TradeTheNews.com EU Market Update: UK Q2 GDP and German IFO survey come in worse than expected; ECB Nowotny sees arguments for giving ESM a banking license
By TradeTheNews.com -
Wed 25 Jul 2012 04:38:16 CT
***Economic Data***
- (FI) Finland Jun Preliminary Retail Sales Volume Y/Y: 2.4% v 0.2% prior
- (FR) France July Business Survey Overall Demand: -24 v -2 prior
- (AT) Austria May Industrial Production M/M: 0.7 v 1.0% prior; Y/Y: 2.6% v 1.5% prior
- (TH) Thailand Central Bank left its Benchmark Interest unchanged at 3.00%; as expected
- (NL) Netherlands July Producer Confidence: -5.2 v -4.7e
- (DE) Germany July IFO Business Climate: 103.3 v 104.5e; Current Assessment: 111.6 v 113.0e; Expectations Survey: 95.6 v 96.8e
- (IT) Italy July Consumer Confidence Index: 86.5 v 85.0e
- (TW) Taiwan Jun M1 Money Supply Y/Y: 3.2% v 3.2% prior; M2 Money Supply Y/Y: 4.2% v 4.4% prior
- (UK) Q2 Advanced GDP Q/Q: -0.7% v -0.2%e; Y/Y: -0.8% v -0.3%e
- (UK) May Index of Services M/M: 0.9% v 0.2%e; 3M/3M: 0.5% v 0.3%e
Fixed Income:
- (IN) India sold total INR120B vs. INR120B indicated in 3-month and 12-month Bills
- (RU) Russia sold RUB2.72B vs. RUB15B indicated in 2017 OFZ bond; Yield 7.91% vs. guidance 7.87-7.92 %
- (EU) ECB allotted $8.0B in 7-Day USD Liquidity Tender at fixed 0.66% vs. $4.3B prior
- (EU) ECB allotted €8.5B in 3-Month Tender vs. €20Be
- (DE) Germany sold €2.322B in 2.50% July 2044 Bund; Avg Yield 2.17% (record low) v 2.41% prior; Bid-to-cover: x v 1.1x prior
*** SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM ***
***Notes/Observations***
- EU said to be mulling options to avert a Greek bankruptcy
- AUD CPI at 13-year low
- Japan registers its smallest trade deficit in 9 months on an adj basis
- IMF: China GDP to bottom out in Q2
- German IFO Business Climate falls for the
- UK GDP contracts more than expected, blames public holidays and weather
***Equities***
FTSE 100 +0.10% at 5506, DAX +0.30% at 6408, CAC-40 +0.50% at 3090, IBEX-35 +1.9% at 6067, FTSE MIB +1.5% at 12,540, SMI flat at 6173, S&P 500 Futures +0.20% at 1332
- Following the mixed open, European bourses are trading mostly higher. Spain's IBEX-35 has led the gains, as a Spanish official again denied that the country needs a bailout and ECB official Nowotny said there were arguments for allowing the ESM to have a banking license. Additionally, during yesterday's US session a financial press report suggested that the Fed was said to be moving closer to taking steps to support growth, as some officials have become frustrated with the progress of the economy. In London, the FTSE 100 has lagged, amid the release of weaker than expected Q2 GDP data out of the UK. Most European banks have tracked the overall strength in the equity markets, although shares of Deutsche Bank have underperformed. Miners have traded higher on the rise in commodity prices. In terms of corporate earnings, companies seen reporting during the US morning include Boeing, Bristol-Myers, Caterpillar, Ford, Pepsico and Wellpoint. Following Tuesday's US equity close, shares of Apple declined, as the company reported weaker than expected quarterly results and guidance.
- Large Steel maker ArcelorMittal [MT.NL] is higher by ~2%, after reporting Q2 EBITDA results which beat analyst forecasts. In the UK, chipmaker Arm Holdings [ARM.UK] has gained over 4%, as the company reported better than expected quarterly results. Telecom name BT [BT.UK] has lost over 4% after reporting quarterly results which missed analyst expectations. Advertising services company Yell Group [YELL.UK] has declined by over 30% following the release of its Q2 results. In other movers, Tullow Oil [TLW.UK] is lower by ~3% (issued H1 results), British American Tobacco [BATS.UK] has lost ~1% (reported H1 results) and EasyJet [EZJ.UK] is higher by over 3% (issued Q3 sales). Deutsche Bank [DBK.DE] is lower by over 2%, as the company warned on its Q2 results citing factors including the weaker Euro. Daimler [DAI.DE] is higher by over 3%, supported by better than expected quarterly results. Coming into the Daimler earnings there had been some expectations that the firm could miss analyst estimates. Large polysilicon maker Wacker Chemie [WCH.DE] is lower by~3%, as the company gave a cautious forecast for the FY. Swiss medical supplies company Lonza is higher by over 5%, as the company's H1 results beat analyst expectations. In other movers in Switzerland, EFG International [EFGN.CH] has gained over 25% on better than expected H1 results, while Meyer Burger's [MBTN.CH] shares have declined by over 3%, as the company reported weaker than expected H1 sales. Automaker Peugeot [UG.FR] is trading higher by over 2% following the release of H1 results. There are also expectations that France could announce its support plan for the auto industry later today. French pushing company PagesJaunes [PAJ.FR] has lost over 4%, after cutting its FY sales forecast. In Spain, utility Iberdrola [IBE.ES] has gained by ~2% on better than expected H1 earnings.
Speakers:
- Spain govt official refuted press speculation that Germany was urging Spain to take a bailout (**Note: Spanish press report stated that German Govt was urging Spain to request €300B package which would give Spain two years without needing to sell debt)
- ECB's Nowotny commented that the central bank was not planning to buy more debt but did see arguments for giving ESM a banking license but added such debate was ongoing.
ECB was not talking about a negative deposit rate at this time and urged against rushing ECB into bank supervisory role. He reiterates view that monetary policy alone could not solve the region's crisis
- EU said to be mulling options to avert a Greek bankruptcy and could consider Public creditor haircut on Greek debt
- German IFO Economists reiterated that euro zone uncertainty was increasingly impacting Germany. It did not see Germany's AAA sovereign rating as being in danger and that the recent Moody statement seen as a warning not to overstretch Germany. Domestic consumption continued to be robust with retail as the bright spot. Reiterated view that no further ECB rate cuts were needed as uncertainty is stemming from politics
- ECB Q2 Lending Survey noted that net 10% of banks were said tightened credit standards to firms in Q2 vs. 9% tightened in Q1. A net 10% of banks expected further tightening of credit standards to firms in Q3. Sovereign market tensions impacted substantially more on banks' funding conditions in Q2 vs Q1
- German Bundesbank Q2 Lending Survey noted that German corporate credit standards were largely unchanged in quarter as rising cost of capital was offset by ample liquidity. Margins on lending tightened in Q2 and experienced sharp rise in demand for housing loans. It did see a perceptible deterioration in long-term retail funding
- SNB chief Jordan commented that he saw no problem in size of SNB FX reserves and added that in theory it could have unlimited FX reserves. To maintain EUR/CHF floor policy given the Euro Zone uncertainties
- German Banking Assoc sought that Basel III to be delayed by a year due to the continuing negotiations
- EFSF official took note of Moody's outlook change but added that such moves did not indicate any immediate action. EFSF issuance continued to be fully covered by AAA guarantees
- India Govt Advisor Pronab Sen commented that the RBI would likely to keep interest rates steady at next week's policy meeting as a weak monsoon rain season could push up food prices
- China's sovereign wealth fund (CIC) said to have posted 2011 investment loss of 4.3%
Currencies:
- The early part of the European morning saw the Spanish yield continue to move into record high territory across the maturity curve. Spanish 10-year gov't yield hit an EMU record high of 7.66% ahead of the European equity open with the 2-year gov't touching 7.0% for the first time ever. The 5-year bond yield was approaching 7.75% while the Spanish 30-year gov't yield approached 7.71%. The yields steadily reversed their opening moves and were lower on the session just ahead of the NY morning.
- The risk aversion sentiment found some traction after a Spanish govt official refuted press speculation that Germany was urging Spain to take a bailout and ECB member Nowotny saw arguments for giving ESM a banking license
- The EUR/USD appeared to found support at the 1.2050 area helped by option related flows. The pair moved back above the 1.21 handle aided by ECB Nowotny comment on arguments for an ESM banking license.
- The GBP currency slumped over 50 pips following the weaker-than-expected Q2 Advanced GDP data. The ONS was quick to point out that extra public holidays and poor weather hurt Q2 GDP and led to additional uncertainty in calculating the data in June. The GBP/USD tested 1.5470 area. Sonia rates were now fully pricing a BOE Rate Cut by January 2013
Political/ In the Papers:
- The FT reported that there are concerns that elevated yields could cause Spain to issue even more debt. The article included comments by Rabbobank's senior fixed income strategist Richard McGuire who likens the situation to "Ponzi game conditions" in which Spain could be forced to issue new debt in order to pay for existing obligations. According to the Telegraph's Ambrose Evans-Pritchard some economists believe Spain is days away from a liquidity crisis, arguing that a backstop is needed for the euro zone bond market, such as the European Redemption Fund.
- British government analysts forecasted that Greece will run out of money by August 20th if they do not secure the next tranche of bailout funds. On August 20, Greece must find €3.26B to repay a maturing bond, money that the country does not currently have now. The lenders must provide for Greece it is to avoid a default. The Telegraph's Ambrose Evans-Pritchard suggested Greece may never be able to meet the Troika's unrealistic economic targets, raising the risk of an exit.
***Looking Ahead***
***All times listed for economic events are denominated in Eastern Standard Time (Add 4 hours for GMT equivalent)
- (FR) ECB Vice Gov Noyer
- (GR) Greece Fin Min to meet US Treasury official
- (PT) Bank of Portugal Publishes Bank Survey on Credit Market
- (EU) EU Commission holds Last Pre-Vacation Meeting
- 06:00 (DE) Germany to sell €1.0B in 0.1% Apr 2022 Inflation Linked Bund
- 06:00 (UK) July CBI Industrial Trends Total Orders: -10e v -11 prior; Selling Prices: 0e v +2 prior; Business Optimism: 0e v +22 prior
- 07:00 (BR) Brazil July FGV Consumer Confidence: No est v 123.5 prior
- 07:00 (US) MBA Mortgage Applications w/e July 20th: No est v 16.9% prior
- 07:30 (TR) Turkey July Industrial Confidence: No est v 108.1 prior; Capacity
- 08:30 (CL) Chile Central Bank's Traders Survey
- 09:00 (BE) Belgium July Business Confidence: -13.6ev -13.2 prior
- 09:00 (CA) Canada Jun Teranet/National Bank HPI M/M: No est v 1.1% prior; Y/Y: No est v 5.8% prior; House Price Index: No est v prior
- 09:00 (MX) Mexico May Global Economic Indicator: No est v 4.7% prior
- 09:30 (US) Tsy Sec Geithner on Financial Stability
- 09:45 (UK) BOE to buy £1.0B in 2019-2025 in reverse auction
- 10:00 (US) Jun New Home Sales: 371Ke v 369K prior
- 10:30 (US) Weekly DOE US Crude Oil Inventories
- 11:00 (US) Fed to purchase $4.50-5.50B in Notes
- 11:30 (BR) Brazil Central Bank weekly currency flow data
- 12:00 (FR) France Jun Net Change Jobseekers+17.5Ke v +33.3K prior; Total Jobseekers: 2.942Me v 2.922M prior
- 13:00 (US) Treasury to sell $35b in 5-Year Notes
- 15:00 (AR) Argentina Jun Shop Center Sales Y/Y: No est v 10.1% prior
- 16:00 (US) May RPX Composite 28day Y/Y: No est v -0.8% prior; Index: No est v 180.48 prior
- 17:00 (NZ) New Zealand Central Bank (RBNZ) Interest Rate Decision: Expected to leave the Official Cash Rate unchanged at 2.50%
View All Market Commentary
- (FI) Finland Jun Preliminary Retail Sales Volume Y/Y: 2.4% v 0.2% prior
- (FR) France July Business Survey Overall Demand: -24 v -2 prior
- (AT) Austria May Industrial Production M/M: 0.7 v 1.0% prior; Y/Y: 2.6% v 1.5% prior
- (TH) Thailand Central Bank left its Benchmark Interest unchanged at 3.00%; as expected
- (NL) Netherlands July Producer Confidence: -5.2 v -4.7e
- (DE) Germany July IFO Business Climate: 103.3 v 104.5e; Current Assessment: 111.6 v 113.0e; Expectations Survey: 95.6 v 96.8e
- (IT) Italy July Consumer Confidence Index: 86.5 v 85.0e
- (TW) Taiwan Jun M1 Money Supply Y/Y: 3.2% v 3.2% prior; M2 Money Supply Y/Y: 4.2% v 4.4% prior
- (UK) Q2 Advanced GDP Q/Q: -0.7% v -0.2%e; Y/Y: -0.8% v -0.3%e
- (UK) May Index of Services M/M: 0.9% v 0.2%e; 3M/3M: 0.5% v 0.3%e
Fixed Income:
- (IN) India sold total INR120B vs. INR120B indicated in 3-month and 12-month Bills
- (RU) Russia sold RUB2.72B vs. RUB15B indicated in 2017 OFZ bond; Yield 7.91% vs. guidance 7.87-7.92 %
- (EU) ECB allotted $8.0B in 7-Day USD Liquidity Tender at fixed 0.66% vs. $4.3B prior
- (EU) ECB allotted €8.5B in 3-Month Tender vs. €20Be
- (DE) Germany sold €2.322B in 2.50% July 2044 Bund; Avg Yield 2.17% (record low) v 2.41% prior; Bid-to-cover: x v 1.1x prior
*** SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM ***
***Notes/Observations***
- EU said to be mulling options to avert a Greek bankruptcy
- AUD CPI at 13-year low
- Japan registers its smallest trade deficit in 9 months on an adj basis
- IMF: China GDP to bottom out in Q2
- German IFO Business Climate falls for the
- UK GDP contracts more than expected, blames public holidays and weather
***Equities***
FTSE 100 +0.10% at 5506, DAX +0.30% at 6408, CAC-40 +0.50% at 3090, IBEX-35 +1.9% at 6067, FTSE MIB +1.5% at 12,540, SMI flat at 6173, S&P 500 Futures +0.20% at 1332
- Following the mixed open, European bourses are trading mostly higher. Spain's IBEX-35 has led the gains, as a Spanish official again denied that the country needs a bailout and ECB official Nowotny said there were arguments for allowing the ESM to have a banking license. Additionally, during yesterday's US session a financial press report suggested that the Fed was said to be moving closer to taking steps to support growth, as some officials have become frustrated with the progress of the economy. In London, the FTSE 100 has lagged, amid the release of weaker than expected Q2 GDP data out of the UK. Most European banks have tracked the overall strength in the equity markets, although shares of Deutsche Bank have underperformed. Miners have traded higher on the rise in commodity prices. In terms of corporate earnings, companies seen reporting during the US morning include Boeing, Bristol-Myers, Caterpillar, Ford, Pepsico and Wellpoint. Following Tuesday's US equity close, shares of Apple declined, as the company reported weaker than expected quarterly results and guidance.
- Large Steel maker ArcelorMittal [MT.NL] is higher by ~2%, after reporting Q2 EBITDA results which beat analyst forecasts. In the UK, chipmaker Arm Holdings [ARM.UK] has gained over 4%, as the company reported better than expected quarterly results. Telecom name BT [BT.UK] has lost over 4% after reporting quarterly results which missed analyst expectations. Advertising services company Yell Group [YELL.UK] has declined by over 30% following the release of its Q2 results. In other movers, Tullow Oil [TLW.UK] is lower by ~3% (issued H1 results), British American Tobacco [BATS.UK] has lost ~1% (reported H1 results) and EasyJet [EZJ.UK] is higher by over 3% (issued Q3 sales). Deutsche Bank [DBK.DE] is lower by over 2%, as the company warned on its Q2 results citing factors including the weaker Euro. Daimler [DAI.DE] is higher by over 3%, supported by better than expected quarterly results. Coming into the Daimler earnings there had been some expectations that the firm could miss analyst estimates. Large polysilicon maker Wacker Chemie [WCH.DE] is lower by~3%, as the company gave a cautious forecast for the FY. Swiss medical supplies company Lonza is higher by over 5%, as the company's H1 results beat analyst expectations. In other movers in Switzerland, EFG International [EFGN.CH] has gained over 25% on better than expected H1 results, while Meyer Burger's [MBTN.CH] shares have declined by over 3%, as the company reported weaker than expected H1 sales. Automaker Peugeot [UG.FR] is trading higher by over 2% following the release of H1 results. There are also expectations that France could announce its support plan for the auto industry later today. French pushing company PagesJaunes [PAJ.FR] has lost over 4%, after cutting its FY sales forecast. In Spain, utility Iberdrola [IBE.ES] has gained by ~2% on better than expected H1 earnings.
Speakers:
- Spain govt official refuted press speculation that Germany was urging Spain to take a bailout (**Note: Spanish press report stated that German Govt was urging Spain to request €300B package which would give Spain two years without needing to sell debt)
- ECB's Nowotny commented that the central bank was not planning to buy more debt but did see arguments for giving ESM a banking license but added such debate was ongoing.
ECB was not talking about a negative deposit rate at this time and urged against rushing ECB into bank supervisory role. He reiterates view that monetary policy alone could not solve the region's crisis
- EU said to be mulling options to avert a Greek bankruptcy and could consider Public creditor haircut on Greek debt
- German IFO Economists reiterated that euro zone uncertainty was increasingly impacting Germany. It did not see Germany's AAA sovereign rating as being in danger and that the recent Moody statement seen as a warning not to overstretch Germany. Domestic consumption continued to be robust with retail as the bright spot. Reiterated view that no further ECB rate cuts were needed as uncertainty is stemming from politics
- ECB Q2 Lending Survey noted that net 10% of banks were said tightened credit standards to firms in Q2 vs. 9% tightened in Q1. A net 10% of banks expected further tightening of credit standards to firms in Q3. Sovereign market tensions impacted substantially more on banks' funding conditions in Q2 vs Q1
- German Bundesbank Q2 Lending Survey noted that German corporate credit standards were largely unchanged in quarter as rising cost of capital was offset by ample liquidity. Margins on lending tightened in Q2 and experienced sharp rise in demand for housing loans. It did see a perceptible deterioration in long-term retail funding
- SNB chief Jordan commented that he saw no problem in size of SNB FX reserves and added that in theory it could have unlimited FX reserves. To maintain EUR/CHF floor policy given the Euro Zone uncertainties
- German Banking Assoc sought that Basel III to be delayed by a year due to the continuing negotiations
- EFSF official took note of Moody's outlook change but added that such moves did not indicate any immediate action. EFSF issuance continued to be fully covered by AAA guarantees
- India Govt Advisor Pronab Sen commented that the RBI would likely to keep interest rates steady at next week's policy meeting as a weak monsoon rain season could push up food prices
- China's sovereign wealth fund (CIC) said to have posted 2011 investment loss of 4.3%
Currencies:
- The early part of the European morning saw the Spanish yield continue to move into record high territory across the maturity curve. Spanish 10-year gov't yield hit an EMU record high of 7.66% ahead of the European equity open with the 2-year gov't touching 7.0% for the first time ever. The 5-year bond yield was approaching 7.75% while the Spanish 30-year gov't yield approached 7.71%. The yields steadily reversed their opening moves and were lower on the session just ahead of the NY morning.
- The risk aversion sentiment found some traction after a Spanish govt official refuted press speculation that Germany was urging Spain to take a bailout and ECB member Nowotny saw arguments for giving ESM a banking license
- The EUR/USD appeared to found support at the 1.2050 area helped by option related flows. The pair moved back above the 1.21 handle aided by ECB Nowotny comment on arguments for an ESM banking license.
- The GBP currency slumped over 50 pips following the weaker-than-expected Q2 Advanced GDP data. The ONS was quick to point out that extra public holidays and poor weather hurt Q2 GDP and led to additional uncertainty in calculating the data in June. The GBP/USD tested 1.5470 area. Sonia rates were now fully pricing a BOE Rate Cut by January 2013
Political/ In the Papers:
- The FT reported that there are concerns that elevated yields could cause Spain to issue even more debt. The article included comments by Rabbobank's senior fixed income strategist Richard McGuire who likens the situation to "Ponzi game conditions" in which Spain could be forced to issue new debt in order to pay for existing obligations. According to the Telegraph's Ambrose Evans-Pritchard some economists believe Spain is days away from a liquidity crisis, arguing that a backstop is needed for the euro zone bond market, such as the European Redemption Fund.
- British government analysts forecasted that Greece will run out of money by August 20th if they do not secure the next tranche of bailout funds. On August 20, Greece must find €3.26B to repay a maturing bond, money that the country does not currently have now. The lenders must provide for Greece it is to avoid a default. The Telegraph's Ambrose Evans-Pritchard suggested Greece may never be able to meet the Troika's unrealistic economic targets, raising the risk of an exit.
***Looking Ahead***
***All times listed for economic events are denominated in Eastern Standard Time (Add 4 hours for GMT equivalent)
- (FR) ECB Vice Gov Noyer
- (GR) Greece Fin Min to meet US Treasury official
- (PT) Bank of Portugal Publishes Bank Survey on Credit Market
- (EU) EU Commission holds Last Pre-Vacation Meeting
- 06:00 (DE) Germany to sell €1.0B in 0.1% Apr 2022 Inflation Linked Bund
- 06:00 (UK) July CBI Industrial Trends Total Orders: -10e v -11 prior; Selling Prices: 0e v +2 prior; Business Optimism: 0e v +22 prior
- 07:00 (BR) Brazil July FGV Consumer Confidence: No est v 123.5 prior
- 07:00 (US) MBA Mortgage Applications w/e July 20th: No est v 16.9% prior
- 07:30 (TR) Turkey July Industrial Confidence: No est v 108.1 prior; Capacity
- 08:30 (CL) Chile Central Bank's Traders Survey
- 09:00 (BE) Belgium July Business Confidence: -13.6ev -13.2 prior
- 09:00 (CA) Canada Jun Teranet/National Bank HPI M/M: No est v 1.1% prior; Y/Y: No est v 5.8% prior; House Price Index: No est v prior
- 09:00 (MX) Mexico May Global Economic Indicator: No est v 4.7% prior
- 09:30 (US) Tsy Sec Geithner on Financial Stability
- 09:45 (UK) BOE to buy £1.0B in 2019-2025 in reverse auction
- 10:00 (US) Jun New Home Sales: 371Ke v 369K prior
- 10:30 (US) Weekly DOE US Crude Oil Inventories
- 11:00 (US) Fed to purchase $4.50-5.50B in Notes
- 11:30 (BR) Brazil Central Bank weekly currency flow data
- 12:00 (FR) France Jun Net Change Jobseekers+17.5Ke v +33.3K prior; Total Jobseekers: 2.942Me v 2.922M prior
- 13:00 (US) Treasury to sell $35b in 5-Year Notes
- 15:00 (AR) Argentina Jun Shop Center Sales Y/Y: No est v 10.1% prior
- 16:00 (US) May RPX Composite 28day Y/Y: No est v -0.8% prior; Index: No est v 180.48 prior
- 17:00 (NZ) New Zealand Central Bank (RBNZ) Interest Rate Decision: Expected to leave the Official Cash Rate unchanged at 2.50%
Copyright (c) 2012 Trade The News, Inc.
Above listed TradeTheNews.com market updates are delayed 5 minutes. To sample the live audio broadcasts, real-time headlines and research on demand in real time, please go to http://www.tradethenews.com/ for your no-obligation FREE trial.
Above listed TradeTheNews.com market updates are delayed 5 minutes. To sample the live audio broadcasts, real-time headlines and research on demand in real time, please go to http://www.tradethenews.com/ for your no-obligation FREE trial.
View All Market Commentary
*Disclaimer: The information in the Market Commentaries was obtained from sources believed to be reliable, but we do not guarantee its accuracy. Neither the information nor any opinion expressed therein constitutes a solicitation of the purchase or sale of any futures or options contracts.
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