Reports » Europe

European stock market, economy and companies update (March 19, 2013)

Contributed by Trade The News

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

***Equities***
FTSE 10 -0.30% at 6,441, DAX -0.50% at 7,970, CAC-40 -0.60% at 3,801, IBEX-35 -0.60% at 8,460, FTSE MIB -0.30% at 15,873, SMI -0.30% at 7,805, S&P 500 Futures flat at 1,546

- Following the losses seen on Monday's session, European equity indices are mostly lower, amid losses in the banking sector. In Greece, banks are lower by over 5% on concerns about exposures to Cyprus' banking sector. Resources related firms are broadly lower, amid cautious analyst commentary on BHP and Rio Tinto. Overall, markets are continuing to focus on the situation in Cyprus, as the political discussions related to the deposit levy remain fluid. Also, the US Fed's FOMC is due to begin its two day policy meeting today, with the decision expected on Wednesday's session.

- UK movers [Sainsbury +2% (Q4 sales above ests); Rio Tinto -2.5% (broker commentary), BHP -2% (broker commentary), Spirit Pub -2% (8-week LFL sales declined), Arm Holdings -1% (CEO succession plan)]
- Germany [Metro +4% (broker commentary); ThyssenKrupp -5% (capital raise speculation)]
- France movers [Iliad +5.5% (FY results above ests), Carrefour +2% (asset sale speculation), Remy Cointreau +1% (broker commentary)]
- Switzerland movers [Richemont -2% (share placement)]

Speakers:
- Draft of revised Cyprus bank levy bill seen exempting deposit only up to €20K, taxing deposits at 6.75% from €20-100K, and 9.9% above €100K
- Cyprus Central Bank Gov: If deposit levy bill passes; banking sector could see outflows of at least 10% in coming days
- Cyprus official commented stated that the country's parliament would not approve bank deposit levy and was trying to find ways to mitigate burden on depositors. He noted that the Cyprus President spoke to German Chancellor Merkel on Monday night and would talk again on Tuesday March 19th. The President might also speak with Russia Pres Putin
- Cyprus govt spokesperson: No indication the vote in parliament on the bank levy will be delayed
- Cyprus Defense Min Fotiou: Working on a plan "B"; Vote on bank levy may not take place today although the debate on the levy in parliament will not be delayed
- Cyprus Green Party spokesperson Xanthou commented on CNBC that no matter what happens in the parliament the country would have a run on the banks when they reopen
- Cyprus stock exchange to close on Tue Mar 19th and Wed Mar 20th
- German Fin Min Schaeuble commented that Cyprus bank deposit tax was a shield for European taxpayers and reiterated the structure of the Cyprus bank levy is up to Cyprus
- France Fin Min Moscovici commented that with no action the Cyprus banking sector would have gone bust. Euro Zone cannot lend more to Cyprus; otherwise the country's debt would become too big and unsustainable. He added there was no plan 'B" for Cyprus
- Russia ambassador to EU: Cyprus decision risks possible domino effect
- Former Russia Fin Min Kurdin: Cyprus tax won't pass, govt coalition is crumbling
- German ZEW Economists: Political situation in Italy and Cyprus increased the risk of that the Eurozone debt crisis will worsen. It reiterated that economic situation in Germany likely to improve in coming months
- France President Hollande said to be planning to cut VAT tax on social housing from 7% to 5% in a move to stimulate housing market
- ECB Draghi reiterated its commitment to single European Market and added that financial integration was essential to make Europe stronger. ECB finding most effective tools to ease fragmentation
- European Banking Authority (EBA) comments on Basel III: Largest banks has capital shortfall of €112B to reach the 7% ratio
- India Central Bank (RBI) commented after its rate cut that the headroom for further monetary easing remained quite limited as high food inflation made it tough to manage price expectations. Headline inflation likely to remain at current level in FY14 and its level not conducive to economic growth. The RBI believed that investing was key to reviving growth. The RBI would continue to use open market operations to manage liquidity
- India PM Economic Adviser Rangarajan commented that the RBI move to cut rates was in the right direction but was unclear what turn Indian monetary policy would take but dependent upon how inflation behaved
- India DMK party withdrew its support for Congress Coalition Govt as 5 lawmakers resigned from Federal Govt. The decision to withdraw due to Govt stand on Sri Lankan Tamils issue
- India Fin Min Chidambaram commented that the stability of the Indian govt was not an issue as it still maintained a majority

Currencies:
- The FX markets were on pins and needle as the Cyprus banking levy situation lingered. The EUR/USD consolidated within the 1.29 handle pending the outcome on Cyprus' proposed bank levy on deposits. It was still unclear if the Cyprus Parliament would vote on the bailout package as conflicting reports circulated in the session. A draft of Cyprus bank levy bill also circulated and showed little differences from reports yesterday that only deposits below €20K would be exempt.
- The JPY currency was slightly weaker as the changing of the guard at the BOJ now formally takes place.

Political/In the Papers:
- (CY) Cyprus President Anastasiades said to have indicated to Eurogroup he does not have enough support to pass the deposit levy through Parliament - financial press; Earlier reports indicated that the DIKO Democratic Party (minority member in ruling coalition with 8 out of 56 seats) would not support the deposit levy law. Anastasiades' DISY party holds 20 seats in parliament.
- (CY) Cyprus govt spokesperson: Cyprus parliament will not approve bank deposit levy, trying to find ways to mitigate burden on depositors
- Haircuts: According to a CNBC report, senior debt holders in non-viable banks could incur charges (about €400M) as part of the effort to raise €5.8B from bail in.
- Earlier reports said that the Eurogroup would support exempting Cypriot deposits up to €100k from the bank levy, and a 15.6% tax on deposits above €100k.
- In terms of the banking sector, a report in the Cyprus Mail said that ATMs were back to normal after bank workers refilled them on Monday. Banks in the country are now not expected to reopen until Thursday.
- (UK) Ernst & Young ITEM Club: Sees govt borrowing exceeding forecast by £8B in upcoming budget - British press; According to the ITEM, the OBR is set to announce net government borrowing surpassed forecasts by £8B 2012/13; expected to cut 2013 economic forecasts from 1.2% to just under 1%.
- (CN) PBoC adviser Song Guoqing: Does not expect an interest rate hike or any major tightening at this time; Sees 2013 GDP at 8.3%, pace of growth may decline to 7% in 5 years
- (JP) Outgoing BoJ gov Shirakawa: Receding risk aversion has made JPY weaker, stocks higher - addressing parliamen
- PBoC Q1 Bankers Survey noted that more bankers felt comfortable about the economy with a rise in loan demand. The survey noted that more bankers saw monetary policy as appropriate. More people expect home prices to rise with 68% think house prices were too high. 62% of citizens saw consumer prices as too high

***Looking Ahead***
***All times listed for economic events are denominated in Eastern Standard Time (Add 4 hours for GMT equivalent)
- (DE) German union IG Metall begin 12-month wage talks
- (JP) Bank of Japan Governor Shirakawa steps Down
- (HU) EU's Rehn speaks on EU Monetary Union and growth
- (US) Federal Reserve FOMC begins 2-day Meeting
- (US) Tsy Sec Lew in China
- (US) House speaker Boehner to meet US President Obama and Ireland PM Kenny
- 06:15 (EU) ECB Announces Allotment in 7-Day Main Refinancing Tender
- 06:30 (HU) Hungary Debt Agency (AKK) to sell 3-Months Treasury Bills
- 06:30 (CH) Switzerland to sell 3-Month Bills
- 07:00 (PT) Portugal Feb Producer Prices M/M: No est v 0.6% prior; Y/Y: No est v 1.9% prior
- 07:00 (TR) Turkey to sell 2015 and 2022 bonds
- 07:00 (EU) ESM to sell up to €2.0B in 6-month bills
- 07:30 (US) Daily US Libor Fixing
- 07:45 (US) Weekly ICSC Chain Store Sales
- 08:00 (EU) ECB allotment in 7-day Term Deposit Tender to offset Govt Bond Purchases (SMP); to drain €
- 08:30 (CA) Canada Jan Wholesale Sales M/M: +0.4%e v -0.9% prior; Manufacturing Sales M/M: -0.6%e v -3.1% prior
- 08:30 (US) Feb Housing Starts: 915Ke v 890K prior; Building Permits: 925Ke v 904K prior (revised from 925K)
- 08:55 (US) Weekly Redbook Retail Sales
- 09:00 (PL) Poland Feb Sold Industrial Output M/M: -1.9%e v +5.4% prior; Y/Y: -1.6%e v +0.3% prior
- 09:00 (PL) Poland Feb Producer Prices M/M: 0.3%e v 0.1% prior; Y/Y: -0.5%e v -1.2% prior
- 10:00 (BE) Belgium Mar Consumer Confidence: No est v -17 prior
- 10:00 (MX) Mexico Q4 Aggregate Supply & Demand: 3.2%e v 2.6% prior
- 10:00 (EU) Weekly ECB Forex Reserves
- 10:45 (UK) DMO to buy £1.1B in +15-year Gilts
- 11:00 (US) Fed to purchase $2.75-3.50B in Notes
- 11:30 (US) Treasury to sell $45B in 4-Week Bills
- 12:00 (CY) Cyprus Parliament is due to convene
- 16:30 (US) Weekly API U.S. Crude Oil Inventories


***Notes/Observations***
- India Central Bank (RBI) cuts Repo Rate by 25bps and signals probably no more room to maneuver
- RBA minutes: Inflation outlook gave scope to ease if needed; steady policy now but further easing may be needed; econ is responding
- Cyprus Govt Spokesperson: appears parliament will not approve deposit tax; looking for ways to reduce burden on depositors; banking sector remains closed until Thursday
- EU official: Eurogroup conference call on Cyprus ended and gave Cyprus more flexibility on bank levy; Eurogroup supported protecting depositors with accounts below €100K.
- Still want to raise €5.8B from the bank levy to secure the bailout.
- Cyprus stock exchange to close on Tue Mar 19th and Wed Mar 20th; banking sector remains closed until Thursday
- Draft of Cyprus bank levy bill also circulated and showed little differences from reports yesterday that only deposits below €20K would be exempt
- Euro Zone new car registrations continue to slump to record low levels
- UK PPI data a touch hotter than expected while CPI was in-line
- Improvement seen in Italy Jan Industrial Production data but back month revised lower
- German ZEW Survey continues to improve

***Economic Data***
- (JP) Japan Jan Final Leading Index CI: 95.0 v 96.3 prelim; Coincident Index CI: 91.6 v 92.0 prelim
- (IN) India Central Bank (RBI) cut the Repo Rate by 25bps to 7.50%; left Cash Reserve Ratio (CRR) unchanged at 4.00% (both as expected)
- (JP) Japan Feb Nationwide Dept Sales: 0.3% v 0.2% prior; Tokyo Dept Store Sales: 2.5% v 0.5% prior
- (EU) EU27 Feb New Car Registrations: -10.5% v -8.7% prior
- (EU) ECB: €34M borrowed in overnight loan facility vs. €12M prior; €135.0B parked in deposit facility vs. €132.6B prior
- (IT) Italy Jan Industrial Production M/M: +0.8% v -0.3%e; Y/Y: -0.6% v -9.3% prior; Industrial Production wda Y/Y: -3.6% v -5.6%e
- (ES) Bank of Spain Jan Bad loan ratio 10.78% v 10.44% prior
- (UK) Feb PPI Input M/M: 3.2% v 1.5%e; Y/Y: 2.5% v 0.8%e
- (UK) Feb PPI Output M/M: 0.8% v 0.4%e; Y/Y: 2.3% v 1.8%e
- (UK) Feb PPI Output Core M/M: 0.3% v 0.3%e; Y/Y: 1.3% v 1.1%e
- (UK) Feb CPI M/M: 0.7% v 0.7%e; Y/Y: 2.8% v 2.8%e; CPI Core: 2.3% v 2.2%e
- (UK) Feb RPI M/M: 0.7% v 0.8%e; Y/Y: 3.2% v 3.3%e; RPI Ex Mort Interest Payments Y/Y: 3.2% v 3.2%e; Retail Price Index: 247.6 v 247.8e
- (UK) Jan ONS House Price Y/Y: 2.2% v 2.4%e
- (ZA) South Africa Q4 Non-Farm Payrolls Q/Q: 0.3% v 0.1% prior; Y/Y: 1.0% v 1.0% prior
- (PH) Philippines Feb Balance of Payments: -$960M v +$2.0B prior
- (DE) Germany Mar ZEW Economic Sentiment:48.5 v 48.1e; Current Situation: 13.6 v 6.0e
- (EU) Euro Zone Jan Construction Output M/M: -1.4% v -1.7% prior; Y/Y: -7.3% v -4.8% prior
- (EU) Euro Zone Mar ZEW Survey Economic Sentiment: 33.4 v 42.4 prior
- (IT) Italy Jan Current Account: -€4.6B v +€2.4B prior

Fixed Income:
- (NL) Netherlands Debt Agency (DSTA) opened its book for its 10-year bond; confirmed spread guidance for 2023 DSL bond between +44-47bps over 1.5% 2023 Bund
- (DK) Denmark sold total DKK3.19B in 2023 and 2039 Bonds
- (ZA) South Africa sold total ZAR2.1B vs. ZAR2.1B indicated in 2036, 2041 and 2048 bonds
- (ES) Spain Debt Agency (Tesoro) sold total €4.0B vs. €3.0-4.0B indicated range in 3-Month and 9-Month Bills
- Sold €1.74B in 3-month Bills; Avg Yield: 0.285% v 0.421% prior; Bid-to-cover: 3.3x v 5.76x prior; Max Yield: 0.340% v 0.445% prior; Tail: bps v 2.4bps prior
- Sold €2.26B in 9-month Bills; Avg Yield: 1.007% v 1.114% prior; Bid-to-cover: 2.4x v 2.31x prior; Max Yield: 1.060% v 1.165% prior; Tail: bps v 2.1bps prior
- (GR) Greece Debt Agency (PDMA) sold €1.3B vs. €1.0B indicated in 13-week bills; Avg Yield 4.05% v 4.05% prior; Bid-to-cover: 1.66x v 1.76x prior