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European Market Update

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European Market Update

Fri, Apr 11 2008, 09:28 GMT
by John J. Phillips IV

TradeTheNews.com

ECONOMIC DATA

• GE Mar Wholesale Price Index: M/M 1.6% v 0.5%e || Y/Y 7.1% v 6.0%e
• SP Mar CPI: M/M 0.9 % v 0.9%e || Y/Y 4.5% v 4.6%e
• SP Mar Core CPI: M/M 0.7% v 0.7%e || Y/Y 3.4% v 3.4%e
• SP Mar Harmonized CPI: M/M 0.9% v 0.9%e || Y/Y 4.6% v 4.6%e
• SW Feb Activity Index Level: 123.7 v 122.9 prior || Prior revised from 122.9 to 123.1

SPEAKERS/COMMENTS

• IEA: Cuts 2008 world oil demand growth forecast by 310K bpd to 87.23M BPD || China may cut tax on crude oil imports to 4% from 17% || China may cut tax to pare refiners' losses || Sees US oil demand declining by 2% in 2008 || Sees Chinese oil demand rising by 4.7% in 2008 || Sees Middle Eastern oil demand rising by 5.7% in 2008 || Cuts 2008 demand forecast for OPEC crude by 200K bpd
• EU President: Foreign exchange rates must reflect economic fundamentals || EMU economy is doing well, but 2008 growth will slow slightly || EMU inflation is absolutely a matter of concern || FX volatility is not conducive to growth

FIXED INCOME/FX/COMMODITIES/ERRATUM

• In energy news overnight the IEA cut its 2008 oil demand growth forecast for the third consecutive month, making the largest cut in seven years. The IEA reduced its 2008 oil demand growth forecast by 310K bpd, and cut its 2008 OPEC oil demand forecast by 200K bpd. The IEA also said that China may cut its oil import tax to 4% from 17% in order to help pare refiners’ losses. The IEA sees US demand declining by 2% in 2008, and expected Chinese and Middle Eastern demand to rise by 4.7% and 5.7% respectively. JP Morgan raised its average 2008 Brent and WTI oil price forecasts to $89/barrel and $90/barrel respectively.
• European government bonds opened lower in the session, and have remained in the red faced with little economic data.  One interesting view circulating amongst analysts centers around the slow rise in M&A activity seen around the world over the past few weeks. This has, perhaps, helped to chip away at the markets’ recent “flight to safety” mentality.  There was no new supply overnight, however Germany did make a €16B cash payment. Going into the weekend focus is likely to rest upon G7, which is widely expected to be a non-event.
• The European indices are currently trading in positive territory in the session, led by the basic resources, and industrial goods and services sectors. There was little in the way of significant equity related news overnight. According to wire reports EDF plans to bid for British Energy, but the bid is expected to be help below 700p/share. Looking ahead, Dow component GE is due to report earnings results ahead of the open today.
•  In currencies, the market maintained a subdued tone ahead of the weekend’s G7 meeting in Washington DC. Dealers suspect that G7 will try to show a clear determination to ensure financial stability as global markets remain in a turbulent mode. FX dealers will see if members of G7 are serious regarding the recent USD weakness and EUR strength. However, it is more likely that G7 will agree that China's CNY will need to rise.  In the event of any surprise at G7, any statement along the lines of EU protests against too strong Euro could increase the short term volatility, although the G7 states that disorderly, excessive FX moves are certainly not welcomed The EUR/USD at 1.5830 and exhibited some softness in the session after Harvard economist Feldstein stated that currency intervention to support USD would be wrong. The is JPY softer across the board with equities in positive territories. Dealers citing the continued financial sector relief rally after the recent Wamu cash infusion deal earlier this week. The USD/JPY at 101.85 and EUR/JPY higher by 10 pips at 161.20.

Published on  Fri, Apr 11 2008, 09:29 GMT

Archive

• Is the ECB in denial or the first of possible October surprises?
  Published On Thu, Oct 2 2008, 13:33 GMT
• Weak European PMI highlight growth outlook and corporate profit potential
  Published On Wed, Oct 1 2008, 13:14 GMT
• Sense of calm returns; European equities recover from opening level lows; Carry-trades in focus
  Published On Tue, Sep 30 2008, 13:51 GMT
• European Financial Sector under stress
  Published On Mon, Sep 29 2008, 13:01 GMT
• European Central banks announced additional liquidity operations to ease quarter-end pressures; Delay in US financial market bailout package prompts risk aversion
  Published On Fri, Sep 26 2008, 14:05 GMT

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