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European Market Update Print E-mail
Daily Forex Fundamentals | Written by Trade The News | Sep 19 13 10:15 GMT

European Market Update

Fed taper delay drives sharp declines in European and emerging market bond yields

Notes/Observations

No surprises out of the SNB

Fed's delay of taper drives sharp gains in emerging market bonds and equities

European government bond yields gap lower after Fed

Portuguese yields underperform following warning from S&P

Traders pare UK rate hike expectations following Fed, amid weaker than expected UK retail sales

European corporate issuance picks up, Telecom Italia comes to market

BoJ's Kiuchi makes first comments since Feb, Kuroda reiterates BoJ's stance

Economic Data of Note

(NO) NORWAY CENTRAL BANK (NORGES) LEAVES DEPOSIT RATES UNCHANGED AT 1.50%, AS EXPECTED

(CH) SWISS NATIONAL BANK (SNB) LEAVES 3-MONTH LIBOR TARGET RATE UNCHANGED AT 0.0%, AS EXPECTED

(CH) SWISS NATIONAL BANK (SNB) MAINTAINS EUR/CHF FLOOR AT 1.2000, AS EXPECTED

(CH) SWISS AUG TRADE BALANCE (CHF): 1.9B V 2.5B PRIOR

(UK) AUG RETAIL SALES EX AUTO M/M: -1.0% V 0.0%E; Y/Y: 2.3% V 3.2%E

(UK) AUG RETAIL SALES INCL AUTO M/M: -0.9% V 0.5%E; Y/Y: 2.1% V 3.4%E

Fixed Income:

(ES) Spain Debt Agency (Tesoro) sells total €3.0B v €2.0-3.0B indicated range in 2016 and 2028 bonds

Sells €2.06B in 3.3% July 2016 Bono; Avg Yield 2.225% v 2.636% prior; Bid-to-cover: 2.25x v 3.32x prior; Max Yield 2.244% v 2.656% prior ; Tail: 1.9bps v 2.0bps prior

Sells €1.02B in 5.15% Oct 2028 Bono; Avg Yield 4.809% v 5.194% prior; Bid-to-cover: 2.73x; Max Yield 4.829%; Tail: 2.0bps

(FR) France Debt Agency (AFT) sells total €7.49B vs. €6.5-7.5B indicated range in 2016 BTAN and 2015 & 2018 Oats

Sells €2.525B in 0.25% Nov 2015 Oats; Avg Yield 0.39% v 0.31% prior; Bid-to-cover: 2.59x v 3.24x prior

Sells €1.915B in 2.25% Feb 2016 BTAN; Avg Yield 0.43% v 0.53% prior; Bid-to-cover: 2.33x

Sells €3.05B in 1.0% 2018 Oat; Avg Yield 1.23% v 1.09% prior; Bid-to-cover: 1.67x v 2.39x prior

(UK) DMO sells £4.75B in 1.25% 2018 Gilts; Avg Yield: 1.652% v 1.405% prior; Bid-to-cover: 1.59x v 1.37x prior; Tail: 0.2bps v 0.8bps prior

(IE) Ireland sells €500M 3-month bills; Avg yield 0.180% v 0.200% prior; Bid-to-cover 3.3x v 3.6x prior

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Indices [EuroStoxx50 +1.1%, FTSE 100 +1.4% at 6,650, DAX +1.2% at 8,740, CAC-40 +1.1% at 4,216, IBEX-35 +1.1% at 9,165, FTSE MIB +1.3% at 18,028, SMI +0.90% at 8,128, S&P 500 Futures +0.30% at 1,723]

Market Focal Points: DAX hits another fresh record high following Fed decision, banks and miners broadly higher

By Sector

Basic Materials/Resources [Gold miners are sharply higher, in line with move in gold prices (African Barrick Gold ABG.UK +13%, Fresnillo FRES.UK +6%, Petropavlovsk POG.UK +19%)]

Consumer Discretionary [Asos ASC.UK +9% (sales above ests)]

Industrials [PostNL PNL.NL +4% (raised outlook)]

EuroStoxx50 Sectors [Consumer Cyclical +1.5%, Consumer Non-Cyclical +1.2%, Basic Materials +1.1%, Financials +1%, Energy +1%, Industrials +0.9%, Technology +0.50%; Utilities -0.1%, Telecom -0.10%]

Speakers:

Norway Fin Min Johnsen: Sees GDP growth above 40-year average. He thinks forecasts for CPI are too low.

Japan Chief Cabinet Sec Suga: New Abenomics to address tax system, must overhaul corporate tax system

Greece Fin Min Stournaras: Reiterates country on path to growth; sees 2013 GDP -3.8% (less contraction than prior thought)

France Fin Min Moscovici: there is no division within the govt on taxes; reiterates deficit reduction targets. France debt will reach a maximum this year.

BoJ Gov Kuroda: Monetary policy is having a positive impact; A moderate recovery is underway in Japan. CAPEX is picking up mainly in the non-manufacturing sector. Price expectations are increasing among the public.

NATO chief Rasmussen: Essential to keep military option on the table when dealing with Syria.

Sweden Central Bank (Riksbank) Dep Gov AF Jochnick: Reiterates Riksbank should keep an eye on household debt.

The Swiss National Bank (SNB) reiterated in its rate decision that they would enforce the EUR/CHF floor of 1.2000 with utmost determination and that CHF is still overvalued. It also reiterated its view to be ready to take further measures if necessary. The SNB noted that property prices have risen further but there are some signs of easing in the mortgage and property markets. It raised its 2013 GDP forecast to 1.5-2.0% from 1.0-1.5% and raised its 2013 inflation view to -0.2% from -0.3% prior.

Norway Central Bank noted that its Rate Path Outlook saw its key rate to be kept at today's level in the period to summer 2014, after which it will rise to a more normal level. They lowered their 2013 non-oil GDP growth outlook to 1.75% v 2.5% seen in June while raising their 2013 core CPI view to 1.75% v 1.25% seen in June.

Norway Central Bank Gov Qvigstad stated in his post rate decision press conference that there was now an equal chance of either holding or cutting rate and added that the bank needs big surprises to raise at next meeting. It did not consider a rate change at today's meeting

Bank of Russia Chief: Govt plan to increase household utility tariffs will impact monetary policy in 2014

Political/In the Papers:

(IT) Italy senate elections committee voted 15-1 against a PDL Senator's recommendation that Berlusconi keep his Senate seat, a first step in a complex process that could see Berlsuconi stripped of his Senate seat

(PL) Poland Central Bank's Bratkowski: Sees 50% chance of stable Poland rates in 2014

(IT) Italy Fin Min Saccomanni: Seeking VAT increase to meet Italy targets, threatens to resign if problem is not solved

(JP) Japan PM Abe asks company to decommission Fukushima Reactors numbers 5 and 6

Forex

At the start of the session, heading into several rate decisions, the Euro hovered right around 1. 3537, nearing mid-way it had rallied up to 1.3553. The Norwegian Krone extended gains against the Euro to a 5-week high after the Norges bank announcement, which included some tweaks to forecasts, though rates were left unchanged as expected. The Swiss franc gained to 0.9098 after Switzerland Central Bank left the EUR/CHF floor unchanged and left rates unchanged. The currency was little impacted on Swiss trade data earlier. Sterling was a bit weaker in the session losing 0.3% to 1.6077, with yield on the DMO climbing.

Looking Ahead

06:00 (UK) Sept CBI Industrial Trends Total Orders: 2e v 0 (flat) prior; Selling Prices: No est v 0 (flat) prior

06:00 (IE) Ireland Q2 GDP Q/Q: +0.9%e v -0.6% prior; Y/Y: -0.8%e v -0.9% prior

06:00 (IE) Ireland Q2 Current Account Balance: No est v €1.2B prior

06:00 France Debt Agency (AFT) to sell combined €1.3-1.7B in I/L 2021, 2024 Oats

06:30 (HU) Hungary Banking Association chief Patai

06:30 (US) Daily Libor Fixing

07:00 (RU) Russia Gold and Forex Reserve w/e Sept 13th: No est v $503.9B prior

08:00 (ZA) South Africa Central Bank Gov Marcus begins Interest Rate Decision press conference

08:00 (US) Baltic Dry Bulk Index

08:00 (PL) Poland Central Bank (NBP) Minutes

08:30 (US) Initial Jobless Claims: No est v 292K prior; Continuing Claims: No est v 2.871M prior

08:30 (US) Q2 Current Account Balance: -$96.3Be v -$106.1B prior

08:30 (CA) Canada July Wholesale Trade Sales M/M: +1.5%e v -2.8% prior

09:00 (BE) Belgium Sept Consumer Confidence Index: No est v -12 prior

09:00 (MX) Mexico Q2 Aggregate Supply and Demand: No est v 1.0% prior

09:30 (DE) Germany Fin Min Schaeuble speaks at at CDU Election Event, Bietigheim

10:00 (US) Sept Philadelphia Fed Business Outlook: 10.0e v 9.3 prior

10:00 (US) Aug Existing Home Sales: 5.25Me v 5.39M prior

10:00 (US) Aug Leading Index: 0.6%e v 0.6% prior

10:30 (DE) German Chancellor Merkel holds campaign rally in Fulda

10:30 (US) EIA weekly Natural Gas Inventories

11:00 (EU) European Medicines Agency releases Safety Decisions

11:00 (US) Treasury Refunding Announcement

11:00 (BR) Brazil to sell 2014, 2015 and 2017 Bills

11:00 (BR) Brazil to sell Fixed-rate 2019 and 2023 bonds

11:00 (US) Fed to purchase $2.75-3.50B in Notes

11:30 (DE) Germany Fin Min Schaeuble speaks at at CDU Election Event, Ludwigsburg

12:00 (CO) Colombia Q2 GDP Q/Q: No est v 0.3% prior; Y/Y: 3.5%e v 2.8% prior

13:00 (US) Treasuries to sell $13B in 10-Year TIPS Reopening

 

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