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Reports Europe

European stock market, economy and companies update (June 04, 2014)

June 4, 2014, Wednesday, 09:26 GMT | 05:26 EST | 13:56 IST | 16:26 SGT
Contributed by Trade The News


***Notes/Observations***
- Australia Q1 GDP hits a 2-year high (QoQ at 1.1% v 0.9%e)
- Major European Services PMI data sees slight downward revisions in final readings; suggest weak prices were undermining the area's recovery
- Draghi said to be posed to keep rate-cut option open even after a June move


*** SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM ***
***Equities***
Indices [Stoxx50 -0.5%, FTSE 100 -0.3% at 6,813, DAX -0.3% at 9,889, CAC-40 -0.6% at 4,476, IBEX-35 -0.9% at 10,685, FTSE MIB -0.7% at 21,495, SMI +0.2% at 8,676, S&P 500 Futures -0.2% at 1,918]

- Market Focal Points/Key Themes: Equities open lower as cautious trading continues into the Thursday ECB meeting, Peripheral indices underperform, Deutsche Bank rises despite speculation that rights offering may price at a significant discount, Tesco opened higher as Q1 sales declined less than expected, RBS joins Lloyds in announcing limits on certain mortgages, European Services PMI data mixed, Upcoming US ADP employment data

By Sector
- Consumer Discretionary [Volkswagen VOW3.DE -1% (placement); Dufry DUFN +5.5% (acquisition), Ryanair RYA.UK +1% (May traffic +4%), Tesco TSCO.UK -0.5% (Q1 sales declined)]
- Financials [Credit Suisse CSGN.CH +1.5% (broker commentary)]
- Energy [Repsol REP.ES -3% (share placement)]
- Stoxx50 Sectors [Energy -1.3%, Technology -0.3%, Telecom -0.1%; Financials +0.2%, Consumer Non-Cyclical +0.2%, Industrials +0.2%, Utilities +0.1%, Basic Materials flat]

Speakers:
- Bank of International Settlements (BIS) chief Caruana stated that ECB should be very cautious as moved into negative rates as it might not increase lending. Banks could simply decide to reduce their balance sheets rather increase credit supply. Entire architecture of financial markets is based upon positive interest rates and consequences of negative deposit rates are anything but clears. Central banks should not over-react to address low inflation
- France Fin MIn Sapin stated that 2015 spending to be reduced by €21B with €8B cut from the federal govt and the rest from social security and local govt. He added that govt found an extra €4.0B in savings for 2014
- Czech Central Bank's Tomsik: Q1 GDP confirmed its forecast and showed improved household consumption(**Reminder: On May 7th Czech central bank raised 2014 GDP to 2.6% from 2.2%). He did not expect shocks when exiting currency cap and reiterated view of rising likelihood of exiting the cap later
- China Housing Ministry: Home prices still face upward pressure in certain cities; property market indicators in normal range. Current slowing in property market is normal adjustment. Most property indicators were at normal levels.
- India said to allow foreign direct investment in e-Commerce in July
- US President Obama: Important for world to stand behind Ukraine
- Ukraine President-elect Poroshenko stated that he was committed to a peaceful Ukraine process

Currencies/Fixed Income:
- Dealers were looking ahead to the key events of the week (Thurs ECB decision and Friday's US Payroll report). Overall the sentiment viewed the recent steepening trend of the US yield curve likely to intact and pushing USD higher. USD/JPY pair tested one-month highs above 102.60
- The PMI Services data in the session showed that Business activity in the euro zone slowed more sharply in May than first estimated and seen as a sign that weak prices were undermining the area's recovery from its debt crisis. The EUR/USD remain just above its 3-month lows registered last week at 1.3584

Political/In the Weekend Papers:
- (EU) Germany Chancellor Merkel has reportedly asked French government to propose IMF's Lagarde as candidate for EU Commission chief - press
- (US) Fed's George (non-voter, hawk): Economic growth is strong enough to consider normalizing Fed policy; Low rates lasting into 2016 could pose a risk for financial stability; Would be likely that rates will need to increase sooner and more quickly than many at the Fed expect ; There is evidence that inflation is rising
- (US) Fed's Fisher (FOMC voter, hawk): Odds are slim of interest rate hike this year
- (RU) G7 draft communique shows unanimity in condemnation of Ukraine sovereignty violations by Russia; supportive of Ukraine restraint shown during the crisis - press; Global economy has strengthened since last June, downside risks remain

**Looking Ahead***
All times listed for economic events are denominated in Eastern Standard Time (Add 4 hours for GMT equivalent)
- (PT) Portugal and Spain Summit in Vidago
- (EU) EU's Van Rompuy, Barroso hold Pre-G-7 press conference
- (EU) Nato Defense ministers in Brussels
- (RU) Russia to sell RUB10B indicated in Aug 2023 OFZ bonds
- 05:30 (DE) Germany to sell €4.0B in 0.5% 2019 BOBL
- 06:00 (EU) EU rules on Lithuania's bid to adopt Euro
- 06:00 (IE) Ireland Apr Industrial Production M/M: No est v 5.5% prior; Y/Y: No est v 10.2% prior
- 06:30 (UK) Queen Elizabeth II opens new session of Parliament
- 06:45 (US) Daily Libor Fixing
- 07:00 (US) MBA Mortgage Applications w/e May 30th: No est v -1.2% prior
- 08:00 (BR) Brazil Apr Industrial Production M/M: -0.5%e v -0.5% prior; Y/Y: -6.1%e v -0.9% prior
- 08:15 (US) May ADP Employment Change: +210Ke v +220K prior
- 08:15 Baltic Dry Bulk Index
- 08:30 (US) Apr Trade Balance: -$40.8Be v -$40.4B prior
- 08:30 (US) Q1 Final Nonfarm Productivity: -3.0%e v -1.7% prelim; Unit Labor Costs: 5.3%e v 4.2% -prelim
- 08:30 (CA) Canada Apr Int'l Merchandise Trade: C$100Me v C$80M prior
- 09:00 (US) Brazil May Services PMI: No est v 50.4 prior; Composite PMI: No est v 49.9 prior
- 09:45 (US) May Final Services PMI: No est v 58.4 prelim; Composite PMI: No est v 58.6 prelim
- 10:00 (US) May ISM Non-Manufacturing Composite: 55.5e v 55.2 prelim
- 10:00 (CA) Bank of Canada (BOC) Interest Rate Decision: Expected to leave Interest Rates unchanged at 1.00%
- 10:30 (US) DOE Weekly Crude Oil Inventories
- 11:00 (US) Fed to purchase $0.85-1.1B in bonds
- 11:30 (BR) Brazil May Commodity Price Index M/M: No est v -2.5% prior; Y/Y: No est v 17.0% prior
- 11:30 (BR) Brazil weekly Currency Flows
- 14:00 (US) Fed Beige Book
- 14:00 (EU) Group of Seven (G7) Leaders begin meeting in Brussels
- 17:00 (CO) Colombia May PPI M/M: No est v 0.4% prior; Y/Y: No est v 3.4% prior
- 17:00 (CO) Colombia Exports: $4.7Be v $4.4B prior
- 19:00 (KR) South Korea Q1 Final GDP Q/Q: No est v 0.9% prelim; Y/Y: No est v 3.9% prelim
- 21:30 (JP) BOJ's Sato
- 21:45 (CN) China HSBC Services PMI: No est v 51.4 prior; Composite PMI: No est v 49.5 prior


***Economic Data***
- (IN) India May Services PMI: 50.2 v 48.5 prior (first expansion in 11 months and highest since Jun 2013); Composite PMI: 50.7 v 49.5 prior (highest since Jun)
- (RU) Russia May Services PMI: 46.1 v 47.0e v 46.8 prior (3rd straight contraction); Composite PMI: 47.1 v 47.6 prior
- (SE) Sweden May PMI Services: 58.5 v 56.6e
- (CZ) Czech Q1 Preliminary GDP Q/Q: 0.4% v 0.0%e; Y/Y: 2.5% v 2.0%e
- (CZ) Romania Q1 Preliminary GDP Q/Q: 0.1% v 0.1% advance; Y/Y: 3.8% v 3.8% advance
- (HU) Hungary Apr Retail Sales Y/Y: 6.6% v 7.5%e
- (HU) Hungary Q1 Final GDP Q/Q: 1.1% v 1.1% prelim; Y/Y: 3.5% v 3.5% prelim
- (EU) ECB €6.0M borrowed in overnight loan facility vs. €2.0M prior; €37.9B parked in deposit facility vs. €30.7B prior - Daily Eurosystem Liquidity Conditions
- (ZA) South Africa May Services PMI: 49.7 v 49.4 prior
- (ES) Spain May Services PMI: 55.7 v 56.1e (7th straight month of expansion); Composite PMI: 55.6 v 56.3 prior
- (SE) Sweden Apr Service Production M/M: 0.7% v 0.4%e; Y/Y: 4.5% v 3.0%e
- (SE) Sweden Apr Industrial Production M/M: 3.0% v 2.0%e; Y/Y: +0.6% v -1.2%e
- (SE) Sweden Apr Industrial Orders M/M: -1.3% v +0.6% prior; Y/Y: -1.0% v -11.5% prior
- (IT) Italy Services PMI: 51.6 v 51.4e (2nd month of growth); Composite PMI: 52.7 v 52.6 prior
- (FR) France May Final Services PMI: 49.1 v 49.2e (confirms first contraction in three months); Composite PMI: 49.3 v 49.4e
- (DE) Germany May Final Services PMI: 56.0 v 56.4e (confirms 12th straight month of growth and highest since Jun 2011); Composite PMI: 55.6 v 56.1e
- (EU) Euro Zone May Final Services PMI: 53.2 v 53.5e (confirms 10th straight month of expansion and highest since Jun 2011); Composite PMI: 53.5 v 53.9e
- (UK) May Services PMI: 58.6 v 58.2e; Composite PMI: 59.0 v 58.7e
- (EU) Euro Zone Q1 Preliminary GDP Q/Q: 0.2% v 0.2%e; Y/Y: 0.9% v 0.9%e (2nd reading)
- (EU) Euro Zone Q1 Household Consumption Q/Q: 0.1% v 0.1%e; Govt Expenditure: 0.3% v 0.2%e; Gross Fixed Capital Q/Q: 0.3%% v 0.0%e
- (EU) Euro Zone Apr PPI M/M: -0.1% v -0.1%e; Y/Y: -1.2% v -1.2%e
- (IS) Iceland May Preliminary Trade Balance (ISK): +2.4B v -6.9B prior

Fixed Income:
- (IN) India sold total INR140B vs. INR140B indicated in 3-month and 6-month Bills
- (EU) ECB allotted $0.0M in 7-day USD Liquidity Tender at fixed 0.59% vs. $0.0M prior (**Note: 36 weeks without an allotment)
- (SE) Sweden sold SEK3.5B vs. SEK3.5B indicated in 5% 2020 Bonds; Yield: 1.4190% v 1.4258% prior

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