Home » stock » January 05, 2011 European stock market, economy and companies

Wednesday, January 5, 2011

January 05, 2011 European stock market, economy and companies

January 05, 2011 European stock market, economy and companies : *** SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM ***
***Notes/Observations:
- Major continental euro zone countries saw their respective Dec services PMI revised higher; Peripheral PMI and confidence data did not fare as well
- SNB not accepting Irish government bonds as repo collateral
- China Vice Premier Keqiang reiterated that China will likely purchase more Spanish government bonds, but added the comment that it depended on market conditions
- US ADP employment Change report kicks off the job data for the next few days

Equities:
Eurostoxx50 at 2810.38, -1.22%, FTSE100 at 5990, -0.39%, CAC40 at 3879, -0.94%, DAX at 6887, -1.25%

- European shares retreated on Wednesday following yesterday's high closing. Commodities such as copper dropped from last session's record highs and basic-resource stocks were the biggest decliners in European trading. Despite the optimism on economic recovery that fueled the past rally investors remain nervous over the Euro zone crisis. SNB confirmed today that it would no longer accept Irish government bonds due 2011-25 as collateral for its repo operations. Also PIMCO will stop buying peripheral bonds. The rally continued to disappear from equities as investors anticipated Portuguese auction of €500M meant to test investors' demand. Portugal sold the desired amount but at a much higher price as yield had almost doubled. Demand, however, was higher than the last auction with a bid to cover of 2.6x. Today's busy European economic picture was not encouraging as data showed that Euro zone growth as indicated by industrial orders had slowed. Confidence indicators for Spain and Portugal declined.

- Among notable individual names, Next [NXT.UK] rallied higher by less than 1% following its trading statement. Total sales came at 0.2% in the lower range of the guidance of 0-3%. Retail sales were negatively impacted by extreme weather and FY11 outlook was uncertain due to govt cuts. HMV Group [HMV.UK] fell about 14% following its profit warning. Company also reported that compliance with April covenant test under group's bank facility would be difficult. Logitech declined over 4% after shares were downgraded to Underweight from Equal weight by Morgan Stanley.

Speakers:
- China Vice Premier Li Keqiang reiterates that China would likely purchase more Spanish government bonds depending on market conditions. He stressed that China was a "long-term and responsible player in the Spanish government bond market. He noted that China even increased its holdings of Spanish debt during the euro zone's crisis.. He expressed confidence that Spain would overcome its economic and fiscal difficulties and hoped that Spain would push the EU to forge better trade ties with China.

- Singapore PM Loong wrote an op-ed piece in the financial press and commented that a Yuan currency revaluation would be a win-win for China and US. A gradually appreciating yuan would encourage Chinese export industries to restructure and upgrade, help distribute the gains from growth more broadly beyond exports to the rest of the economy, and mitigate inflation, which is a growing problem in China. At the same time, it would help ease political pressures in the U.S. and tensions in the relationship.

- China PBOC Gov Zhou commented that it would strengthen the prevention of systemic risks and reiterated to use variable Reserve Requirement Ratio (RRR) to adjust money and credit supply. The PBoC to study higher capital requirements for key banks and study building a counter-cyclical capital cushion and set up a deposit insurance system. Lastly the central bank pledged to prevent risks in cross border capital flows.
- Former China Gov Researcher Li Lianzhongr commented that China should use its foreign currency reserves to invest in the US resource, energy and property sectors. He added that such investments would help ease domestic inflationary pressure and hedge against the reserves' depreciation. Using China's foreign reserves to invest in Europe and the US. could also reduce domestic money supply

- Ex-PBoC advisor YuYongding commented that China should reduce its holdings of USD as much as possible and that China needed to a balance between yuan appreciation and ensuring employment. He noted that moderate yuan appreciation was in the interest of China, instead of a result of pressure from the US. Thus yuan appreciation should be based on market supply and demand factors.

- India Gov't Panel Advisor Rangarajan commented that price stability had become the dominant issue for the RBI's monetary policy and the central bank would act if inflation became 'sticky'. He reiterated the view that Wholesale Price Index (WPI) would decline towards 6.0-6.5% be end of Mar 2011
Japan Chamber of Commerce chief commented that he saw USD/JPY trading between 80-85 area during the FY12 (begins on Apr 1st)
- EU exec commented that national authorities should have the authority to write down senior debt at ailing banks

Currencies/Fixed income:
- Overall the USD maintained a steady/firm tone as the corrective action across the commodity complex and global equity markets continued for a second day. Dealers noted that risk aversion was evident. The Euro was softer during the course of the session as the market digested press report that News that Switzerland was not accepting Irish government bonds as repo collateral. EUR/USD was lower by 70 pips heading into the NY morning. Dealers noted that 1.3230 area was initial support but the Key level remains the 1.3060 area (Dec lows). Dealers pointed out that the Euro did encounter 'two-way' price action with the usual Far East name buying dips but Middle-Eastern name offering the pair.
- The USD/JPY remained contained around the 82.05 area during the session. The 82.30/50 area remained pivotal resistance in the pair. Nippon Steel Exec commented that joint currency intervention was an option and worth considering. Japan Chamber of Commerce Okamura commented that he saw the range in USD/JPY between ¥80-85 during the FY12 period.
- The Portugal 6-month Bill auction came in line with forecasts and saw little market reaction. The yield was sharply higher compared to the Sept auction for the same maturity of paper. The results help to calm the overall tone of the market sentiment in FX, fixed income and equities ahead of the NY morning. The spread between 10-year Portuguese/German gov't bonds tightened a few pips around the 375bps

Geo-Political/ In the Papers:
- Guardian reported that Vietnam Conglomerate Vinashin missed a debt payment as its debt level reached 5% of nation's GNP for 2009 at $4.4B
- The Irish press noted that The Swiss National Bank (SNB) has rejected Irish government 2011-25 bonds as collateral for repo deals. The SNB had taken similar steps on Greek bonds in April of 2010. The decision had been made in December 2010 after ratings agencies cut Ireland's rating to below 'A' status. The feature suggested that because Switzerland is not a member of the EU, it is likely to suffer less from any political fallout. The article also cited former IMF economist Rogoff, who forecasts 'restructuring in some of the periphery countries'.
- The Financial Times reported that the rise in oil prices could hurt the economic recovery and thus put pressure on OPEC to raise output. The article cited the International Energy Agency, as it reiterated the risks that higher oil prices could present to the recovery.
- In British political news, according to polls, support for the Lib Dems declined to 11%, the lowest level in more than a decade. The party received about 24% of the votes in the last elections. The decline has been attributed to the decision to back away from plans to oppose higher university fees. Alternatively, support for the Labour party is about 40%, and Tories at 38%. The poll showed that if elections were held today, Labour would have a 14-seat majority. The poll included data from ComRes, ICM, Ipsos MORI and YouGov.
- According to the Belfast Telegraph, housing prices in Ireland have declined by about 40% from their peak levels of 2007. Some analysts believe that the Irish property market has yet to bottom due to weak consumer sentiment. The report cites data from companies including Daft.ie and MyHome.ie.


***Looking Ahead***
- 6:00 (PD) Poland to sell up to PLN 6.5B in bonds
- 6:00 (BR) Brazil Industrial Production M/M: 0.0%e v 0.4% prior; Y/Y: 4.7%e v 2.1% prior
- 6:30 (CL) Chile Nov Economic Activity Y/Y: 5.3%e v 4.8% prior
- 7:00 (US) MBA Mortgage Applications w/e Dec 31st (2-weeks of data)
- 7:30 (US) Dec Challenger Job Cuts: No est v 48.7K prior; Y/Y: No est v -3.3% prior
- 8:15 (US) Dec ADP Employment Change: 100Ke v 93K prior
- 8:30 (CA) Canada Nov Industrial Product Price M/M: 0.3%e v 0.5% prior; Raw Materials Price Index M/M: 2.0%e v 1.7% prior
- 10:00 (US) Dec ISM Non-Manufacturing Composite: 55.7e v 55.0 prior
- 10:30 (US) DOE Weekly Energy Inventories: Crude:-2Me; Gasoline:+1Me; Distillate: +500Ke; Utilization: 87.8%e
- 11:00 (US) Fed to purchase $1.5-2.5B in Notes/Bonds
- 13:00 (US) Fed's Hoenig Speaks at The Central Exchange in Kansas City



***Economic Data***
- (ID) Bank Indonesia leaves Reference Rate unchanged at 6.50%; As expected
- (IR) Ireland Dec NCB Services PMI: 47.4 v 50.8 prior
- (BR) Brazil Dec FIPE CPI: 0.5% v 0.5%e
- (RU) Russia Dec Consumer Price Index M/M: 1.0% v 0.9%e; Y/Y: 8.7% v 8.6%e; CPI YTD: 8.7% v 8.6%e
- (HU) Hungary Nov Unemployment Rate: 10.7% v 11.0%e
- (HU) Hungary Nov Producer Prices M/M: 1.5% v -0.8% prior; Y/Y: 8.2% v 7.3%e
- (SP) Spain Nov Industrial Output WDA Y/Y +2.7% v -1.9% prior; Industrial Output NSA Y/Y: +2.3% v -3.8% prior
- (TT) Taiwan Dec CPI Y/Y: 1.3% v 1.8%e; WPI Y/Y: 2.2% v 2.1%e
- (SP) Spain Dec Services PMI: 46.2 v 48.3 prior
- (AS) Austria Wholesale Price Index M/M: 1.4% v 0.8% prior; Y/Y: 9.1% v 7.7% prior
- (IT) Italy Dec PMI Services: 50.2 v 53.5e; Lowest reading since July
- (FR) France Dec Final PMI Services: 54.9 v 54.1e
- (GE) Germany Dec Final PMI Service: 59.2v 58.3e
- (EU) Euro Zone Dec Final PMI Services: 54.2 v 53.7e; PMI Composite: 55.5 v 55.0e
- (SP) Spain Dec Consumer Confidence: 64.6 v 70.0 prior
- (IC) Iceland Nov Final Trade Balance (ISK): 10.4B v 10.4B prior
- (UK) Dec PMI Construction: 49.1 v 51.0e
- (EU) Euro Zone Oct Industrial New Orders M/M: 1.4% v 1.5%e; Y/Y: 14.8% v 18.4%e
- (EU) Euro Zone Nov PPI M/M: 0.3% v 0.3%e; Y/Y: 4.5% v 4.4%e
- (PO) Portugal Dec Consumer Confidence: -50.2 v -44.9 prior; Economic Climate: -1.0 v -0.5 prior

Fixed income:
- (EU) ECB allotted $70M in 7-day USD liquidity operation at fixed 1.18%
- (UK) BOE allotted zero dollars in 7-day USD liquidity operation at fixed 1.18%
- (GE) Germany sells approx €3.92B in 2.5% Jan 2021 Bund; avg yield: 2.87% v 2.59% prior; Bid-to-cover: 1.60x v 1.19x prior
- (PO) Portugal Debt Agency (IGCP) sells €500M vs €500M indicated in six-month Bills; Avg Yield: 3.686% v 2.045% prior; Bid-to-cover: 2.6x v 2.4x prior For the latest updates PRESS CTR + D or visit Stock Market news Today

Related Post:

Posted by at
Labels:

No comments:

Post a Comment

Subscribe to: Post Comments (Atom)