Reports » Europe

European stock market, economy and companies update (October 23, 2012)

Contributed by Trade The News

*** SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM ***
***Notes/Observations***
- Pressure mounts on BoJ for more monetary easing at its Oct 30th policy meeting. Market chatter of another $250B in asset purchases but Japan Govt denies any such pressure on BOJ
- Moody's cuts rating on 5 Autonomous Spanish regions and affirms 5 other
- Spain 2012 deficit to GDP may be 7.2-7.4% of GDP against the planned 6.3% target
- Greek political leaders meet today, as the negotiations over the release of the next bailout tranche reach the final round
- Obama the perceived winner of the third and final presidential debate
- Hong Kong Monetary Authority (HKMA) continues to defend its USD peg and curb HKD currency appreciation

***Equities***
- Indices: FTSE 100 -0.60% at 5,848, DAX -0.70% at 7,277, CAC-40 -0.40% at 3,467, IBEX-35 -0.40% at 7,848, FTSE MIB -0.20% at 15,832, SMI -0.70% at 6,699, S&P 500 Futures -0.60% at 1,422

-Following the mixed open, European equity indices are mostly lower, led by the German DAX index, amid the rise being seen in peripheral yields. Weakness has been seen throughout the banking sector and underperformers include Deutsche Bank, Lloyds, RBS, SocGen and BBVA. Greece banks are broadly lower, tracking the declines in Greece's bond prices. Mining shares are broadly lower, tracking the declines in commodity prices. Overall, the European corporate earnings/forecasts released on the session have been mixed. Companies which have beat expectations include ARM Holdings, CSR and Swedbank, while quarterly results were weaker than expected for Alfa Laval, KPN, Norsk Hydro and Syngenta. Cautious outlooks were issued by firms including Faurecia, Leoni and Mulberry. Companies due to report during the US morning include 3M, Coach, Dupont, Harley Davidson, Lexmark International and UPS.

- Luxury handbag retailer Mulberry [MUL.UK] has declined by over 25%, as the company warned on its FY outlook amid weakness in the international business. Chipmaker ARM Holding [ARM.UK] has gained over 3%, after reporting better than expected Q3 results. CSR [CSR.UK] is higher by more than 3%, on better than expected Q3 sales. Shares of drilling services firm Capital Drilling [CAPD.UK] are lower by more than 10%, as the company warned on its full year outlook. In other UK movers, Premier Foods [PGD.UK] has gained over 4% (issued interim management statement), while Whitbread [WTB] has moved lower by over 1.5% (issued H1 sales report).Dutch telecom firm KPN [KPN.NL] is trading lower on weaker than expected Q3 results. Coffee and tea products manufacturer DE Master Blenders [DE.NL] is lower by over 4%, after releasing Q1 sales figures. In Switzerland, Syngenta [SYNN.CH] has moved higher, despite reporting weaker than expected Q3 sales, as the firm reaffirmed its FY forecast. In Germany, wire/cable products firm Leoni [LEO.DE] has declined by over 3%, as the company made cautious comments about its Q4 outlook. ADVA Optical Networking [ADV.DE] has declined by over 13%, as the firm issued sales guidance for Q4. In France, Michelin [ML.FR] has gained over 4% on better than expected Q3 sales figures. Auto parts company Faurecia [EO.FR] has declined by over 3% as it cut its FY operating income forecast. Swedish engineering products/solutions firm Alfa Laval [ALFA.SE] is lower more than 6% on weaker than expected quarterly results. Shares of Swedbank [SWEDA.SE] are higher by more than 2%, as the company reported better than expected Q3 profits. Norwegian aluminum firm Norsk Hydro [NHY.NO] has declined by over 3% on weaker than expected quarterly sales results. In Finland, Nokia has declined by over 4%, as the company announced a plan to sell convertible bonds.

-FTSE 100 movers (ARM Holdings +4%, Experian +3.3%, Centrica; Burberry -4.5%, Kazakhmys -3.6%, Whitbread -2.9%, RBS -2.4%, Weir Group -2.2%, Lloyds -2.2%)
- CAC-40 movers (Alcatel-Lucent -2.6%, Solvay -1.6%, Sanofi -1.5%, AXA -1.5%, Schneider Electric -1.3%)
- DAX movers (Adidas -2.1%, Bayer -1.8%, Lufthansa -1.8%, Infineon -1.5%, K+S -1.4%)
- IBEX-35 movers (Banco Popular -2.3%, Mapfre -2.3%, ACS -1.7%, BBVA -1.3%, Banco Sabadell -1.3%)
- FTSE MIB (Ferragamo -3%, Finmeccanica -3%, Mediaset -2.1%, Banca Popolare -1.9%, Fiat -1.8%)
- SMI movers (Syngenta +1%; Credit Suisse -1.9%, Actelion -1.9%, Adecco -1.5%)

Speakers:
- Bank of Spain commented that it saw Q3 GDP contracting by 0.4% q/q and y/y seen contracting by 1.7%
- EU's Van Rompuy reiterated that Eurogroup to decide on Greece after receipt of the EU/IMF/ECB Troika report and also reiterated view that Greece had made great progress
- German Econ Min Roesler commented that it needed certainty that Greek reforms were in fact being carried out. German budget should be balanced in 2014 if possible (**Note: 2016 has been the prior discussed time frame)
- German Foreign Min Westerwelle commented that the EU must speak in one foreign policy voice. He noted that he saw light at the end of the tunnel in regards to the Euro crisis
- Sweden Debt Office issued its updated borrowing forecasts which raised the 2013 nominal target to SEK74B vs. SEK63B prior. It did cut its 2012 Net Borrowing to SEK28B from SEK32B prior while raised the 2013 Net Borrowing to SEK55B from SEK15B prior. It sets initial 2014 Net Borrowing at SEK56B. It would raise linker sales to SEK9B annually. The agency forecasted 2012 GDP growth at 1.0% with 2013 seen at 1.3% and 2014 GDP growth at 2.2%
- China to maintain "proactive" fiscal policy
- Iran Oil Min Qasemi stated that it would cut all oil exports if sanctions were increased and it had a plan to function without oil revenues

Currencies:
- The European session traded on a cautious note as Spain remained in focus. The EUR/USD again stalled at the 1.3075 area in Asia and drifted lower ahead of the NY morning. Dealers cited various excuses for the cautious tone. Moody's cuts rating on 5 Autonomous Spanish regions and affirms 5 other while the Bank of Spain confirmed that the gov't 2012 deficit to GDP might be 7.2-7.4% of GDP against the planned 6.3% target. Peripheral yield were also higher despite a solid Spanish Bill auction as Rajoy continued to stall on a formal aid request. ESM was facing a fresh legal challenge this time at the highest EU court, with a hearing today and a ruling as soon as the year end. Dealer did note the court would likely to follow Germany's constitutional court and clear this last hurdle.
- The USD/JPY remained below the 80 handle after a brief test of it during the Asian session. The JPY retraced from its worst levels against numerous pair

Political/ In the Papers:
- (DE) According to some estimates, the Bundesbank's gold reserves are believed to be worth over €130B - German Press; Germany's General Accounting Office is seeking to verify the size of the German central bank's gold reserves held overseas.
- (GR) German parliament member: expect Greece will get a program extension with revised conditions
- (GR) Hedge funds have continued to buy Greece's sovereign bonds - US financial press; Buyers are said to include Third Point LLC, Greylock Capital, Appaloosa Management and Fir Tree Partners.
- (IE) France President Hollande: Supportive of a retroactive recap of Ireland banks; banking recapitalizations through the ESM can begin in 2013
- (ES) Investor Wilbur Ross: Could be interested in Spain banks once bad loan issues are resolved, currently talk frequently with Spanish banks
- (UK) Chatter is circulating on the UK's exit from its EU cooperation, being called "Brexit," after German Chancellor Merkel shot back at UK PM Cameron's opinion on the EU budget and the UK's failure to sifn the budget pact - La Tribune
- AUD/USD: According to IMF, Australian Dollar is the most expensive out of G20 when valued against a basket of good and services' US production costs - SMH
- (JP) BOJ planning to conduct more easing and increasing asset purchases at the next meeting on Oct 30 - Japan press
- (JP) Japan PM Noda and leaders of opposition parties have failed to reach an agreement regarding passage of a deficit-financing; Timing of next election said to be the main point of contention - Nikkei News

***Looking Ahead***
***All times listed for economic events are denominated in Eastern Standard Time (Add 4 hours for GMT equivalent)
- (IS) Israel Sept Leading "S" Indicator: No est v 0.1% prior
- 06:00 (DE) German Chancellor Merkel
- 06:00 (PL) Poland to sell Up to PLN9.0B in Bonds
- 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
- 07:00 (FI) ECB member Liikanen
- 07:30 (TR) Turkey Oct Industrial Confidence: No est v 103.1 prior; Capacity Utilization: No est v 74.0% prior
- 07:45 (US) Weekly ICSC Chain Store Sales
- 08:00 (GR) Greek political leaders meet
- 08:30 (BR) Brazil Sept Current Account: -$2.5Be v -$2.6B prior; Foreign Direct Investment (FDI): $4.0Be v $5.0B prior
- 08:30 (CA) Canada Aug Retail Sales M/M: 0.3%e v 0.7% prior; Retail Sales Less Autos M/M: 0.4%e v 0.4% prior
- 08:55 (US) Weekly Redbook Retail Sales
- 09:00 (BE) Belgium Oct Business Confidence: -11.0e v -11.6 prior
- 09:00 (CA) Bank of Canada Interest Rate Decision: Expected to leave interest rates unchanged at 1.00%
- 09:00 (EU) Weekly ECB Forex Reserves
- 9:45 (UK) BOE to buy £1.0B 2027-2060 Gilts in reverse auction
- 10:00 (EU) Euro Zone Oct Advanced Consumer Confidence: -25.9e v -25.9 prior
- 10:00 (US) Oct Richmond Fed Manufacturing Index: +4e v +4 prior
- 11:00 (US) Fed to sell $7.0-8.0B in notes
- 11:30 (US) Treasury to sell combined $$40B in 4-week bills
- 12:00 (US) Former Fed Chairman Greenspan speaks at SIFMA
- 13:00 (US) Treasury to sell $35B in 2-Year Notes
- 14:00 (PT) Portugal Year-to-Date Budget Report
- 15:00 (UK) BOE Gov King
- 15:00 (AR) Argentina Sept Shop Center Sales Y/Y: No est v 23.0% prior
- 16:30 (US) Weekly API Crude Oil Inventories
- 20:30 (AU) Australia Q3 CPI
- 21(CN) China Oct HSBC Flash Manufacturing PMI: No est v 47.9 prior

***Economic Data***
- (FI) Finland Sept Unemployment Rate: 7.1% v 7.0%e
- (FR) France Oct Business Confidence Indicator: 85 v 90e; Production Outlook Indicator: -56 v -50e; Own-Company Production Outlook: -8 v -5 prior
- (DK) Denmark Oct Consumer Confidence: -5.5 v -2.2 prior
- (ZA) South Africa Aug Leading Indicator: 131.2 v 130.4 prior
- (EU) ECB: €1.1B borrowed in overnight loan facility v €1.0B prior; €251.6B parked in deposit facility vs. €248.7B prior- 03:30 (NL) Netherlands Aug Consumer Spending Y/Y: -2.0% v -1.6% prior
- (RO) Romania Sept Money Supply Y/Y: 7.8% v 9.8% prior
- (PL) Poland Sept Retail Sales M/M: -1.3%% v +0.3%e; Y/Y: 3.1% v 4.5%e
- (PL) Poland Sept Unemployment Rate: 12.4% v 12.5%e
- (TW) Taiwan Sept Industrial Production Y/Y: 3.0%% v 6.5%e; Commercial Sales: -0.8% v -0.8%e
- (UK) Sept BBA Loans for House Purchase: 31.2K v 30.8Ke

Fixed Income:
- (ES) Spain Debt Agency (Tesoro) sold total €3.53B vs. €2.5-3.5B indicated range in 3-Month and 6-Month Bills
- Sold €967M in 3-month Bills; Avg Yield: 1.415% v 1.203% prior; Bid-to-cover: 4.32x v 3.29x prior; Max Yield: 1.45% v 1.25%; Tail: 3.5bps v 4.7bps prior
- Sold €2.56B in 6-month Bills; Avg Yield: 2.023% v 2.213% prior; Bid-to-cover: 1.99x v 1.83x prior; Max Yield: 2.100% v 2.30% prior; Tail: 7.7bps v 8.7bps prior
- Spain Autonomous region of Madrid to sell additional Mar 2020 bonds; Yield guidance seen at 7.80%
- (UK) DMO opened its book on 3.25% Oct 2044 Gilt via syndication; pricing guidance +8ps/2042 Gilt with order book over £9.5B
- (IN) India sold total INR100B vs. INR100B indicated in 3-month and 6-month Bills
- (ZA) South Africa sold total ZAR2.1B vs. ZAR2.1B indicated in 2026, 2036 and 2048 Bonds
- (CH) Switzerland sold CHF850.3M in 3-Month Bills; Avg Yield -0.229% v -0.221% prior
- (EU) ECB allotted €77.3B vs. €90Be in 7-Day Main Refinancing Tender at fixed 0.75%; recd 93 bids vs. 96 prior