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European Market Update Print E-mail
Daily Forex Fundamentals | Written by Trade The News | Jan 18 13 10:58 GMT

European Market Update

UK Retails Sales disappoint; Rampant speculation about what the BOJ will announce on Tuesday

Notes/Observations

China economic data was all largely as expected; 2012 GDP at 7.8% was lowest annual pace since 1999

Rumors rampant ahead of Tuesday's BOJ rate decision with open ended options on everything; BoJ may scrap 0.1% rate paid on excess reserves; pledge open ended asset purchases

Japan Gov advisor Hamada: Would only worry with USD/JPY above the 110 level

Nikkei225 Index ends session higher by almost 3%; largest percentage gain since March 2011 and produces longest weekly winning streak since 1987 of 10 aid with Japanese currency at a fresh 2-1/2 year low

Bank of Spain Nov Bad Loan Ratio rises to fresh record level of 11.4%

UK Dec Retail Sales come in negative and well below market expectations

Economic Data

(RU) Russia Narrow Money Supply w/e Jan 14th (RUB): 7.64T v 7.96T prior

(ES) Spain Nov NSA Industrial Orders Y/Y: -4.0% v +5.3% prior

(EU) ECB: €900M borrowed in overnight loan facility vs. €0.0M prior; €179.1B parked in deposit facility vs. €173.3B prior

(IT) Italy Nov Industrial Orders M/M: 0.5% v 0.1% prior; Y/Y: -6.7% v -0.1% prior

(IT) Italy Nov Industrial Sales M/M: -0.2% v -0.2% prior; Y/Y: -5.4% v -4.7%

(CZ) Czech Nov Current Account Monthly (CZK): -2.0B v -8.0Be

(ES) Bank of Spain Nov Bad Loan Ratio 11.4% v 11.2% prior (record)

(UK) Dec Retail Sales Ex Auto Fuel M/M: -0.3% v +0.1%e; Y/Y: 1.1% v 2.0%e

(UK) Dec Retail Sales w/Auto Fuel M/M: -0.1% v +0.2%e; Y/Y: 0.3% v 1.0%e

Fixed Income:

(IN) India sold total INR120B vs. INR120B indicated in 2017, 2026 and 2030 bonds

(ZA) South Africa sold total ZAR210M in I/L 2025, 2038 and 2050 Bonds

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Equities

Indices: FTSE 100 +0.30% at 6,150, DAX -0.20% at 7,721, CAC-40 +0.10% at 3,746, IBEX-35 +0.20% at 8,646, FTSE MIB -0.30% at 17,536, SMI -0.40% at 7,402, S&P 500 Futures flat at 1,475.50

European indices opened the session broadly higher, as US equities on Thursday's session hit highs not seen since late 2007. Resources related firms are gaining, amid the release of GDP and industrial production data out of China. Currently indices are mixed. The Swiss SMI, Italian FTSE MIB and German DAX have underperformed, while the FTSE 100 hit fresh multi-year highs earlier in the session. In terms of US corporate earnings for today's session, the main companies due to report include GE and Morgan Stanley.

UK movers [Spectris +5.5% (Q4 sales update),Kentz Corporation +3.5% (trading update),Evraz +1.5% (Q4 production update),Meggitt +1.5% (broker commentary);Home Retail -1.8% (profit-taking), Sainsbury -1% (broker commentary), Bovis Homes -0.50% (trading update)]

Germany movers [Praktiker +8.5% (broker commentary), Commerzbank +1% (renewed job cut speculation); Metro -1.9% (broker commentary), ThyssenKrupp -1% (AGM comments)]

France movers [Renault +3% (FY12 sales),BNP +1.4% (cost cut speculation) ArcelorMittal +1.1% (broker commentary); Saint Gobain -1.5% (broker commentary), Air France -1.5% (broker commentary)]

Italy Movers [Mediaset +8% (broker commentary); Telecom Italia Media +3% (ongoing takeover speculation), Ansaldo STS +2.5% (broker commentary)]

Switzerland movers [Credit Suisse +0.50% (broker commentary); Santhera -22% (negative opinion related to RAXONE)]

Speakers:

EU's Rehn commented in the press that it was essential for Italy to continue reforms. He expressed confidence in Italy's economy but more work needed to be done to complete reforms and saw Italy economy recovery in late 2013/early 2014

Austria Central Bank: Austria has reached the bottom of the economic downturn and forecasted Q1 GDP +0.2%

Greece Fin Min Stournaras noted that its holdings of property were vast and should be exploited

Fitch commented on Hungary and noted that an: Investment grade rating was not likely in near future. Fitch did not expect any agreement on an IMF precautionary laon with Hungary

Swiss Trade union: SNB should raise the cross floor to 1.2500 and defend it at all costs

Poland Central Banker Zielinska-Glebocka stated that Q4 GDP growth could be above 1.0% but she would not support easing pause as too soon to end rate-cut cycle. Poland might need somewhat deeper rate cuts (Note: Poland has been cutting in 25bps increments) and Base Rate at 3.25% would still be too high (Note: current rate is 4.00%)

China Fin Min Xie: Reiterates that China to maintain proactive fiscal policies

Thailand Central Bank raised its 2012 and 2013 GDP growth forecasts. 2012 GDP was raised to 5.9% from 5.7% while 2013 GDP was bumped up to 4.9% from 4.6%

UN Nuclear Agency (IAEA) has not reached agreement with Iran to receive access to Parchin military site. The next schedule round of talks scheduled for Feb 12th

IEA Monthly Oil Report: Raises 2013 global oil demand forecast by 240K bpd to 90.8M bpd. Oil markets look tighter than previously thought as China demand rebounded and Saudi supply dipped. Might be entering a new kind of oil market post financial crisis

Currencies:

European session began following a spat of JPY and CHF currency weakness overnight. The USD/JPY pair did hit a fresh 2 high earlier after influential PM Abe economic adviser Hamada stated that USD/JPY at ¥95 or ¥100 would not a problem or cause an inflation fear. This built upon earlier reports ahead of Tuesday's BOJ rate decision that the central bank might scrap 0.1% rate paid on excess reserves and pledge open ended asset purchases. During the European session the JPY retraced some of its weakness as some Japanese exporters took advantage of a 90.00 handle

EUR/CHF cross was above 1.25 handle attributed to earlier reports that institutional investors had started to move funds out of Switzerland. Swiss Business Lobby (Economiesuisse) chief Wehril that SNB would maintain Franc cap. A Swiss Trade union wanted the SNB to raise the cross floor to 1.2500 and defend it at all costs.

The EUR/USD failed to move above the 1.34 level in the session after dealers noted that price action suggested a possible option barrier there. The pair moved below 1.3350 as the EUR/JPY consolidated its gains from overnight.

The GBP/USD was at 8-week lows after UK Dec Retail Sales data came in negative and well below analyst expectations.

Political/ In the Papers:

(EU) Netherlands Fin Min Dijsselbloem confirms he will submit his name for the Chairmanship of the Eurogroup; says will not be outlining a new vision for the Euro Zone at the meeting on Monday

EUR/USD: During yesterday's US session, there was dealer chatter that the recent euro strength could be attributed to speculation that Portugal and Ireland could shortly request activation of the OMT program, as both countries are due to exit their bailout programs in 2013

(IE) CDU budgetary official said to have suggested that Germany could be open to easing Ireland's debt burden related to bank bailouts

(US) Treasury Sec Geithner: People are being too pessimistic about the US economy right now, economic is very resilient

(US) Fed's Lockhart: unclear whether there is any evidence to support the idea that QE has impacted the USD as there are many influences

PM Cameron is said to have postponed a major speech on UK/Europe relations that had been scheduled for Friday, Jan 18th

Side Note: Dealers noted that 4 distinct areas of statistics released from China earlier today, and all of them within 0.1% of expectations. Such accuracy appears to be mathematical impossibility. Maybe Oprah will do an interview with the Chinese statistician chief where he admits to making up the

Looking Ahead

All times listed for economic events are denominated in Eastern Standard Time (Add 5 hours for GMT equivalent)

(RO) Romania Nov YTD Current Account: No est v -€4.3B

06:00 (EU) ECB member Coeure in Paris

06:00 (IC) Iceland to sell bonds

06:00 (PT) Portugal Dec Producer Prices M/M: No est v -0.6% prior; Y/Y: No est v 3.8% prior

06:10 (UK DMO to sell combined £2.5B in 1-month, 3-month and 6-month Bills

06:30 (US) Daily Libor Fixing

06:30 (IN) Weekly India Forex Reserves

07:00 (UK) BOE member McCafferty in London

08:00 (PT) Bank of Portugal Monthly Economic Indicators Report

08:00 (PL) Poland Dec Avg Gross Wages M/M: 8.2%e v 1.7% prior; Y/Y: 2.1%e v 2.7% prior

08:00 (PL) Poland Dec Employment M/M: -0.3%e v -0.2% prior; Y/Y: -0.4%e v -0.3% prior

08:00 (PL) Poland Dec Sold Industrial Output M/M: -10.9%e v -4.8% prior; Y/Y: -6.5%e v -0.8% prior

08:00 (PL) Poland Dec Producer Prices M/M: -0.2%e v -0.2% prior; Y/Y: -0.6%e v -0.1% prior

08:00 (PL) Poland Nov Current Account: -€777Me v -€650M prior; Trade Balance: €104Me v €225M prior; Exports: €13.1Be v €14.2B prior; Imports: €13.1Be v €13.9B prior

08:30 (CA) Canada Nov Manufacturing Sales M/M: +1.0%e v -1.4% prior

09:00 (EU) ECB member Visco

09:00 (BE) Belgium Jan Consumer Confidence: No est v -25 prior

09:55 (US) Jan Preliminary University of Michigan Confidence: 75.0e v 72.9 prior

10:00 (MX) Mexico Central Bank Interest Rate Decision: expected to leave the Overnight Rate unchanged at 4.50%

10:00 (US) API Month report

11:00 (US) Fed to purchase $1.25-1.75B in bonds

14:00 (AR) Argentina Nov Economic Activity Index M/M: No est v 1.1% prior; Y/Y: No est v 3.0% prior

Weekend

(DE) Lower Saxony holds State Election

 

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