Reports » Europe

European stock market, economy and companies update (September 13, 2012)

Contributed by Trade The News

*** SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM ***
***Notes/Observations***
- Netherlands elections: pro-Euro parties survive; PM Rutte's Liberal party win most seats but no majority so coalition must be formed
- Numerous central banks keep policy decisions unchanged with New Zealand, South Korea, Indonesia, Philippines and SNB among them
- SNB also maintains EUR/CHF floor at 1.2000
- Markets await decision for FOMC and clarification on QE3

***Equities***
FTSE 100 -0.10% at 5777, DAX -0.40% at 7316, CAC-40 -0.70% at 3520, IBEX-35 -0.90% at 7922, FTSE MIB -0.70% at 16,310, SMI flat at 6491, S&P 500 Futures -0.20% at 1429.50

- Following the mixed open, European equity indices are trading lower ahead of the later today FOMC decision, led by declines in the peripheral indices. European banks are lower and the laggards in the sector include recent outperformers (Commerzbank Bank, Credit Agricole and SocGen). Resource related shares are mostly lower, tracking the weakness in Chinese equity markets. In terms of corporate issuance, various peripheral firms have come to market ahead of the Fed meeting, including Intesa, Repsol and Telecom Italia.
- Shares of BAE Systems [BA.UK] have declined by over 5% after rising on Wednesday's session, as the company is in merger talks with EADS [EAD.FR]. EADS' shares have lost over 8% on the news. Retailer Home Retail [HOME.UK] is lower by over 2% following the release of its Q2 trading update, while retailer Next [NXT.UK] has lost over 7% after reporting H1 earnings. German home improvement retailer Praktiker [PRA.DE] is lower by more than 5% on reports that the firm's talks related to a credit agreement have been delayed. Deutz [DEZ.DE] has traded slightly higher after Volvo confirmed that it raised its stake in the company.

Speakers:
- ECB's Demetriades (Cyprus) commented that the ECB might not be ready for negative deposit rates and might not need to buy govt bonds. He saw no real need to sterilize bond purchases. ECB He noted that there were no downside risks to economic outlook. He did not expect to reach a bailout for Cyprus agreement this month.
- ECB's Nowotny stated that the EU bank supervision plan was good approach and it was important that EU was a center of stability for Europe
- Germany's Fin Min Schaeuble stated in the German media that lawsuits against the ECB bond purchases were possible
- Spain official said to have called for the privatization of the rail industry
- IMF's Shinaohara stated that it would discuss the European crisis and overall global economy at its Tokyo meeting. He noted that there was little risk of a hard landing in emerging markets but saw no quick recovery in Asia exports. He added that the IMF had no objection to Japan's basic forex stance and saw room for additional easing from the BoJ, as deflation continued. The IMF had no change it in its view that the yen was moderately overvalued.
- The Swiss National Bank (SNB) stated after ots rate decision that it would lower its 2012 GDP and inflation outlook. Downside economic risks would stay high as the Euro Area crisis and uncertainty on US fiscal decisions dampened growth outlook. The SNB maintained EUR/CHF floor at 1.20000 with the utmost determination and reiterated its view that CHF currency remained overvalued (too high. The SNB also reiterated that it wasprepared to buy foreign currency in unlimited quantities
- Sweden Central Bank (Riksbank) Jansson commented that ther was a strong case for declining growth in H2. He did current forecast assumed Eurozone crisis would be resolved and included German court ruling. There was room for Krona currency devaluation against the Euro but hard to say whether Sweden should join bank union
- Spain Catalonia Region Fin Min Artur Mas stated that Spain should give regions more time to cut deficit and must take action if it wanted to be in the euro
- Luxembourg Central Bank Monthly Bulletin: Luxembourg's gov't needed to tighten government spending
- Italy PM Monti reiterated that it would be the wrong message to study the effects of any potential EMU member exit
- OECD commented that it expected global M&A activity to fall 33% to $675M in 2012 (would be the lowest level since 2004) as companies were increasingly withdrawing from international operations. It noted that the decline in M&A activity reflected global economic uncertainty and fears of protectionism
- Japan Official Nakao reiterated that recent JPY currency (yen) price movement were not reflective of economic fundamentals

Currencies:
-The FX price ranges were relatively narrow ahead of the FOMC policy decision later today. Overall the USD remained vulnerable on speculation that the Fed could further take QE measures. The USD/JPY did hit a 7-month low as the 77.60 was broken and Japanese officials continue3d with their verbal rhetoric that the price action did not reflect fundamentals
- The EUR/USD held above the 1.29 level during the morning and about 20 pips higher from its Far East open.
- The EUR/CHF cross hovered around the 1.21 handle as the SNB maintained the peg at 1.2000 (as expected). There had been some speculation that the SNB could raise the lower limit from 1.2000 to 1.2200. The pair drifted higher to test 1.2125 as the NY moring approached

Political/ In the Papers:
- (NL) Netherlands election results: PM Rutte's Liberals (PPFD) party projected to win the most votes, taking 41 of 150 parliament seats; opposition Labor party wins 40 seats - exit polls; Dutch Freedom Party gets 13 seats
- (UK) Bank of England (BoE) Q3 Bulletin: Without rate cut and QE economic growth would have been lower and unemployment higher
- (BE) Belgium Deputy PM Quickenborne: Tax on capital gains is not on the agenda for 2013 budget - Le Soir
- (GR) Greece coalition talks yesterday failed to come up with the final make up of the €11.5B in spending cuts needed to satisfy the troika - ekathimerini
- (DK) Denmark, Viborg Mayor/Conservative Party Chairman Soren Pape Poulsen: We are in favor of EU cooperation, but are wary that it develops into a federalist direction and have no desire to support that future - Jyllands-Posten
- (IT) Italy Econ Min: Structural balance in the budget should be achieved in 2013; VAT increase would be a mistake - financial press; Affirms plans for asset sales valued at 1% of GDP
- (ES) Spain needs to raise €81B in 2012 to reach budget goals - Cinco Dias
- (EU) European equity trading volumes have hit 12-year lows - FT; Factors which have weighed on volumes include the EU debt crisis, lack of M&A activity and outflows from euro zone countries; Some analysts believe that volumes will rebound following the summer holidays; Notes volumes have started to rebound in Sept.
- (FR) France govt officials will meet with union heads on Friday, Sept 14th to start negotiations on reforms to the labor market and job security - La Tribune

***Looking Ahead***
***All times listed for economic events are denominated in Eastern Standard Time (Add 4 hours for GMT equivalent)
- (MX) G20 Finance Ministers and Central Bankers meet in Mexico City
- G24 technical meeting
- (US) Federal Reserve's Symposium on Stress Testing Models
- G24 technical group meeting
- (RU) Russia Central Bank Interest Rate Decision: Expected to leave the Russia Refinancing unchanged at 8.00%; Leave Overnight Deposit Rate unchanged at 4.00%; leave Overnight Auction-Based Repo unchanged at 5.25%
- 06:00 (EU) ECB's Nowotny
- 06:00 (IT) Italy PM Monti
- 06:00 (IE) Ireland Aug CPI M/M: No est v -0.1% prior; Y/Y: No est v 2.0% prior
- 06:00 (IE) Ireland Aug CPI EU Harmonized M/M: No est v -0.1% prior; Y/Y: No est v 1.6% prior
- 06:00 (EU) OECD July Leading Indicators: No est v 100.1 prior
- 06:00 (EU) OECD: G20 Q2 GDP Q/Q: No est v 0.7% prioir
- 06:30 Daily Libor Fixings
- 07:00 (GR) France Fin Min Moscovici meets Greece PM Samaras in Athens
- 08:00 (US) Sept RBC Consumer Outlook: No est v 46.4 prior
- 08:00 (PL) Poland Aug CPI M/M: -0.3%e v -0.5% prior; Y/Y: 3.8%e v 4.0% prior
- 08:00 (BR) Brazil July Retail Sales M/M: 1.0%e v 1.5% prior; Y/Y: 7.0%e v 9.5% prior; Broad Retail Sales Y/Y: 1.0%e v 12.3% prior
- 08:30 (US) Aug Producer Price Index M/M: 1.2%e v 0.3% prior; Y/Y: 1.6%e v 0.5% prior
- 08:30 (US) Aug PPI Ex Food & Energy M/M: 0.2%e v 0.4% prior; Y/Y: 2.6%e v 2.5% prior
- 08:30 (US) Initial Jobless Claims: 370Ke v 365K prior; Continuing Claims: 3.318Me v 3.322M prior
- 08:30 (CA) Canada Q2 Capacity Utilization Rate: 81.1%e v 80.7% prior
- 08:30 (CA) Canada July New Housing Price Index M/M: 0.1%e v 0.2% prior; Y/Y: 2.3%e v 2.3% prior
- 9:00 (DE) German Chancellor Merkel press conference
- 09:30 (US) Weekly Commercial Paper stats
- 10:30 (US) IMF's Rice bi-monthly press conference
- 10:30 (US) Weekly EIA Natural Gas Inventories
- 11:00 (DE) German Chancellor Merkel
- 11:00 (US) 10-year TIPS refunding announcement
- 12:00 (IC) Iceland Aug International Reserves (ISK): No est v 830B prior
- 12:30 (US) FOMC Rate Decision: Expected to leave interest rates unchanged at 0.25%
- 13:00 (US) Treasury to sell $13B in 30-year bonds
- 14:00 (US) FOMC to release projections of Economy and Fed Funds Rate
- 14:15 (US) Fed Chairman Bernanke holds Press Conference
- 14:00 (US) Aug Monthly Budget Statement: -$160.0Be v -$134.1B prior
- 17:00 (CL) Chile Central Bank Interest Rate Decision: Expected to leave the Nominal Overnight Rate Target unchanged at 5.00%
- 17:00 (CO) Colombia July Trade Balance: +$200.0Me v -$190.9M prior; Imports CIF: No est v $5.1B prior

***Economic Data***
- (ID) Indonesia Central Bank leaves Reference Rate unchanged at 5.75%
- (RU) Russia Gold & Forex Reserve w/e Sept 7th: $517.2B v $514.6B prior
- (CH) Swiss Aug Producer & Import Prices M/M: +0.5% v -0.1%e; Y/Y: -0.1% v -0.7%e
- (CH) Swiss Central Bank (SNB) left the 3-Month Libor Target Range unchanged between 0.00-0.25%; as expected and maintained the EUR/CHF cross currency floor at 1.2000
- (NL) Netherlands July Retail Sales Y/Y: -4.0% v +1.0% prior
- (SE) Sweden Aug Unemployment Rate: 7.2% v 6.8%e; Unemployment Rate Seasonally Adj: 7.8% v 7.5%e
- 03:30 (SE) Sweden Aug Average House Prices (SEK): No est v 2.078M prior
- (SE) Sweden Aug CPI Headline Rate M/M: 0.2% v 0.3%e; Y/Y: 0.7% v 0.9%e; CPI Level: v 314.01e
- (SE) Sweden Aug CPI Underlying Rate M/M: % v 0.3%e; Y/Y: % v 1.1%e
- (IT) Italy Aug Final CPI (NIC incl. tobacco) M/M: 0.4% v 0.4%e; Y/Y: 3.2% v 3.2%e
- (IT) Italy Aug Final CPI EU Harmonized M/M: 0.0% v 0.2%e; Y/Y: 3.3% v 3.5%e
- (PH) Philippines Central Bank left its Overnight Borrowing Rate unchanged at 3.75%; as expected
- (HK) Hong Kong Q2 Industrial Production Y/Y: -2.9% v -1.6% prior
- (HK) Hong Kong Q2 Producer Price Y/Y: -0.7 v +3.6% prior
- (IT) Italy July General Government Debt: €1.967T v €1.973T prior
- (GR) Greece Q2 Unemployment Rate: 23.6% v 22.6% prior
- (ZA) South Africa July Gold Production Y/Y: -5.0% v -4.0% prior; Mining Production Y/Y: 6.7% v 4.2% prior

Fixed Income:
- (IT) Italy Debt Agency (Tesoro)sold total €6.5B vs. €6.5B indicated in 2015, 2017 and 2026 BTP Bonds
- Sold €4.0B vs. €4.0B indicated in 4.5% July 2015 BTP bond; Avg Yield 2.75% v 4.65% prior; Bid-to-cover: 1.49x v 1.73x prior
- Sold €1.0B vs €1.0B indicated in 5.25% 2017 BTP bond; Avg Yield 3.71% v 4.73% prior; Bid-to-cover: 1.90x v 1.46x prior
- Sold €1.5B vs €1.5B indicated vs. €3.0-4.0B indicated range Mar 2026 BTP; Avg Yield 5.32% v 5.90% prior; Bid-to-cover: 1.50x v 1.49x prior
- (HU) Hungary Debt Agency sold HUF55B vs. HUF45B indicated in 12-month Bills; Avg Yield 6.70% v 6.79% prior; Bid-to-cover: 2.01x v 2.50x prior
- (IE) Ireland Debt Agency (NTMA) sold €500M v €500M in 3-month bills; Avg Yield 0.70% v 1.80% prior; Bid-to-cover: 3.04x v 2.5x prior
-(UK) DMO sold £3.5B in 1.75% Sept 2022 Gilts; Avg Yield 1.825% v 1.72% prior; Bid-to-cover:1.82 x v 2.20x prior; Tail 0.2bps v 0.3bps prior