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Reports Europe

European stock market, economy and companies update (September 04, 2014)

September 4, 2014, Thursday, 11:49 GMT | 06:49 EST | 15:19 IST | 17:49 SGT
Contributed by Trade The News

- Brazil Central Bank (BDB) held its Target Selic Rate steady at 11.00% for the 3rd straight meeting ahead of the Oct Presidential election
- Australia July Trade Balance registered its 4th consecutive deficit with the current reading being smallest deficit in 3 months (-A$1.4B v -A$1.4Be)
- (JP) Bank of Japan (BOJ) kept its policy steady in an unanimous vote and maintained its overall economic assessment (did cut its view on housing)
- ECB has the potential to disappoint heightened market expectations for policy action at today's meeting
- BOE decision should prove to be a non-event despite the recent split in vote

Indices [Stoxx50 -0.4%, FTSE 100 flat at 6,877, DAX -0.8% at 9,551, CAC-40 -0.4% at 4,406, IBEX-35 -0.4% at 10,846, FTSE MIB -0.1% at 20,806, SMI -0.1% at 8,798, S&P 500 Futures flat at 1,997]

- Market Focal Points/Key Themes: Equity markets open lower following recent gains as traders focus on today's ECB decision, Russia's MICEX declines after gaining sharply on Wednesday's session, German industrial firm Bilfinger SE issues another profit warning

By Sector
- Consumer Discretionary [SuperGroup SGP.UK +7% (Q1 sales above ests), Go-Ahead Group GOG.UK +2% (FY sales above ests, raised dividend); Adecco ADEN.CH -1.5% (share placement)]
- Industrials [Bilfinger SE GBF.DE -10% (another profit warning), BASF BAS.DE -1% (broker commentary)]
- Financials [Standard Life SL.UK +9% (asset sale, special dividend)]
- Healthcare [Bavarian Nordic BAVA.DK +4% (update on Ebola vaccine development program)]
- Stoxx50 sectors [Industrials -1%, Basic Materials -0.8%, Telecom -0.5%, Consumer Cyclical -0.4%, Utilities -0.3%, Energy -0.2%, Financials -0.2%; Technology +0.4%, Consumer Non-Cyclical flat]

- BOJ Gov Kuroda post rate decision press conference was pretty much in line with prior views. He reiterated that prior BOJ easing was having the intended effects. The virtuous cycle was working as domestic economy was recovering moderately. He did also note that it could still see effects of reaction to the April sales tax hike but reiterates it was expected to wane gradually. CPI likely to reach 2% target in middle of projection period and had no plans to change the inflation target. Fundamentally the USD was seen firming against the JPY and EUR currencies as US economy steadily recovered. He did not see weaker JPY currency (yen) as a negative for the domestic economy
- Eurogroup chief Dijsselbloem reiterated euro-area recovery is fragile and uneven and stressed that fiscal policy must be growth friendly. He reiterated EU view of not seeing deflation risk but a long period of low inflation rate
- Sweden Central Bank (Riksbank) rate statement noted that interest rates must remain low for 'long period of time' but it maintained its view on first potential rate hike was seen at the end of 2015 . Labor market had developed somewhat better than expected over summer

Currencies/Fixed Income:
- Caution was the word ahead of the ECB rate decision and press conference (ECB action had risen after Draghi's Jackson Hole speech in late Aug). EUR/USD was not too far off from its recent 12-month lows of 1.3110. Dealers noted that ECB had the potential to disappoint heightened market expectations for policy action and this could prompt a short covering rally in EUR/USD. Draghi likely to re-affirm his commitment to more action on the back of downward revisions to the central bank's growth and inflation forecasts. Dealers also note that participants were anticipating a strong August US employment report on Friday.
- USDJPY was unable to make fresh 2014 highs following the BOJ rate decision and press conference

Political/In the Papers:
- (UR) Ukraine PM Yatsenyuk: Cannot trust the peace plan put forth by Russia President Putin, Russia has ignored all prior agreements

**Looking Ahead***
All times listed for economic events are denominated in Eastern Standard Time (Add 4 hours for GMT equivalent)
- (UK) NATO begins 2-day Summit in Newport, South Wales
- (RU) EU-Russia technical energy meeting
- (AR) Argentina Cabinet Chief Capitanich: Parliament to vote on debt-swap law
- 05:30 (HU) Hungary Debt Agency (AKK) to sell Bonds
- 06:00 (CZ) Czech Republic to sell 12-month Bills
- 06:00 (RO) Romania to sell billls
- 06:45 (US) Daily Libor Fixing
- 07:00 (PL) Poland to sell Bonds
- 07:00 (UK) Bank of England (BOE) Interest Rate Decision: Expected to leaves both Interest rate and Asset Purchase Target (APT) unchanged at 0.50% and £375B respectively
- 07:00 (RU) Russia Gold and Forex Reserve w/e Aug 29th: No est v $466.1B prior
- 07:00 (ZA) South Africa July Electricity Production Y/Y: No est v -3.1% prior; Electricity Consumption Y/Y: No est v -2.7% prior
- 07:30 (US) Aug Challenger Job Cuts: No est v +46.9K prior; Y/Y: No est v 24.4% prior
- 07:30 (US) Sept RBC Consumer Outlook Index: No est v 51.5 prior
- 07:45 (EU) ECB Interest Rate Decision: Expected to leave Key rates unchanged; Leave Main Refinancing unchanged at 0.15%; Leave Marginal Lending Facility unchanged at 0.40%; Leave Deposit Facility Rate unchanged at -0.10%
(- (DK) Watch Denmark Central bank should ECB act in today's session
- 08:15 (US) Aug ADP Employment Change: +225Ke v +218K prior
- 08:15 (US) Baltic Dry Bulk Index
- 08:30 (US) July Trade Balance: -$42.4Be v -$41.5B prior
- 08:30 (US) Q2 Final Nonfarm Productivity: 2.5%e v 2.5% prelim; Unit Labor Costs: 0.7%e v 0.6% prelim
- 08:30 (US) Initial Jobless Claims: 300Ke v 298K prior; Continuing Claims: 2.51Me v 2.527M prior
- 08:30 (CA) Canada July Int'l Merchandise Trade: C$1.2Be v C$1.9B prior
- 08:30 (EU) ECB'S Draghi post rate decision press conference
- 09:30 (BR) Brazil Aug Vehicle Production: No est v 252.6K prior; Vehicle Sales: No est v 294.8K prior; Vehicle Exports: No est v 34.2K prior
- 09:45 (US) Aug Final Markit Services PMI: 58.5e v 58.5 prelim; Composite PMI No est v 58.8 prelim
- 10:00 (US) Aug ISM Non-Manufacturing: 57.7e v 58.7 prelim
- 10:00 (BR) Brazil July CNI Capacity Utilization: No est v 80.1% prior
- 10:30 (US) Weekly EIA Natural Gas Inventories
- 11:00 (US) DOE Crude Oil Inventories
- 11:00 (US) Fed to purchase notes
- 11:15 (BR) Brazil to sell 2015, 2016 and 2018 Bills
- 11:15 (BR) Brazil to sell Fixed-rate 2021 and 2025 bonds
- 12:30 (US) Fed's Mester in Pittsburgh
- 17:00 (CO) Colombia Aug PPI M/M: No est v % prior; Y/Y: No est v % prior
- 20:15 (US) Fed's Fisher in Dallas
- 21:00 (US) Fed's Kocherlakota in Helena, Montana

***Key Economic Data in session***
- (FR) France Q2 ILO Unemployment Rate: 10.2% v 10.2%e; Mainland Unemployment Rate: 9.7% v 9.8%e; Mainland Unemployment Change: K v +23K prior
- (DE) Germany July Factory Orders M/M: 4.6% v 1.5%e; Y/Y: 4.9% v 1.1%e
- (CZ) Czech July Retail Sales Y/Y: 6.2% v 4.8%e
- (EU) ECB €3.0M borrowed in overnight loan facility vs. €300.0M prior; €24.0B parked in deposit facility vs. €31.1B prior - Daily Eurosystem Liquidity Conditions
- (SE) Sweden Central Bank (Riksbank) left its Repo Rate unchanged at 0.25% (as expected)
- (NL) Netherlands Aug CPI M/M: -0.1% v +0.8% prior; Y/Y: 1.0% v 0.9%e
- (NL) Netherlands Aug CPI EU Harmonized M/M: -0.1% v 0.0%e ; Y/Y: 0.4% v 0.5%e
- (DE) Germany Aug Construction PMI: 47.7 v 48.2 prior
- (UK) Aug New Car Registrations YoY Y/Y: 9.4% v 6.6% prior
- (BR) Brazil Aug FIPE CPI: 0.3% v 0.5%e
- (EU) Euro Zone Aug Retail PMI: 45.8 v 47.6 prior
- (DE) Germany Aug Retail PMI: 49.4 v 52.1 prior
- (FR) France Aug Retail PMI: 45.5 v 45.6 prior
- (IT) Italy Aug Retail PMI: 40.8 v 43.4 prior
- (CY) Cyprus Aug CPI M/M:-0.2 % v -0.9% prior; Y/Y: -0.7% v -0.6% prior

**Fixed Income:**
- (ES) Spain Debt Agency (Tesoro) sold total €3.007B vs. €2.0-3.0B indicated in 2024 and 2044 Bonds
- Sold €2.29B in 2.75 % Oct 2024 bono; Avg Yield 2.272% (record low) v 2.686% prior; Bid-to-cover: 1.82x v 2.12x prior; Maximum Yield: 2.286% v 2.699% prior
- Sold €714M in 5.15% 2044 bono; Avg Yield 3.594% (record low) v 4.043%prior; Bid-to-cover: x1.99 v 1.82x prior; Maximum Yield: 3.604% v 4.053% prior
- (FR) France Debt Agency (AFT) sold total €8.996B vs. €8.0-9.0B indicated range in 2024, 2030 and 2045 Oats
- Sold €4.297B in 1.75% Nov 2024 Oat; Avg Yield: 1.32% (record low) v 1.77% prior; Bid-to-cover: 2.84x v 2.74x prior
- Sold €3.549B in 2.50% May 2030 Oat; Avg Yield 1.92% v 2.38% prior; Bid-to-cover: 2.29x v 2.62x prior
- Sold €1.15B in 3.25% 2045 Oat; Avg Yield: 2.37% (record low) v 3.19% prior; Bid-to-cover: 2.52x v 2.42x prior