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Reports Europe

European stock market, economy and companies update (June 17, 2013)

June 17, 2013, Monday, 10:20 GMT | 05:20 EST | 14:50 IST | 17:20 SGT
Contributed by Trade The News


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

***Equities***
FTSE 100 +0.70% at 6,350, DAX +1.2% at 8,226, CAC-40 +1.5% at 3,862, IBEX-35 +0.90% at 8,141, FTSE MIB +0.30% at 16,200, SMI +1.2% at 7,731, S&P 500 Futures +0.90% at 1,632

- Equity markets in Europe are broadly higher ahead of the later this week 2-day US Fed meeting. The DAX has outperformed, supported by shares of Bayer and HannoverRe. Italy's FTSE MIB has lagged on declines in shares of Eni and Saipem. European banks are trading mixed. Italian banks have led the gains in the sector, while shares of Deutsche Bank have underperformed. Telecoms are broadly higher, supported by gains in shares of Deutsche Telekom and France Telecom. Resource related companies are broadly higher, in line with what has been seen with commodity prices.

- UK movers [APR Energy +7% (contract award), Lamprell +3% (lending agreement); Associated British Foods -1.5% (broker commentary), Imagination Technologies -1.5% (broker commentary)]
- Germany movers [Solarworld +20% (reached agreement with creditors), HannoverRe +2% (issued update on exposure to Central European floods)]
- France movers [France Telecom +3% (CEO expected to remain in position),EADS +1.8% (orders at Paris airshow)]
- Italy movers [RCS Mediagroup +15% (update on capital raise); Saipem -22% (profit warning), Banca Monte Paschi -2% (credit rating downgraded), Eni -2% (tracking declines in Saipem)]
- Spain movers [Telefonica +2.5% (denied bid from AT&T)]
- Switzerland movers [ABB +3% (new CEO)]
- The Netherlands movers [Philips +3% (broker commentary)]

Speakers:
- German Chancellor Merkel promised she would serve a full 3rd term if re-elected
- German Fin Ministry spokeperson Kotthaus: Greece must stay on track on reforms
- German economic think tank DIW saw German unemployment rising in both 2013 and 2014 to 6.9 and 7.0% respectively. Higher unemployment was NOT due to job losses but rather that the number of employed people would also increase this year and next as more women, more elderly people and more immigrants from Europe's crisis countries were looking for a job in Germany
- Italy Fin Min Saccomanni: Italy needed to continue to fight tax evasion
- Spain Budget Min Montoro stated that he saw Spain inflation at unprecedentedly low levels in H2 and added that Q2 could be the inflection point for Spanish growth
- Poland Central Bank's Zielinska commented that she saw little room for more rate cuts with possible 25-50bps more in cuts at most. She added that it would be best to end easing cycle in July. Economy could rebound in late 2013 while CPI could remain at low level for a few months. Lastly she did not favor multiple terms on Rate setting Board
- BoE H1 report on systemic risk noted that perceived risk of high impact event the lowest since 200. Economic downturn and sovereign risk were biggest threat to financial system. Risks also seen from declining property prices and cyber security
- Hungary Econ Min Varga stated that it would modify budget and raise FTT and Telecom taxes to keep country out of EU's excessive deficit procedure (EDP)
- Hungary Debt Agency (AKK) Chief Pleschinger rate setters saw room for further policy rate cut and had no policy rate target; equilibrium "policy rate depends on economy
- Hungary Central Bank: To keep 2-week Bill auction unchanged and not turn them into deposits
- Russia Fin Min Siluanov: May start buying FX for reserve fund in August; it could weaken currency by RUB1-2
- The Indian Central Bank (RBI) commented after its rate decision that upside risks to inflation from weaker INR currency (rupee) and increases in food prices. It noted that only a durable receding of inflation that would open up the space for monetary policy to continue to address risks to growth. It needed to be vigilant about global uncertainty, rapid shift in risk perception and impact on capital flows. The RBI did stand ready to use all available instruments to respond to adverse developments. Inflation to be influenced by concerted efforts to break persistent food inflation. Monetary policy stance to be determined by growth, inflation and Balance of Payments (BOP) in months ahead. It expected gold imports to moderate in June after recent surge
- India Govt advisor Rangarajan commented that RBI had taken a cautious stance but saw the current trend continuing on the price front
- Thailand Central Bank Gov Prasarn stated that he could not say whether current easing phase of interest rate cycle was over due to global uncertainty. He was not worried about outflows as country had high foreign reserves
- Japan Vice Fin Min Obuchi: Will speed up tax cut reforms for capex

Currencies/Fixed Income:
- The week began on a quiet note in Europe with focus already on Chairman Bernanke's policy statement mid-week. Disappointment from the University of Michigan consumer confidence out of the US on Friday, on top of the Hisenrath argument tempering expectations for immediate tapering and higher rates, appeared to have tilted the scales more in favor of a dovish statement, This followed intense speculation over the rising potential for policy tapering later this year.
- The EUR/USD was little changed in the session around the 1.3335 area
- The JPY was softer as the Nikkei rally for the second consecutive session and closed above the 13,000 level. USD/JPY hovered around the 95 handle after the pair held a key 38% Fib retracement level last week.
- AUD/USD pair above 0.9600 level aided by broad equity market gains in the Far East.

- Political/In the Papers:
- Hassan Rohani wins Iranian presidential elections with 50.7% of the vote; 2nd round run-off is avoided, Rohani said to have previously criticized government intervention in Iranian lives and pledged dialogue with the world. Will still require approval from Supreme Leader Ali Khamenei to improve relations with the West.
- Japan planning tax breaks: Japanese press reported the govt will seek tax breaks for corporate investments this year.
- Italy cabinet approves €3B program in emergency measures: The financial press reported these measures are designed to boost growth and create as many as 30K new jobs in infrastructure sector alone. The report noted the measures will focus on machinery investment as well as more liberal labor laws to allow companies hire more new workers after youth unemployment has recently risen above 40%.
- North Korea calling for first talks with the US in over a year: The press reported the countries plan to discuss nuclear disarmament and a peace treaty. A North Korean defense official noted that any talks should not have any preconditions
- Paris Air Show set to begin: EAD unit Airbus has already pre-announced preliminary orders from AIG unit ILFC (50 planes at $5B) and Doric Asset Finance (10 double-decker jets at $4B)
- (GR) Moody's: Greece fraying political consensus and slippage in privatization plans is credit negative
- (PT) Moody's: Portugal's IMF review is credit positive
-(CN) China Ministry of Finance failed to sell the full CNY15B in 9-month bills on Friday; First failed auction since July 2011
- G8 Draft Communiqu: World economy still faces vulnerabilities in 2013; Japan policies will support near-term growth, still need to achieve longer-term sustainability
- UK intelligence agencies spied on G20 summit officials during 2009 meeting in London- Guardian. Documents uncovered by NSA whistleblower Snowden showed foreign delegates had their computers, phone calls, and emails monitored

**Looking Ahead***
All times listed for economic events are denominated in Eastern Standard Time (Add 4 hours for GMT equivalent)
- (EU) 39th G-8 Summit Held in Northern Ireland
- JUN (FR) 50th International Paris Air Show
- 06:00 (IL) Israel to sell Bills and Bonds
- 06:00 (RO) Romania to sell T-Bills
- 06:30 (US) Daily Libor Fixing
- 07:30 (BR) Brazil Central Bank Weekly Economists Survey
- 08:00 (PL) Poland Apr Current Account: -€150Me v -€200M prior; Trade Balance: +€69Me v -€273M prior; Exports: €12.5Be v €12.8B prior; Imports: €12.6Be v 13.0B prior
- 08:00 (RO) Romania to sell RON800M in Bonds
- 08:30 (CH) Swiss Government Question Time in Parliament
- 08:30 (CA) Canada Apr Int'l Securities Transactions: C$3.0Be v C$1.2B prior
- 08:30 (US) Jun Empire Manufacturing: 0.00e v -1.43 prior
- 08:50 (FR) France Debt Agency (AFT) to sell combined €6.8-7.6B in 3-month, 6-month, and 12-month bills
- 09:00 (PL) Poland May YTD Budget Performance: No est v 89.3% prior; Budget Level (PLN): No est v 31.8B prior
- 09:00 (BE) Belgium Apr Trade Balance: No est v -€40.5M prior
- 09:00 (CA) Canada May Existing Home Sales M/M: No est v 0.6% prior
- 09:15 (DE) ECB's Asumussen (Germany) in Magdeburg
- 09:30 (EU) ECB announces prior settlements in SMP program to offset bond purchases
- 09:30 (EU) ECB calls for bids in 7-Day Main Refinancing Tender
- 10:00 (US) Jun NAHB Housing Market Index: 45e v 44 prior
- 11:00 (US) Fed to Purchase $4.75-5.75 Bln Notes
- 11:30 (US) Treasury to sell combined $55B in 3-Month and 6-Month Bills
- 12:30 (EU) ECB's Mersch (Luxembourg) in Hamburg
- 21:30 (AU) RBA June Policy Meeting Minutes


***Notes/Observations***
- Iran elected a moderate president to take place of the outgoing Ahmadinejad without the need for a run-off
- North Korea reached out to the US with an offer of talks to diffuse the tensions related to its nuclear program
- Russia amped up its opposition to the US-armed Syrian rebels on the eve of a 2-day G8 summit.
- Italy cabinet approved €3B program in emergency measures (called 'To Do' law) designed to boost growth and create as many as 30K new jobs in infrastructure sector alone
- Scales more in favor of a dovish statement from Fed later this week

***Economic Data***
- (IN) India Central Bank (RBI) left Repo Rate unchanged at 7.25% (as expected) and kept Cash Reserve Ratio (CRR) unchanged at 4.00%
- (IN) India Apr Trade Balance: -$20.1B v -$17.8B prior; Imports Y/Y: 7.0% v 11.0% prior; Exports Y/Y: -1.1% v +1.7% prior
- (CZ) Czech Apr Export Price Index Y/Y: 2.4% v 2.6% prior; Import Price Index Y/Y: 0.8% v 1.1% prior
- (CZ) Czech May PPI (Industrial) M/M: -0.3% v -0.1%e; Y/Y: 0.3% v 0.4%e
- (DK) Denmark May Wholesale Prices M/M: -0.1% v -0.2% prior; Y/Y: -0.1% v -0.8% prior
- (TR) Turkey Mar Unemployment Rate: 10.1% v 10.2%e
- (EU) ECB €206M borrowed in overnight loan facility vs. €101M prior; €89.95B parked in deposit facility vs. €82.1B prior - Daily Eurosystem Liquidity Conditions
- (IT) Italy Apr Total Trade Balance: €1.9B v €3.2B prior; Trade Balance EU: €441M v €611M prior
- (CZ) Czech Apr Current Account Monthly (CZK): 4.2BB v 3.8Be
- (NO) Norway May Trade Balance (NOK): 30.1BB v 26.6B prior
- (EU) Euro Zone Apr Trade Balance seasonally adj: €16.1B v €18.1B prior; Trade Balance unadj: €14.9B v €22.5B prior
- (EU) Euro Zone Q1 Labor Costs: 1.6% v 1.3% prior

Fixed Income:
- (NO) Norway sold NOK7.0B in 12-month Bills; Yield: 1.50% v 1.55% prior
- (SK) Slovakia Debt Agency (ARDAL) sold total €213M in Bonds
- (NL) Netherlands Debt Agency (DSTA) sold total €2.41B vs. €2.04.0B indicated range in 3-month and 6-month Bills
- Sold €1.3B vs. €2.0B indicated in 3-month bills; Yield: -0.010% v -0.033% prior
- Sold €1.11 vs. €2.0B indicated in 6-month Bills; Avg Yield: +0.030% v +0.005% prior

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