European Market Update: Traders focus shifting from European peripherals towards key central bank meetings; GBP continues to reflect political and economic uncertainties


ECONOMIC DATA 

- (JP) Japanese Cabinet March Economic Report raised the economic assessment for the first time in eight months. Economy had been steadily picking up but upturn only weakly self-sustaining. Reiterated view that deflation poses economic risk

- (IN) India Feb Wholesale Prices Y/Y: 9.9% v 9.7%e

- (CH) China Feb Foreign Direct Investment (FDI) Y/Y: 1.1% v 10.7%e

- (FI) Finland Feb CPI M/M: 0.4% v 0.2% e; Y/Y: 0.1% v -0.1%e

- (FI) Finland Jan Final Retail Sales Volume Y/Y: -0.9% v 1.6% prior

- (CZ) Czech Feb PPI M/M: -0.3% v 0.1%e; Y/Y: -2.0% v -1.6%e

- (CZ) Czech Jan Export Price Index Y/Y: -5.5% v -3.9% prior; Import Price Index Y/Y: -3.9% v -3.2% prior

- (TU) Turkey Dec Unemployment: 13.5% v 13.9%e

- (FI) Finland Jan Current Account: €270M v €450M prior

- (SZ) Swiss Feb Producer & Import Prices M/M: -0.3% v 0.1%e; Y/Y: -1.0% v -0.6%e

- (DE) Denmark Feb Wholesales Prices M/M: -0.1% v 1.5% prior; Y/Y: 2.3% v 2.8% prior

- (NE) Netherlands Jan Trade Balance: €2.0 v €2.1B prior

- (NO) Norway Feb Trade Balance (NOK): 32.4B v 34.4B prior

- (EU) Euro Zone Q4 Employment Q/Q: -0.2% v -0.5% prior; Y/Y: -2.0% v -2.1% prior


SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM 

- European equity markets have started the week on a down note, with banks and miners on the back foot. Markets are anticipating a range of political and central bank action, including a range of rate decisions (US and Japan) and possible Congressional votes on healthcare and financial regulation. Ahead of these releases, financials have given back ground, with warnings from China on the yuan and American public debt furthering the rotation. Miners have trended lower on concerns over Asian demand while a continuation of iron ore pricing issues, this time highlighted by ThyssenKrupp [TKA.GE] and Vale [VALE], refused to let the input price issue fade away. French insurers traded negative as an industry body reiterated expected costs related to winter storm Xyntha. In this environment, defensives had a better showing with utilities, pharma and telecom standing out. Roche [ROG.SZ] and AstraZenica [AZN.UK] received positive mention from MS while BT [BT.UK] received an upgrade from Citi. Into 6:00est European markets traded at or near their lows on volume levels that were well below moving averages.

- Individual equities: Altran [ALT.FR] reported FY09 Net loss €75.3M v €12.7M y/y, Rev €1.4B v €1.65B y/y. Krones [KRN.GE] reported FY09 Net loss €34.5M v loss €24Me, Rev €1.87B v €1.9Be. Pharming [PHARM.NV] to request approval at EGM to raise authorized share capital with 200-400M if and when needed.

- Speakers: BoE's Barker commented in a press interview that the UK needs about two more months of data to get better picture of economic outlook. She is not predicting a double-dip recession but is also not ruling out a negative quarterly GDP reading. She did reiterated view that economic recovery would be bumpy and fragile. Japan's government upgraded its assessment of the economy for the first time in eight months, but reiterated that deflation posed a risk and called on the Bank of Japan for further economic support. Japan MoF Noda commented that a flexible Chinese yuan currency would be a positive factor for both the global and Chinese economies. He commented about the upcoming BOJ policy decision on Wednesday. He would welcome a flexible action from the BoJ and believed the Central Bank was sufficiently aware of the role over monetary policy. The Gov't would closely monitor the BOJ's policy decisions. Japanese Fin Min Kan commented that he sees evidence of self-sustaining recovery in domestic demand but downside risks remained. He did note that concerns over a double-dip recession have receded and reiterated that both Gov't and BOJ working together to defeat inflationary price pressures. Kan stated that the Euro currency woes could impact the JPY but added that the JPY currency was relatively steady. A Qatar OPEC official stated that OPEC would discuss output compliance levels at March 17th meeting but saw no pressing need to change supply targets. EU's Almunia reiterated the view that the proposed European Monetary Fund (EMF) would be used to solve a long-term problem. ECB's Tumpel- Gugerell stated that the ECB has not taken a stance on the proposed European Monetary Fund (EMF).

- Currencies: Sterling was softer in choppy price action as the country's debt and political situation remains under the microscope. The pound began the session modestly softer as the latest election polls continue to point towards a hung parliament. Comments from BoE's Barker about a possible negative GDP reading also added to the pound bearish sentiment. GBP/USD was off 150 pips as the New York morning approached, testing 1.5050. The euro was mildly softer against most majors and EUR/CHF hit fresh 16 month lows below the 1.4540 level. EUR/JPY is near session lows.

- Sovereign: European finance minters are meeting early this week to discuss the European Monetary Fund. Moody's said the US's "Aaa" sovereign rating would see pressure on budget's 10-yr projections. Moody's believes higher UK yields could test UK's "Aaa" sovereign status over time but is confident whoever wins the UK election would take action on the deficit, even if there is a hung parliament.

- Geo-political: Voter frustration from the current economic malaise reappeared in the first round of the regional French elections on Sunday. In the vote, President Sazkozy's center right UMP coalition fared poorly, taking 27% of the first round while a combination of left wing/socialist parties polled a combined 48.2%. A further blow to the UMP came from the resurgence of the far right Front National that polled 11.7%. Pundits have looked on the vote as referendum on the Sarkozy presidency and point to the extraordinarily low turnout as a reflection of popular discontent with all parties. A power failure at a central Chile electricity grid transformer temporarily left most of the country without electricity for Sunday night and temporally halted copper production in the Antofagasta region (produced 900K tons of copper in 2009). State and private mines have reported a gradual resumption of power and operations at their facilities. A political tiff between the US and Israel continued over the weekend as White House advisor David Alexrod used the Sunday morning talk shows to follow up sharp comments from VP Biden and Sec State Clinton. Timing of a new East Jerusalem settlement announcement puts a newly restarted proxy-talk plan into jeopardy and complicated US efforts for multi-national consensus on Iran.


Notes

- US TIC data to show if Chinese dwindling holdings of Tsy a trend

- Focus moving from European peripheral situation to central bank policy meetings. Traders seeing if the Fed amends the wording on its exit policy at its FOMC on Tuesday. The BoJ might begin new Quantitative Easing (QE) program this week.


Looking Ahead

- Greece to submit progress report to EU on deficit cutting plan

- 7:30 (GE) BDB Bank Lobby

- 8:30 (CL) Chile Feb Copper Exports: No est v $3.4B prior

- 8:30 (CA) Canada Jan New Motor Vehicle Sales: 0.0%e v 2.6% prior

- 8:30 (US) Mar Empire Manufacturing: 22.00e v 24.91 prior

- 9:00 (US) Jan Net Long Term TIC Flows: $47.5B v $63.3B prior; Total Net TIC Flows: No est v $60.9B prior

- 9:00 (PD) Poland Feb CPI M/M: 0.4%e v 0.5% prior; Y/Y: 3.0%e v 3.6% prior

- 9:15 (US) Feb Industrial Production: 0.0%e v 0.9% prior; Capacity Utilization: 72.6%e v 72.6% prior

- 10:00 (PD) Poland Feb Budget Level (PLN): No est v -4.8B prior; Budget Level YTD: No est v -4.8B prior

- 10:00 (BE) Belgium Dec Trade Balance (EUR): No est v 1.9B prior

- 12:30 (IS) Israel Feb Consumer Prices M/M: -0.4%e v -0.7% prior; Y/Y: 3.5%e v 3.8% prior

- 13:00 (US) Mar NAHB Housing Market Index: 17e v 17 prior