European market update: UK CPI a bit above expectations but remains on a declining trend; IMF reiterates that global situation is not as dire but must remain vigilant

Tuesday, March 20, 2012 6:36:20 AM TradeTheNews.com European Market Update: UK CPI a bit above expectations but remains on a declining trend; IMF reiterates that global situation is not as dire but must remain vigilant***Economic Data***

- (EU) ECB: €11.5B borrowed in overnight loan facility v €11.8B prior; €765.2B parked in deposit facility vs. €758.8B prior
- (DE) Germany Feb Producer Prices M/M: 0.4% v 0.5%e; Y/Y: 3.2% v 3.2%e
- (FI) Finland Feb Unemployment Rate: 7.7% v 8.0%e
- (ZA) South Africa Jan Leading Indicator: 132.9 v 132.3 prior
- (TW) Taiwan Feb Export Orders Y/Y: +17.6% v +13.0%e
- (HU) Hungary Jan Avg Gross Wages Y/Y: 4.3% v 5.8%e
- (CH) Swiss Q4 Industrial Production Q/Q: +7.9% v +2.6%e; Y/Y: -1.4% v -2.0%e
- (NL) Netherlands Mar Consumer Confidence: -39 v -35e
- (ES) Spain Jan Bad Loan Ratio at 7.91% v 7.62% prior Dec reading
- (GR) Greece Jan Current Account: -€1.5B v -€2.2B prior
- (IS) Israel Mar Inflation Forecast: 2.6% v 2.4% prior
- (IS) Israel Feb Money Supply Y/Y: +0.7 v -0.8% prior
- (ZA) South Africa Q4 Non-Farm Payrolls Q/Q: 0.3% v 0.7% prior; Y/Y: 1.6% v 2.5% prior
- (UK) Feb CPI M/M: 0.6% v 0.4%e; Y/Y: 3.4% v 3.3%e (lowest since Nov 2010); Core CPI Y/Y: 2.4% v 2.3%e (lowest since Nov 2009) - (UK) Feb RPI M/M: 0.8% v 0.6%e; Y/Y: 3.7% v 3.5%e; RPIX Y/Y: 3.8% v 3.6%e; Retail Price Index: 239.9 v 239.4e
Fixed Income: - (ZA) South Africa sold total ZAR2.1B vs. ZAR2.1B indicated in 2018, 2026 and 2031 Bonds
- (ID) Indonesia sold total IDR7.3T vs. IDR6.0T indicated in 5-Year and 20-year bonds
- (DK) Denmark sold total DKK5.4B in 2021 and 2039 Bonds
- (ES) Spain Debt Agency (Tesoro) sold total €5.05B vs.€4.5-5.5B indicated range in 12-month and 18-month Bills
- Sold €3.6BB in 12-month Bills; Avg Yield 1.418% v 1.899% prior; Bid-to-cover: 2.1x v 2.3x prior; Max Yield 1.473% v 1.949% prior
- Sold €1.45B in 18-month Bills; Avg Yield 1.711% v 2.308% prior; Bid-to-cover: 2.9x v 2.88x prior; Max Yield 1.770% v 2.395% prior
- (GR) Greece Debt Agency (PDMA) sold €1.3B v €1.0B in 13-week Bills; Avg Yield 4.25% v 4.61% prior; Bid-to-cover: 2.69x v 2.70x prior
- (EU) ECB allots €59.5B vs. €42.2B prior in 7-Day Main Refinancing Tender at fixed 1.0%
- (HU) Hungary Debt Agency (AKK) sold HUF60B vs. HUF50B indicated in 3-Month Bills; Avg Yield 7.26% v 7.25% prior
*** SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM ***
***Notes/Observations***
- BHP exec: China iron ore growth is flattening out
- RBA: Appropriate for interest rates to stay at current levels
- UK CPI a bit above expectations but YoY at lowest level since Nov 2010
***Equities***
FTSE 100 -0.90% at 5906, DAX -1.2% at 7070, CAC-40 -1.1% at 3537, IBEX-35 -0.40% at 8555, FTSE MIB -0.80% at 16,999, SMI -0.50% at 6300
- European shares were still trading in negative territory ahead of US housing starts due out in NY morning. Automakers were pressuring the market as China's association of automakers expect vehicle delivers to grow only 5% from 8% prior.
Metro [MEO.DE] reported EBIT and Revenues in line with analysts' expectations and forecast a flat profitability but higher sales. Company also noted that macroeconomic conditions have worsened noticeably compared to 2010.
Speakers: - IMF Chief Lagarde commented that the global situation was not as dire as it was three months ago but vulnerabilities still needed to be addressed. Financial reforms were necessary to avoid growth threat. On rebalancing theme she noted that China's shift to consumption can be gradual while encouraging FDI should be key priority for India
- ECB member Nowotny commented in an online chat that he saw a multi-speed Europe to 2014 period. He added that one must carefully observe the fx loan development in Hungary
And reiterated that Portugal was not the same as Greece and is in better shape
- Netherlands Bureau for Economic Policy Analysis (CPB) amended its forecasts for the second time this month citing the current economic climate to continue into H2. The ECB LTRO operation had not solved the underlying issue of the weak European financial sector. Dutch economy would perform moderately in 2012-15 period due to high unemployment, low consumption and declining housing prices. Downside risks include, budget cuts, worsening of the EU debt crisis and bank deleveraging. It cautioned that the size of the Dutch economy would not exceed Q1 2008 level until the 2014 period
- India Central Bank Dep Gov Gokarn commented that internationalization of INR currency was not a strategic goal and the RBI was not actively planning strategic currency diversification. The RBI favored a gradual opening of the capital account. A sharp decline in commodity prices might create room for both fiscal and monetary policy but it was too early to decide on policy based upon the new CPI indicator. Oil price was one of many factors in determining RBI inflation policy
- China PBoC researcher Ji Min stated that China should purchase additional EFSF bonds. He noted that such bonds have stable returns and purchasing the debt could improve trade ties with Europe.. Lastly he noted that European banks were trading at attractive valuations
- Former PBoC Advisor Xia Bin commented that China should maintain its prudent monetary policy stance and not loosen its monetary policy even if the economy slowed. He expected GDP to avg 7% for next 5-years and believed that a China hard landing was impossible. Lastly he expected the CNY currency (yuan) to become fully convertible by 2020
- China Central Bank (PBoC) Q2 survey found less dissatisfaction with price levels. Approx 63% of households thought consumer products were too high vs. 69% prior Q1 survey. The survey also showed that 14.1% of respondents wished to buy an apartment over the next three months, the lowest level since 1999
- Czech Central Bank Hampl commented that the central bank should keep its loose monetary conditions as inflation was not a reason to hike rates. He stressed that the Czech economy lacked the characteristics of demand-pull inflation
- IATA cut its 2012 airline net profit guidance view to to $3.0B from $3.5B prior citing the oil price rise since December.
Currencies:
- Europe's initial focus was on China. First after BHP exec China iron ore growth was flattening out. Then dealer chatter surfaced of 'unrest and demonstrations' in Beijing coupled into that various blogs noted of 'unusual troop movements' and numerous army vehicles around Beijing. The situation was explained that the extra police activity was due an expected visit from a high level dignitary from North Korea. Nonetheless the USD opened the European session on a firmer footing
- The JPY maintained a soft tone in the session. The EUR/JPY cross trade above 110.70; highest level since the Oct 31st BOJ solo FX intervention
- The GBP saw an initial bounce after its CPI data a bit above expectations but the YoY reading were at their lowest level since Nov 2010. The EUR/GBP cross moved lower to test 0.8320 area. GBP/USD was relatively steady at 1.5855 area.
Political/ In the Papers:
- Former ECB's Bini-Smaghi warned Ireland against changing the terms of the Anglo bailout. The Irish press reported that Bini-Smaghi thought that Ireland would be 'shooting itself in the foot' if it changed the terms of the bailout in a way that is not 'consistent' with the rescue program.
- The Netherlands Bureau for Economic Policy Analysis (CPB) amended its recent deficit-to-GDP forecasts, notably lowering the 2012 deficit-to-GDP figure to 4.6% from the prior 4.5%. It sees the current economic climate to continue into the second half, with the economy to perform moderately in 2012-15 period due to high unemployment, low consumption and declining housing prices
- Ahead of the UK budget announcement, the FT reported that economists expect the OBR to slightly raise its 2012 forecast for growth of 0.7% to approx 0.8%, and will not predict a technical recession of two consecutive quarters of negative growth. Treasury officials indicated some relief that the forecasts are drifting in line with private sector forecasts, and thus expect no surprises in the data which will negatively affect the bond markets.
- Accountants warned the Chancellor of the Exchequer Osborne that plans to cut the 50p tax could cost the treasury billions, as top earners may delay income until the rate is reduced. They also suggest that instead of deferring the measure, the Chancellor should immediately reduce the top rate to 45p or risk losing tax revenues, incurring higher borrowing costs and compounding the 50p tax fiasco.
***Looking Ahead***
- (GR) Greek €14.4B in bond redemption
- (IS) Israel Feb Leading 'S' Indicator M/M: No est v 0.2% prior
- (ES) Spain Jan Trade Balance: No est v -€4.6B prior
- 7:00 (UK) Mar CBI Industrial Trends Total Orders: -5e v -3 prior; Trends Selling Prices: 13e v 10 prior
- 7:00 (EU) EFSF to sell €2.0B in 6-month bills
- 7:30 (US) ICSC Chain Store Sales
- 8:00 (EU) ECB to drain €218.0B in 7-Day Term Deposits to offset Govt Bond Purchases (SMP)
- 8:30 (US) Feb Housing Starts: 700Ke v 699K prior; Building Permits: 686Ke v 682K prior (revised from 676K)
- 8:55 (US) Redbook Retail Sales
- 9:00 (PL) Note: Poland Jan. and Feb. Core CPI will be released on the same day
- 9:00 (PL) Poland Feb Core Inflation M/M: No est v % prior; Y/Y: No est v % prior; Core Inflation Y/Y: 2.7%e v % prior
- 9:15 (EU) EU's Barroso with Swiss Fin Min Widmer-Schlumpf
- 10:00 (EU) China's Ambassador to EU speaks at Brussels Think Tank
- 10:00 (US) US Tsy Sec Geithner
- 10:00 (EU) ECB member Praet
- 10:00 (EU) ECB member Weldmann
- 10:00 (BE) Belgium Mar Consumer Confidence: No est v -20 prior
- 10:00 (EU) ECB Forex Reserves w/e Mar 16th: No est v €249.7B prior
- 10:30 (IT) Italy PM Monti meets for labor talks
- 10:45 (EU) EU President Van Rompuy with Swiss Fin Min Widmer-Schlumpf
- 10:45 (UK) BOE to buy £1.5B in 2027-2060 Gilts in reverse auction
- 11:00 (US) Fed to purchase $1.75-2.25B in Notes
- 11:00 (EU) EU's Ashton
- 11:00 (MX) Mexico weekly international reserves
- 11:30 (US) Treasury to sell 4-Week Bills
- 12:00 (PT) Portugal Fin Min Gaspar in Washington DC
- 12:45 (US) Fed' Chairman Bernanke gives lecture at George Washington University
- 14:00 (UK) BOE member Dale
- 16:00 (CA) Quebec Fin Min Bachand gives 2012-12 budget
- 16:30 (US) Weekly API Energy Inventories
- 17:30 (US) Fed's Kocherlakota speaks in St. Louis, Missouri
- (US) Republican Illinois Primary
- (UK) Queen Elizabeth Addresses Parliament for Diamond Jubilee
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