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Reports Europe

European stock market, economy and companies update (July 05, 2013)

July 5, 2013, Friday, 12:09 GMT | 07:09 EST | 15:39 IST | 18:09 SGT
Contributed by Trade The News


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

***Equities***
FTSE 100 +0.2% at 6,437, DAX -0.1% at 7,983, CAC-40 -0.2% at 3,801, IBEX-35 -0.6% at 7,956, FTSE MIB -0.3% at 15,758, SMI +0.2% at 7,845, S&P 500 Futures +1.0% at 1,624

- Equity markets in Europe opened slightly higher extending gains from yesterday when both the ECB and BoE issued forward guidance signaling their willingness to remain accommodative for an extended period of time. Portugal's main equity index gained over xxx% after the Portugal PM and junior coalition leader Portas reached a tentative agreement to keep their ruling coalition together thus avoiding early elections. The French trade balance came in wider than expected and eventually stocks succumbed to selling with most indexes slipping slightly into the red in light trading.

- UK movers [British Land +1.6% (Invests £470M in Paddington Central), Meggitt 0.0% (Deutsche downgrade)]
- Germany movers [Commerzbank +1.5% (technical bounce)]
- France movers [Saft Groupe -9.6% (FY13 Rev to be towards guidance bottom of previous range)]

Speakers:
- ECB's Liikanen (Finland) reiterated that monetary policy would be kept supportive as it sought to create confidence in the market. Inflation risks were low and real economy was weak. He also reiterated that economic recovery should begin towards end of 2013 and pick up momentum in 2014. The caveat was recovery would be slower than before. He believed that the political crisis in Portugal would calm down
- ECB's Costa (Portugal) commented at a Lisbon conference that the adjustment had been impressive in Portugal's foreign account but public and external debts were truly a concern. Portugal's external debt limited its economic policy. He saw Portugal 2014 GDP being slightly positive and stressed it was important to keep social cohesion for bailout plan
- Cyprus Govt believed that ECB member Asmussen threatened to stop financial aid after country repeatedly sought softening of agreed-upon reforms. Cyprus sought more liquidity support for Bank of Cyprus as a concession. German Govt and ECB rejected such demands in June. Halting aid to Cyprus would lead to a Cyprus bankruptcy
- ECB refuted press speculation the Germany's Asmussen threatened to end Cyprus bailout aid
- Portugal President Silva commented that his country bailout program was set to end in June 2014 and it was important to think about period after aid ends. Budget rigor will not disappear after aid program. Negative scenario would envision that the country was not able to return to market access for funding
- EU official Buti stated that tasks of implementing Portugal program had been made more difficult. Progress was being made in Portugal and should not jeopardize that
- EU Tax Commissioner Semeta commented that EU transaction tax was still being discussed
- China State Council reiterated prudent monetary policy and planned to keep total credit level at a reasonable level. It stressed that it would not ease policy just because economic growth was slowing nor tighten policy due to any volatility in short-term money supply. China to maintain prudent monetary policy and balance between growth and financial reform. To provide banks more authority for NPL write-offs and strengthen wealth management product supervision. It would provide guide for banks to separate wealth management from loan business. The Govt reiterated that it would use quantitative and price tools in monetary policy and gradually resolve Local Government Financing Vehicle (LGFV) debt risks. To proactively support major infrastructure projects and strictly control property finance risks. To stimulate existing money supply
- China Banking Regulatory Commission (CBRC) stated that it would encourage banks to write off and sell bad assets and ban new credit to any overcapacity industry; To help companies with backward production to phase out and any new credit must be right industries
- PBoC's Xie Duo commented that China's financial markets were stable currently although shadow banking was a problem. He noted that China's economic and financial indicators were all normal and that market fluctuations were normal. Off balance sheet assets were a problem
- BOJ Quarterly Survey on Public View of Economic Conditions noted that individuals saw prices rising 3% in 1-years time and up 2.5% annually over the next 5 years

Currencies/Fixed Income:
- The USD maintained a steady footing during the European session following the dovish guidance given by the BOE and ECB on Thursday. The focus turns to today's NFP report and any hints that the data would provide in possible Fed tapering. Leading up to todays data Fed officials had work hard in their rhetoric in trying to push back against market expectations of imminent tapering.
- EUR/USD pair hit its at lowest level since May 29th in the session as it traded below 1.2880 area. The pair was poised to register its third weekly loss
- The GBP/USD hit 4-month lows as the pair dipped below the 1.50 handle for the first time since Mid-March.

-Political/In the Papers:
- (EU) ECB'S Draghi:: Key rates to stay or even lower for extended period; Reiterated that monetary policy to stay accommodative as long as needed as growth risks were on the downside. Balance sheet adjustments to weigh on economy. Decision to introduce such forward guidance was unanimous (so was the actual rate decision)
- Discussed several forms of forward guidance. ECB looked at three variables for its rate outlook: Medium term inflation, monetary dynamics, and economic weakness. Current Main Refi Rate of 0.50% is not the lower bound
- BOE issued Statement following rate decision. Increase in market rates weighed upon economic outlook and that the rise in expected path in bank rate was not warranted by developments in economy
- (IT) IMF cuts Italy 2013 GDP forecast to -1.8% from -1.5% prior and saw downside risks to country. It did see a recovery starting in latter part of 2013; economy was stabilizing but had strong headwinds
- (EU) IMF called for ECB to make direct asset purchases and hold another large scale LTRO
- (EU) EU G20 Draft: Countries must continue to monitor currency commitments and with global economic rebalancing. Euro Area re-balancing was ongoing and many EMU members had made substantial current account balances. US must address fiscal and debt ceiling challenges; saw Japan adopting more credible fiscal consolidation; China should continue progress on consumer growth and must progress towards more market determined FX rates
- (CN) China to cut gasoline price by CNY80/ton, cuts diesel price by CNY75/ton
- China vice Fin Min Zhu reiterates govts' call for US to grant China market economy status and to lift curbs on high-tech exports to the U. China financial markets are healthy and stable. Liquidity is sufficient and finance ministry is injecting liquidity by fiscal deposit auctions

**Looking Ahead***
All times listed for economic events are denominated in Eastern Standard Time (Add 4 hours for GMT equivalent)
- (DE) Germany President Gauck in Finland
- (US) Fed deadline for US bank strss test results
- (RU) Russia Jun Official Reserve Assets: No est v $518.4B prior
- 06:00 (FI) EU Commissioner Rehn, ECB's Liikanen (Finland) speak in Mikkeli, Finland
- 06:00 (DE) Germany May Factory Orders M/M: +1.2%e v -2.3% prior; Y/Y: +0.1%e v -0.4% prior
- 06:00 (IE) Ireland Industrial Production M/M: No est v 3.0% prior; Y/Y: No est v 1.8% prior
- 06:00 (EU) ECB announces 3-Year LTRO Repayment
- 06:00 (IS) Iceland to sell Bonds
- 06:10 (UK) DMO to sell £2.0B in 1-month, 3-month and 6-month Bills
- 06:30 (US) Daily Libor Fixing
- 06:30 (FR) ECB's Coeure (France)
- 07:00 (BR) Brazil Jun FGV Inflation IGP-DI: 0.7%e v 0.3% prior
- 07:30 (IN) India Forex Reserves w/e Jun 28th: No est v $287.9B prior
- 08:00 (PL) Poland Jun Official Total Reserves: No est v €110.2B prior
- 08:00 (BR) Brazil Jun IBGE Inflation IPCA M/M: 0.3%e v 0.4% prior; Y/Y: 6.8%e v 6.5% prior
- 08:30 (US) Jun Change in Nonfarm Payrolls: 165Ke v +175K prior; Change in Private Payrolls: 175Ke v +178K prior; Change in Manufacturing Payrolls: 0.0Ke v -8Kprior; Two-Month Payroll Net Revision: no est v K prior
- 08:30 (US) Jun Unemployment Rate: 7.5%e v 7.6% prior; Underemployment Rate: No est v 13.8% prior; Change in Household Employment: No est v 319K prior
- 08:30 (US) Jun Avg Hourly Earning M/M: 0.2%e v 0.0% prior; Y/Y: 1.9%e v 2.0% prior; Avg Weekly Hours: 34.5e v 34.5 prior
- 08:30 (CA) Canada Jun Net Change in Employment: -7.5Ke v +95.0K prior; Unemployment Rate: 7.1%e v 7.1% prior; Full Time Employment Change: No est v +76.7K; Part Time Employment Change: No est v +18.2K prior; Participation Rate: No est v 66.7% prior
- 08:30 (CL) Chile May Economic Activity Index M/M: No est v 0.2% prior; Y/Y: no est v 4.4% prior
- 08:30 (US) Weekly USDA Net Export Sales
- 10:00 (DE) Germany Fin Min Schaeuble holds Discussion With Voters,
- 10:00 (CA) Canada Jun Ivey Purchasing Managers Index Seasonally Adj: 58.2e v 63.1 prior; PMI Unadj: no est v 70.8 prior
- 20:00 (CO) Colombia Jun Consumer Price Index M/M: 0.2%e v 0.3% prior; Y/Y: 2.1%e v 2.0% prior


***Notes/Observations***
- ECB: The bank that never pre-commits; pre-commits. Both ECB and BOE issue forward guidance
- Portugal PM Coelho says have found the formula for government stability but provides no further details
- China stresses it would use quantitative and price tools in monetary policy including re-discounting and differential reserve requirement ratio (RRR)
- China 7-day Repo Rate declines for 11th straight session to 3.8055%, down 15bps today (longest stretch since late May 2007)
- Focus on US payroll data. Traders eyeing the Unemployment Rate of 7.00% as "target" rate for tapering of Fed's asset purchases.

***Economic Data***
- (RU) Russia Narrow Money Supply w/e Jun 31st (RUB): 7.76 v 7.84T prior
- (UK) Retailer John Lewis reports weekly LFL sales for week ending June 29th (y/y): +6.7% v +7.2%
- (ZA) South Africa Jun Gross Reserves: $47.0B v $47.6Be; Net Reserves: $44.6B v $44.7Be
- (AU) Australia Jun Foreign Reserves: A$51.9B v A$51.7B prior
- (FR) France May Trade Balance: -€6.0Bv -€4.6Be
- (CH) Swiss Jun Foreign Currency Reserves (CHF): 434.9B v 436.0Be
- (ES) Spain May Industrial Output WDA Y/Y: -1.3% v -2.0%e; Industrial Output NSA Y/Y: -1.3% v +7.6% prior
- (HU) Hungary May Preliminary Industrial Production M/M: -1.3% v +1.2% prior; Y/Y:-2.1 % v -0.1%e
- (DK) Denmark May Industrial Production M/M: 0.6% v 0.8% prior
- (EU) ECB €52M borrowed in overnight loan facility vs. €461M prior; €103.7B parked in deposit facility vs. €104.7B prior - Daily Eurosystem Liquidity Conditions
- (CH) Swiss Jun CPI M/M: +0.1% v -0.2%e; Y/Y: -0.1% v -0.4%e
- (CH) Swiss Jun CPI EU Harmonized M/M: 0.2% v 0.0% prior; Y/Y: +0.2 v -0.2% prior
- (SE) Sweden May Service Production M/M: +1.4 v -1.2% prior; Y/Y: +0.6 v -0.7% prior
- (SE) Sweden Jun Budget Balance (SEK): -6.4B v +22.7B prior
- (AT) Austria Jun Wholesale Price Index M/M: -0.3% v +0.3% prior; Y/Y: +0.4 v -0.6% prior
- (CN) Shanghai Futures Exchange (SHFE) Weekly Copper Stockpiles: 173.0K v 182.5K tons
- (NO) Norway May Industrial Production M/M: 1.2% v 4.4% prior; Y/Y: % v -5.3% prior
- (NO) Norway May Manufacturing Production M/M: -2.1% v -0.6%e; Y/Y: 2.8% v 6.1% prior
- (TW) Taiwan Jun Foreign Exchange Reserves: $406.6B v $406.6B prior
- (PH) Philippines Jun Foreign Reserves: $81.6B v $82.9B prior
- (IT) Bank of Italy (BOI) Jun Balance-Sheet Aggregates: ECB funding to Italian banks at €255.5B v €259.2B prior

Fixed Income:
- (IN) India sold total INR150B vs. INR150B indicated in 2019, 2023, 2030 and 2042 bonds

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