TradeTheNews.com European Market Update: Euro encounters profit-taking following recent rally

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Share This Story: Friday, January 20, 2012 5:47:16 AM TradeTheNews.com European Market Update: Euro encounters profit-taking following recent rally***Economic Data***
- (GR) Greece Nov Current Account: -€2.5B v -€1.5B prior
- (RU) Russia Narrow Money Supply Narrow w/e Jan 16th(RUB): T v 7.15T prior
- (EU) ECB: €3.0B borrowed in overnight loan facility v €3.3B prior; €420.9B parked in deposit facility vs. €395.3B prior
- (DE) Germany Dec Producer Prices M/M: -0.4% v +0.1%e; Y/Y: 4.0% v 4.6%e
- (JP) Japan Dec Convenience Store Sales Y/Y: 4.1% v 7.5% prior
- (TH) Thailand Dec Customs Trade Balance: -$2.1B v -$1.4Be; Exports Y/Y: -2.0% v -10.0%e; Imports Y/Y: 19.1% v 5.3%e
- (HU) Hungary Nov Avg Gross Wages Y/Y: 6.0% v 5.4%e
- (TW) Taiwan Dec Industrial Production Y/Y: -8.2% v -6.6%e; Commercial Sales Y/Y: -0.5% v -0.8%e
- (TW) Taiwan Dec Export Orders Y/Y: -0.7% v -0.5%e (First decline in 2 years)
- (HK) Hong Kong Dec CPI Composite Y/Y: 5.7% v 5.6%e
- (NL) Netherlands Nov Consumer Spending Y/Y: -1.2 v -1.7% prior
- (IT) Italy Nov Industrial Orders M/M: +0.1% v -1.6% prior; Y/Y: -0.7% v -4.8% prior
- (IT) Italy Nov Industrial Sales M/M: 0.0% v 0.1% prior; Y/Y: 0.2% v 1.1% prior
- (UK) Dec Retail Sales Ex Auto Fuel M/M: 0.6% v 0.7%e; Y/Y: 1.7% v 1.7%e
- (UK) Dec Retail Sales (with Auto Fuel) M/M:0.6 % v 0.6%e; Y/Y: 2.6% v 2.4%e
- (ES) Spain Nov Trade Balance: -2.7B v -€3.5Be
Fixed Income
- (ZA) South Africa sold total ZAR800M in I/L 2022, 2028 and 2033 Bonds
*** SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM ***
***Notes/Observations***
- Greece pushes to reach agreement in Private Sector Involvement (PSI)with Monday seen as the pivotal day
- Today is the dealine for European bank to submit capital raising plans to EBA
- Jan China manufacturing PMI 48.8 vs 48.7 in Dec (third straight month of contraction)
- Taiwan Export order decline for the first time in 2 years
- China begins week long lunar new year holiday
Equities:
FTSE 100 +0.10% at 5747, DAX -0.30% at 6396, IBEX 35 -0.40% at 8572, FTSE MIB -0.30% at 15,617, SMI -0.40% at 6170
- European shares dipped during the session, presumably on profit taking, after a week of solid gains which culminated in a 5-month high on Thursday. US initial jobless claims fell to a 4-year low while in Europe, Greece is continuing its talks with private investors. Peripheral bond auctions were also successful despite recent sovereign downgrades.
- In individual names, Vodafone [VOD.UK] rose up to 1.8% after Indian Supreme court ruled it had no jurisdiction to tax Vodafone's 2007 acquisition of Hutchison Essar on its territory. Furthermore, it directed the government to return the money with a 4% interest and pay back Vodafone's deposit of INR25B. The tax liability could have been approx. €1.9B. On the other hand, Thyssenkrupp [TKA.GE] issued a profit warning even after refuting speculations that the company would do so during the week. Germany's largest steel maker expects its steel business earnings to be down y/y.
Speakers:
- BoE's Broadbent stated that he did not pre-commit to QE decisions and votes each month on stock of asset purchases. Gilt purchases speed not relevant to his QE decision. He noted that the downside risks had lessen slightly in past 6 months due to actions by central banks and had not seen what was most feared about the EU. He saw household income and growth to improve in H2 and the degree of fiscal tightening to ease. BoE to maintain GDP forecast of flat growth for both Q4, Q1 quarters as near term output looked slightly weaker but Q1 seemed marginally stronger.
- German Fin Min Schaeuble commented in the German press that the economic recovery would be a 'long road' ahead. He stressed that Italy needed to lower its debt as it has been avoiding this since the 1990s. He reiterated the German govt view that Europe could not solve its crisis in 'one go'
- German Coalition MP reiterated the view that Germany should not bring forward ESM payments without participating countries
- BOE Trends in Lending Report noted that bank Long term funding markets were challenging in Q4 and higher funding costs fed into corporate loan pricing. Write-offs were stable in Q4 and arrears were seen stable but might pick up in late 2012
- Spain to maintain its 2012 budget deficit target of 4.4% to GDP (refutes earlier press reports that Budget Minister Montoro stated that the country might miss its 2012 deficit target.
- Portugal PM Coelho commented that it must continue with bailout plan despite market uncertainty
- Poland Central Bank's Chonja-Duch commented that Polish 2011 GDP was seen at 4% or higher and that the recent December output was positive. She noted that the Polish Central Bank should keep interest rates steady through March. The Zloty currency was still in an appreciation trend with EUR/PLN at 4.0 seen reflecting fundamentals (currently at 4.30)
- Austria Debt Agency (AFFA) stated that it would skip the planned auction on Feb 7th due to recent syndicated debt sale of 10-year and 50-year bonds
- France President Sarkozy commented that the Euro Zone still faced danger and stressed that swift action was needed from Greece to stem crisis. All must be done to avoid military conflict in Iran and all must stop buying Iranian oil (appeals to both China and Russia)
Currencies:
- The USD gained over the course of the European morning with some concerns over the looming EBA capital raising plan deadline. Cautious comments from German Finance Minister Schaeuble also weighed against the recent euphoria of the European debt auctions.
- The EUR/USD approached the 1.30 handle in late Asian trading before succumbing to selling pressures with Middle Eastern names cited. EUR/JPY cross was above the 100 level in late Asian and was around the 99.60 as the NY morning approached
- The GBP currency was mixed in the session. There were no surprises in the Retail sales data but the back month was revised lower. The GBP/USD was at 1.5460 ahead of the NY morning, softer by 20 pips from the Tokyo open
Political/ In the Papers:
- Telegraph's Ambrose Evans-Pritchard looked at the recent rise in Portugal's bond yields and credit default swaps (CDS) and attributed some of the rise in yields to forced selling after S&P cut the country's rating to junk. Also, cited concerns that Portugal's fiscal cuts could negatively impact the country's growth, like in Greece.
- Citigroup Europe economist Jurgen Michels, expected Portugal's economy to contract by 5.8% in 2012, which is more pessimistic than the government's forecast. Portugal might not be able to significantly lower its debt levels, unless it implemented a "sizeable" haircut; Expected a haircut of 35% at the end of 2012 or in 2013.
- European officials have ruled out forced haircuts for Portuguese bondholders. Portugal's public debt was about 113% of GDP, while its total debt (including private sector debt) was 360% of GDP. Suggested the high levels of private sector debt in Portugal could make the banking system vulnerable to deleveraging
***Looking Ahead***
- (GR) EU/IMF/ECB Troika chiefs to arrive in Athens
- (MX) G20 Vice Finance Ministers meet in Mexico City
- 7:00 (CA) Canada Dec Consumer Price Index M/M: -0.2%e v +0.1% prior; Y/Y: 2.7%e v 2.9% prior; CPI Index: No est v 120.9 prior
- 7:00 (CA) Canada Dec CPI Core M/M: -0.2%e v +0.1% prior; Y/Y: 2.2%e v 2.1% prior
- 8:00 (PL) Bank of Portugal releases monthly Economic Indicators Report
- 8:00 (PL) Poland Dec Core Inflation M/M: 0.2%e v 0.3% prior; Y/Y: 3.0%e v 3.0% prior
- 8:30 (CA) Canada Nov Wholesale Sales M/M: 0.5%e v 0.9% prior
- 10:00 (US) Dec Existing Home Sales: 4.65Me v 4.42m prior
- 10:00 (MX) Mexico Central Bank Interest Rate Decision: Expected to leave the Overnight Rate unchanged at 4.50%
- 14:00 (AR) Argentina Nov Economic Activity Index M/M: No est v 0.3% prior; Y/Y: 7.5%e v 8.1% prior
- 16:00 (CO) Colombia Nov Trade Balance: $60Me v $103.2M prior
- 18:00 (IT) Italy PM Monti visits Tripoli, Libya
Saturday
- (US) Republican South Carolina Primary
Sunday
- (FI) Finland holds first round of Presidential Elections
- (DE) German Chancellor Merkel to meet IMF Lagarde Legal disclaimer and risk disclosure All information provided by Trade The News (a product of Trade The News, Inc. "referred to as TTN hereafter") is for informational purposes only. Information provided is not meant as investment advice nor is it a recommendation to Buy or Sell securities. Although information is taken from sources deemed reliable, no guarantees or assurances can be made to the accuracy of any information provided. 1. Information can be inaccurate and/or incomplete 2. Information can be mistakenly re-released or be delayed, 3. Information may be incorrect, misread, misinterpreted or misunderstood 4. Human error is a business risk you are willing to assume 5. Technology can crash or be interrupted without notice 6. Trading decisions are the responsibility of traders, not those providing additional information. Trade The News is not liable (financial and/or non-financial) for any losses that may arise from any information provided by TTN. Trading securities involves a high degree of risk, and financial losses can and do occur on a regular basis and are part of the risk of trading and investing.