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EU Market Update TRADETHENEWS.COM STAFF
Markets exhibit some calm following weekend G8 Summit
Economic Data
- (EU) ECB: €845M borrowed in overnight loan facility €809M prior; €789.7B parked in deposit facility v €762.4B prior
- (JP) Japan Mar Final Leading Index CI: 96.4 v 96.6 prelim; Coincident Index CI: 96.7 v 96.5 prelim
- (CH) Swiss Apr SECO Consumer Confidence: -8 v -15e
- (JP) Japan Apr Convenience Store Sales Y/Y: 6.1% v 0.4% prior
- (CH) Swiss Apr M3 Money Supply M3 Y/Y: 6.3% v 6.6% prior
- (NL) Netherlands Apr House Price Index M/M: -0.8% v -1.2% prior; Y/Y: -5.2 v -4.7% prior
- (TW) Taiwan Apr Export Orders Y/Y: -3.5% v +0.5%e
- (TW) Taiwan Q1 Current Account: $10.9B v $12.1B prior
- (IT) Italy Mar Current Account: -€2.4B v -€5.1B prior
- (EU) Euro Zone Mar Construction Output M/M: +12.4% v -10.4% prior (largest monthly rise on record; Y/Y: -3.8% v -16.3% prior
Fixed Income
- (NO) Norway sold NOK6.0B vs. NOK6.0B indicated in 2% 2023 Bonds; Yield 2.26%
- (DE) Germany sold €2.91B in 12-month BuBills; Avg Yield 0.0264% (record low) v 0.0743% prior; Bid-to-cover: 2.1x v 2.33x prior
- (NL) Netherlands Debt Agency (DSTA) sold approx €2.3B vs.€4.0B indicated in 3-month and 6-month Bills
- Sold €1.21B vs. €2.0e in 3-month Bills; Yield 0.014% v 0.004% prior; Bid-to-cover: 3.67x v 3.17x prior
- Sold €1.08B vs. €2.0e in 6-month Bills; Yield 0.025% v 0.035% prior; Bid-to-cover: 4.12x v 2.3x prior
- (BE) Belgium Debt Agency sold total €2.5B vs. €2.0-3.0B indicated range in 2017, 2022 and 2026 Bonds
- Sold €510M 3.5% June 2017 OLO; Avg Yield 2.379% v 2.621% prior; Bid-to-cover: 2.60x v 2.36x prior
- Sold €1.015B in 4.25% Sept 2022 OLO; Avg Yield 3.453% v 3.737% prior; Bid-to-cover: 1.86x v 1.7x prior
- Sold €1.025B in 4.5% Mar 2026 OLO; avg yield 3.641% v 4.037% prior; Bid-to-cover: 1.29x v 1.97x prior
SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM
Notes/Observations
- Spain again revised its 2011 Budget Deficit to GDP Ratio to 11.5% from 11.0%
- Greek elections: Anti-bailout SYRIZA party has reclaimed a small lead in the latest poll
- Italy PM Monti proposes Euro zone bank deposit guarantee fund
- Germany's largest industrial union IG Metall reached agreement on wage increase, securing 4.3% pay hike; largest in 20 years
Equities
Indices: FTSE 100 +0.60% at 5296, DAX +0.80% at 6323, CAC-40 +0.70% at3029, IBEX-35 -0.70% at 6516, FTSE MIB -0.90% at 12,934
05/21 05:34
SMI +0.30% at 5813
- Equity indices opened the session mostly lower, but indices have since pared losses as most banks are now trading in positive territory. Additionally, most resource related companies are gaining, amid the move higher in commodity prices. In Asian trading, commodity prices were supported by commentary from the Chinese Premier Wen, as he suggested that China needed to give more priority to growth. Despite the comments from Wen, China's key lending and swap rates were little changed to slightly higher. In terms of central bank speak, ECB official Asmussen said that he saw the risk of a "downward spiral" from the EMU debt crisis and that it was possible to add a growth package to the EU's fiscal's compact.
- Shares of Ryanair [RYA.UK] have lost over 5%, as the company guided its FY13 net profit below analyst expectations. Fund manager Man Group [EMG.UK] is higher by more than 6% on the company's plan to acquire hedge fund investment specialist FRM. SportingBet [SBT.UK] has lost over 4%, amid concerns about a potential outstanding tax liability in Spain. Spanish banks are mostly higher, amid reports that the country's PM Rajoy has requested that the ECB inject funds into certain banks. Separately, Spain's Finance Minister said that Bankia could need €7-7.5B in order to meet Spain's new bank provisioning rules. It was reported previously that Bankia could require approx. €10B to cover its bad loans.
Speakers:
- Fed's Lockhart commented from Tokyo that the current conditions were not right for QE3 but the option could not be taken off the table due to risks from Europe, He forecasted modest US economic growth and 2% inflation over the horizon
- Spain Fin Min de Guindos commented that its Q2 GDP contraction be similar to Q1 performance of -0.3%. He saw strong commitment from Autonomous Regions to meet deficit targets. He did not expect mortgage defaults to rise much more; says mortgages in Spain 'get paid'. He would address Parliament on Wed, May 23rd for Bankia and added that the entity needed between €7.0-7.5B for new provision rules. He would also seek consensus over next Bank of Spain governor (Note: Current Gov is Ordonez). Lastly auditors to carry out stress test on banking sector loan book with a second phase of audit to have more detailed analysis
- Spain Budget Min Montoro commented that there was no way forward other than for Spain to cut its deficit and the Autonomous Regions realize the priority
- ECB member Asmussan stated that the situation in Greece and Europe was difficult and required a European response to crisis. Overall he expressed optimism on future of Euro as it benefits both Germany and Europe as a whole. He reiterated that non-standard measures were temporary and would be exited when upward risk to price stability appeared. ECB could withdraw liquidity from 3-year lending LTRO at any time with various instruments
- ECB member Asmussan later commented on Greece and would not speculate on any 'plan B' for the country. There was one plan for Greece - to stay within the EMU
- BOE member Posen: Source of Euro zone problems is not only Greece as some banks are insufficiently undercapitalized. Good monetary policy alone would not solve structural problems in global markets but govt intervention would
- Germany Govt spokesperson reiterates that its position on Euro Bonds had not changed and still opposed to concept as it was not the medium for resolving crisis
- France Govt spokesperson reiterated the view that it would do everything possible to keep Greece within euro zone
- France Foreign Min stated that Greece needed to make efforts to stay within EMU
- BOE Cohrs commented that the UK banking sector liquidity was strong and had enough capital for Greek shock of any EMU exit
- Former BoJ official Iwata commented that the BOJ was a long way from reaching the desired 1% inflation target (Reminder: BOJ meets later this week)
Currencies:
- The European morning was relative quiet with the week beginning with some mild risk appetite. The weekend G8 meeting did not offer any new developments, but China Premier Wen signaled that it must focus on growth. Dealers were a tad cautious that the USD might be a tad over-extended from its recent moves. The EUR/USD did hold above its January lows last week and some positioning squaring has occurred since last Friday. The EUR/USD hovered around 1.2780 area for the bulk of the session and appeared capped amid euro zone uncertainty. There were light reductions in yen longs against the major pairs in the session.
The Bund futures were softer after their repeated tests of all-time highs last week but peripherals were starting to widen as the NY morning approached
Political/ In the Papers:
- The Times reported that British retirement savings are at record lows. Data released through the Scottish Widows Pensions Report indicated pension savings were facing plunging disposable incomes, as the percentage of those saving enough for a comfortable retirement declined to 46% from 51% over the past year. 20% of adults have put nothing aside for retirement.
- JPMorgan analysts anticipate that a Greek exit would produce contagion to other EU periphery nations; sovereigns and banks may come under pressure.
- Spanish bank Bankia, which was recently seized by the government, is expected to request over €10B from the Fund for Orderly Bank Restructuring (FROB) by mid-week. As a reminder, Last week it was reported that Spain's government was expected to inject another €10B in loans or cash into Bankia to cover the firm's bad loans.
- France may nationalize or find a buyer for one of its biggest mortgage lenders Caisse Centrale Credit Immobilier de France. According to the firm's semiannual report for 2011, its liquidity reserves were about €2.4B as of June 2011 compared to €3.6B at the end of 2010.
Looking Ahead
- IAEA Inspectors Meet with Iranian
- NATO Summit
- (IS) Israel Apr Leading 'S' Indicator M/M: No est v 0.2% prior
- 6:30 (EU) EU's Kroes Speaks at Broadband Conference in Brussels
- 7:30 (DE) German Bundesbank member Dombret
- 7:30 (BR) Brazil Central Bank Weekly Economists Survey
- 8:00 (DE) German Econ Min Roesler
- 8:00 (PL) Poland Apr Sold Industrial Output M/M: -7.2%e v +10.7% prior; Y/Y: 2.8%e v 0.7% prior
- 8:00 (PL) Poland Apr Producer Prices M/M: 0.5%e v 0.1% prior; Y/Y: 4.3%e v 4.5% prior
- 8:30 (US) Apr Chicago Fed National Activity Index: No est v -0.29 prior
- 9:00 (FR) France Debt Agency to sell up to €8.4B in 3-month, 6-month and 12-month Bills
- 9:30 (EU) ECB calls for bids in 7-Day Main Refinancing Tender
- 9:30 (EU) ECB announces weekly settlements in its Govt Bond Purchase program (SMP)
- 10:30 (FR) German and France finance ministers to hold news conference
- 11:00 (CL) Chile President Pinera Gives Annual Address to
- 11:00 (US) Fed to purchase $1.5-2.0B in Notes
- 11:30 (US) Treasury to sell $30B in 3-Month and $27B in 6-Month Bills
- (EU) ECB: €845M borrowed in overnight loan facility €809M prior; €789.7B parked in deposit facility v €762.4B prior
- (JP) Japan Mar Final Leading Index CI: 96.4 v 96.6 prelim; Coincident Index CI: 96.7 v 96.5 prelim
- (CH) Swiss Apr SECO Consumer Confidence: -8 v -15e
- (JP) Japan Apr Convenience Store Sales Y/Y: 6.1% v 0.4% prior
- (CH) Swiss Apr M3 Money Supply M3 Y/Y: 6.3% v 6.6% prior
- (NL) Netherlands Apr House Price Index M/M: -0.8% v -1.2% prior; Y/Y: -5.2 v -4.7% prior
- (TW) Taiwan Apr Export Orders Y/Y: -3.5% v +0.5%e
- (TW) Taiwan Q1 Current Account: $10.9B v $12.1B prior
- (IT) Italy Mar Current Account: -€2.4B v -€5.1B prior
- (EU) Euro Zone Mar Construction Output M/M: +12.4% v -10.4% prior (largest monthly rise on record; Y/Y: -3.8% v -16.3% prior
Fixed Income
- (NO) Norway sold NOK6.0B vs. NOK6.0B indicated in 2% 2023 Bonds; Yield 2.26%
- (DE) Germany sold €2.91B in 12-month BuBills; Avg Yield 0.0264% (record low) v 0.0743% prior; Bid-to-cover: 2.1x v 2.33x prior
- (NL) Netherlands Debt Agency (DSTA) sold approx €2.3B vs.€4.0B indicated in 3-month and 6-month Bills
- Sold €1.21B vs. €2.0e in 3-month Bills; Yield 0.014% v 0.004% prior; Bid-to-cover: 3.67x v 3.17x prior
- Sold €1.08B vs. €2.0e in 6-month Bills; Yield 0.025% v 0.035% prior; Bid-to-cover: 4.12x v 2.3x prior
- (BE) Belgium Debt Agency sold total €2.5B vs. €2.0-3.0B indicated range in 2017, 2022 and 2026 Bonds
- Sold €510M 3.5% June 2017 OLO; Avg Yield 2.379% v 2.621% prior; Bid-to-cover: 2.60x v 2.36x prior
- Sold €1.015B in 4.25% Sept 2022 OLO; Avg Yield 3.453% v 3.737% prior; Bid-to-cover: 1.86x v 1.7x prior
- Sold €1.025B in 4.5% Mar 2026 OLO; avg yield 3.641% v 4.037% prior; Bid-to-cover: 1.29x v 1.97x prior
SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM
Notes/Observations
- Spain again revised its 2011 Budget Deficit to GDP Ratio to 11.5% from 11.0%
- Greek elections: Anti-bailout SYRIZA party has reclaimed a small lead in the latest poll
- Italy PM Monti proposes Euro zone bank deposit guarantee fund
- Germany's largest industrial union IG Metall reached agreement on wage increase, securing 4.3% pay hike; largest in 20 years
Equities
Indices: FTSE 100 +0.60% at 5296, DAX +0.80% at 6323, CAC-40 +0.70% at3029, IBEX-35 -0.70% at 6516, FTSE MIB -0.90% at 12,934
05/21 05:34
SMI +0.30% at 5813
- Equity indices opened the session mostly lower, but indices have since pared losses as most banks are now trading in positive territory. Additionally, most resource related companies are gaining, amid the move higher in commodity prices. In Asian trading, commodity prices were supported by commentary from the Chinese Premier Wen, as he suggested that China needed to give more priority to growth. Despite the comments from Wen, China's key lending and swap rates were little changed to slightly higher. In terms of central bank speak, ECB official Asmussen said that he saw the risk of a "downward spiral" from the EMU debt crisis and that it was possible to add a growth package to the EU's fiscal's compact.
- Shares of Ryanair [RYA.UK] have lost over 5%, as the company guided its FY13 net profit below analyst expectations. Fund manager Man Group [EMG.UK] is higher by more than 6% on the company's plan to acquire hedge fund investment specialist FRM. SportingBet [SBT.UK] has lost over 4%, amid concerns about a potential outstanding tax liability in Spain. Spanish banks are mostly higher, amid reports that the country's PM Rajoy has requested that the ECB inject funds into certain banks. Separately, Spain's Finance Minister said that Bankia could need €7-7.5B in order to meet Spain's new bank provisioning rules. It was reported previously that Bankia could require approx. €10B to cover its bad loans.
Speakers:
- Fed's Lockhart commented from Tokyo that the current conditions were not right for QE3 but the option could not be taken off the table due to risks from Europe, He forecasted modest US economic growth and 2% inflation over the horizon
- Spain Fin Min de Guindos commented that its Q2 GDP contraction be similar to Q1 performance of -0.3%. He saw strong commitment from Autonomous Regions to meet deficit targets. He did not expect mortgage defaults to rise much more; says mortgages in Spain 'get paid'. He would address Parliament on Wed, May 23rd for Bankia and added that the entity needed between €7.0-7.5B for new provision rules. He would also seek consensus over next Bank of Spain governor (Note: Current Gov is Ordonez). Lastly auditors to carry out stress test on banking sector loan book with a second phase of audit to have more detailed analysis
- Spain Budget Min Montoro commented that there was no way forward other than for Spain to cut its deficit and the Autonomous Regions realize the priority
- ECB member Asmussan stated that the situation in Greece and Europe was difficult and required a European response to crisis. Overall he expressed optimism on future of Euro as it benefits both Germany and Europe as a whole. He reiterated that non-standard measures were temporary and would be exited when upward risk to price stability appeared. ECB could withdraw liquidity from 3-year lending LTRO at any time with various instruments
- ECB member Asmussan later commented on Greece and would not speculate on any 'plan B' for the country. There was one plan for Greece - to stay within the EMU
- BOE member Posen: Source of Euro zone problems is not only Greece as some banks are insufficiently undercapitalized. Good monetary policy alone would not solve structural problems in global markets but govt intervention would
- Germany Govt spokesperson reiterates that its position on Euro Bonds had not changed and still opposed to concept as it was not the medium for resolving crisis
- France Govt spokesperson reiterated the view that it would do everything possible to keep Greece within euro zone
- France Foreign Min stated that Greece needed to make efforts to stay within EMU
- BOE Cohrs commented that the UK banking sector liquidity was strong and had enough capital for Greek shock of any EMU exit
- Former BoJ official Iwata commented that the BOJ was a long way from reaching the desired 1% inflation target (Reminder: BOJ meets later this week)
Currencies:
- The European morning was relative quiet with the week beginning with some mild risk appetite. The weekend G8 meeting did not offer any new developments, but China Premier Wen signaled that it must focus on growth. Dealers were a tad cautious that the USD might be a tad over-extended from its recent moves. The EUR/USD did hold above its January lows last week and some positioning squaring has occurred since last Friday. The EUR/USD hovered around 1.2780 area for the bulk of the session and appeared capped amid euro zone uncertainty. There were light reductions in yen longs against the major pairs in the session.
The Bund futures were softer after their repeated tests of all-time highs last week but peripherals were starting to widen as the NY morning approached
Political/ In the Papers:
- The Times reported that British retirement savings are at record lows. Data released through the Scottish Widows Pensions Report indicated pension savings were facing plunging disposable incomes, as the percentage of those saving enough for a comfortable retirement declined to 46% from 51% over the past year. 20% of adults have put nothing aside for retirement.
- JPMorgan analysts anticipate that a Greek exit would produce contagion to other EU periphery nations; sovereigns and banks may come under pressure.
- Spanish bank Bankia, which was recently seized by the government, is expected to request over €10B from the Fund for Orderly Bank Restructuring (FROB) by mid-week. As a reminder, Last week it was reported that Spain's government was expected to inject another €10B in loans or cash into Bankia to cover the firm's bad loans.
- France may nationalize or find a buyer for one of its biggest mortgage lenders Caisse Centrale Credit Immobilier de France. According to the firm's semiannual report for 2011, its liquidity reserves were about €2.4B as of June 2011 compared to €3.6B at the end of 2010.
Looking Ahead
- IAEA Inspectors Meet with Iranian
- NATO Summit
- (IS) Israel Apr Leading 'S' Indicator M/M: No est v 0.2% prior
- 6:30 (EU) EU's Kroes Speaks at Broadband Conference in Brussels
- 7:30 (DE) German Bundesbank member Dombret
- 7:30 (BR) Brazil Central Bank Weekly Economists Survey
- 8:00 (DE) German Econ Min Roesler
- 8:00 (PL) Poland Apr Sold Industrial Output M/M: -7.2%e v +10.7% prior; Y/Y: 2.8%e v 0.7% prior
- 8:00 (PL) Poland Apr Producer Prices M/M: 0.5%e v 0.1% prior; Y/Y: 4.3%e v 4.5% prior
- 8:30 (US) Apr Chicago Fed National Activity Index: No est v -0.29 prior
- 9:00 (FR) France Debt Agency to sell up to €8.4B in 3-month, 6-month and 12-month Bills
- 9:30 (EU) ECB calls for bids in 7-Day Main Refinancing Tender
- 9:30 (EU) ECB announces weekly settlements in its Govt Bond Purchase program (SMP)
- 10:30 (FR) German and France finance ministers to hold news conference
- 11:00 (CL) Chile President Pinera Gives Annual Address to
- 11:00 (US) Fed to purchase $1.5-2.0B in Notes
- 11:30 (US) Treasury to sell $30B in 3-Month and $27B in 6-Month Bills
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.