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European Market Update

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European PMI Manufacturing data suggests a fragile recovery

Mon, Nov 2 2009, 11:06 GMT
by Trade The News Staff

TradeTheNews.com

ECONOMIC DATA

- (CZ) Aug Final Trade Balance: -€99M v -€75Me

- (SW) Swedish Oct Swedbank PMI Survey: 56.7 v 55.5e

- (IR) Irish Oct NCB Manufacturing PMI: 48.0 v 46.6 prior

- (TU) Turkey Oct PMI Manufacturing: 52.8 v 55.3 prior

- (PD) Polish Oct Manufacturing PMI: 48.8 v 48.2 prior

- (SP) Spain October Manufacturing PMI: 46.3 v 45.8 prior

- (HU) Hungary Oct PMI: 48.2 v 49.0 prior

- (CZ) Czech Oct Manufacturing PMI: 49.8 v 49.5 Prior

- (DE) Danish Sept Retail Sales M/M: -1.7% v -1.2% prior; Y/Y: -1.7% v -4.6% prior

- (SZ) Swiss Oct SVME PMI: 54.0 v 54.8e

- (HK) HK Sept Retail Sales Value Y/Y: 2.4% v 3.5%e; Retail Sales Volume: 1.0% v 1.4%e

- (IT) Italian Oct PMI Manufacturing: 49.2 v 48.8e

- (FR) French Oct PMI Manufacturing: 55.6 v 55.3e

- (GE) German Oct PMI Manufacturing: 51.1 v 51.1e

- (SA) South Africa Oct Kagiso PMI: 47.6 v 52.1e

- (NO) Norwegian Sept Credit Indicator Growth Y/Y: 5.5% v 5.6%e

- (UK) Oct PMI Manufacturing: 53.7 v 50.0e

- (DE) Danish Oct PMI Survey: 48.5 v 37.4 prior

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

- Equities: Asian markets (ex-China) traded broadly negative following last Friday's NY selloff. This negative momentum rolled into the open of European equity markets. CITs late Sunday announcement that it would be filing for bankruptcy protection, while broadly expected, added further weight, and additional financial jitters to the markets. Share of UK banks opened sharply to the downside ahead of expected commentary regarding the UK APS. Earnings results proved mixed, with commentary out of RyanAir [RYA.UK] and TNT [TNT.NV] beating expectations, but still remaining cautious and showing further y/y declines. European markets rallied off their lows, led by industrials, manufacturers, tech and miners on the back up upgrades and order wins. UK PMI at 4:30EST provided continued upward motivation. Trading levels remained choppy through 5:30ESt with equities moving above and below the unchanged mark several time in the session. Volumes have been high on the back of interest in tech and financial names with all three major bourses printing turnovers ahead of moving averages.

-In individual equities: TNT [TNT.NV] Reports Q3 adj Net €99M v €82Me, Rev €2.5B v €2.5Be; Q3 mail volumes -4.8% y/y.
|| Linde [LIN.GE] Reports Q3 Net €169M v €178Me, Rev €2.8B v €2.9Be; Reiterates view that FY09 will be down y/y. || RBS [RBS.UK] Confirms it is close to agreement with HM Treasury over participation in APS. || RyanAir [RYA.UK] Reports Q2 Net €250.5M v €186Me, Rev €1.8B v €1.8Be; expect to be loss making Q3/Q4 on back of lower average fares. || Alstom [ALO.FR] Announces €450M contract win from Grosskraftwerk. || Faurecia [EO.FR] To acquire Emcon Technologies; to offer 20.9M share rights to fund acquisition (approx 22% of market cap). ||

- Speakers: || China Q4 Industrial Output could be between 15% to 16% ; FY output might reach 10% - Chinese press.
Article cited Minister of Industry and Information Technology Li Yazhong||Norway Industry Min Giske commented that the country needs a responsible budget such that deficits not spurn higher interest rates or stronger currency. He stated that the country's shipping industry could face trouble in 2010/2011 and added that a stronger NOK currency to hurt exporters || Russia Central Bank Official commented that it was too early for banks to reduce bad debt provisions || Currency discussions likely not be major topic at upcoming G20 meeting - unconfirmed report ||

- In Currencies: The price action in the USD continued to be focused on stock market performance. The USD saw its initial gains from the Far East session evaporate during the course of the European morning. Some risk appetite was fueled following some comments that China's Q4 Industrial Output could be between 15% to 16% according to Minister of Industry and Information Technology Li Yazhong. Thus the carry-related sentiment saw the dollar move lower against high-yielding currencies. The energy and metals sectors took note of the Chinese data front to move to fresh session highs. Spot gold move 1% higher above $1,056/oz while NYMEX Dec crude was almost $1.00 per barrel to approach $78.00 level. the EUR/USD tested the the 1.4680 pivotal support level ahead of the Asian open today but moved towards the 1.48 level as the European morning wore on.

- The GBP initially encountered some soft sentiment ahead of Thursday's BOE meeting. However, better Oct PMI data helped to ease the GBP off its session lows, GBP/USD tested 1.6345 before re-approaching the 1.64 handle.

- The EUR/CHF was again retesting a former SNB intervention zone below the 1.51 level.

- A trading error reportedly sent the South African Rand (ZAR) plunging some 6% against the yen drew during the thin Asian session, which feed into other pairs. USD/ZAR moved from 7.78 to test 8.25 in a 30 min period before re-couping the move as the day wore on.

- Looking ahead there will be four major central bank decisions from the RBA, FED. BOE and ECB. There is a possibility of an Australian 25bps rate hike to 3.50%. A lot of talk about moves away from quantitative easing (QE) is expected.
However, some analysts expect a final tranche of QE by the BOE to be announced at its MPC on Thursday.

- Fixed income: Government bonds are weaker amidst a modest risk revival this morning in Europe. Gilts are under-performing following better than expected PMI data out of the UK and the selling is most pronounced in the short end (notable ahead of the BoE rate decision on Thursday) producing a flatter yield curve. The 2 year Gilt yield is higher by some 7bhps at 0.93%. In contrast, US and German yield curves have steepened. The year note yield is up roughly 4bps at 3.42% while the 10y Bund yield is flirting with 3.25%.

- In Energy: Russia Energy Min stated that its Oct oil output was steady at 10M bpd and little changed from Sept levels. Oct Natural gas output at 1.76B CM/day, up 16% from Sept. Gazprom Oct Gas output at 1.45B CM/day, up 21% MoM || WSJ's "Heard on the Street" column looked at Nigeria's recent ceasefire agreement related to the Delta region. The ceasefire could mean that the Nigerian government could increase its efforts to pass legislation which would raise oil royalties and change the structures of existing joint ventures with foreign oil companies.

- Geo-political: Russia and the United States will continue their talks on nuclear arsenal cut on Nov. 9 - Russian Foreign Min

- In the papers: WSJ expects the Fed to tweak its language, although it remains unclear when this is likely to happen. The shift in wording will be a precursor to an eventual unwinding of the unprecedented stimulus that will also mean higher interest rates. || NYU professor Nouriel Roubini commented that since asset prices were being inflated by a weak dollar right now, a dollar reversal could smash this rally. He conceded that this may not be in the cards in the short term, it will be a substantial risk once the FED is pushed to increase interest rates.

NOTES

- CIT: Confirmed filing for bankruptcy protection, as expected

- China Oct PMI Manufacturing: 55.2 v 54.7e (Highest figure since Apr 2008)

- Active economic calendar ahead for the week coupled with four major central bank decisions from the RBA, FED. BOE and ECB.

Looking Ahead:

- US Earning season continues with Cloroc, [CLX], Copper Tire [CTB], Ford [F], Humana [HUM], Loews Corp [L] and Sysco [SYY] expected before the bell

- (RU) Russia Sept Reserve Fund: $ B v $76.4B prior; Wellbeing Fund: $B v 91.9B prior

- (CZ) Czech Oct Budget Balance (-CZK87.3B last)

- 10:00 (US) Oct ISM Manufacturing: 53.0 expected versus 52.6 prior; Prices Paid: 64.0 expected versus 63.5 prior

- 10:00(US) Sept Pending Home Sales MoM: 0.0% expected versus 6.4% prior; YoY: No est versus 12.1% prior

- 10:00 (US) Sept Construction Spending MoM: -0.2% expected versus 0.8% prior

- 12:00 (IT) Italian Budget Balance (-11.8B last)

- 12:00 (IT) Italian Budget Balance year-to-date (-72.6B last)

Published on  Mon, Nov 2 2009, 11:08 GMT