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European Market Update

European Market Update

Fri, Nov 9 2007, 10:58 GMT
by Trade The News Staff

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• *** ECONOMIC DATA ***
• SZ Oct SECO Consumer Climate: 15 v 11e
• GE Oct Wholesale Price Index: M/M 0.5% v 0.5%e || Y/Y 4.7% v 4.7%e
• FR Sep Industrial Production: M/M –1.1% v –0.5%e || Prior revised from 0.3% to 0.0% |||| Y/Y 1.1% v 2.8%e || Prior revised from 2.6% to 2.1%
• FR Sep Manufacturing Production: M/M –1.3% v –0.5%e || Y/Y 1.4% v 3.1%e || Prior revised from 3.1% to 2.8%
• French industrial and manufacturing production declined sharply from August weighed down by significant declines in all of its components. On the industrial production front, the biggest decline was seen in the automobile industry, which declined from 1.1% m/m in August to –3.1% in September, perhaps suggesting that the Euro is beginning to weigh down on French companies. Despite the lower reading in September, the sharp rise seen in July seems to have secured a quarterly gain in industrial and manufacturing production. Taking into account the recent rhetoric by French companies regarding the Euro, as well as industry forecasts as seen in the October survey of industrial investment, it would appear that a period of decline lies ahead.
• FR Sep Trade Balance: €3.1B v -€3.0Be || Prior revised from -€2.8B to -€2.7B
• IT Sep Industrial Production: M/M –1.0% v –0.4%e || Prior revised from 1.3% to 1.0% |||| Y/Y 0.3% v 1.9%e || Prior revised from 3.0% to 3.4% |||| Y/Y nsa –2.3% m/m v 0.8%e || Prior revised from 2.9% to 3.3%
• The notoriously volatile Italian industrial production declined by much more than expected as almost all of its components post declines from August. The food/drink/tobacco component, which has a weighting of 7.6%, declined to –3.2% from 1.3% in August, while the most heavily weighted component, metals, declined to 1.1% from 2.0% in August. While most components posted significant declines, the second most heavily weighted component, machinery, rose to 0.7% from –0.2% in August. The unadjusted y/y reading declined to its lowest level since April of 2006, weighted down by the textiles/clothes component, which has a weighting of 8.5%. The said component declined to –3.6% from 18.3% in August.
• NO Oct CPI: M/M 0.3% v 0.4%e || Y/Y –0.2% v 0.0%e
• NO Oct CPI Underlying: M/M 0.1% v 0.2%e || Y/Y 1.4% v 1.6%e
• Norwegian inflation figures declined by more than expected in October, with the y/y core CPI coming off of its second highest level in over four years, perhaps indicating that Norges Bank will not have to raise interest rates to fight inflation anytime soon. Recall that on October 31 Norges Bank kept rates on hold at 5.00% as expected.
• SW Oct AMS Unemployment Rate: 3.2% v 3.2%e
• As expected the ASM unemployment rate declined to its lowest level since records began in January of 1992 as continued economic growth continued to boost the demand for workers.
• UK Sep Visible Trade Balance: -£7.75B v -£6.9Be || Prior revised from -£6.85B to -£6.95B
• UK Sep Trade Balance Non-EU: -£4.71B v -£3.9Be || Prior revised from -£3.9B to -£3.95B
• UK Sep Total Trade Balance: -£5.05B v -£4.1Be || Prior revised from -£4.11B to -£4.22B
• The visible trade balance widened to the biggest deficit on record since records began in early 1980, a sign that record high GBP levels are beginning to weigh down on British exports as foreigners opt to purchase goods elsewhere. GBP levels are also boosting imports, as British consumers showed increased demand for foreign vehicles and other consumer goods.
• *** COMMENTS/SPEAKERS ***
• HKMA: The USD is still the best anchor for the HK currency
• China Banking Regulatory Commission: China may raise the cap on foreign investment banks
• FR Industrial Investment Survey: Forecasts 2007 industrial investment at 4.0% vs. previous forecast of 4.0%
• FR Industrial Investment Survey: Forecasts 2007 manufacturing investment at 5% vs. previous forecast of 7%
• FR Industrial Investment Survey: Forecasts both 2008 industrial and manufacturing investment at 3%
• ECB Mersch: Echoing Trichet said that the ECB will do everything necessary for price stability
• ECB Mersch: The ECB does not want brutal FX moves
• ECB Mersch: The ECB naturally looks at the Euros impact on growth, and inflation
• ECB Mersch: Brutal FX moves raise the risk of a disorderly unwinding of global imbalances
• *** FIXED INCOME/FX/COMMODITIES/ERRATUM ***
• Finland 2008 supply likely to be near that of 2007 [wires citing sources]

• Finland Will not tap the 4.2% September 2012 RFGB bond next week [wires citing sources]

• Finland: 5-Year tap likely within the next 2 or 3 weeks [wires citing sources]
• Finland: To issue one new 11-year benchmark in May of 2008 [wires citing sources]

• Greek PDMA announced that it will sell €1.4B in 3.40% June 2009 GGBs on November 13

• Belgian bonds continue to gain, despite a slight decline in the 10-year OLO mid-session. The yield on the 10-year OLO surpassed that of the 10-year note in the US today for the first time since late 2004.

• Fixed income futures in Germany rebounded from session lows mid-way through today’s session and are trading modestly higher following softer European data in Italy and France.

• Over in the UK fixed income futures are trading modestly higher as well rebounding from a bout in negative territory as the visible trade balance declined to its lowest level since records began in 1980.

• NOK weakened following the weaker than expected inflation data, which seemed to indicate that Norges bank will not have to raise interest rates at its next policy-setting meeting. Despite the weakening the NOK remains near early August levels where it reach its highest level against the Euro since Early 2003, as well as multi-decade highs against the US Dollar. Interesting side note, as oil prices are at record highs one can oil image that the Norwegian Sovereign Fund known as the Government Pension Fund of Norway, is growing. It is currently the third largest sovereign fund in the world. As the outlook for the US economy becomes more uncertain, it is possible the fund manages will seek to diversify away from US related fixed income instruments. The fixed income class currently represents 0% of the fund, with 35% of that class held in fixed income instruments in the Americas and Africa, 60% held in European fixed income instruments, and the remaining 5% held in Asian fixed income instruments.
• EUR/USD remains above the 1.47 handle after dipping back below in early trading Wednesday, and quickly retouching the handle and then falling back below during Asian trading on Friday. The Euro broke 1.47 again ahead of European trading today, but lost ground after weaker than expected industrial and manufacturing production data in France. The Euro continues to remain above 1.47 however as uncertainties surrounding the US economic outlook persist following comments from Fed chairman Bernanke yesterday afternoon noting that the FOMC expects Q4 economic growth to slow noticeably.
• USD/JPY Fell to new 18-month lows overnight on the back of the usual Friday PBOC rate hike rumors, as well as dealer chatter that China could accelerate its Yuan flexibility ahead of a planned EU summit scheduled for November 28. Note that, according to reports overnight, the Yuan rose against the Dollar in the one-year offshore NDF market for its biggest rise since the Yuan’s 2005 revaluation
• USD Index falls to new all-time lows around 75.064 amid persistence in the US Dollar decline globally
• On the commodity front crude oil prices remain in positive territory, but are off session highs as improving weather conditions lead to the resumption of production from platforms in the area owned by the likes of Statoilhydro and British Petroleum. All is relatively quiet for the metals.
• End

Published on  Fri, Nov 9 2007, 10:58 GMT

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