Reports » Europe

European stock market, economy and companies update (October 18, 2012)

Contributed by Trade The News

*** SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM ***
***Notes/Observations***
- China Q3 GDP in line +7.4% expectations but registering its 7th straight quarter of slowing growth with the YoY at a 3 low
- S&P cut Cyprus sovereign rating three notches to B from BB, ratings remains on Watch Negative
- UK Sept retail sales beats expectations
- Spain auction results seen as solid
- No pressure for EU Leaders to achieve results at current summit meeting ( its 22nd in the current crisis)

***Equities***
-Indices: FTSE 100 +0.20% at 5,921, DAX +0.30% at 7,415, CAC-40 -0.10% at 3,524, IBEX -0.50% at 8,086, FTSE MIB -0.30% at 16,181, SMI -0.25% at 6,769, S&P 500 Futures flat at 1,457

- European equity indices are trading mixed, as Spain's IBEX-35 has seen slight profit-taking following yesterday's outperformance. In terms of the banking sector, Spanish banks have lagged, while shares of Credit Agricole and Barclays have outperformed. Resource related firms are broadly higher, amid in line Q3 GDP data out of China
- Shares of UK-listed fund manager Man Group [EMG.UK] have declined by over 4%, as the company noted that its outflows in Q3 accelerated on a q/q basis. SABMiller [SAB.UK] has moved slightly lower after issuing its H1 trading update, while retailer Mothercare [MTC.UK] is higher by over 9% following the release of its Q2 sales report. Dutch chemicals/coatings firm Akzo Nobel [AKZA.NL] is lower by more than 4%, as the firm's Q3 net profit missed analyst expectations. Nestle [NESN.CH] has declined by over 1.5%, after reporting weaker than expected Q3 organic sales growth. Biotechnology firm Actelion [ATLN.CH] is higher by over 1%, after releasing its 9-month results and reaffirming FY outlook. Remy Cointreau [RCO.FR] is lower by over 6%, as the company noted that sales growth moderated in Q3. Italy's Banca Monte Paschi de Siena [BMPS.IT] has declined by over 5%, after Moody's downgraded the firm's rating to junk status. Additionally, there has been speculation that the firm is seeking to hire advisors for its previously announced €1B capital raise. In Sweden, aerospace/defense firm Saab [SAABB.SE] has traded lower, following the release of its 9-month results. Hygiene products firm Svenska Cellulosa [SCAB.SE] is higher by more than 3% on better than expected Q3 results.

- FTSE 100 movers (Evraz +2.8%, Kazakhmys +2.6%, CRH +2.4%, Antofagasta +2.2%, IMI +1.8%; Capital Shopping Centers -1.7%, Smith & Newphew -1.2%, Unilever -1.2%, Standard Chartered -1%)
- CAC-40 movers (Alcatel-Lucent +5.5%, Technip +2.9%, Renault +2.6%, STMicroelectronics +2.3%, Vallourec +1.5%; Pernod-Ricard -3.3%, L'Oreal -1.5%, BNP -1.1%, Vivendi -1.1%)
- DAX movers (Infineon +2.9%, Lufthansa +2.1%, Daimler +2.1%, Deutsche Post +2%, HeidelbergCement +1.3%; Lanxess -1.1%)
- IBEX-35 movers (Bankia +7%, Obrascon +1%, Endesa -2.6%, Mapfre -2.1%, Bankinter -1.6%, Banco de Sabadell -1.4%, CaixaBank -1.3%)
- FTSE MIB movers (Ferragamo -4.8%, Banca Monte dei Paschi -4.9%, Impregilo -2.3%, Campari -2%, Tenaris -1.9%)
- SMI movers (Actelion +2%, Credit Suisse +1.5%, Transocean +1.5%, Holcim +1.3%; Richemont -3.6%, Swatch -2.4%, Nestle -1.9%)

Speakers:
- EU leaders were vocal ahead of its 22nd summit in three years.
- German Chancellor Merkel reiterated the German point of view as she addressed the Bundestag. Merkel noted that the current crisis would not be solved in one single step but leaders had made progress to date. She added that too many reforms were going too slowly in Greece, corruption remained an issue there. EU could not stop its reforms at the halfway mark. Agreeing to a legal basis for EU banking supervision was not sufficient in itself to trigger direct bank aid from the ESM. The ECB's OMT bond buying program must not lead to a slower reform path
- Finland PM Katainen stated that it needed to get an EU banking supervisor in place as soon as possible as Banking union would strengthen confidence in the EMU
- Portugal PM Coelho stated that his country was not seeking either more aid or time to meet targets. The single banking supervisor must cover all banks and the ECB must separate monetary policy from any supervisory role. He forecasted that it would take 2 to 3 years to establish banking union
- EU Commissioner Rehn stated that there were talks about fiscal multipliers in Japan and that stagnation in economy would last until year end. He noted that the EU would return to growth in 2013 after structural changes had a negative impact on growth.
- Poland Central Banker Chojna-Duch (dovish) reiterated her dovish views noting that the recent economic data suggested more decisive easing was needed
- Sweden Central Bank Gov Ingves stated in an opinion piece in the press that there were risks with a too low interest rate over time and the central bank must consider the debt levels of households and companies
- S&P Kraemer commented that he saw another leg down in Euro Zone investor confidence and that Greece would likely default again. He saw a low risk of default by Ireland, Portugal, and Spain but noted Europe sovereign ratings faced 1 in 3 chance of downgrade. Overall he saw Euro zone risks on the downside but it limited. On the US he believed America has serious need for medium term fiscal strategy but might keep US rating through 2013 but would monitor after that
- Moody's commented on Poland and expressed comfort in the country's stable outlook. Forecasts 2012 budget deficit to GDP between 3.5% to 3.7% range with 2012 GDP growth at 2.1% and at 1.7% in 2013
- Russia could widen Ruble trading band (corridor) before a free float (Note: The Band was widened several times over the past year and last amended 7 rubles from 6 back on July 24th 2012

Currencies:
- Risk appetite is holding up heading into the European morning following relief over the plethora of Chinese data but again the price action in Europe was largely muted. The USD and JPY currencies remain vulnerable given the environment.
- The EUR/USD held above the 1.3070 level throughout the Asian and European sessions with dealers eyeing the 1.3200 level as its next real test.
- CNY currency hits fresh post 2005 revaluation high against the USD as the pair trades below the 6.2450 level

Political/ In the Papers:
- (EU) EU Council secret legal opinion suggests ECB banking supervisor plan may be illegal - FT
- (EU) EU is mulling a plan that would allow European banking regulator (EBA) to impose decisions directly on banks, would prevent the ECB from having special 'comply or explain' exemption within the EBA - financial press
- (FR) France Fin Min Moscovici: Had positive discussion with Moody's on France sovereign rating - financial press; Ratings agencies are sensitive to efforts the country is making; prepared to give France time
- (GR) Germany has been working for some time with EU, ECB and IMF on the next bailout tranche for Greece (unofficially); Official position remains they will wait to see Troika report before making a decision - Der Spiegel; The next payment of €31.5B will be put into an escrow account no later than Nov.
- (GR) Troika formally concludes mission to Greece; talks were productive and agreed on most of the core issues (as scheduled); Discussions will continue among technical representatives in coming days to reach a full agreement.
- (IT) Italy PM Monti wins confidence vote regarding the anti corruption legislation
- (ES) EMU members said to be seeking to use less than the €100B fund for the Spain bank bailout; still considering use of the balance of the bank bailout fund toward a potential sovereign bailout for Spain - financial press
- (ES) Spain Econ Min Official: Maximum size of Spanish bad bank will be €90B, expected size of the facility will be much smaller

***Looking Ahead***
***All times listed for economic events are denominated in Eastern Standard Time (Add 4 hours for GMT equivalent)
- (GR) Greece's Largest Unions ADEDY and GSEE hold strikes
- (FI) Finland presents 3rd supplementary budget to Parliament
- 06:00 (CZ) Czech Republic to sell 12-monthBills
- 06:00 (FR) France Debt Agency (AFT) to sell €1.5B-EUR2.5B Inflation-Linked Bonds
- To sell 0.1% July 2021 OATi
- 06:00 (PT) Portugal Sept Producer Prices M/M: No est v 0.9% prior; Y/Y: No est v 4.0% prior
- 06:30 (US) Daily Libor Fixing
- 07:00 (TR) Turkey Central Bank Interest Rate Decision: Expected to leave Benchmark Repo Rate unchanged at 5.75% (unanimous) ; Cut Overnight Lending Rate by 50bps to 9.50%
- 07:30 (BR) Brazil Central Bank (COPOM) Monetary Policy Meeting
- 08:00 (RO) Romania to sell RON300M in Bonds
- 08:30 (CA) Canada Aug Wholesale Sales M/M: +0.2%e v -0.6% prior
- 08:30 (US) Initial Jobless Claims: 365Ke v 339K prior; Continuing Claims: 3.275Me v 3.273M prior
- 09:00 (BE) Belgium Oct Consumer Confidence: No est v -14 prior
- 09:45 (US) Commercial Paper outstanding
- 10:00 (US) Oct Philadelphia Fed: 1.0e v -1.9 prior
- 10:00 (US) Sept Leading Indicators: +0.2%e v -0.1% prior
- 10:30 (US) Weekly EIA Natural Gas Inventories
- 11:00 (EU) EU Leaders begin Two-Day Summit in Brussels
- 11:00 (US) Fed to Purchase $1.75-2.25B in Notes
- 11:00 (US) Treasury 2-year, 5-year and 7-year refunding announcement
- 13:00 (US) Treasury to sell $7.00B in 30-Year TIPS Reopening

***Economic Data***
- (CH) Swiss Sept Trade Balance (CHF): 2.0B v 1.7B prior; Real Exports M/M: 2.6% v 0.5%e; Real Imports M/M: 3.0% v 2.6% prior
- (EU) ECB: €921M borrowed in overnight loan facility v €1.92B prior; €261.6B parked in deposit facility vs. €257.9B prior
- (NL) Netherlands Oct Consumer Confidence: -32 v -27e
- (NL) Netherlands Sept Unemployment Rate: 6.6% v 6.5% prior
- (SE) Sweden Sept Unemployment Rate: 7.4% v 7.4%e; Unemployment Rate Seasonally Adj: 7.8% v 7.8%e
- (ES) Bank of Spain released its Aug loan data with Total Bad Loans at €178.6B v €173.2B prior; Bad Loan Ratio: 10.5% v 9.9% prior (record levels)
- (UK) Sept Retail Sales Ex Auto Fuel M/M: 0.6% v 0.3%e; Y/Y: 2.9% v 2.4%e
- (UK) Sept Retail Sales w/Auto Fuel M/M: 0.6% v 0.4%e; Y/Y: 2.5% v 2.1%e
- (HK) Hong Kong Sept Unemployment Rate: 3.3% v 3.3%e
- (PL) Central/Eastern European Oct ZEW Indicator: +5.5 v -14.6 prior
- (IT) Italy Aug Current Account: -€2.5B v +€1.6B prior

Fixed Income:
- (ES) Spain Debt Agency (Tesoro) sold total €4.61B vs. €3.5-4.5B indicated range in 2015, 2016 and 2022 bono bonds
- Sold €1.637B in 4.00% July 2015 Bono; Avg Yield 3.227% v 3.676% prior; Bid-to-cover: 2.61x v 1.8x prior; Maximum Yield 3.266% v 3.774% prior, tail: bps
- Sold €1.464B in 4.25% Oct 2016 Bono; Avg Yield 3.977% v 4.603% prior; Bid-to-cover: 2.56x v 1.9x prior; Max Yield 3.999% v 4.694% prior; tail bps
- Sold €1.513B in Jan 5.85% 2022 Bono Bonds; Avg Yield 5.458% v 5.666% prior; Bid-to-cover: 1.88x v 2.85x prior; Max Yield 5.468% v 5.700% prior; Tails 1.0bps v 3.4bps prior
- (FR) France Debt Agency (AFT) sold total €7.96Bvs. €7.0-8.0B indicated rangeB in 2014, 2015, 2016 and 2017 BTANs
- Sold €1.0B in 0.75% Sept 2014 BTAN; Avg Yield 0.19% v 0.20% prior; bid-to-cover: 4.73x v 2.25x prior
- Sold €1.445B in 2.0% 2015 BTAN; Avg Yield 0.34% v 0.83% prior; Bid-to-cover: 3.45x v 3.31x prior
- Sold €795M in 2.50% July 2016 BTAN note; Avg Yield 0.61% v 0.53%; Bid-to-cover: 3.84x v 2.14x prior
- Sold €4.72B in 1.0% July 2017 BTAN; Avg Yield 0.92% v 0.98% prior; bid-to-cover 1.85x v 1.88x prior
- (IE) Ireland Debt Agency (NTMA) sold €500M v €500M indicated in 3-month Bills; Avg Yield 0.700% v 0.700% prior; Bid-to-cover: 3.60x v 3.03x prior
- (HU) Hungary Debt Agency (AKK) sells total HUF49B vs.HUF47B indicated in 2015, 2017, and 2022 bonds
- (UK) DMO sold £3.75B in 4.5% 2019 Gilts; Avg Yield 1.128% v 1.495% prior; Bid-to-cover: 1.5x v 1.79x prior; Tail: 0.4bps v 0.4bps prior