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European Market Update

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IMF optimistic on pending Asian region recovery

Thu, Oct 29 2009, 10:36 GMT
by Trade The News Staff

TradeTheNews.com

European Market Update: IMF optimistic on pending Asian region recovery and offsets recent risk aversion ahead of US GDP data 

ECONOMIC DATA 

- (RU) Russia Central Bank (CBR) cuts Refi rate by 50bps to 9.50%; in line (8th rate cut since April)

- (RU) Russian Gold & Forex Reserves w/e Oct 23rd: $429.3B v $423.4B prior

- (SA) South Africa Sept PPI M/M: -3.2% v-2.2%e; Y/Y: -3.7% v -2.5%e 

- (SP) Spain Aug Total Housing Permits M/M: -53.3% v 22.5% prior; Y/Y: -45.3% v -44.3% prior

- (HU) Hungarian Sept unemployment Rate: 10.3% v 10.1%e 

- (SP) Spanish Oct Prelim CPI - EU Harmonized: -0.6% v -0.7%e 

- (DE) Danish Sept unemployment Rate: 4.1% v 3.9%e 

- (SW) Sweden Aug Wages - non-Manual workers Y/Y: 2.7% v 3.0% prior

- (GE) German Oct Unemployment Change: -26K v +15Ke; Unemployment Rate: 8.1% v 8.3%e 

- (GE) German Sept Machine Orders M/M: -43% v -43% prior; Y/Y: -33% - VDMA

- (NO) Norwegian Oct unemployment Rate: 2.6% v 2.7%e 

- (NO) Norwegian Sept Retail Sales M/M: -1.1% v 0.4%e; Y/Y: 2.0% v 2.2%e 

- (IT) Italian Sept Hourly Wages M/M: 0.7% v 0.3% prior, Y/Y: 3.1% v 2.4% prior

- (SA) South African Q3 Unemployment Rate: 24.5% v 23.6 % prior

- (UK) Sept Net Consumer Credit: -£0.3B v -£0.2Be; Net Lending: £0.9B v £0.8B 

- (UK) Sept Mortgage Approvals: 56.2K v 53.6Ke 

- (UK) Sept Final M4 Money Supply M/M: 0.8% v 0.7% prior, Y/Y: 11.6%v 11.3% prior

- (EU) Oct Business Climate Indicator: -1.78 v -1.90e; Consumer Confidence: -18 v -18; Economic Confidence: 86.2 v 84.4e 

- (IT) Italian Aug Large Company employment: -1.9% v -1.8% prior 

(BR) Brazil Oct FGV Inflation IGP-M Y/Y: -1.3% v -1.3%e 

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM 

- European equity markets have been swamped by a distorted and confused volume of corporate earnings, including have included significant misses, mediocre performers and top line smashers. Thanks to earnings and the negative trend from Asia, European market opened to the downside before sharply rallying 15 minutes into the session. Positive comments out of Standard Chartered [STAN.UK] followed by a further Russian Central Bank rate cut fueled the rally. Earnings in the premarket and yesterday's post-market reports included all sectors (financial, industrial, chemical, travel, auto, consumer discretionary). Energy names continued their solid performance with ENI [ENI.IT] and Shell [RDSA.UK] in line, both names rolled over on the open, however. Auto names including heavy truck maker MAN Ag [MAN.GE] and VW [VOW.GE] traded higher off their reports. BASF [BAS.GE] continued its cautious macro tone and added further CIBA integration costs, shares traded lower. Press speculation that Lloyd's would be granted approval for its £25B capital raise broke that firms multi-day decline and sent it and RBS [RBS.UK] to the top of the FTSE100. Into 5:30EST, equities are mixed, trading near the unchanged mark expected a plethora of US corporate reports, and the highly anticipated Advanced US Q3 GDP release.

- In individual earrings: VW [VOW.GE] reported Q3 Net €172M v €212Me, revenue €26B v €26.4Be and reiterated expectations that FY09 revenue will come in down y/y. Shell [RDSA.UK] reported Q3 Net $3.25B v $2.8Be, revenue $76B v $55.8Be, declares dividend of $0.42/share. Kazakhamys [KAZ.UK] reported Q3 production: On track to meet FY target of copper cathode equivalent output of 315kt. BASF [BAS.GE] reported Q3 Net €237M v €401Me (unclear if comparable), revenue €12.8B v €12.8Be; Guides Q4 income down q/q v Q3. Man [MAN.GE] reported Q3 Net €4M v €34Me, revenue €3.1B v €2.9Be. Henkle [HEN.GE] reported prelim Q3 adj EBIT €385M v €307Me, revenue €3.49B v €3.54Be. Aixtron [AIXA.GE] Update: reported 9-month revenue €185M -4% y/y; Guides FY09 higher; Announces capital increase.
Continental [CON.GE] reported Q3 adj EBIT €413M v €182M (unclear if comp), revenue €5.3B v €5.1Be; Guides Q4 EBIT and revenue level higher on y/y comps. Deutsche Bank [DBK.GE] confirmed Q3 Net €1.4B v €821Me (as given Oct 21) and revenue €6.7B v 6.8Be. 

- In speakers: The IMF's Asian Region outlook concluded the East is rebounding fast from the depths of the credit crunch. The IMF said Asia must maintain fiscal support amid sluggish export outlook, while also warning that maintaining the balance between support and inflation might be difficult. It forecasted 2010 Asian GDP at +5.8% from the +2.8% level forecasted in 2009. The IMF said G7 consumers and businesses have been hobbled by the global crisis and warned G7 demand for Asian export might remain weak. Moody's placed Greece's "A1" sovereign rating on review for possible downgrade. The deterioration of the fiscal position raises serious questions about the sustainability of Greek public finances and the problem will be compounded by a less favorable global economic environment going forward. Moody's changed Portugal's sovereign outlook to negative from stable. The action reflects both the structural economic challenges facing the country, which have been exacerbated by the global crisis, and the apparent lack of motivation for policymakers to address them. Chinese Trade official Chen said US import limits will not solve trade imbalance, US and China will jointly oppose protectionism. The ECB's Quaden reiterated the central bank's view that the economic recovery will remain fragile and that inflation was likely to stay weak in coming months. He noted that the conclusions for monetary policy were obvious. EU's Verhuegen said China has a competitive advantage from low CNY rate and called on the G20 to discuss artificially low currencies.

- In currencies: The USD retraced some of its recent strength against the Euro and Swiss currencies during the European morning. Dealers noted that European stocks did not fall as much as initially feared and the comments from the IMF on the Asian region outlook helped to sooth the recent spat of risk aversion. EUR/USD trading in the mid 1.47 neighborhood about 40 pips higher from its opening level in Tokyo. GBP/USD re-tested above the 1.64 level. Dealers noting that market chatter of perhaps more BoE QE measures seem to be offset by the potential M&A flows. Overall dealers noted that the dollar's price action was once again highly correlated to the equity market sentiment.

- Fixed Income: European peripheral government bonds are weaker versus bunds following Moody's action on Portugal and Greece. Greece's ratings were put on review for a possible downgrade while Portugal was cut to negative from stable. The Greek 10y is 5bps wider on the day at 142bps, while the Portuguese 10-year is at bunds +57bps. The Italian 10y BTP is also 5bps wider at Bunds +85bps with up to €5B in reopenings of 2012 and 2020 BTP's imminent. Treasuries are pretty much unchanged,as are Gilts, having made up a little lost ground following the biggest increase in Mortgage Approvals since March 2008.

- In Energy\commodities: Iraq was rumored to have signed initial agreement for the Zubair Oilfield Eni consortium on Nov 1st. Iran replaced the head of its state oil company as Ghoamhossein Bayat will replace Adel Nejadsalim.

NOTES  

- IMF: Asia leading the world out of recession

- US Q3 GDP data : Most street forecasts range between +3.0% and +3.5%. Traders sense that the rise in GDP being attributed to the "cash for clunkers" program and pondering if the release woulf be an opportunity to sell stocks. Note US payroll data only a week away with the last positive read seen back in Dec 2007 (some 22 months ago)

Looking Ahead: 

U.S. GDP data

- 7:10 (GE) ECB's Weber

- 9:30 (US) Treasury's Geithner

- 8:30 (CA) Canadian Sept Industrial Product Price M/M: -0.2%e v +0.5% prior, Raw Materials Price Index M/M: -0.5%e v 3.7% prior

- 8:30 (US) Q3 Advance GDP Q/Q: 3.2%e v -0.7% prior, GDP Price Index 1.4%e v 0.0% prior, Core PCE Q/Q:1.4%e v 2.0% prior, Personal Consumption: 3.1%e v -0.9% prior

- 8:30 (US) Initial Jobless Claims w/e Oct 24th: 523Ke v 531K prior, Continuing Claims: 5.905Me v 5.923M prior

- 11:00 (US) Fed coupon pass

- 13:00 (US) Treasury to sell $31B in seven-year notes

Published on  Thu, Oct 29 2009, 10:42 GMT