Reports » Europe

European stock market, economy and companies update (October 16, 2012)

Contributed by Trade The News

*** SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM ***
***Notes/Observations***
- New Zealand inflation 13 yr lows and below the central bank target
- RBA minutes hint of room to further lower rates
- ESM putting its funds to work in the short-end of the market
- Risk on sentiment continued to brew helped by an FT report that Spain was considering requesting a line of credit from the ESM bailout mechanism
- UK Sept CPI at lowest level in 3-year and slightly above BOE target
- Spain sells more than the indicated amount at its Bill auction with slightly lower yields
- German ZEW Survey mixed while ZEW economists noted that ECB OMT bond buying program had not improved sentiment for the Euro area

***Equities***
-Indices: FTSE 100 +0.50% at 5,833, DAX +0.50% at 7,297, CAC-40 +0.30% at 3,432, IBEX-35 +1.2% at 7,768, FTSE MIB +0.20% at 15,613, SMI +0.30% at 6,726, S&P 500 Futures flat at 1,436

- European bourses are broadly higher, tracking yesterday's gains in the US equity markets. So far, today's upside has been led by the Spanish IBEX, as Spain sold bills at lower yields. Banks are mostly higher and outperformers include BNP, Commerzbank, Deutsche Bank and Lloyds. Resource related firms are trading higher, amid the rise in commodity prices.

- UK home builder Bellway [BWY.UK] has gained over 4%, following the release of its FY results. SportingBet [SBT.UK] is slightly higher, after the firmed received a higher bid from William Hill [WMH.UK]. In Switzerland, shares of Roche [ROG.CH] have moved slightly higher as the company reported better than expected Q3 sales and reaffirmed its FY sales forecast. In France, luxury goods manufacturer LVMH [MC.FR] has declined, as it reported a slowdown in its Q3 sales. Casino [CO.FR] is lower by over 1%, following the release of its Q3 sales. In Norway, silicon wafer producer Renewable Energy [REC.NO] has lost over 15%, as the company issued a profit warning for Q3.

- FTSE 100 movers (Lloyds +2.9%, Kazakhmys +2.3%, Randgold +1.9%, Antofagasta +1.8%, Evraz +1.8%; GKN -2.9%, InterContinental Hotels -1.8%, IAG -1.7%)
- CAC-40 movers (SocGen +2%, BNP +2%, Credit Agricole +2%, Lafarge +1.9%, ArcelorMittal +1.7%; Renault -1.6%, St-Gobain -1.5%, LVMH -1.1%)
- DAX movers (Deutsche Bank +2.7%, Infineon +2.2%, Commerzbank +1.9%, Bayer +1.6%, Beiersdorf +1%; Continental AG -1.9%, Daimler -1%)
- IBEX-35 movers (Santander +2.3%, BBVA +2.1%, Acciona +2%, Repsol +1.9%, Gamesa +1.7%; Fomento -1.5%, Red Electrica -1.1%, Abertis -1%)
- FTSE MIB movers (Mediaset +2.9%, Generali +1.6%, Intesa +1.6%, Banca Popolare di Milano +1.3%, A2A +1.2%; Lottomatica -2.4%, Tenaris -1.9%, Luxottica -1.5%, Pirelli -1.4%, Fiat -1%)
- SMI movers (Adecco +1.7%, Julius Baer +1.3%, Swiss Re +1.2%, Transocean +1.2%. UBS +1.2%; Richemont -0.70%)

Speakers:
- German Fin Min Schaeuble stated that Germany would present a 3-point plan at the upcoming EU Leader Summit this week. Germany noted that EU should consider faster steps towards fiscal union and seek changes to EU Treaty. Germany also sought to install an Econ Commissioner with unilateral decision making power and ability to reject member budgets
- German Chancellor Merkel noted that competitiveness would be a topic at upcoming EU Leader Summit and could support the EMU by stimulating Germany.
- Spain's proposal on the upcoming EU Leader Summit noted that a common bill auction would be seen as a first step towards fiscal union
- ECB's Bonnici (Malta) commented that it would be better to explore rescue before the market tested Spain.
- ECB's Costa (Portugal) commented that economic problems were structural not just cyclical
- Finland PM Katainen reiterated that Finland rejected raising the size of the firewalls and that the region needed to use what it currently had effectively. He added that one needed to make sure countries could continue to access the markets and that not many EU countries were willing to raise joint budgets
- Austria Finance Ministry revised both its 2012 and 2013 budget targets. It raises 2012 budget deficit to GDP ratio forecast to 3.1% from 3.0% prior; debt to GDP ratio at 74.7% from 74.4% prior. For 2013 Austria raised its budget deficit to GDP ratio forecast to 2.3% from 2.1% prior; debt to GDP ratio at 75.4% from 74.7% prior view. By 2016, the deficit should shrink to 0.2% of GDP and debt to 70.8%
- ZEW Economists commented that diminished risks could well be explained by decreasing uncertainty on financial markets with half of the survey respondents seeing the German economy remaining more or less the same in next 6 months. Risks for the German economy had somewhat diminished but investors expected German economy to cool. Lastly the ZEW stated that ECB OMT bond buying program had not improved sentiment for the Euro area
- Germany expected to cut 2013 growth forecast to 1.0% from 1.6% and tweak its 2012 GDP growth forecast to +0.8% from +0.7% prior
- IMF staff mission to visit Romania between Nov 6th through 14th for its 7th review of the country's bailout conditions. The delay was due to upcoming elections. The IMF to discuss the country's economic and fiscal outlook
- Moody's commented that China's banking sector was facing risks as the central bank moved towards liberalized interest rate regime which could challenge banks' management capacities. Ability of management to adapt to fully market driven pricing environment was untested.
- OECD chief Gurria commented that the global crisis continued to simmer and emerging market economies were suffering from the global slowdown

Currencies:
- Risk appetite continued to find footing following encouraging round of US economic data coupled with constructive China trade components. Risk was also aided by press speculation that Spain was said be preparing to make a formal rescue request in order that the ECB can start buying its debt. The USD and JPY currencies were on a softer footing as a result with remain within 1-month ranges.
- The EUR/USD tested 1.3015 after a better headline German ZEW survey but drifted off its best levels after ZEW stated that ECB OMT bond buying program had not improved sentiment for the Euro area. As the month of October ticks away dealers are expecting a decision from Moody's on Spain. Rumors circulated that Spain had received a warning from Moody's on an imminent sovereign downgrade. Dealers noted a that sovereign cut to junk status might not see much 'forced selling' of Euros but this could change if Moody's kept a negative outlook for Spain
- The USD/JPY pair continued to probe towards the 79 handle where Japanese exporter offers were said to lurk
- The GBP/USD tested 1.6109 but drifted off its best levels are the NY morning approached. The UK data had little impact on price action despite CPI hit its lowest levels since November 2009.

Political/ In the Papers:
- (BE) Belgium needs to plug a €800M hole in the 2013 budget - De Tijd
- (FR) The pace of bankruptcies in France have accelerated, raising concerns about the country's economic slowdown - Telegraph's Ambrose Evans-Pritchard; Also, there are worries that large foreign investors are losing confidence in France.
- (DE) Investor George Soros reiterates that Germany should leave the euro zone - German Press
- (GR) Greece PM Samaras: Greece will receive the next tranche of aid soon, EU partners are betting on success in Greece; Greek economy could take a turn for the better next year, the worst is over now.

***Looking Ahead***
***All times listed for economic events are denominated in Eastern Standard Time (Add 4 hours for GMT equivalent)
- (IN) OECD World Forum in India
- (EU) EU General Affairs Ministers meet in Luxembourg
- (IS) Israel Q2 Final GDP Annualized: No est v 3.4% prelim
- 06:00 (EU) EFSF to sell up to €2B of 6-month bills
- 06:00 (TR) Turkey to sell 7.5% 2014 Bonds
- 06:30 (EU) ECB'S Honohan (Ireland) speaks in Dublin
- 06:30 (US) Daily Libor Fixing
- 07:00 (EU) ECB announces allotment in 7-Day Term Deposits to offset Govt Bond purchases; To drain €209.5B
- 07:45 (US) Weekly ICSC Chain Store Sales
- 08:00 (PL) Poland Sept Employment M/M: -0.1%e v -0.1% prior; Y/Y: 0.0%e v 0.0% prior
- 08:00 (PL) Poland Sept Avg Gross Wages M/M: -0.1%e v -0.4% prior; Y/Y: 2.7%e v 2.7% prior
- 08:30 (CA) Canada Aug Int'l Securities Transactions: C$8.5Be v C$6.7B prior
- 08:30 (CA) Canada Aug Manufacturing Sales M/M: +0.3%e v -1.5% prior
- 08:30 (US) Sept Consumer Price Index M/M: 0.5%e v 0.6% prior; Y/Y: 1.9%e v 1.7% prior
- 08:30 (US) Sept CPI Ex Food & Energy M/M: 0.2%e v 0.1% prior; Y/Y: 2.0%e v 1.9% prior
- 08:30 (US) Sept Consumer Price Index NSA: 231.300e v 230.379 prior; CPI Core Index: No est v 230.244 prior
- 08:55 (US) Weekly Redbook Retail Sales
- 09:00 (IT) Bank of Italy releases the Quarterly Economic Bulletin
- 09:00 (IT) Bank of Italy releases the Quarterly Economic Bulletin
- 09:00 (US) Aug Total Net TIC Flows: No est v $73.7B prior; Net Long-term TIC Flows: $48.0Be v $67.0B prior
- 09:00 (EU) Weekly ECB Forex Reserves
- 09:15 (US) Sept Industrial Production: +0.2%e v -1.2% prior; Capacity Utilization: 78.3%e v 78.2% prior
- 9:45 (UK) BOE to buy £1.0B 2027-2060 Gilts in reverse auction; Bid-to-cover: 2.07x
- 10:00 (US) Oct NAHB Housing Market Index: 41e v 40 prior
- 11:00 (US) Fed to buy $4.50-5.50B in Notes
- 11:00 (US) BOE to announce maximum size of ECTR auction for Wed, Oct 17th
- 11:30 (US) Treasury to sell $25B in 52-Week Bills
- 11:30 (US) Treasury to sell 4-Week Bills
- 12:00 (US) Fed's Lockhart to Introduce Argentine Ambassador in Atlanta
- 12:00 (US) Fed's Raskin in Boston
- 12:30 (DE) German Chancellor Merkel with Sweden PM Reinfeldt
- 16:30 (US) Weekly API U.S. Crude Oil Inventories
- (US) Second US Presidential Debate

***Economic Data***
- (EU) Sept EU27 New Car Registrations: -10.8% v -8.9% prior (biggest decline in 2 years)
- (TR) Turkey Sept Consumer Confidence: 88.8 v 91.1prior; lowest reading since Aug 2010)
- (EU) ECB: €1.97B borrowed in overnight loan facility v €1.3B prior; €251.4B parked in deposit facility vs. €260.5B prior
- (NL) Netherlands Aug Retail Sales Y/Y: +0.9% v -3.9% prior
- (AT) Austria Sept Consumer Price Index M/M: 0.9% v 0.3% prior; Y/Y: 2.7% v 2.2% prior
- (IT) Italy Aug Total Trade Balance: -€0.6B v +€4.5B prior; Trade Balance EU: €0.4B v €2.7B prior
- (UK) Aug ONS House Price Y/Y: 1.8% v 1.9%e
- (UK) Sept PPI Input M/M: -0.2% v +0.2%e; Y/Y: -1.2% v -0.6%e
- (UK) Sept PPI Output M/M: 0.5% v 0.3%e; Y/Y: 2.5% v 2.2%e
- (UK) Sept PPI Output Core M/M: 0.3% v 0.1%e; Y/Y: 1.2% v 1.0%e
- (UK) Sept CPI M/M: 0.4% v 0.4%e; Y/Y: 2.2% v 2.2%e; Core CPI Y/Y: 2.1% v 2.1%e
- (UK) Sept RPI M/M: 0.5% v 0.5%e; Y/Y: 2.6% v 2.6%e; Core RPI-X Y/Y: 2.6% v 2.6%e; Retail Price Index: 244.2 v 244.1e
- (EU) Euro Zone Sept CPI M/M: 0.7% v 0.7%e; Y/Y: 2.6% v 2.7%e; CPI Core Y/Y: 1.5% v 1.6%e
- (DE) Germany Oct ZEW Economic Sentiment: -11.5 v -14.9e; Current Situation: 10.0 v 11.8e
- (EU) Euro Zone Aug Trade Balance seasonally adj: €9.9B v €8.2Be; Trade Balance Unadj: €6.6B v €10.0Be
- (EU) Euro Zone Oct ZEW Economic Sentiment: -1.4 v -3.8 prior

Fixed Income:
- (ES) Spain Debt Agency (Tesoro) sold total €4.86B vs. €3.5-4.5B indicated range in 12-Month and 18-Month Bills
- Sold €3.4B in 12-month Bills; Avg Yield: 2.823% v 2.835% prior; Bid-to-cover: 2.71x v 2.03x prior; Max Yield 2.860% v 2.978% prior; Tail: 3.7 bps vs. 14.3 bps prior
- Sold €1.46B in 18-month Bills; Avg Yield 3.022% v 3.072% prior; Bid-to-cover: 3.04x v 3.56x prior; Max Yield 3.070% v 3.150% prior; Tail: 4.8 bps v 7.8 bps prior
- (GR) Greece Debt Agency (PDMA) sold €1.63B vs. €1.25B indicated in 13-week Bills; Avg Yield 4.24% v 4.31% prior; Bid-to-cover: 1.90x v 1.98x prior
- (ZA) South Africa sold total ZAR2.1B vs. ZAR2.1B indicated in 2023, 2041 and 2048 bonds
- (EU) ECB allotted €91.8B vs. €90.0Bein 7-Day Main Refinancing Tender at fixed 0.75%
- (CH) Switzerland sold CHF790.9M in 3-Month Bills; Avg Yield -0.221% v -0.221% prior
- (HU) Hungary Debt Agency (AKK) sold HUF60B vs. HUF45B indicated in 3-Month Bills; Avg Yield 6.12% v 6.40% prior; Bid-to-cover: 2.21x v 2.32x prior
- (BE) Belgium Debt Agency sold total €3.11B vs. €2.8-3.2B indicated range in 3-month and 12-month Bills
- Sold €1.503B in 3-month Bills; Avg Yield -0.010% v -0.003% prior; Bid-to-cover: 3.12x v 2.32x prior
- Sold €1.605B in 12-month Bills; Avg yield +0.072% v +0.095% prior; Bid-to-cover: 2.17x v 1.98x prior