TradeTheNews.com European Market Update: Risk on sentiment remains in vogue

Wednesday, February 08, 2012 5:47:22 AM TradeTheNews.com European Market Update: Risk on sentiment remains in vogue***Economic Data***
- (EU) ECB: €1.9B borrowed in overnight loan facility v €1.8B prior; €495.4B parked in deposit facility vs. €503.4B prior

- (CH) Swiss Jan Unemployment Rate: 3.4% v 3.5%e; Unemployment Rate Seasonally Adj: 3.1% v 3.1%e - (DE) Germany Dec Current Account: €19.3B v €15.2Be; Trade Balance: €12.9B v €13.; Exports M/M: -4.3% v -1.0%e; Imports M/M: -3.9% v +0.8%e
- (FR) Jan Bank of France Business Sentiment: 96 v 96e
- (FR) France Dec Central Govt. Balance: -€90.8B v -€90.8Be
- (CZ) Czech Jan Unemployment Rate: 9.1% v 9.1%e
- (ES) Spain Dec Industrial Output WDA Y/Y: -3.7% v -5.7%e; Industrial Output NSA Y/Y: -6.9% v -7.0% prior
- (DK) Denmark Dec Current Account (DKK): 9.1B v 6.5Be; Trade Balance (ex-shipping): 6.0B v 6.5Be
- (HU) Hungary Dec Preliminary Trade Balance: €352.1M v €430.0Me
- (TR) Turkey Dec Industrial Production WDA M/M: +2.7% v -2.2% prior; Y/Y:3.8% v 5.3% prior; Industrial Production NSA Y/Y: 3.7% v 2.8%e
- (PH) Philippines Dec M3 Money Supply Y/Y: 6.3 v7.2% prior
- (PH) Philippines Dec Bank Lending Y/Y: 16.4% v 19.3% prior; Bank Lending Net of RRPs Y/Y: 19.3% v 22.5% prior
- (IC) Iceland Central Bank (Sedlabanki) leaves 7-day Lending Rate unchanged at 4.75%
- (IT) Italy Dec Private Sector Deposits Y/Y: -0.5% v -0.7% prior (third straight month of declines) - Bank of Italy:
- (ZA) South Africa Jan SACCI Business Confidence: 97.1 v 99.1 prior
- (BR) Brazil Jan FGV Inflation IGP-DI: 0.3% v 0.3%e
Fixed Income:
- (EU) ECB allotted $4.1B in 7-Day USD Liquidity Tender at fixed 0.61% vs $3.7B prior
- (SE) Sweden sold SEK2.5B in 2022 Bonds; Yield 1.909%
- (DE) Germany sold €3.29B in 0.75% Feb 2017 BOBL; Avg Yield 0.91% v 0.90% prior; Bid-to-cover: 1.8x v 2.8x prior
*** SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM ***
***Notes/Observations***
- Japan registers its smallest current account surplus in 15 years
- ECB willing to exchange Greek bonds with EFSF but contingent on the success of current talks over the new bailout and debt restructuring.
Equities: FTSE 100 +0.20% at 5901, DAX +0.60% at 6796, CAC-40 +0.50% at 3426, IBEX 35 +0.40% at 8880, FTSE MIB +1.5% at 16,741, SMI +0.50% at 6185
- European shares were up among optimism that Greek debt deals are continuing to progress. Reports from Greek press noted that the PSI deal is now completed. The coupon would be 3% to 2020. Greek political leaders are expected to meet later in the day and are expected to agree on austerity measures. On the other hand, Greece PM is also meeting individually with ECB, EU and IMF.
- In individual names, Sanofi [SAN.FR] dropped about 2% after issuing a profit warning for 2012. Due to generic competition, Sanofi expects profit to drop up to 15% in 2012. Vestas [VWS.DK] also declined after reporting a significant decline in its EBIT and announcing the resignation of its CFO. Synngenta [SYNN.CH] declined over 1% after missing analysts' expectations for both net and revenues. However, company noted that it expected sustained growth in sales and EBITDA.
Speakers: - Greek press noting that PSI deal was now completed. The average coupon would be around 3.6% and incur a 50% nominal haircut (as previously speculated). Bondholders would receive 15% in cash and the rest in a Greek bonds. By Wed next week they were going to publish the list of 80 Greek bonds that are going to participate in the PSI plus the loans of the Greek banks.
- EU Commission commented that it was not there yet on Greek deal
- EFSF's Frankel commented that it would probably play large role in Greece's needs and stated that the PSI deal needed "to be finalized". Leverage looked to implement two options.
- EU started 2012 with a budget deficit of €11B
- Greece Jan budget revenues were said to decline 7% y/y vs. planned target for an increase 8.9%. The article noted that value-added tax receipts posted an 18.7% decline y/y. The article went on noting that according to the current data, the 2012 budget would certainly have to be revised soon, given that the original estimate for a contraction of 2.8 percent is now raised to 3.5-4 percent of gross domestic product
- ECB official Papadia: Seeing some tentative indications of economic stabilization; can say mission accomplished regarding bank liquidity
- Spain said to be planning to tap of the 5.85% Jan 2022 benchmark bond
- S&P offical Hinrichs commented that Germany could not necessary export fiscal recipe to stressed euro-zone states noting that saving alone was not enough as growth impulses were mentioned too little. He refuted the concept that what was good for Germany would also good for Europe
- German Bundesbank official Lautenschlaeger reiterated the view that there were no indications of a credit 'crunch' in Germany
- Hungary might begin discussions with IMF by early part of March for the precautionary credit line
- Sweden Central Bank (Riksbank) published corporate survey results which saw the business climate worsening with major risks. Companies were noting of a downturn in operations and cutback due to weaker economic climate
Currencies:
- The USD was initially softer across the board as risk appetite maintained a firm footing amid continued hopes that Greece was close to agreeing a deal that would ensure the next bailout payment.
- The EUR/USD probed the 1.33 neighborhood during the early part of the session and remained above the pivotal Jan high of 1.3233 and possibly embarking for mush higher levels if history is a guide. The pair retreated back to its opening levels of 1.3250 ahead of the NY morning.
- JPY maintained a soft tone. The EUR/JPY cross hit 7-week highs above 102.75 while USD/JPY held above the 77 handle. The question remained whether corporate hedging would take advantage of the recent JPY weakness ahead of the fiscal year-end in March.
Political/ In the Papers:
- Former NTMA Chief Michael Somers claimed investors would not buy Irish bonds due to the poor credit rating per reports in the Irish Independent. In the radio interview Mr. Somers said Ireland was likely to require a second bailout since credit rating agencies cut the rating too low to be able to sell bonds to international investors. Michael Somers was the NTMA chief until 2009, and is currently the deputy chairman of government owned AIB.
- The German press hinted that Greek losses may cost Germany €25B citing the the publication's own calculation, and those of German think tank IfW. With discussions occurring at the moment, which include a waiver of a portion of the aid granted to Greece, the losses may increase.
- The Global Head of Sovereign Ratings at Fitch Stringer said that he does not expect China to provide lots of funds to the EU bailout fund. A large investment in the EFSF by China could be risky, as the Chinese government could lose money if the fund is downgraded.
- The Telegraph's Evans-Pritchard commented on how some EU officials have become more willing to consider a Greek exit from the EU. Recent comments by EU Commission Vice President Nellie Kroes said, "It is not the end of the world if someone leaves the euro zone." And according to Greece's EU commissioner Maria Damanaki, contingency plans are under way for a Greek withdrawal. Pritchard noted in the article that Greece leaving the EMU is now a 50:50 event.
- The FT reported that banks increased their collateralized mortgage obligations (CMO) holdings by $82B in the first 9-months of 2011 to $479B citing FDIC data. The proportion of CMOs on the balance sheets of banks increased by nearly half a percentage point to 3.47% over the period. US Treasuries, on the other hand, declined by 0.17 percentage points between end-2010 and Q3 2011 to 1.25% ($173B). It was added that unlike the subprime collateralized debt obligations of the financial crisis, the majority of the CMOs being purchased today by banks are composed made up of mortgages backed by the US government.
Germany's Finance Minister Schaeuble was said to be mulling the idea of delaying a majority of new Greek aid to maintain pressure for further austerity measures, or possibly even prepare for a default. The delay would be applied to the €100B portion of the aid package. Mr. Schaeuble is seeking to break up the new bailout aid into two segments. The second €30B portion designated for the Greek banks that participate in the private sector may be released in days. The report by FT Deutchland added that Mr. Schaeuble discussed this plan with the Dutch and Finnish finance minister. FT Deutchland did not specify its sources.
- Troika officials were reported to be seeking individual meetings with Greek leaders. The officials were likely to hold talks with each of them individually to obtain their explicit commitment to the measures. The new loan agreement would be submitted to Parliament on Friday and voted on several days later. During the European session various Greek party official confirmed that the Troika draft documents were received. As a reminder, the three Greek coalition party leaders are due to meet the prime minister on Wednesday to finalize the measures the government will have to adopt to receive further loans.
***Looking Ahead***
- (PL) Poland Central Bank Interest Rate decision: Expected to leave the Base Rate unchanged at 4.50%
- 6:00 (CL) Chile Jan CPI M/M: 0.2%e v 0.6% prior; Y/Y: 4.3%e v 4.4% prior; CPI Ex Perishables & Fuel M/M: No est v 0.7% prior
- 6:00 (EU) EU issues First Alert Mechanism Report on Macro-Imbalances
- 7:00 (UK) Prime Minister's Question Time in House of Commons
- 7:00 (US) MBA Mortgage Applications w/e Feb 3rd: No est v -2.9% prior
- 8:00 Greece PM said to be meeting with party officials
- 8:15 (CA) Canada Jan Housing Starts: 194.0Ke v 199.9K prior (revised from 200.2K)
- 9:30 (BR) Brazil Central Bank Posts Currency Flows' Data
- 9:30 (BR) Brazil Jan Commodity Price Index M/M: No est v -0.5% prior; Y/Y: No est v -0.4% prior
- 10:30 (US) Weekly DOE Energy Inventory data
-10:30 (US) Fed's Williams speaks on economy in San Ramon, California
- 13:00 (US) Treasury to sell $24B in 10-Year Notes
- 20:30 (CN) China Jan Producer Price Index Y/Y: 0.7%e v 1.7% prior
- 20:30 (CN) China Jan Consumer Price Index Y/Y: 4.0%e v 4.1% prior 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.