSR.DE +5% (Q1 profits above ests); Gameloft GFT.FR -6% (2013 sales below target)]
- Healthcare [Transgene TNG.FR +8% (agreement with Sanofi), Novartis NOVN.CH +1% (reaffirmed outlook)]
-Industrials [Siemens SIE.DE -2.5% (ex-dividend)
- Telecom [Carphone Warehouse CPW.UK +7% (agreement with Samsung)]
- Stoxx50 sectors [Technology +1%, Telecom +0.8%, Financials +0.8%, Basic Materials +0.5%, Consumer Non-Cyclical +0.5%, Utilities +0.4%, Energy flat; Industrials -0.5%, Consumer Cyclical -0.2%]
 
Speakers:
- Turkey Fin Min Simsek commented that Central bank credibility was important for the economy. Domestic demand would weaken with risk being high that it could weaken quite quickly. He expected important contraction in the current account deficit; might fall below 5%
- Turkey Central Bank (CBRT) stated that it ened the procedure of 'extra tightening' days; effective Jan 29th following the recent aggressive rate hike
- German Chancellor Merkel commented in Parliament that the goal was keeping German competiveness as the country remained the economic growth engine for Europe. Still a lot to do in terms of financial regulation
 
Currencies/Fixed Income:
- Focus remained on the 'Fragile Five' economies (Turkey, Brazil, India, South Africa and Indonesia) and again saw rate action implemented to protect its attraction on foreign investment to finance their growth ambitions. Turkey central bank joined India (last night) and Brazil (2 weeks ago) with a more aggressive than expected policy tightening. Lira erased two weeks of currency losses with its best daily advance since Nov 2008.
- As the European session progressed the euphoria from the aggressive Turkish central bank action wore off. Emerging market currencies reverse earlier gains in session and trade weaker against USD and Euro. The safe -haven flows appeared to get the upper hand - especially after Euro Zone M3 money slowed sharply in December
- The JPY was initially weaker following the Turkish rate hike as it aided risk appetite and apparently saved other emerging countries fir the time being. USD/JPY moved lower in the session after testing 103.46 in Asia. The pair was back below the 103 handle ahead of the NY morning.
 
Political/In the Papers:
-(EU) UK Telegraph's Evans-Pritchard: Delay of German Constitutional Court ruling on euro zone's OMT backstop is a bad sign, ruling that severely restricts bond rescue scheme could reignite euro crisis; (EU) UK Telegraph's Evans-Pritchard: Delay of German Constitutional Court ruling on eurozone's OMT backstop is a bad sign, ruling that severely restricts bond rescue scheme could reignite euro crisis
- (ES) Spain Fin Min De Guindos: Primary budget surplus will be reached in 2016; Spain inflation to be around 0.5% over next few months
- (UR) S&P cuts Ukraine sovereign credit rating one notch to CCC+ from B-, long-term currency outlook and sovereign credit outlook to negative from stable
-WSJ's Hilsenrath: Fed inclined to stay on current path; Turkey rate hike will not drive their decision
- (US) President Obama's State of the Union address saw progress on the economy and 2014 could be a breakthrough year; to issue executive order to raise federal contractor minimum wage to $10.10
 
**Looking Ahead***
All times listed for economic events are denominated in Eastern Standard Time (Add 5 hours for GMT equivalent)
- (CH) Swiss government holds regular meeting
- (BR) Brazil release 2014 debt plan
- 05:30 (DE) Germany to sell €5.0B in new 1.75% 2024 Bunds
- 06:00 (ZA) South Africa Dec Electricity Consumption Y/Y: No est v -2.4% prior; Electricity Production Y/Y: No est v -3.3% prior
- 06:00 (CZ) Czech Republic to sell 2021 and 2036 bonds
- 06:30 (HU) Hungary Central Bank President Matolcsy
- 06:45 (US) Daily Libor Fixing
- 07:00 (US) MBA Mortgage Applications w/e Jan 24th: No est v +4.7% prior
- 07:00 (RU) Russia to sell OFZ Bonds
- 07:00 (UK) PM Cameron Question Time in House of Commons
- 07:15 (UK) BOE Gov Carney at event in Scotland
- 07:30 (BR) Brazil Dec Total Outstanding Loans (BRL): No est v 2.647T prior; M/M: No est v 1.5% prior; Private Banks Lending: No est v 1.301T prior; Personal Loan Default Rate: No est v 6.7% prior
- 08:00 (ZA) South Africa Central Bank (SARB) Interest Rate Decision: Expected to leave Interest Rates unchanged at 5.00%
- 09:00 (BE) Belgium Q4 Preliminary GDP Q/Q: No est v 0.3% prior; Y/Y: No est v 0.4% prior
- 09:30 (BR) Brazil weekly Currency Flows
- 10:30 (US) Weekly DOE Crude Oil Inventories
- 11:30 (BR) Brazil Dec Total Federal Debt (BRL): No est v 2.069T prior
- 12:00 (CA) Canada to sell 2-Year Bonds
- 13:00 (US) Treasury to sell $15B in 2-Year Floating Rate Notes
- 14:00 (US) FOMC Rate Decision: Fed QE3 Pace: $65Be v $75B prior (Treasury Purchases: $35Be v $40B prior; MBS Purchases: $30Be v $35 prior)
- 14:00 (AR) Argentina Dec Shop Center Sales Y/Y: No est v 20.4% prior; Supermarket Sales Y/Y: No est v 18.8% prior
- 15:00 (NZ) New Zealand Central Bank (RBNZ) Interest Rate Decision: expected to leave Official Cash Rate unchanged at 2.50%
- 20:45 (CN) China Jan HSBC/Markit Manufacturing PMI: 49.6e v 50.5 prior
 
 
***Economic Data***
- (UK) Jan Nationwide House Prices M/M: 0.7% v 0.6%e; Y/Y: 8.8% v 8.5%e
- (DE) Germany Feb GFK Consumer Confidence: 8.2 v 7.6e
- (CH) Swiss Dec UBS Consumption Indicator: 1.81 v 1.40 prior
- (HU) Hungary Dec Unemployment Rate: 9.1% v 9.4%e
- (ES) Spain Dec Adjusted Retail Sales Y/Y: -1.0% v +1.8% prior; Retail Sales Y/Y: 0.0 v 2.0% prior
- (EU) ECB €210M borrowed in overnight loan facility vs. €219M prior; €34.7B parked in deposit facility vs. €43.8B prior - Daily Eurosystem Liquidity Conditions
- (SE) Sweden Dec Household Lending Y/Y: 4.9% v 5.0%e
- (NO) Norway Nov AKU Unemployment Rate: 3.5% v 3.3%e
- (EU) Dec M3 Money Supply Y/Y: 1.0% v 1.7%e; M3 3-month average: 1.3% v 1.5%e
- (IT) Italy Jan Business Confidence: 97.7 v 98.6e; Economic Sentiment: 86.9 v 83.6 prior
- (IS) Iceland Q4 Unemployment Rate: 4.5% v 4.4% prior
- (UK) Dec House Prices Y/Y: +4.4% - Land Registry
- (MY) Malaysia Central Bank (BNM) left its Overnight Policy Rate unchanged at 3.00%; as expected (15th straight pause)
 
Fixed Income:
- (IN) India sold total INR70B in 3-month and 6-month Bills
- (IN) India rejected all bids in 1.44% 2023 I/L bonds
- (EU) ECB allotted $0.0M in 7-Day USD Liquidity Tender at fixed 0.58% vs. $0.0M prior (19th straight week of no allotments)
- (EU) ECB allotted $231M in 3-month USD Liquidity Tender at fixed 0.59% vs. $100M prior
(SE) Sweden sold SEK3.5B vs. SEK3.5B indicated in 2025 bond; Avg Yield: 2.4180% v 2.3338% prior
- (IT) Italy Debt Agency (Tesoro) sold €8.0B vs. €8.0B indicated in 6-month Bills; Avg Yield: 0.590% v 0.827% prior; Bid-to-cover: 1.52x v 1.32x prior
- (EU) ECB allotted €5.0B in 3-month Tender Operation at fixed 0.25% vs. €20.9B prior

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