European Market Update: German ZEW Expectations survey turns positive for the first time since May 2011; China reiterates support for Europe

 Tuesday, February 14, 2012 5:54:21 AM
 TradeTheNews.com European Market Update: German ZEW Expectations survey turns positive for the first time since May 2011; China reiterates support for Europe
***Economic Data***
- (EU) ECB: €1.1B borrowed in overnight loan facility v €1.2B prior; €510.2B parked in deposit facility vs. €507.9B prior
- (ES) Spain Jan ECB Banks Borrowings: €161.4B v €132.4B m/m
- (IN) India Jan Monthly Wholesale Prices Y/Y: 6.6% v 6.7%e
- (FI) Finland Dec Final Retail Sales Volume Y/Y: 2.1% v 1.8% prelim
- (SE) Sweden Jan PES Unemployment Rate: 4.8% v 4.9%e
- (FR) France Q4 Preliminary Non-Farm Payrolls Q/Q: -0.2% v -0.2%e; Wages Q/Q: 0.3% v 0.3% prior
- (HU) Hungary Jan Consumer Prices M/M: 2.1% v 1.7%e; Y/Y: 5.5% v 5.0%e
- (HU) Hungary Dec Final Industrial Production M/M: -7.4% v -7.4% prelim; Y/Y: -6.7% v -6.7% prelim
- (ES) Spain Dec Industrial Orders Y/Y: -4.0% v -1.6% prior
- (FR) France Jan Real Retail Sales (seasonally adj) M/M: +0.6% v +0.2% prior; Y/Y: +0.7% v -3.1% prior - Bank of France Survey
- (NL) Netherlands Dec Retail Sales: 1.0% v 1.3% prior
- (SE) Sweden Q4 Total Number of Employees Y/Y: 3.1% v 3.5% prior
- (UK) Dec DCLG UK House Prices Y/Y: +0.1% v -0.3% prior
- (UK) Jan CPI M/M: -0.5% v -0.5%e; Y/Y: 3.6% v 3.6%e; Core CPI Y/Y: 2.6% v 2.6%e - (UK) Jan RPI M/M: -0.6% v -0.4%e; Y/Y: 3.9% v 4.1%e; RPI-X Y/Y: 4.0% v 4.2%e; Retail Price Index: 238.0 v 238.4e
- (DE) Germany Feb ZEW Economic Sentiment: +5.4 v -11.8e (first positive reading since May 2011); Current Conditions: 40.3 v 30.5e
- (EU) Euro Zone Dec Industrial Production M/M: -1.1% v -1.2%e; Y/Y: -2.0% v -1.2%e
- (EU) Euro Zone Feb ZEW Economic Sentiment: -8,1 v -32.5 prior
- (GR) Greece Q4 Preliminary GDP: Y/Y: -7.0% v -5.0% prior
- (PT) Portugal Q4 Preliminary GDP Q/Q: -1.5%e v -0.6% prior; Y/Y: -2.8%e v -1.7% prior
Fixed Income - (NL) Netherlands Debt Agency (DSTA) sold €3.98B vs €3.0-4.0B indicated range in 2.5% 2017 DSL Bond; Avg Yield 1.347% v 1.777% prior
- (ES) Spain Debt Agency sold total €5.44B vs. €4.5-5.5B indicated range in 12-Month and 18-Month Bills
- Sold €2.94B in 12-month Bills; Avg Yield 1.899% v 2.049% prior; Bid-to-cover: 2.3 x v 3.55x prior; Max Yield 1.949% v 2.150% prior
- Sold €2.5B in 18-month Bills; Avg Yield 2.308% v 2.399% prior; Bid-to-cover: 2.88x v 3.23x prior; Max Yield 2.395% v 2.490% prior
- (GR) Greece Debt Agency (PDMA) sold €1.3B vs. €1.0B indicaqted in 13-week treasury bills; Avg Yield 4.61% v 4.64% prior; Bid-to-cover:2.70 x v 2.90x prior
- (IT) Italy Debt Agency (Tesoro) sold €6.0B vs. €6.0B in 2014, 2015 and 2017 Bonds
- Sold €4.0B in 6.0% Nov 2014 BTPs; Avg Yield 3.41% v 4.83% prior; Bid-to-cover: 1.40x v 1.22x prior
- Sold €687M in 3.0% Nov 2015 BTPs; Avg Yield 3.77%; Bid-to-cover: 2.37x
- Sold €1.31B in 4.0% Feb 2017 BTPs; Avg Yield 4.26% v 4.93% prior; Bid-to-cover: 1.71x v 2.3x prior****Note: -
- (EU) ECB allotted €142.8B in 7-Day Main Refinancing Tender vs. €115Be
- (EU) ECB allotted €14.3B in 1-Month Tender vs. €30.0Be
- (HU) Hungary Debt Agency (AKK) sold HUF60B in 3-Month Bills; Avg yield 7.32% v 7.32% prior; Bid-to-cover: 2.52x v 2.69x prior
- (BE) Belgium Debt Agency sold total €3.2B vs. €3.0B indicated in 3-month and 12-month Bills
- Sold €1.80B in 3-month Bills; Avg Yield 0.291% v 0.506% prior; Bid-to-cover: 2.51x v 2.70x prior
- Sold €1.41B in 12-month Bills; Avg Yield 0.892% v 1.162% prior; Bid-to-cover: 2.64x v 2.06x prior
*** SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM ***
***Notes/Observations***
- Moody's downgrades 6 European sovereigns (Italy, Spain, Portugal, Slovakia, Slovenia & Malta) lowers outlook on several AAA (UK, Austria and France)
- BOJ sets an inflation target (and cranks up the printing press); Announced further easing measures (first since Oct)
- Fed's Williams (voting member): Vital to keep policy throttle wide open.
- Germany ZEW Survey registers its first positive reading since May 2011
- UK inflation data declines in Jan as expected by BOE
Equities: FTSE 100 +0.20% at 5915, DAX +0.60% at 6779, CAC-40 +0.30% at 3395, IBEX-35 +0.40% at 16,504, SMI +0.10% at 6182
- European shares traded mixed during today's session hurt by Moody's action which downgraded 6 European states, including Italy and Spain. The most worrying action for the markets is Moody's cutting UK's and France's outlook to negative from stable. However, Italy sold its debt in the indicated range. Losses were limited after Germany's ZEW increased and was a positive number, beating analysts' estimates.
- In individual names, Thyssenkrupp [TKA.DE] fell after reporting a larger than expected loss. The steel maker had already stated that Q1 EBIT would be considerably lower than last year's and was unable to give an outlook for FY12. Swedbank [SWEDA.SE] reported a lower than expected operating profit although net interest income was higher than estimates. The bank however decided to withdraw its capital targets and would decide on new ones when the situation was more stable. Among winners, MAN [MAN.DE] reported better than expected earnings.
Speakers: - China Premier Wen met key European officials in Beijing and hereiterated that China was ready to "get more involved" to help Euro debt and maintained confidence in Euro. He also hoped EU maintained its stability and prosperity and supported strengthening of fiscal discipline in Europe
- EU President Van Rompuy welcomed China's PM Wen support for Europe and noted that both regions were becoming increasingly inter-dependent. China was making progress on its CNY currency rate and rebalancing its economy. China showed "solid interest" on EFSF investment
- EU's Barroso commented from Beijing that EU was doing what was necessary to restore confidence and that the region was seeking more investment access in China
- Austria Fin Min Fekter commented that she was confident that Greece would get more help. She noted that no Austrian banks have asked for aid
- Bank of Japan Gov Shirakawa commented at his post rate decision press conference that the BOJ would not end its inflation targeting until the 1% CPI rise was in sight. He stressed that the BOJ would ensure Japan's economic recovery through its policy and that the central bank was not pressured by gov't in today's action but both did share the perspective of what is deemed as price stability. Today's decision meant buying JGBs at a faster pace
But not use JGB purchases for monetizing debt. The change in wording on prices aimed at clarifying BoJ's determination to deal with deflation.
- ZEW Economists commented after the better Feb data that the economic slowdown in Germany was unlikely to last as domestic demand expected to support economic growth. It stressed that a solution to Euro Zone crisis remained an important issue but progress with Greek creditors might have reduced uncertainty. Lastly it noted that Germany might see slight uplift in H2 2012
- ECB's Nowotny reiterated the central bank view that it did not see risk of inflation. He cautioned that Euro region needed to avoid the same fate as Japan's. The main objective was to avoid longer periods of stagnation.
- ECB's Coeure commented that the ECB should distribute profits on Greek debt to member nations who could use it to contribute to sustainability of Greek debt
- Bank of England released its inflation letter noting that inflation was falling broadly as expected and expected to hit around target of 2.0% by end of 2012. Impact of factors that pushed up inflation was now waning. CPI decline due to VAT and energy prices but cautioned that a risk of an oil shock was possible due to political tensions. Extent of CPI decline was highly uncertain with key uncertainties of wages and profit margin building. To focus on spare capacity and inflationary expectations and that the key policy outlook was the medium-term view
- France Fin Min Baroin commented on Moody's lower revision of the French sovereign outlook that the Govt will continue to seek an increase its economic growth and competitiveness. He noted that Moody's action was due to risks associated with the Euro Zone. He confirmed France 2012 GDP growth forecast of 0.5%
- Poland Fin Min Rostowski Greece's Euro exit would be less damaging at this time compared to 2011 but would pose legal obstacles. Greek default would have less impact with new EU policies because of the European Central Bank's liquidity measures. He noted that it was not clear how it would be possible for Greece to leave the euro zone under its legal system
- China State Administration of Foreign Exchange (SAFE) reiterated it stance to enhance monitoring of two-way cross-border capital flows and improve policy response to impact of capital flows.
- Turkey Econ Min Babacan commented that the country's 2011 imports came in at $240.8B and added that he was not comfortable with the level of imports
Currencies:
- The session shrugged off the initial effects of the multi-country European sovereign downgrade and revisions to AAA outlooks. The EUR/USD clawed its way from late Asian session lows of 1.3128 and moved above 1.32 handle by the NY morning following better German ZEW data and commentary of out China's Premier Wen.
- The USD/JPY was probing the upper end of its three-month range with 78.30 being the key resistance following the BOJ policy decision to set a inflation target. Some dealers noting that the continued threat of BOJ FX intervention would be more successful if enacted above the pivotal 78.30 level
- The GBP/USD recovered from its Far east session lows of 1.5686 after Moody's became the first major rating agency to cut the UK's sovereign outlook to negative. The pair was only slightly negative ahead of the NY morning at 1.5755
Political/ In the Papers:
- Portugal is to hold a fresh round of discussions with its international creditors this week before the next tranche of funds are set. Troika officials and the IMF will arrive Wednesday for a two-week review of the country. If approved, then it will be given the next tranche of €14.9B.
- The Independent looked at who could replace the current Bank of England Governor King next year when his term expires. The decision on the succession will be made by the Prime Minister, and advised by the Chancellor and the Cabinet Secretary. Note that the last two Governors were chosen from within the Bank, which places the leading internal candidate, the present deputy governor, Paul Tucker, in a strong position. Other candidates include Andy Haldane, external candidate Lord Turner, Sir John Vickers, John Varley, and former HSBC chairman Lord Green.
- The UK federation of trade unions, Trades Union Congress (TUC), released a report that finds true unemployment in the country may be as high as 6.3M, over twice the official figure of 2.68M released last month. The higher figure was found by using an American measure, which includes part-time employment due to the lack of full-time jobs, recent redundancies. TUC found that under-employment (those taking on temporary or part-time work because they cannot find permanent, full-time work) increased to 1.3M (record).
***Looking Ahead***
- (US) China Vice premier Xi Jinping will visit the White House on Feb 14th
- (IT) Italy PM Monti in Parliament
- 6:00 (BR) Brazil Dec Retail Sales M/M: 0.1%e v 1.3% prior; Y/Y: 6.0%e v 6.8% prior; Broad Retail Sales Y/Y: No est v 3.2% prior
- 6:00 (TR) Turkey to sell 10% 2013 and fixed 2022 Bonds
- 6:00 (TR) Turkey to sell 2021 Inflation Linked Bonds
- 6:30 (DE) OECD chief Gurria presents German Economic Survey in Berlin
- 7:00 (EU) ECB announces allotment in 7-Day Term Deposits to offset Govt Bond purchases
- 7:00 (IC) Iceland Jan Unemployment Rate: No est v 7.3% prior
- 7:30 (US) Jan NFIB Small Business Optimism: 95.0e v 93.8 prior
- 7:45 (US) Weekly ICSC Chain Store Sales
- 8:00 (PL) Poland Jan M3 Money Supply: -1.4%e v +3.2% prior
- 8:30 (US) Jan Import Price Index M/M: +0.3%e v -0.1% prior; Y/Y: 7.2%e v 8.5% prior - 8:30 (US) Jan Advance Retail Sales: 0.8%e v 0.1% prior; Retail Sales Less Autos: +0.5%e v -0.2% prior; Retail Sales Ex Auto & Gas: 0.5%e v 0.0% prior
- 8:45 (US) Fed's Plosser speaks on Economy in Newark, Delaware
- 8:55 (US) Weekly Redbook Retail Sales
- 9:00 (EU) Weekly ECB Forex Reserves
- 9:45 (UK) BOE to buy £1.5B in 2027-2060 Gilts in reverse auction
- 10:00 (US) Treasury Sec Geithner testifies before Senate
- 10:00 (US) Dec Business Inventories: 0.5%e v 0.3% prior
- 10:00 (MX) Mexico International Reserves w/e Feb 10th
- 10:00 (MX) Mexico Jan Vehicle Production: 211.0Ke v 180.2K prior; Vehicle Domestic Sales: No est v 115.7K prior; Vehicle Exports: No est v 171.3K prior
- 11:00 (US) Fed to purchase $4.25-5.00B in Notes
- 13:00 (US) Treasury to sell 4-Week Bills
- 16:00 (CL) Chile Central Bank Interest Rate Decision: Expected to cut the Nominal Overnight Rate Target by 13bps to 4.88%
- 16:00 (KW) South Korea Jan Export Price Index M/M: No est v 0.3% prior; Y/Y: No est v 2.5% prior
- 16:00 (KW) South Korea Jan Import Price Index M/M: No est v 0.2% prior; Y/Y: No est v 7.1% prior
- 16:30 (US) Weekly API Energy Inventories
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