Reports » Europe

European stock market, economy and companies update (October 26, 2012)

Contributed by Trade The News

*** SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM ***
***Notes/Observations***
- AAPL misses and guides lower
- RBNZ Governor Wheeler sees scope for rate cuts if needed
- S&P cuts ratings of several major French banks citing economic risks
- FT comments on Finland: Parallel currency as being imaginable
- IMF on Portugal; serious downside risks exist to outlook, risks are rising for the bailout program
- Euro Zone Working Group: Greece off track an likely to badly miss bailout targets
- Markets focus on US Q3 Advanced GDP reading during NY morning

***Equities***
- Indices: FTSE 100 -0.60% at 5,772, DAX -0.30% at 7,177, CAC-40 -0.40% at 3,398, IBEX-35 -0.80% at 7,718, FTSE MIB -0.50% at 15,449, SMI -0.40% at 6,578, S&P 500 Futures -0.70% at 1,398
- European equity indices are broadly lower, led by declines in Spain's IBEX-35, as the country's unemployment rate hit another record high in Q3. Additionally, the market declines have come as the Shanghai Composite dropped over 1.6% and US technology firms reported weaker than expected results. French financials have led the declines in the banking sector, as S&P lowered the ratings and outlooks of certain banks in France. Looking ahead, traders are expected to focus on US Q3 advanced GDP data. US companies due to report earnings include Arch Coal, Comcast, Merck and Moody's.
- Shares of African Barrick Gold [ABG.UK] have declined by over 2.5%,as the company reported y/y declines in its Q3 net profits and sales. Commercial services firm, CPP Group [CPP.UK] has gained over 5%, following the release of its Q3 update. Anglo American [AAL.UK] is higher by over 1% on the planned resignation of its CEO. Dutch staffing firm, USG People [USG.NL] is trading lower, as the firm reported weaker than expected Q3 revenues. In Sweden, Ericsson [ERICB.SE] has declined by over 4 % on lower than expected sales. Energy producer Statoil [STL.NO] is lower by more than 1%, as the firm's Q3 results missed expectations. Fish farmer Marine Harvest [MHG.NO] is lower by over 3%, after releasing its Q3 results. French advertising firm Publicis has declined by over 3%, following the release of its Q3 sales figures. Audio/visual firm Technicolor [TCH.FR] is higher by over 6%, after releasing its Q3 sales report.

- FTSE 100 movers (Anglo American +2.9%, Weir Group +2.5%, Pearson +1.7%; Shire -2.7%, Kazakhmys -1.9%, Prudential -1.8%, ARM Holdings -1.8%, Fresnillo -1.8%)
- CAC-40 movers (Carrefour +2.4%, St. Gobain +1.8%, PPR +1.8%, EADS +1.3%; Credit Agricole -3.4%, Publicis -3%, SocGen -2.9%, BNP -2.7%, STMicroelectronics -2.4%)
- DAX movers (SAP +1.1%; Lanxess -1.8%, Daimler -1.5%, Fresenius Medical Care -1.3%, Volkswagen -1%)
- IBEX-35 movers (Gamesa +1.8%, Endesa +1%, Bankia -2.6%, Mapfre -2.3%, Red Electrica -2%, Ferrovial -1.9%, Banco de Sabadell -1.9%)
- FTSE MIB moves (Luxottica +2%; Lottomatica -2.6%, Fiat -2.5%, Campari -2.1%, Unicredit -1.5%, Exor -1.5%)
- SMI movers (Adecco -2.7%, UBS -1.7%, Credit Suisse -1.4%, Swiss Re -1.4%, SGS -1.3%)

Speakers:
- ECB member Praet (Belgium) commented that the central bank's non-standard measures had contributed to price stability but must carefully monitor side effects of abundant liquidity. He reiterated that OMT bond purchase program addressed unfounded fears about the reversibility of the Euro. The LTRO operations proved effective in preventing abrupt deleveraging
- ECB's Asmussen (Germany) commented that proposal for treaty reforms should be further developed and noted that Europe was making good progress on deficit reduction. OMT bond buying program was a very effective tool to restore the monetary policy mechanism and would not have an inflationary consequence. European Council to decide the amount and timing of bond purchases and stressed that the ECB would not firing up the printing press. He commented on the Far East and stated that some Chinese local govts were close to broke which raised questions on of Asian economic growth as China survived crisis through domestic investment
- BoE's Haldane commented that claims by regulators that have solved too big too fail issue was premature, implicit bank subsidy for largest banks seen at $300B/year. He noted that some of the biggest banks might need even more capital.
- Senior German Coalition Lawmaker commented that Germany sought an extension of the Greece program with a loan moratorium a conceivable path. The official said to favors ECB's Assmussen's Greek bond buy back program but stressed Greece must share responsibility in any extension of bailout agreements
- German Govt spokesperson Seibert stated that Germany to hold to the prior June EU Leader summit conclusions on Ireland
- Spain Deputy Economy Min Latorre commented that recent employment data showed jobs destruction was slowing, but could not determine when net job creation would resume. He could not estimate funding needs of Spain's regions for 2013 yet and reiterated that Spain had not decided on a bailout yet
- Moody's Chief Sovereign Economist De Souza commented that he did not see a short term resolution for debt crisis with ECB and Fed stimulus was buying time.
- Ireland could face new conditions if new rescue fund refunds govt cost of recapitalizing banks
- (ES) Catalonia chief Mas stated that the final decision on the future of Catalonia would be decided by its people. He noted that Spain PM Rajoy should do as UK PM Cameron did with Scotland (allow a referendum)
- BOJ may downgrade their economic assessment at their next meeting. It last cut back in Sept when it noted that the pick up in the economy had paused
- Japan Ministry of Finance might delay issuance or reduce issuance amount of JGBs at its Dec sales if deficit financing bill passage was delayed
- China Commerce Ministry (MOFCOM) commented that the global economy to recover in 2013 and saw China GDP growth being faster in 2013 period vs. 2012
- Thailand Central Bank cuts its 2013 GDP growth forecast to 4.6% from 5.0% prior (as expected) and maintained 2012 GDP growth at 5.7%. On inflation the central bank raised its 2012 forecast to 3.0% from 2.9% prior
-Fitch affirmed AAA sovereign rating of Australia with outlook stable

Currencies:
- The European session began taking note of the sentiments from various equity markets and provided a sense of risk aversion in the early part of the session. Weaker than expected earnings from Apple and Amazon set the tone for Asia helped the USD and JPY currencies to gains against their European counterparts. The financial press was also quite plentiful in various concerns over the European periphery (**Note pls refer to the Notes/Observations section above). Soothing comments from a German Parliamentary member that Germany sought an extension of the Greece program helped to restore some calm in markets. The EUR/USD tested a 3-month uptrend line at the 1.2910 area before consolidating its losses. The pair was now little changed at 1.2940 as the NY morning approached.
- The USD/JPY moved below the 80 handle on profit-taking after Japan did confirm the cabinet approval of a ¥750B stimulus package.

Political/ In the Papers:
-(EU) The contraction in the euro zone's money supply figures shows that the ECB needs to engage in quantitative easing (QE) - Telegraph's Ambrose Evans-Pritchard
-(FI) FT commented on Finland; Some businesses in Finland and govt officials are considering the logistics of leaving the euro currency union; Although no one expects this to happen soon, many have openly discussed the mechanism of exiting the euro
- (FR) S&P took action on various France Banks; revised Societe Generale outlook to Negative from Stable; Took action on other France banks; lowered long- and short-term counterparty credit ratings on BNP Paribas to 'A+/A-1' from 'AA-/A-1+'; Revises Credit Agricole SA's outlook to negative
- (GR) Greece official: Greece requires additional €30B through 2016 to close financing gap - financial press; Interest rate cut on loans to Greece may be a more feasible approach; Debt-to-GDP ratio now seen at 140% in 2020.
-(GR) Greece deal with Troika is being held up by the smallest coalition partner, Democratic Left, who is trying to get labor reforms changed - ekathimerini; Democratic Left appealed to Greece's eurozone partners to convince the troika to withdraw its demands on labor reforms.
-(GR) Greece Fin Min Stournaras has been hospitalized with exhaustion and the flu - EU press
-(GR) Greece extends short selling ban through Jan 31
-(IE) IMF issues commentary on Ireland; 2012 fiscal program remains on track; lowers 2013 GDP forecast for Ireland to 1.1% from 1.4%; ESM does have the ability to finance Ireland bank linked debt
- (PT) IMF comments on Portugal; serious downside risks exist to outlook, risks are rising for the bailout program
-(ES) Spain Govt approves €4.6B in aid to Valencia, Andalusia regions from the bailout fund - financial press

***Looking Ahead***
***All times listed for economic events are denominated in Eastern Standard Time (Add 4 hours for GMT equivalent)
- (CO) Colombia Central Bank Interest Rate Decision: Expected to leave the Overnight Lending Rate unchanged at 4.75% (**Note: Speculation that they might cut rates again)
- 06:00 (IE) Ireland Sept Retail Sales Volume M/M: No est v 0.4% prior; Y/Y: No est v -0.6% prior
- 06:00 (BR) Brazil Oct FGV Construction Costs M/M: 0.2%e v 0.2% prior
- 06:10 (UK) DMO to sell combined £3.5B in 1-month, 3-month and 6-month Bills
- 06:30 (US) Daily Libor Fixing
- 07:30 (DE) German Govt press conference
- 07:30 (US) Weekly India Forex Reserves
- 08:30 (US) Q3 Advanced GDP Q/Q Annualized: 1.8%e v 1.3% prior; Personal Consumption: 2.1%e v 1.5% prior
- 08:30 (US) Q3 Advanced GDP Price Index: 2.1%e v 1.6% prior; Core PCE Q/Q: 1.3%e v 1.7% prior
- 08:30 (BR) Brazil Sept Total Outstanding Loans (BRL): No est v 2.211T prior; Y/Y: No est v 1.2% prior; Private Banks Lending: No est v 1.197T prior
- 08:30 (BR) Brazil Sept Tax Collections (BRL): 78.1Be v 77.1B prior
- 09:00 (DE) SPD's Steinbrueck talks with Irish Foreign Minister Gilmore
- 09:55 (US) Oct Final University of Michigan Confidence: 83.0e v 83.1 prelim
- 10:00 (DE) German Chancellor Merkel
- 10:00 (MX) Mexico Central Bank Interest Rate Decision: Expected to leave the Overnight Rate unchanged at 4.50%
- 11:00 (US) Fed to purchase $1.50-2.50B in Notes

Weekend
**Reminder: European clocks will fall back an hour
- The US was move its clocks back the following weekend (Nov 4th)

***Economic Data***
- (RU) Russia Narrow Money Supply w/e Oct 22nd (RUB): 7.27 v 7.21T prior
- (DE) Germany Nov GfK Consumer Confidence: 6.3 v 5.9e
- (DE) Germany Sept Import Price Index M/M: -0.7% v +0.3%e; Y/Y: 1.8% v 2.9%e
- (FI) Finland Q3 House Prices Q/Q: 1.1% v 0.8% prior; Y/Y: 1.8% v 0.9% prior
- (FR) France Oct Consumer Confidence: 84 v 84e; Business Survey Overall Demand: -21 v -25 prior
- (ES) Spain Q3 Unemployment Rate: 25.0% v 25.0%e (record high level)
- (CH) Swiss Oct KOF Leading Indicator: 1.67 v 1.63e
- (EU) ECB: €527M borrowed in overnight loan facility €592M prior; €248.5B parked in deposit facility vs. €245.1B prior - 03:30 (SE) Sweden Sept Trade Balance (SEK): 6.0Be v 3.3B prior
- (VN) Vietnam Oct Trade Balance: -$500M v +$175M prior
- (DE) Germany Oct CPI Hesse M/M: 0.0 v 0.0% prior; Y/Y: 2.0 v 2.0% prior
- (IT) Italy Oct Business Confidence: 88.6 v 88.7e; Economic Sentiment: 76.6 v 76.0 prior
- (TW) Taiwan Sept Leading Index M/M: +0.1 v -0.1% prior; Coincident Index M/M: 0.4% v 0.3% prior

Fixed Income:
- (IT) Italy Debt Agency (Tesoro) solds total €3.0B vs. €3.0B indicated in Zero coupon Sept 2014 CTZ ; Avg Yield 2.397% v 2.532% prior; Bid-to-cover:1.65 x v 1.65 prior
- (IT) Italy Debt Agency (Tesoro) sold total €1.0B vs. €1.0B indicated in 2021 and 2026 BTPi
- Sold €674M in 2.1% I/L Sept 2021 BTPi; Yield 3.33% v 3.68%; Bid-to-cover: 2.13x v 2.26x prior
- Sold €326M in 3.1% I/L Sept 2026 BTPi Bond; Avg Yield 3.75% v 5.29% prior; Bid-to-cover: 2.71x v 2.43x prior
- (ZA) South Africa sold total ZAR800M in l I/L 2038 and 2050 Bonds