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European Market Update

European Market Update

Tue, Apr 8 2008, 10:20 GMT
by John J. Phillips IV

TradeTheNews.com

ECONOMIC DATA

• UK Mar HBOS House Prices: M/M –2.5% v –0.3%e || Prior revised from –0.3% to –0.4% |||| Y/Y 1.1% v 2.4%e (M/M lowest since September 1992; Y/Y lowest since December 2002)

SPEAKERS/COMMENTS

• BOF's Landau: Attempts to spread risk through the financial market have been less effective than foreseen
• RU Russian Central Bank: Forecasts inflation below 10% in 2008 || May increase interest rates further
• EU Banking supervisor says significant stress continues within financial market sector || Method of disclosing illiquid assets may exacerbate market uncertainty
• EU Monster Employment Index Europe shows moderate rise in March to 170 from 165 in February.
• HSBC Updates its BOE Forecast; Sees a 25bps cut at the April 10th meeting; Previously forecasted no change

FIXED INCOME/FX/COMMODITIES/ERRATUM

• There is very little that can be said about today’s session other than it was like watching paint dry. Faced with a lack of economy data and central bank speakers the one economic release seen overnight, HBOS house prices in the UK, was pretty interesting as the M/M reading slid to its lowest level since September of 1992. That said, fixed income futures are currently trading in positive territory in the session on the back of a decline in the equity markets as a stream of poor earnings related news in the US has ushered in the beginning of earnings season. Thursday’s rate decisions, and post rate decision press conferences remain in focus this week. HSBC jumped on the band wagon overnight updating its BOE rate forecast to include a 25bps cut at this weeks meeting; HSBC had previously forecasted no change. In new supply overnight the Dutch DSTA sold €2.75B in 4.00% January 2011 DSL with an average yield of 3.762%, while the UK DMO sold £1.2B in 1.25% November 2017 I/L gilts with an real yield of 1.196% and a bid-to-cover of 1.64x. The cover on the DMO’s auction compares to the 2.07x seen at the previous auction.
• The European indices are currently trading lower in the session. The downward trend started late in the US after Alcoa’s earnings results failed to meet market expectations, while Advance Micro Devices lowered its first-quarter guidance. The negative news weighted down on Asian trading, which fed into European trading as well. The downward trend in European indices cannot be attributed solely to US news, as there was some bad news in the European pre-market today. TomTom cut its first-quarter guidance rather drastically, which brought shares down immediately at the open. 
• In energy news overnight OPEC’s President made a series of comments overnight, most of which were inline with recent OPEC rhetoric. The OPEC president said that the Oil price level is not due to a lack of supply, adding that high oil prices are with us to stay. He reiterated that the declining Dollar and a US slowdown remain amongst OPEC’s concerns.  The OPEC president also reiterated that supply and stocks are at very reasonable levels. On another note the OPEC president said that he sees USD falling more in value, will impact oil prices, and forecasted an oil price range of $80-$110/barrel for 2008. In other oil related news overnight Kazakhstan's Prime Minister has signed into law an oil export duty of $109.91/ton, which will be effective in May. The Chinese Academy of Social Sciences said overnight that China's 2010 oil consumption is expected to be 407M tons, up 17.4% from 2006 levels.  On the geopolitical front the Iranian president said overnight that Iran has started to set up 6K advanced enrichment centrifuges at a key complex. Front month crude has spent time in both positive and negative territory overnight, and currently sits around session lows. Looking at the metals spot gold is currently trading higher, while spot silver and copper futures are in negative territory in the session. Rio-Tinto’s CEO said overnight that emerging market demand is seen sustaining the recent rally in metals prices. Elsewhere, Citigroup raised its 2008 nickel, zinc, and lead price forecasts.
• In currencies the GBP was the focus in trading on Tuesdays as the March HBOS data yielded speculation that the BOE could take an aggressive stance in lowering rates at Thursday's MPC meeting. The GBP/USD was off over 100 pips at 1.9770, while EUR/GBP was retesting its all-time highs of 0.7983. The soft housing data giving credence to the Times article noting that the Director of the British Retail Consortium (BRC) urged the BOE to cut rates by up to 50bps this week or face a potential wave of job cuts.  The EUR/USD maintain a steady footing above the 1.57 level-where strong demand from far eastern names keeping the USD on the defensive. Adding to the USD woes were comments from the OPEC President who continues to see the USD declining in value, thus impacting oil prices.  The JPY was firmer as equity markets were broadly lower in both Tokyo and Europe. Concerns over the upcoming US earning season deflating the recent optimism found on Monday in which financial sector credit crisis was suggested to have passed its ''worst point'' by a major US brokerage firm.

Published on  Tue, Apr 8 2008, 10:22 GMT

Archive

• French Sentiment Data Loewst in Over Five Years
  Published On Mon, Aug 18 2008, 13:23 GMT
• Commodites slides as USD continues to recover
  Published On Fri, Aug 15 2008, 12:18 GMT
• Inflation hawks remain on front burner
  Published On Mon, Aug 11 2008, 12:54 GMT
• Let the Games Begin!
  Published On Fri, Aug 8 2008, 10:49 GMT
• Markets Quiet as Rate Decisions are on the Horizon
  Published On Thu, Aug 7 2008, 13:43 GMT

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