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Reports Europe

European stock market, economy and companies update (June 18, 2014)

June 18, 2014, Wednesday, 10:59 GMT | 05:59 EST | 14:29 IST | 16:59 SGT
Contributed by Trade The News


***Notes/Observations***
- Japan May Trade Balance: -¥909.0B vs. -¥1.19Te with both exports and imports declining
- Bank of Japan (BOJ) May 20-21 meeting minutes had all members agree on the expected impact of the recent sales tax hike (Economy was recovering moderately)
- China May New Home Price rise slows with MoM increases seen in only 15 cities vs. 44 prior
-Senior Sunni and Shi'ite political leaders release joint statement calling for national unity
- Iraq's Baiji refinery falls into ISIS militants hands
- BOE minutes again unanimous in both interest rates and Asset Purchase Target (APT) votes; echoes Carney's Mansion House speech from last week


*** SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM ***
***Equities***
Indices [Stoxx50 +0.3%, FTSE 100 +0.4% at 6,791, DAX +0.3% at 9,951, CAC-40 +0.2% at 4,548, IBEX-35 +0.6% at 11,119, FTSE MIB +0.4% at 22,078, SMI +0.3% at 8,690, S&P 500 Futures flat at 1,934]

- Market Focal Points/Key Themes: Equity markets open higher following positive leads from Tokyo, Gains amid rise in oil prices and ahead of Fed decision, UK homebuilder Berkeley Group declines despite rise in FY profits, Cellectis rises sharply on deal with Pfizer , Premier Foods warns on sales outlook, H&M reports inline Q2 profits,

By Sector
- Industrials [Rheinmetall RHM.DE +3% (speculation related to order); Zodiac ZC.FR -2% (Q3 sales in line)]
- Healthcare [Cellectis ALCLS.FR +50% (agreement with Pfizer)]
- Consumer Discretionary [Premier Foods PFD.UK -5% (cut sales forecast), Mediaset MS.IT +2% (asset sale)]
Stoxx50 sectors [Utilities +0.7%, Technology +0.6%, Energy +0.5%, Financials +0.4%, Consumer Non-Cyclical +0.3%,Telecom +0.2%, Consumer Cyclical +0.2%, Industrials +0.1%, Basic Materials flat]

Speakers:
- BOE minutes noted that the low probability markets put on 2014 rate hike was'surprising'. For some MPC hike decision was more balanced than early 2014 and reiterated the view that it could be argued earlier start meant more gradual hikes. Gradual hike case strengthened by uncertain impact and MPC agreed more spare capacity should be used up pre-hike and premature tightening could see sizeable lost output.
- South Africa Deputy President Ramaphosa stated that the govt was very concerned about low growth and noted that energy shortages was a headwind to growth
- Sweden's NIER think tank updated its economic forecasts which cut the GDP growth outlook, inflation forecast and rate views for 2014 and 2015 period
- Finland Finance Ministry updated its forecasts for Economy which cut its 2014 GDP growth from 0.5% to 0.2% but raised 2016 growth to 1.6%
- South Africa Central Bank (SARB) stated that Inflation pressure increased in recent months with CPI trajectory uncomfortably close to upper target
- Thailand Central Bank rate statement noted that interest rates remained supportive of growth but it would to act if necessary as it saw risks from slow recovery in both tourism and exports. It saw inflation picking up in H2 but was not a concern yet and that the THB currency (Baht) was still suitable for business and for economic recovery. It again cut its 2014 GDP forecast from 2.7% to 1.5% (**Note 5th in its forecast cut since last Oct)
- Ukraine planning unilateral ceasefire in coming days
- Iraq's Baiji refinery attacked by Sunni militants with mortars and machine guns with reports that the refinery tank now on fire. Later reports noted that ISI militants were in control of the facility
- Saudi Arabia Foreign Min stated that the situation in Iraq was showing signs of a civil war. Syria situation seemed to have helped deepen internal disturbances in Iraq but the Kingdom rejected outside interference in the region's conflicts

Currencies/Fixed Income:
- The BOE minutes were the highlight in an otherwise quiet FX market. The minutes were again unanimous (9-0) in keeping both interest rates and Asset Purchase Target (APT) steady. The GBP/USD briefly tested above 1.70 as the BOE noted that the low probability markets placed on 2014 rate hike was somewhat 'surprising' but its gave back the initial gains as the comments were in-line with Gov carney's Mansion House address from last week.

Political/In the Papers:
- (DE) Interior Min de Maiziere: Does not rule out possibility of 4th term for German Chancellor Merkel - German press interview; Too early to determine whether she will seek another term.
- (IT) IMF issues commentary on Italy; finds the economy is struggling to emerge from the recession; headwinds remain for investment in Italy; calls on banks to increase the speed of the write offs of bad loans
- (CN) PBoC may create new tool Pledged Supplementary Lending (PSL) to manage medium-term rates - financial press
-USD/CNY: (CN) PBoC Chief Economist Ma Jun: CNY close to equilibrium level with current account surplus close to normal - Chinese press
- (JP) BOJ held 20.1% of JGBs in Mar, largest holder of JGBs for the period - financial press; Japan's public pension funds (including GPIF) sold a net of ¥1.8T in JGBs in Q1.

**Looking Ahead***
All times listed for economic events are denominated in Eastern Standard Time (Add 4 hours for GMT equivalent)
- (IR) Iran, World Powers continue Nuclear Talks in Vienna
- (RU) Russia to sell RUB10B in 2019 OFZ bonds
- 05:30 (DE) Germany to sell €5.0B in new 1.5% 2024 Bunds
- 05:30 (HU) Hungary to hold Bonds switch-auctions
- 05:30 (PT) Portugal Debt Agency (IGCP) to sell 3-month and 12-month Bills (May 21st 2014)
- 06:00 (PT) Portugal May PPI M/M: No est v 0.1% prior; Y/Y: No est v -0.6% prior
- 06:45 (US) Daily Libor Fixing
- 07:00 (US) MBA Mortgage Applications w/e Jun 13th: No est v +10.3% prior
- 07:00 (BR) Brazil Jun IGP-M Inflation (2nd Preview): -0.6%e v -0.0% prior
- 07:00 (ZA) South Africa Apr Retail Sales M/M: 0.0%e v -1.4% prior; Y/Y: 1.7%e v 1.0% prior
- 07:00 (UK) Weekly PM Cameron question time in House of Commons
- 07:15 (UK) BOE's Weale in Belfast
- 08:00 (PL) Poland May Sold Industrial Output M/M: +0.4%e v -2.3% prior; Y/Y: 5.9%e v 5.4% prior
- 08:00 (PL) Poland May PPI M/M: 0.1%e v -0.1% prior; Y/Y: -0.7%e v -0.7% prior
- 08:00 (BR) Brazil Jun IBGE Inflation IPCA-15 M/M: 0.4%e v 0.6% prior; Y/Y: 6.4%e v 6.3% prior
- 08:15 Baltic Dry Bulk Index
- 08:30 (US) Q1 Current Account Balance: -$97.0Be v -$81.1B prior
- 08:30 (CA) Canada Apr Wholesale Trade Sales M/M: +0.5%e v -0.4% prior
- 08:30 (US) BEA Current Account Revisions
- 09:45 (UK) BOE nominee Forbes appointment hearing
- 10:30 (US) Weekly DOE Crude Oil Inventories
- 11:00 (BR) Brazil to sell 2015, 2016 and 2018 Bills
- 11:30 (BR) Brazil weekly Currency Flows
- 12:00 (CA) Canada to sell 2-Year Bonds
- 13:30 (UK) BOE's Haldane in Scarborough
- 13:45 (US) Former Fed Chairman Bernanke speaks in Zurich
- 14:00 (US) FOMC Interest Rate Decision: Expected to leave Interest Rates unchanged at 0.25% and reduce QE3 by $10B to $35B
- 14:30 (US) Fed Chair Yellen post rate decision press conference
- 17:00 (KR) South Korea May PPI Y/Y: % v -0.3% prior
- 21:30 (JP) BOJ Board Member Morimoto speaks in Akita


***Economic Data***
- (JP) Japan May Nationwide Dept Sales Y/Y: -4.2% v -12.0% prior; Tokyo Dept Store Sales Y/Y: -4.3% v -10.8% prior
- (SE) Sweden Jun Consumer Confidence: 101.3 v 101.3e; Manufacturing Confidence: 99.8 v 98.9e; Economic Tendency Survey: 101.0 v 101.6e
- (EU) ECB €62M borrowed in overnight loan facility vs. €3.0M prior; €15.8B parked in deposit facility vs. €14.8B prior - Daily Eurosystem Liquidity Conditions
- (TH) Thailand Central Bank (BoT) left its Benchmark Interest Rate unchanged at 2.00%, as expected
- (ZA) South Africa Q1 Current Account Balance (ZAR): -161B v -214Be; Current Account to GDP ratio: -4.5% v -6.0%e
- (ZA) South Africa CPI M/M: 0.2% v 0.1%e; Y/Y: 6.6% v 6.5%e
- (ZA) South Africa CPI Core M/M: 0.1% v 0.2%e; Y/Y: 5.5% v 5.6%e
- (ES) Spain Apr Bad Loan Ratio: 13.4% v 13.4% prior
- (UK) Bank of England (BOE) Minutes: Votes for both interest rates and Asset Purchase Target (APT) were unanimous (9 to 0)
- (EU) Euro Zone Apr Construction Output M/M: +0.8% v -0.3% prior; Y/Y: 8.0% v 6.4% prior
- (CH) Swiss Jun Credit Suisse ZEW Expectations Survey: 4.8 v 7.4 prior

Fixed Income:
- (CY) Cyprus opened its books to sell Euro-denominated 5-year bond; yield guidance seen at 4.90%
- (ES) Spain Debt Agency (Tesoro) sold total €3.08B vs. €2.0-3.0B indicated range in 2017 and 2019 bonds
- Sold €1.53B in 2.1% Apr 2017 Bono; Avg Yield: 0.876% v 0.968% prior; Bid-to-cover: 2.05x v 2.0x prior; Maximum Yield: 0.893% v 0.987% prior; Tail: 1.7bps v 1.9bps prior
- Sold €1.55B in 4.60% July 2019 Bono; Avg Yield 1.402% v 4.669% prior; Bid-to-cover: 2.32x v 2.47x prior; Max Yield 1.412% v 4.729% prior; Tail 1.0bps v 6.0bps prior
- (EU) ECB allotted $0.0M in 7-day USD Liquidity Tender at fixed 0.60% vs. $0.0M prior
- (SE) Sweden sold total SEK3.5B in 2020 and 2039 bonds