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European Market Update

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European Market Update

Mon, Mar 31 2008, 09:56 GMT
by John J. Phillips IV

TradeTheNews.com

ECONOMIC DATA

• FR Feb Producer Prices: M/M 0.4% v 0.5%e || Y/Y 4.9% v 4.9%e
• SP Mar Preliminary CPI Harmonized Y/Y: 4.6% v 4.4%e
• SW Mar Economic Tendency Survey: 103.2 v 99.5 prior || Prior revised from 99.5 to 99.6
• SW Mar Manufacturing Confidence: 2 v –2e
• SW Mar Consumer Confidence: 2.5 v –0.5e
• SW Feb Household Lending: 11.0% v 11.1% prior
• IT Feb PPI: M/M 0.7% v 0.5%e || Prior revised from 0.4% to 0.6% |||| Y/Y 5.7% v 5.2%e || Prior Y/Y revised from 5.2% to 5.4%
• EU Feb M3 Y/Y: 11.3% v 11.5%e || M3 3-Month Avg: 11.4% v 11.5%e
• UK Jan Index of Services: 0.5% v 0.5%e || Prior revised from 0.6% to 0.7%
• EU Mar CPI Estimate: 3.5% v 3.3%e
• EU Mar Business Climate: 0.80 v 0.72e || Prior revised from 0.72 to 0.71
• EU Mar Consumer Confidence: -12 v –12e
• EU Mar Economic Confidence: 99.6 v 100.0e || Prior revised from 100.1 to 100.2
• EU Mar Industrial Confidence: 0 v 1e
• EU Mar Services Confidence: 9 v 10 e
• IT Mar Preliminary CPI: M/M 0.5% v 0.3%e || Y/Y 3.3% v 3.1%e
• IT Mar Preliminary CPI Harmonized: M/M 1.6% v 1.3%e || Y/Y 3.6% v 3.3%e

SPEAKERS/COMMENTS

• UK According to a CBI survey most financial companies now expect the credit crunch to last at least another 6 months || The results also suggested that there will be financial sector job losses of 10K to 11K from early March to the beginning of June.

• UK In a March survey, consumer inflation expectations fell to 78% v 86% m/m - Lloyds TBS

• US According to the Telegraph, the Fed is examining the Nordic bank nationalizations of the 1990s as a possible interim solution to the US financial crisis || A senior official at one of the Scandinavian central banks said that Fed strategists had stepped up contracts to learn how Norway, Sweden and Finland managed their crisis from 1991 to 1993 || The Telegraph reported that it is understood that Fed vice-chairman Don Kohn remains very concerned by the depth of the US crisis and is eyeing the Nordic approach for contingency options.

• SZ SECO Government Forecasts: Leaves 2008 growth forecast unchanged at 1.9% || Cuts 2009 forecast to 1.5% from 1.7% || Cuts 2008 export growth forecast to 3.0% from 4.0% || Leaves 2008 private consumption forecast unchanged at 1.9% || Leaves 2008 jobless forecast unchanged at 2.5% || Cuts 2009 export growth forecast to 3.4% from 4.5% || Raises 2009 jobless forecast to 2.6% from 2.5% || Cuts 2009 private consumption forecast to 1.6% || Forecasts assume libor rate of 2.5% in 2008

• SW Swedish Think Tank NEIR: Forecasts key rate at 3.75% in 2008; Forecast GDP at 2.5% in 2008 || Forecasts 2009 GDP at 2.6% || Forecasts 2008 Inflation at 2.2% || Forecasts 2009 inflation at 2.0%

• ECB's Liikanen: Reiterates that 2nd round effects must be prevented; Anchoring inflation remains top priority || Possible that global growth weakening substantially || Inflation expectations have hardened || Euro-region inflation has gathered pace || US economy seen avoiding a recession || Bank of Finland cuts 2008 GDP forecast to a 5-year low of 2.7%
• BOE's King: Sees inflation falling back to target in 2009 || Cannot ignore pick-up in inflation under way; has to gauge impact on expectations || Some economic slowdown needed to achieve CPI target || Once inflation is entrenched it may be too costly to dislodge || MPC cannot allow economy to slow too sharply

FIXED INCOME/FX/COMMODITIES/ERRATUM

• European fixed income futures are trading in positive territory today despite a higher than expected reading on the March Euro-Zone CPI estimate, perhaps suggesting that market participants expected it after all of the hawkish rhetoric from the ECB over the past few weeks. Gilts are outperforming their European counterparts today as the European indices are lower, and there was a lack of significant data scheduled in the UK. Despite an array of economic data in the Euro-Zone action in fixed income has been subdued to some degree today as it is the last day in the quarter. One story of note overnight surrounded a public sector wage agreement in German. According to wires citing sources, the preliminary public sector pay deal is for a 5.1% wage hike in 2008, and a 2.9% wage hike in 2009.

• The European indices are currently trading lower across the board. Shares of UBS traded lower at the open after Merrill Lynch speculated that the bank may post further writedowns in 2008. Shares of Air Berlin were lower after the company pulled-in its 2008 EBIT guidance in, forecasting a range that fell below consensus estimates. As expected, Friends Provident rejected JC Flowers’ revised bid claiming that it undervalues the company.  In M&A activity, Teva announced this morning that it will be acquiring Bentley Pharma in a $360M deal. The $15.02/share offer represents a 9.3% to Bentley’s closing price as of Friday.

• The USD was mixed during the European morning as it softened against the Euro and CHF, but firmed against the GBP. Continued hawkish comments from ECB members and higher Euro-zone CPI kept the EUR/USD within eyesight of the 1.60-handle. The EUR/GBP hit fresh all-time highs as it nears the 0.80-level. April marks the start of the Japanese fiscal year, and the launch of new Toushin funds will initially weight upon the JPY sentiment, but lingering concerns about the health of the global financial sector limiting JPY losses for now.

Published on  Mon, Mar 31 2008, 09:56 GMT