European Market Update
European Market Update: 2010 saw the return of economic growth but is the confidence level sustainable through 2011?
Economic Data
- (SA) South Africa Nov Private Sector Credit Y/Y: 4.6% v 5.6%e
- (FI) Finland Oct Final Trade Balance: €1.3B v €1.3B
- (UK) Dec Nationwide House Prices M/M: +0.4% v -0.2%e; Y/Y: +0.4% v -0.3%e
- (HK) Hong Kong Nov M3 Money Supply Y/Y: 7.1% v 14.7% prior
- (HK) Hong Kong Nov Budget Balance (HKD): 25.1B v 14.1B prior
- (SA) South Africa Nov Trade Balance (ZAR): +8.4B V -3.5Be
SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM
Notes/Observations:
- USD struggles into calendar year-end
- Estonia joins the Euro on Jan 1st to become the 17th member
Equities:
-FTSE 100 -0.50% at 5,942, CAC-40 -0.50% at 3,829. Equities in Germany, Italy, Spain and Switzerland are closed.
After opening the session slightly higher, the UK FTSE 100 and the French CAC-40 have moved into negative trading territory in the last trading day of the year for both indices. In UK equities, banks are trading mixed with Barclays seeing slight gains, while HSBC is lower by about 0.70%. UK energy names are slightly lower on the weakness in oil prices. Additionally, retailers in the UK are mostly lower, amid reports that 2011 could be a tough year for the sector. In France, banking shares are lower, with SocGen losing about 0.80%. Overall for 2010, the FTSE 100 is currently on pace to gain about 10%, while the CAC-40 is set to close the year lower by about 2.5%. The other European indices closed out 2010 on yesterday's session. The DAX gained 16% in 2010, the IBEX-35 lost about 17%, the SMI lost about 2% and the FTSE MIB ended down by 13%.
In individual equities, EADS [EAD.FR] is lower by over 1%, following reports that the company trimmed its 2010 delivery forecast for the A380. In the UK, Caledon Resources [CDN.UK] has declined by over 2% after the company announced that its planned merger agreement might be delayed.
Speakers:
- China PBoC Gov Zhou's New Year Statement reiterated that China would have a "prudent" monetary policy in 2011 and added that next year's economic outlook was more complicate. The PBoC stated that it would maintain basic stability and improve the flexibility and focus of its policy.
- China President Hu reiterated that China would ensure both stable and fast growth in 2011
- Singapore PM Loong's annual economic outlook speech cautioned that 2011 economic growth was expected to slow to 4-6% from 14.7% seen in 201.
- China State Administration of Foreign Exchange (SAFE) noted that it would let exporters hold currency offshore effective Jan 1st, 2011. The purpose of the move was to support cross-border transfers and help local companies with their overseas expansion plans.
- Poland Central Bank Zielinska-Glebocka reiterated her view that Poland should consider raising interest rates in Q1 period of 2011. She stated that the country's Q4 GDP growth was seen around 4.0% with next year growth forecasted between 4.0% to 4.5% range.
- India government said to be planning to levy an import duty on sugar equal to 60%, effective Jan 1st
- S&P raised Italian City of Genoa to "A+"; Outlook Stable
Currencies/Fixed income:
The USD was softer against the major pairs and commodity currencies in thin year-end market conditions. Dealers noted that the absence of most European centers hampered activity and London names were mostly sidelined. Once again Far East sovereign names were cited as USD sellers ahead of the European morning that sent EUR/USD towards the 1.34 handle for two-week highs. The USD/CHF again tested all-time lows at 0.9332 but EUR/CHF was higher by almost 100 pips from its Asian open above the 1.25 area. USD/JPY limps along around the 81.35 level. - The GBP was further aided by Nationwide house price data which came in better than expected
Geo-Political/ In the Papers:
Greece PM Papandreou is reportedly seeking support for proposed common euro zone bonds according to the Greek press. The article noted that Germany firmly opposes a proposal to issue common euro zone bonds believing it would reduce market discipline on countries to tackle high budget deficits
In terms of the UK Press, the FT reported that some UK retailers are showing caution with regards to the outlook for 2011 due to the disappointing 2010 holiday season and weather conditions. c
The Guardian noted that the UK's Shadow Chancellor Alan Johnson believed that the government should delay the increase in the VAT, which is due to take effect on Tuesday Jan 5th, on concerns about the impact that the measure could have on consumers.
Looking Ahead:
(RU) Russia Q3 Current Account: No est v $18.7B prior
6:30 (IN) India Q3 Current Account: -$15.2Be v -$13.7B prior
20:00 (CH) China Dec PMI Manufacturing: 55.4e v 55.2 prior |
