Reports » Europe

European stock market, economy and companies update (September 11, 2012)

Contributed by Trade The News

*** SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM ***
***Notes/Observations***
- - German High Court ruled that it would proceed and render a decision on the ESM rescue fund on Wed, Sept 12th despite a last minute protest by CSU member Gauweiler
- IMF Zhu stated that the world should believe in Euro Zone recovery and expressed support ECB bond buying plan
- German Finance Ministry: ECB can help economy in the short term
- China Aug new CNY loans stronger than expected
- UK Visible Trade Balance narrowest since February 2011; Non-EU goods exports hit record high in July
- Germany High Court decision on ESM and FOMC decisions loom for risk appetite sentiment

***Equities***
Indices: FTSE 100 -0.40% at 5772, DAX -0.10% at 7203, CAC-40 3492, IBEX-35 -1% at 7776, FTSE MIB -1.2% at 15,903, SMI -0.50% at 6476, S&P 500 Futures +0.20% at 1429.50

- European equity markets are trading lower led by declines in the Spanish IBEX-35 and Italian FTSE MIB, as markets await Wednesday's commentary out of the German Constitutional Court and Thursday's US Fed FOMC decision. European banks are broadly lower, led by weakness in shares of Commerzbank [CBK.DE], Credit Agricole [ACA.FR], SocGen [GLE.FR], Intesa [ISP.IT] and Unicredit [UCG.IT]. Most resource related firms are trading lower, tracking the declines in Chinese equities. Amid the recent stabilization in the European corporate bond markets, various companies have announced plans to issue debt, including Anglo American [AAL.UK], Banca Monte Paschi [BMPS.IT], Banco Sabadell [SAB.ES] and Total [FP.FR].
- In London, luxury retailer Burberry [BRBY.UK] has traded lower by over 18% after issuing a FY profit warning, as the company saw slowing growth in Q2. Shares of retailer SuperGroup [SGP.UK] are higher by more than 4%, following the release of Q1 results. In Spain, Enagas [ENG.ES] has declined by over 6%, after investors placed a 5% stake in the company.

Speakers:
- German High Court ruled that it would proceed and render a decision on the ESM rescue fund on Wed, Sept 12th despite a last minute protest by CSU member Gauweiler
- German Econ Min Roesler commented that the Germany economy remained robust despite weak global trend but still have significant down risk risks. ECB bond buying should only be temporary and could aid liquidity in the short-term
- German Fin Min Schaeuble commented that the Euro crisis was not over and could hang around for months to come. EMU crisis was clouding the German domestic outlook. He did not see risks to current German economic growth forecasts of 0.7% in 2012, 1.6% in 2013. He reiterated view of no European aid without conditionality but did concede that Greece had made significant progress in consolidating budget. He stressed that Greece must fulfill ALL bailout conditions had saw no room for new negotiations. Italy and Spain had also made significant progress in reforms. The Lower House (Bundestag) would get a chance to debate any direct ESM aid given to banks. He noted about the great uncertainty about how the US would deal with its high debt levels
- BOE newest member McCafferty (replaced Posen) stated that the debt outlook and banking crisis weighed upon confidence but consumer spending was main risk to UK outlook. The US and China outlook weighed upon the UK domestic growth but downside risks were already built into BOE forecasts. He did note that views on quantitative easing (QE) were changing and did see problem in QE in terms of UK Corporate bond markets. Allowing bonds purchased by BOE through QE to mature would have less effect on Gilt market than sales; some QE bonds to begin to mature in spring 2013
- German CSU lawmaker Michelbach rejected idea of Portugal ECB's Constancio as EU bank supervisor
- Taiwan commented that economic growth momentum continued to weaken and announced steps to promote private investment and infrastructure growth
- India Oil Min Reddy commented that rising fuel prices were unavoidable, CCPA would consider an increase in fuel prices within the next few days if not today

Currencies:
- The key events of the German high court ruling and FOMC meeting on Thursday continued to be on the mindset of traders. The USD continued to be generally weaker ahead of the key events. The USD Index hit 4-month lows during the session.
- The decision by the German High Court rules to reaffirm that it would render a decision on the ESM rescue fund on Wed, Sept 12th despite a last minute protest by CSU member Gauweiler helped to keep the EUR/USD above the 1.28 handle and tested 4-month highs but the pair continued to have difficulties breaching the 200-day moving average pegged at 1.2835.
- GBP/USD continued to probe back above 1.6000 and was testing Friday's four-month high of 1.6033. The Trade balances came in better than expected with the UK Visible Trade Balance narrowest since February 2011 and the non-EU goods exports hitting a record high in July
- The USD/JPY tested below the 78 handle

Political/ In the Papers:
- Spain PM Rajoy stated that new ECB backstop makes bailout less urgent and would study conditions of ECB aid before decision; will not accept any bailout that specifies cuts; will meet 4.5% deficit tgt next year
- Speculation that Greek PM will ask Draghi to help Greece by ECB not making a profit on Greek bonds
- Only €6B of the €11.5B in proposed spending cuts by the Greek Gov have been accepted by the Troika; Sends Greece back to the drawing board for new savings - ekathimerini
- German Chancellor Merkel told German lawmakers the ECB was acting within its mandate on bond buying
- (BE) Belgian Financial Sector Federation (Febelfin): Separation of investment and commercial banks would have disastrous consequences for the economy, we are not London or New York - Le Soir
- China Premier Wen China has enjoy fast economic development for over 30-yrs - comments from World Economic forum (summer Davos)

***Looking Ahead***
***All times listed for economic events are denominated in Eastern Standard Time (Add 4 hours for GMT equivalent)
- Summer Davos in China
- (US) US Treasury official Brainard to visit France, Germany and Spain
- (GR) Greece PM Samaras to meet ECB chief Draghi
- OPEC Monthly oil report
- 06:00 (EU) EU to unveil Proposal for Single Banking Supervisor
- 06:30 Daily Libor Fixings
- 07:00 (EU) ECB announces allotment in 7-Day Term Deposits to offset Govt Bond Purchases (SMP) ; To drain €209.0B
- 07:00 (ZA) South Africa July Manufacturing Production M/M: -0.5%e v -2.4% prior; Y/Y: 6.2%e v 0.8% prior
- 07:15 (EU) World Bank Kim
- 07:30 (US) Aug NFIB Small Business Optimism: 91.4e v 91.2 prior
- 07:45 (US) Weekly ICSC Chain Store Sales
- 08:00 (PL) Poland July Current Account: -€1.4Be v -€1.2B prior; Trade Balance: -€716Me v -€412M prior
- 08:15 (CA) Canada Aug Housing Starts: 200.0Ke v 208.5K prior
- 08:30 (CL) Chile Central Bank Economist Survey
- 08:30 (US) July Trade Balance: -$44.0Be v -$42.9B prior
- 08:30 (CA) Canada July Intl Merchandise Trade: -1.3Be v -1.8B prior
- 08:55 (US) Weekly Redbook Retail Sales
- 09:00 (MX) Mexico July Industrial Production M/M: 0.3%e v 1.3% prior; Y/Y: 3.9%e v 3.7% prior
- 09:00 (EU) Weekly ECB Forex Reserves data
- 09:45 (UK) BOE to buy £1.0B in 2027-2060 Gilts in reverse Auction
- 10:00 (US) Sept IBD/TIPP Economic Optimism: 46.4e v 45.6 prior
- 10:00 (US) July JOLTs Job Openings: 3.740Me v 3.762M prior
- 10:00 (MX) Mexico weekly International Reserves
- 10:30(UK) BOE to announce size of 1.0% 2017 Gilt for Sept 20th auction
- 11:30 (US) Treasury to sell $40B in 4-Week Bills
- 12:00 (EU) ECB's Asmussen speaks in Frankfurt
- 13:00 (US) Treasury to sell $32B in 3-Year Notes
- 13:15 (UK) BOE member Miles
- 16:30 (US) Weekly API Crude Oil Inventories
- (PE) Peru July Trade Balance: No est v $441.7M prior

***Economic Data***
- (RU) Russia July Trade Balance: $11.1B v $13.5Be; Exports: $40.6B v $42.0Be; Imports: $29.6B v $29.1Be
- (FR) France Q2 Final Non-Farm Payrolls: -0.1% v -0.1%e
- (DE) Germany Aug Wholesales Prices M/M: 1.1 v 0.3% prior; Y/Y: 3.1 v 2.0% prior
- (JP) Japan Aug Preliminary Machine Tool Orders Y/Y: -2.6% v -6.7% prior
- (ES) Spain July House transactions Y/Y: -2.5% v -11.4% prior
- (HU) Hungary Aug Consumer Prices M/M: -0.1% v +0.2%e; Y/Y: 6.0% v 6.0%e
- (TR) Turkey July Current Account: -$3.9B v -$4.0Be
- (NL) Netherlands July Trade Balance: €2.8B v €4.2B prior
- (CN) China Aug M2 Money Supply Y/Y: 13.5% v 14.0%e; M1 Money Supply Y/Y: 4.5% v 4.7%e; M0 Money Supply Y/Y: 9.7% v 9.7%e
- (CZ) Czech July Current Account (CZK): -11.5B v -8.7Be
- (ZA) South Africa Q2 Current Account Balance (ZAR):-200.0B v -143.2B; Current Account to GDP: -6.4% v -4.8%e
- (UK) July Visible Trade Balance: -£7.2B v -£9.0Be; Total Trade Balance: -£1.5B v -£3.2Be; Trade Balance Non EU: -£2.9B v -£-4.5Be
- (PH) Philippines July M3 Money Supply Y/Y: 8.7% v 7.1% prior
- (PH) Philippines July Bank Lending Net of RRPs Y/Y: 16.0% v 14.9% prior

Fixed Income:
- (NL) Netherlands Debt Agency (DSTA) sold €2.0B vs. €1.5-2.5B indicated range in 2.25% July 2022 DSL Bonds; Avg Yield 1.846% v 1.995% prior
- (EU) ECB allotted €130.3B in 7-Day Main Refinancing Tender at fixed 0.75% vs. €129Be
- (EU) ECB allotted €13.8B in 1-Month MRO Tender at fixed 0.75% vs. 25Be
- (CH) Switzerland sold CHF931.1M 3-Month Bills; Yield -0.300% v -0.399% prior
- (ZA) South Africa sold total ZAR2,1B vs. ZAR2.1B indicated in 2023, 2041 and 2048 Bonds
- (UK) DMO sold £1.25B in 0.75% I/L Mar 2034 Gilts; Real Yield 0.126% v 0.049% prior; Bid-to-cover: 1.55x v x 1.93x prior
- (HU) Hungary Debt Agency (AKK) sold HUF45B vs. HUF45B target in 3-Month Bills; Avg Yield 6.71% v 6.68% prior; Bid-to-cover: 1.44x v 1.95x prior