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Reports Europe

European stock market, economy and companies update (September 03, 2014)

September 3, 2014, Wednesday, 10:24 GMT | 05:24 EST | 13:54 IST | 16:24 SGT
Contributed by Trade The News

- China Aug Non-manufacturing PMI: 54.4 v 54.2 prior (first increase in 3 months)
- China HSBC Aug Services PMI: 54.1 v 50.0 prior (17-month high)
- Australia Q2 GDP slows sequentially but slightly better than expected (Q/Q: 0.5% v 0.4%e; Y/Y: 3.1% v 3.0%e)
- Japan PM formally reshuffles his Cabinet (1st under his 2-year tenure)
- Headline roulette over Ukraine. Initially Poroshenko/Putin said to reach permanent ceasefire for Ukraine's Donbass region; risk appetite finds some tailwind but both sides later clarified that it was working on steps towards one
- Core European Services PMI revised lower in Aug but some peripherals stand out
- German said to be preparing a package to counter its economic slowdown

Indices [Stoxx50 +1.3%, FTSE 100 +0.8% at 6,883, DAX +1.4% at 9,642, CAC-40 +1.2% at 4,430, IBEX-35 +1.3% at 10,895, FTSE MIB +1.6% at 20,788, SMI +1% at 8,842, S&P 500 Futures +0.3% at 2,007]

- Market Focal Points/Key Themes: Equity markets open higher following positive leads from Asia as traders remain focused on Thursday's ECB decision and US payrolls report (due Friday), Russia's MICEX gains over 2% on hopes of cease-fire, High quality corporates continue to tap debt market ahead of ECB decision (Sanofi, Citigroup, Bank of America, Toyota), Euro Zone Services PMIs mostly below ests, UK services PMI above ests, Toll Brothers beats ests

By Sector
- Energy [Bourbon GBB.FR -3% (reported H1 loss)]
- Consumer Staples [Danone BN.FR +1.5% (new CEO)]
- Consumer Discretionary [LVMH MC.FR +3% (agreement with Hermes), Ashtead AHT.UK +2% (raised outlook), Ryanair RYA.UK +1% (Aug load factor rose); Hermes RMS.FR -9% (LVMH to cut stake)]
- Basic Materials/Resources [BHP BLT.UK -2% (ex-dividend)]
- Stoxx50 Sectors [Consumer Cyclical +2.2%, Utilities +1.6%, Basic Materials +1.6%, Financials +1.4%, Consumer Non-Cyclical +1.4%, Energy +1.4%, Industrials +1.3%, Telecom +0.8%, Technology +0.4%]

- Ukraine President Poroshenko said to reach agreement with Russia President Putin on permanent ceasefire for Donbass region
- Donetsk rebels stated that they were ready for political settlement with Ukraine govt but settlement was conditional on Ukraine govt halting fire
- Russia President Putin said to have spoken to Ukraine President Poroshenko by phone to discuss halting the bloodshed in Ukraine and their positions said to overlap significantly on ways to exit the crisis
- Russia govt spokesperson clarified that Russian President Putin and Ukraine President Poroshenko didn't agree on ceasefire as Russia was not a party to the Ukraine conflict
- Ukraine President Poroshenko and Russia Pres Putin discussed steps to cease-fire
- Russia Defense Ministry planning to hold large-scale drills in Sept with Strategic Missile forces
- ECB's Liikanen (Finland): ECB ready for further measures
- Christian Democrat party spokesperson Barthle: CDU/CSU again rejected common European bonds
- Germany said to be planning a package to counter its economic slowdown with possibly ending power taxes
- Japan PM Abe formally announced cabinet reshuffle and named Shiozaki as the Health Min (**Note: Shiozaki has been the LDP's largest proponent of GPIF pension reform including diversification into more domestic equities and foreign securities and away from domestic bonds). Some key players retained their positions including Fin Min Aso, Econ Min Amari and Chief Cabinet Secretary Suga

Currencies/Fixed Income:
- Word of a cease-fire in Ukraine prompted a relief rally in various asset classes. The EUR/USD tested above 1.3150 while the Russian Ruble currency surged 1.5% as it rebound from prior record lows. Spot gold hit a 10-week low near $1,260/oz. However, just before the NY morning both Ukraine and Russian govt officials clarified that steps towards a cease fire was being worked upon. This has taken out some of the initial enthusiasm in various asset classes
- The formal announced cabinet reshuffle in Japan continued to place a bid in the Nikkei225 equity index and soften the JPY currency. As widely expected Shiozaki was appointed as the Health Minister (**Note: Shiozaki has been the LDP's largest proponent of GPIF pension reform). The USD/JPY pair fresh 7-month highs at 105.30 before consolidating.
- The GBP/USD moved off multi-month lows after Aug PMI Services beat expectations

Political/In the Papers:
- (FR) France Govt notes it may have to adjust its spending plans further due to low inflation; to reduce austerity cuts from the planned €21B in 2015 that had been indicated in July

**Looking Ahead***
All times listed for economic events are denominated in Eastern Standard Time (Add 4 hours for GMT equivalent)
- (BR) Brazil Central Bank (BDB) Interest Rate Decision: Expected to leave Target Selic Rate unchanged at 11.00%
- (PL) Poland Central Bank (NBP) Interest Rate Decision: Expected to leave Base Rate unchanged at 2.50%
- (BR) Brazil July CNI Capacity Utilization: No est v 80.1% prior
- 05:30 (DE) ECB's Laughtenschlaeger (Germany) in Franfurt
- 05:30 (ZA) South Africa Aug SACCI Business Confidence: No est v 87.9 prior
- 05:30 (DE) Germany to sell €5.0B in 0.25% Apr 2019 BOBL
- 06:00 (IE) Ireland Aug Live Register Monthly Change: No est v -3.4K prior; Unemployment Rate: No est v 11.5% prior; Live Register Level: No est v 382.8 prior
- 06:45 (US) Daily Libor Fixing
- 07:00 (US) MBA Mortgage Applications w/e Aug 29th: No est v +2.8% prior
- 07:00 (UK) PM Cameron weekly question time in House of Commons
- 07:45 (US) ICSC Weekly Chain Store Sales
- 08:15 (US) Baltic Dry Bulk Index
- 08:55 (US) Weekly Redbook Same Store Sales
- 09:00 (BR) Brazil Aug Services PMI: No est v 50.2 prior; Composite PMI No est v 49.3 prior
- 09:45 (US) Aug ISM New York: No est v 68.1 prior
- 10:00 (CA) Bank of Canada (BOC) Interest Rate Decision: expected to leave Interest Rate unchanged at 1.00%
- 10:00 (US) July Factory Orders: 11.0%e v 1.1% prior
- 10:00 (US) Possible July Durable Goods revisions
- 10:00 Poland Central Bank Gov Belka to hold post rate decision press conference
- 11:30 (BR) Brazil Weekly Currency Flow data
- 11:30 (US) Treasury to sell 4-Week Bills
- 14:00 (US) Fed Beige Book
- 16:30 (US) API Crude Oil Inventories
- 17:00 - (US) Aug Total Vehicle Sales: 16.60Me v 16.40M prior; Domestic Vehicle Sales: 13.20Me v 12.95M prior
- 19:00 (KR) South Korea Q2 Final GDP Q/Q: No est v 0.6% prelim; Y/Y: No est v 3.6% prelim
- 21:30 (AU) Australia July Trade Balance: -A$1.4Be v -A$1.7B prior
- 21:30 (AU) Australia July Retail Sales M/M: 0.4%e v 0.6% prior
- 22:30 (AU) RBA Gov Stevens in Adelaide
- (JP) Bank of Japan (BOJ) Interest Rate Decision

***Key Economic Data in session***
- (IE) Ireland Aug Services PMI: 62.4 v 61.3 prior; 25th month of expansion
- (IN) India Aug Services PMI: 50.6 v 52.2 prior; 4th month of expansion
- (RU) Russia Aug Services PMI: 50.3 v 49.7 prior; first expansion in six months and highest since Feb
- (SE) Sweden Aug PMI Services: 54.2 v 60.1 prior
- (RO) Romania Q2 Preliminary GDP Q/Q: -1.0% v -1.0% advance; Y/Y: 1.2% v 1.2% advance
- (HU) Hungary Q2 Final GDP Q/Q: 0.8% v 0.8% prelim; Y/Y: 3.9% v 3.9% prelim
- (HU) Hungary July Retail Sales Y/Y: % v 3.2%e
- (TR) Turkey Aug CPI M/M: +0.1% v -0.1%e; Y/Y: 9.5% v 9.4%e; CPI Core Index Y/Y: 9.7% v 9.6%e
- (TR) Turkey Aug PPI M/M: 0.4% v 0.7% prior; Y/Y: 9.9% v 9.5% prior
- (EU) ECB €300M borrowed in overnight loan facility vs. €300.0M prior; €33.1B parked in deposit facility vs. €31.6B prior - Daily Eurosystem Liquidity Conditions
- (ZA) South Africa Aug Service PMI: 51.1 v 46.4 prior
- (ES) Spain Aug Services PMI: 58.1 v 55.5e 10th month of expansion and highest since Dec 2006
- (IT) Italy Aug Services PMI: 49.8 v 52.0e; 1st contraction in 5 months
- (FR) France Aug Final Services PMI: 50.3 v 51.1e (confirmed second straight month of expansion)
- (DE) Germany Aug Final Services PMI: 54.9 v 56.4e
- (EU) Euro Zone Aug Final Services PMI: 53.1 v 53.5e
- (UK) Aug Services PMI: 60.5 v 58.5e; 20th month of expansion and highest since Oct 2013
- (EU) Euro Zone July Retail Sales M/M: -0.4% v -0.3%e; Y/Y: 0.8% v 0.9%e
- (CY) Cyprus Q2 Final GDP Q/Q: -0.3% v -0.3% prelim; Y/Y: -2.2% v -2.2% prelim
- (IS) Iceland Aug Preliminary Trade Balance (ISK): +6.5B v -1.2B prelim

Fixed Income:
- (FI) Finland opened its book to sell USD-denominated Sept 2019 bond; guidance seen at -1 bps to mid-swaps
- (PT) Portugal Debt Agency opens book to sell Euro-denominated 15-year bonds (Feb 2030) via syndicate; guidance seen +235bps over mid-swaps
- (IN) India sold total INR140B vs. INR140B indicated in 3-month and 12-month Bills
- (SE) Sweden sold total SEK3.5B vs. SEK3.5B indicated in 2020 and 2025 Bonds