EU Market Update: Euro moves between gains and losses near $1.30, as press reports continue to speculate on Spanish bailout


Economic Data

- (UK) AUG PUBLIC FINANCES (PSNCR): -£9.6B V -£5.5BE; PSNB EX INTERVENTIONS: £14.4B V £15.0BE; NET BORROWING: £12.4B V £13.2BE

- (ES) SPAIN JULY TRADE BALANCE: -€1.69B V -€2.7B PRIOR

- (IC) ICELAND AUG WAGE INDEX M/M: 0.1% V 0.1% PRIOR; Y/Y: 5.9% V 6.0% PRIOR

- (DE) GERMANY JULY CONFERENCE BOARD LEADING ECONOMIC INDEX M/M: +0.1% V 0.0% PRIOR (1st increase in 5-months)

- (NL) NETHERLANDS JULY CONSUMER SPENDING Y/Y: -1.5% V -0.5% PRIOR

- (NL) NETHERLANDS AUG HOUSE PRICE INDEX M/M: -0.7% V -3.6% PRIOR; Y/Y: -8.0% V -8.0% PRIOR

- (CH) SWITZERLAND AUG M3 MONEY SUPPLY Y/Y: 8.5% V 9.5% PRIOR

- (ES) SPAIN JULY MORTGAGES-CAPITAL LOANED Y/Y: -27.4% V -20.4% PRIOR; MORTGAGES ON HOUSES Y/Y: -17.5% V-25.2% PRIOR

- (FR) FRANCE Q2 FINAL WAGES Q/Q: +0.5% V 0.5% PRELIM

Fixed Income:

- (DE) Germany to sell €3B in 1 year zero coupon Bubills

- (FR) France Debt Agency (AFT) to sell up to €6.8B in 3-month, 6-month and 12-month bills on Monday Sept 24th

- (IN) India sells total INR150B vs. INR150B indicated in 2020, 2025, 2032 and 2041 bonds

- (ZA) South Africa sells total ZAR800M in I/L 2025, 2038 and 2050 Bonds

- Buzzi Unichem [BZU.IT]: Said to be planning to sell at least €300M of 6-year bonds; Yields seen at 6.375-6.5%


SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

***Notes/Observations***

- Commodities rebound from losses seen on prior session, led by copper

Indian equities outperform as finance ministry discloses new tax reduction measures.

- Following the recently released better than expected German Sept advance PMI data, the July conference board leading index for the country rose for the first time in 5 months.

- China PBoC official Song expressed caution about a H2 rebound in China, as he noted that Q3 growth could slow to 7.4% vs the approx. 7.8% seen in H1.

- GBP/USD hits 5-month highs following the release of UK Aug public finances data

- EUR/USD recovers $1.30, amid gains in Cable and slight decline in Spanish yields

- Peripheral European corporate continue to return to the market. On today's session, Italian high yield issuer Buzzi Unicem announced plans to sell 6-year bonds.


Equities

- Indices: FTSE 100 -0.10% at 5,850, DAX +0.30% at 7,408, CAC-40 +0.40% at 3,525, IBEX-35 +1.1% at 8,107, FTSE MIB +1.1% at 16,006, SMI +0.40% at 6,578, S&P 500 Futures +0.24% at 1,457

- European equity indices are trading broadly higher, following the losses seen on Thursday's session. The gains have been led by the peripheral indices, as the Spanish IBEX-35 and Italian FTSE MIB indices are higher by over 0.80%. Banks are broadly higher, led by Italian banks. Today is a triple witching session for various European indices. Also, the DAX reshuffle is expected later today.

- In The UK, HMV [HMV.UK] has lost over 3% after reporting a decline in its H1 sales. Xstrata [XTA.UK] is slightly higher amid reports that the firm 's board could recommend Glencore's offer by as earlier as today. Air France [AF.FR] has outperformed the overall CAC-40 index, as a company executive said that the firm's debt should decline later in 2012 due to cost cutting measures. Technip [TEC.FR] has gained over 1.5% after receiving a contract related to a project in Norway. In Germany, Adidas [ADS.DE] has lost over 1%, after affirming its 2012 forecast and revising its 2015 sales target. Small-cap pharmaceutical company Morphosys [MOR.DE] is higher by over 12%, as the company presented data on its rheumatoid arthritis treatment. Shares of Swiss travel firm Kuoni [KUNN.CH] have gained over 2% after the company announced plans to exit certain loss making businesses. Danish pharmaceutical firm TopoTarget [TOPO.DK] has gained over 140% after disclosing data on BELINTOSTAT.

- FTSE 100 movers (Evraz +2.9%, Vedanta +2.8%, Eurasian +2%, Kazakhmys +1.8%, Pearson +1.5%; Imperial Tobacco -1.5%, Reckitt Benckiser -1.2%, National Grid -1.2%, Babcock International -1%, British American Tobacco -0.90%)

- CAC-40 movers (Technip +1.7%, SocGen +1.5%, Axa +1.5%, Renault +1.4%, BNP +1.3%; Vallourec -0.40%, Air Liquide -0.20%, STMicroelectronics -0.10%)

- DAX movers (Man +1.4%, MunichRe +1.4%, Deutsche Boerse +1.2%, Allianz +1.1%, HeidelbergCement +1%; Adidas -1.7%, Henkel -0.90%, BMW -0.60%, Metro -0.60%, Deutsche Telekom -0.50%)

- IBEX-35 movers (Endesa +4.4%, Grifols +4.2%, Sacyr +3.5%, Acciona +3.2%, Mapfre +2.7%; Tecnicas -0.80%, Bolsas Y Mercados -0.40%)

- FTSE MIB movers (Banca Monte Paschi +3.8%, Mediobanca +2.6%, Mediolanum +2.4%, Intesa +2.3%, Mediaset +2.3%; Tenaris -0.70%)

- SMI movers (Transocean +2.8%, Credit Suisse +1.6%, UBS +1.5%, Julius Baer +1.1%, SGS +1%; Givaudan -0.30%; Swisscom -0.20%)

Speakers:

- Norway Central bank Olsen said Europe is in a double dip and the outlook it not bright.

- Portugal PM Coelho said the path to recovery will be difficult, most recent talks were tough.

- Greece PM Samaras and Italy PM Monti said they agree on need to safeguard Euro area, and for the need for European integration.

- UK Treasury's Gauke reported that Aug borrowing figures show that there should be no second guessing what PBR will project on borrowing targets. Data is further evidence that the UK is taking steps in its debts

- ECB's Liikanen (Finland) said OMT bond buying program will cover all of the EU if needed.

- Brazil Fin Min Mantega said Brazil growth may be 4-4.5% in 2013. Fed and Japan QE will lead all countries to pursue currency wars.

- Turkey Central Bank sees 2012 GDP 3-4%. Turkey debt to GDP to fall slightly this year.

- China PBOC advisor commented that they see 7.4% growth in Q3, and that a slowdown may persist into 2013. They said project approvals not enough to drive growth rebound.

- Poland Central Bank's Kazmierczak said a rate cut decision cannot come soon enough, there is risk to easing steps. He sees debate on rate cut in Nov at the earliest. He sees Poland CPI near 3% at the end of 2012 and 2.5% in Q2.

- US Asst Sec of State Campbell reported that the disputed islands fall under Japan defense treaty US will defend Japan if they are attacked.

- Philippine Central Bank Asst Gov said they are guarding against one way currency speculation.

- Switzerland Central Bank (SNB) monthly bulletin reported that downside risk to economy will stay high in near term. Swiss companies remain cautious with their investment plans.

- Russia Economy Min to make decision on whether to ban grain exports during the fall, may limit exports rather than a flat ban. They may need to cap grain exports if prices rise.

- UK BoE Dale commented that the export sector showing signs of picking up. He wants to see return of a more normal policy situation. Early signs on funding for lending are encouraging.

- India Fin Ministry said they will cut tax on foreign borrowings by local companies to 5% from 20%, applied to funds borrowed between Jul 2012 and June 2015.

- Japan PM Noda said he needs to analyze economic situation before making a decision on the extra budget.

- Italy Under Sec Polillo said Italy and Spain will not request aid unless yields "jump", and that a Bond buying request would be an admission of failure. Italy is seeking €6.5B in cuts to avoid hike to the VAT.

- Sweden Fin Min Borg commented that Swedish taxes can't go into Ill-managed Europe banks. There is a very big risk, we haven't seen the worst for Europe yet. Sweden should spend 0.5-1.0% of GDP on stimulus in a new crisis.

- China Vice President Xi Jinping reiterates interest to solve territorial disputes with neighbors in a peaceful manner (speaking at the 9th China-ASEAN Business and Investment Summit).

- WTO's Lamy said that global economic output is on the downside, and the WTO needs to substantially downgrade forecasts, which will be announced today.

Currencies:

- During the session some Euro weakness being attributed to the SNB selling EUR/AUD (this is part of diversification from maintaining the EUR/CHF peg); AUD/USD for its part was up +0.8% above $1.05. There was also a report that a Hedge fund was taking off a hedge on a large fixed income play, the single currency dipped to a low of $1.2955. There was also some chatter that Middle East Central Banks were in the market as buyers, this took the currency higher above $1.3035. USD/JPY was little changed in the session with a range of ¥78.12-78.37. USD/CHF remained around the CHF0.9290 level, the SNB noted that the franc remains high and is weighing on the economy. The SNB did say they would enforce the EUR/CHF cap with the "utmost determination." GBP/USD was stronger in the session, testing $1.6210 but failing to hold and fell back to $1.6280.

Political/In the Papers:

- (EU) WTO's Lamy: Global economic output is on the downside, WTO needs to substantially downgrade forecasts, which will be announced today; Expects growth in Europe to be slow for next 5 yrs

- (IT) Italy Under Sec: Italy and Spain will not request aid unless yields "jump"; Bond buying request would be an admission of failure; Note: The Spanish PM Rajoy and Italy PM Monti are expected to meet later today, at around 1030 GMT

- (EU) ECB Chief Economist Praet (Germany): Reiterates that the euro itself is not in crisis, long-term inflation expectations firmly anchored; Need to contain the crisis as soon as possible

- (DE) German Finance Ministry official: Economy, labor market to slow in H2; inflation likely to moderate in coming months; Export industry in good shape; Reports Aug total tax rev +12.8% y/y, YTD +5.8% y/y; Federal tax rev +10.5% y/y, YTD +4.6% y/y.

- (GR) Greece creditors evaluating another debt haircut in order for the country to achieve sustainability - Germany press; IMF pushing creditors to accept a new haircut that would not involve the ECB or the IMF

- (IE) Ireland think tank ESRI: Raises 2012 GDP forecast to 1.8% from 0.6% prior, cuts 2013 GDP to 2.1% from 2.2% prior

- (GR) Greece official: Approx 95% of aid package to be agreed on by Sunday 23rd Sept; troika to leave by end of week - financial press

- (UK) BoE's King: Seeing signs of a slow recovery, Q3 expecting to show growth; Would be more acceptable to miss debt targets because of a slow economy


Looking Ahead

***All times listed for economic events are denominated in Eastern Standard Time (Add 4 hours for GMT equivalent)

- 6:00 (IC) Iceland to sell Bonds

- 6:10 (UK) DMO to sell combined £3.0B in 1-month, 3-month and 6-month Bills

- 6:30 (US) Daily LIBOR Fixings

- 7:15 (EU) Sweden Central Bank Gov Ingves speaks at Brussels Think Tank

- 8:30 (CA) Canada July Wholesale Sales M/M: 0.2%e v -0.1% prior

- 8:30 (CA) Canada Aug Consumer Price Index M/M: +0.2%e v -0.1% prior; Y/Y: 1.2%e v 1.3% prior; Consumer Price Index: No est v 121.5 prior

- 8:30 (CA) Canada Aug CPI Core M/M: +0.3%e v -0.1% prior; Y/Y: 1.6%e v 1.7% prior

- 9:00 (DE) German Fin Min Schaeuble speaks at Foreign Press Association Event, Berlin

- 9:00 (BE) Belgium Sept Business Confidence: No est v -11.8 prior

- 9:00 (MX) Mexico Aug Unemployment Rate: No est v 5.0% prior

- 11:00 (US) Fed to purchase $1.50-2.00B in Notes

- 12:40 (US) Fed's Lockhart speaks on Policy and Economy in Atlanta

- 13:00 (DE) German, French Ministers discuss Europe's Future in Ludwigsburg

- 15:00 (AR) Argentina Q2 Current Account: No est v -$552M prior

- 15:00 (AR) Argentina Q2 Quarterly GDP: 0.5%e v 5.2% prior