European Market Update
German Oct Business Sentiment registers its first MoM decline in six months; UK Q3 GDP meets expectations and grows at fastest pace in over 3 years
Notes/Observations
China money market rates continue to rise; 7 day repo fix +21bps to 4.88%; reports circulated that PBoC could inject liquidity thru reverse repos next week if rates get too high to avoid problems that were seen in June
China PBoC launched prime interest rate for commercial lending to promote interest rate liberalization
China PBoC said not viewing CNY appreciation as too quick but could intervene if it rises too fast
Japan Sept CPI above expectations (YoY reading 1.1% vs. 0.9%e; Core CPI (ex food and energy) registered its first non-negative figure since 2008 when it came in at 0.0%
Far East equities lower by weaker-than-expected Japanese earning reports and China growth uncertainties
German IFO misses expectations with Business Sentiment registering its first MoM decline in six months
UK Q3 Advance GDP comes in line with expectations (Q/Q 0.8% vs. 0.8%e and Y/Y: 1.5% v 1.5%e); fastest pace since Q2 2010
Economic Data
(RU) Russia Narrow Money Supply Narrow w/e Oct 14th (RUB): 7.92T v 7.85T prior
(SG) Singapore Sept Industrial Production M/M: 3.7% v 0.5%e; Y/Y: 9.3% v 5.5%e
(FI) Finland Sept House Price Index M/M: -0.4 v -0.1% prior; Y/Y: 0.6 v 0.8% prior
(DE) Germany Aug Construction Order Y/Y: -5.0%; YTD: +1.4%
(ES)) Spain Sept PPI M/M: +0.2 v -0.1% prior; Y/Y: +0.1 v -0.1% prior
(TH) Thailand Sept Customs Trade Balance: $470M v $420Me; Customs Exports Y/Y: -7.0% v +0.5%e; Customs Imports Y/Y: -5.2% v +3.6%e
(EU) ECB €0.0M borrowed in overnight loan facility (6th time in 7 sessions) vs. €0.0M prior; €53.2B parked in deposit facility vs. €50.2B prior - Daily Eurosystem Liquidity Conditions
(AT) Austria Aug Industrial Production M/M: -0.5% v +0.5% prior; Y/Y: -1.4% v -0.9% prior
(SE) Sweden Oct Manufacturing Confidence: 101.2 v 96.2e; Consumer Confidence: 102.0 v 98.5e; Economic Tendency Survey: 101.6 v 98.9e
(NL) Netherlands Oct Producer Confidence Index: -0.5 v -2.0e
(SE) Sweden Sept Household Lending Y/Y: 4.8% v 4.8%e
(CN) Shanghai Futures Exchange (SHFE) Weekly Copper Stockpiles: 172.1K v 172.1K tons prior
(DE) Germany Oct IFO Business Climate: 107.4 v 108.0e; Current Assessment: 111.3 v 111.4e; Expectations Survey: 103.6 v 104.5e
(EU) Euro Zone Sept M3 Money Supply Y/Y: 2.1% v 2.4%e; M3 3-month average: 2.2% v 2.3%e
(IT) Italy Aug Retail Sales M/M: 0.0% v 0.0%e; Y/Y: +0.2 v -2.3%e
(TW) Taiwan M2 Money Supply Y/Y: 5.5% v 5.4% prior
(UK) Q3 Advance GDP Q/Q: 0.8% v 0.8%e; Y/Y: 1.5% v 1.5%e
(UK) Aug Index of Services M/M: 0.4% v 0.4%e; 3M/3M: 0.6% v 0.5%e
(MY) Malaysia Sept CPI Y/Y: 2.6% v 2.5%e
(IS) Iceland Oct CPI M/M: 0.0% v 0.3% prior; Y/Y: 3.6% v 3.9% prior
Fixed Income:
None seen
SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM
Equities
Indices [EuroStoxx50 -0.40%, FTSE 100 -0.10% at 6,708, DAX -0.20% at 8,964, CAC-40 -0.50% at 4,255, IBEX-35 -0.80% at 9,838, FTSE MIB -0.90% at 18,989, SMI -0.20% at 8,220, S&P 500 Futures -0.20% at 1,745]
Market Focal Points: European equity markets open lower following negative leads from Asia (Nikkei225 -2.8% Shanghai Composite -1.5%), China money market rates hit highs not seen since July, FTSE100 outperforms on banks and energy companies, FTSE MIB underperforms as Italy debt spreads widen, Big European Corporate Earnings (Electrolux, BASF, BBVA, Schneider Electric, Volvo, Solvay, Novozymes), European corporate results continue to be negatively impacted by currencies, UK GDP in line, Germany IFO data below ests, Upcoming US Corporate Earnings (Moody's, Procter & Gamble, UPS)
By Sector
Industrials [Volvo VOLVB.SE -6.5% (Q3 results below ests), Electrolux ELUXB.SE -5% (Q3 results below ests), Brembo BRE.IT -3.5% (share placement) Schneider Electric SU.FR -3.5% (cut outlook), Renault RNO.FR -3% (Q3 sales declined y/y) Solvay SOLB.BE -2% (Q3 results below ests); Saint-Gobain SGO.FR +2.5% (reaffirmed forecast), BASF BAS.DE +1% (Q3 results above ests)]
Consumer Discretionary [Technicolor TCH.FR -6% (Q3 sales declined y/y), Kering KER.FR -2% (Q3 sales declined y/y), Adecco ADEN.CH -2.5% (broker commentary); USG USG.NL +3% (Q3 profits rose y/y), G4S GFS.UK +2% (management change)]
Technology [SAP SAP.DE +2% (Microsoft earnings); Atos ATO.FR -1% (Q3 sales in line, reaffirmed outlook)]
Healthcare [Novozymes NZYMB.DK -3% (cut sales forecast), UCB UCB.BE -2% (9-month sales declined y/y); Morphosys MOR.DE +3% (positive outlook)]
Telecom [Belgacom BELG.BE -4%(Q3 sales below ests)]
Financials [BBVA BBVA.ES -1.5% (Q3 revenues declined y/y, bad loans rose, cut dividend)]
Basic Materials/Resources [Wacker Chemie WCH.DE -5% (broker commentary)]
Eurostoxx50 Sectors [Telecom -1%, Industrials -0.70%, Financials -0.6%, Consumer Cyclical -0.5%, Technology -0.5%, Consumer Non-cyclical -0.2%, Utilities -0.1%; Basic Materials +0.4%, Energy +0.1%]
Speakers:
ECB's Asmussen: Don't have any specific worry on exchange rates, reiterates view that currency within its historical band
German IFO Economisr Wohlrabe noted that the decline in business sentiment was only a mild damper and did not change the current trend. Manufacturing production plans and export expectations have been revised higher and that forecasts showed continued rise in exports to the US despite the budget dispute
UK Office of National Stats (ONS) stated that the domestic UK economy was growing at an annualized rate of 3.2%, but still 2.5% lower than before pre-crisis peak
UK Treasury commented that the domestic recovery had real momentum, but economic risks remained; hard work was paying off and the country was back on the path towards prosperity.
Currencies/Fixed Income:
The USD continued to be on the defensive but a softer German IFO reading halted the slide (at least for now). The Asian session saw further reports of reserve diversification out of the greenback and this has aided other currencies ( EUR, GBP and even AUD ). Various central banks appeared not too concern of FX price action at this time. ECB's Asmussen echoed Draghi comments from earlier this month when he noted that he did not have any 'specific worry' on exchange rates and reiterated view that currency was within its historical band since its launch in 1999 (0.82-1.60). The CNY continued to hit 20-year highs against the USD. Reports out of China that the CNY currency (Yuan) appreciation was not perceived as too fast but PBoC might intervene fx market if appreciation accelerated
The EUR/USD was capped at 1.38030 after German IFO missed expectations with Business Sentiment registering its first MoM decline in six months. Dealers noted that greater of concern was the drop in M3 and continuing drop in loans to private sector
The GBP/USD got a small boost from the UK Q3 GDP reading. The pair tested 1.6240 in the session
The negative Nikkei/yen cycle continued as a stronger Yen weighed on exporters and sent the Nikkei down 2% in the session to a two-week low. The USD/JPY remained below its 200-day moving average of 97.32
German Oct Business Sentiment registers its first MoM decline in six months; UK Q3 GDP meets expectations and grows at fastest pace in over 3 years
Notes/Observations
China money market rates continue to rise; 7 day repo fix +21bps to 4.88%; reports circulated that PBoC could inject liquidity thru reverse repos next week if rates get too high to avoid problems that were seen in June
China PBoC launched prime interest rate for commercial lending to promote interest rate liberalization
China PBoC said not viewing CNY appreciation as too quick but could intervene if it rises too fast
Japan Sept CPI above expectations (YoY reading 1.1% vs. 0.9%e; Core CPI (ex food and energy) registered its first non-negative figure since 2008 when it came in at 0.0%
Far East equities lower by weaker-than-expected Japanese earning reports and China growth uncertainties
German IFO misses expectations with Business Sentiment registering its first MoM decline in six months
UK Q3 Advance GDP comes in line with expectations (Q/Q 0.8% vs. 0.8%e and Y/Y: 1.5% v 1.5%e); fastest pace since Q2 2010
Economic Data
(RU) Russia Narrow Money Supply Narrow w/e Oct 14th (RUB): 7.92T v 7.85T prior
(SG) Singapore Sept Industrial Production M/M: 3.7% v 0.5%e; Y/Y: 9.3% v 5.5%e
(FI) Finland Sept House Price Index M/M: -0.4 v -0.1% prior; Y/Y: 0.6 v 0.8% prior
(DE) Germany Aug Construction Order Y/Y: -5.0%; YTD: +1.4%
(ES)) Spain Sept PPI M/M: +0.2 v -0.1% prior; Y/Y: +0.1 v -0.1% prior
(TH) Thailand Sept Customs Trade Balance: $470M v $420Me; Customs Exports Y/Y: -7.0% v +0.5%e; Customs Imports Y/Y: -5.2% v +3.6%e
(EU) ECB €0.0M borrowed in overnight loan facility (6th time in 7 sessions) vs. €0.0M prior; €53.2B parked in deposit facility vs. €50.2B prior - Daily Eurosystem Liquidity Conditions
(AT) Austria Aug Industrial Production M/M: -0.5% v +0.5% prior; Y/Y: -1.4% v -0.9% prior
(SE) Sweden Oct Manufacturing Confidence: 101.2 v 96.2e; Consumer Confidence: 102.0 v 98.5e; Economic Tendency Survey: 101.6 v 98.9e
(NL) Netherlands Oct Producer Confidence Index: -0.5 v -2.0e
(SE) Sweden Sept Household Lending Y/Y: 4.8% v 4.8%e
(CN) Shanghai Futures Exchange (SHFE) Weekly Copper Stockpiles: 172.1K v 172.1K tons prior
(DE) Germany Oct IFO Business Climate: 107.4 v 108.0e; Current Assessment: 111.3 v 111.4e; Expectations Survey: 103.6 v 104.5e
(EU) Euro Zone Sept M3 Money Supply Y/Y: 2.1% v 2.4%e; M3 3-month average: 2.2% v 2.3%e
(IT) Italy Aug Retail Sales M/M: 0.0% v 0.0%e; Y/Y: +0.2 v -2.3%e
(TW) Taiwan M2 Money Supply Y/Y: 5.5% v 5.4% prior
(UK) Q3 Advance GDP Q/Q: 0.8% v 0.8%e; Y/Y: 1.5% v 1.5%e
(UK) Aug Index of Services M/M: 0.4% v 0.4%e; 3M/3M: 0.6% v 0.5%e
(MY) Malaysia Sept CPI Y/Y: 2.6% v 2.5%e
(IS) Iceland Oct CPI M/M: 0.0% v 0.3% prior; Y/Y: 3.6% v 3.9% prior
Fixed Income:
None seen
SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM
Equities
Indices [EuroStoxx50 -0.40%, FTSE 100 -0.10% at 6,708, DAX -0.20% at 8,964, CAC-40 -0.50% at 4,255, IBEX-35 -0.80% at 9,838, FTSE MIB -0.90% at 18,989, SMI -0.20% at 8,220, S&P 500 Futures -0.20% at 1,745]
Market Focal Points: European equity markets open lower following negative leads from Asia (Nikkei225 -2.8% Shanghai Composite -1.5%), China money market rates hit highs not seen since July, FTSE100 outperforms on banks and energy companies, FTSE MIB underperforms as Italy debt spreads widen, Big European Corporate Earnings (Electrolux, BASF, BBVA, Schneider Electric, Volvo, Solvay, Novozymes), European corporate results continue to be negatively impacted by currencies, UK GDP in line, Germany IFO data below ests, Upcoming US Corporate Earnings (Moody's, Procter & Gamble, UPS)
By Sector
Industrials [Volvo VOLVB.SE -6.5% (Q3 results below ests), Electrolux ELUXB.SE -5% (Q3 results below ests), Brembo BRE.IT -3.5% (share placement) Schneider Electric SU.FR -3.5% (cut outlook), Renault RNO.FR -3% (Q3 sales declined y/y) Solvay SOLB.BE -2% (Q3 results below ests); Saint-Gobain SGO.FR +2.5% (reaffirmed forecast), BASF BAS.DE +1% (Q3 results above ests)]
Consumer Discretionary [Technicolor TCH.FR -6% (Q3 sales declined y/y), Kering KER.FR -2% (Q3 sales declined y/y), Adecco ADEN.CH -2.5% (broker commentary); USG USG.NL +3% (Q3 profits rose y/y), G4S GFS.UK +2% (management change)]
Technology [SAP SAP.DE +2% (Microsoft earnings); Atos ATO.FR -1% (Q3 sales in line, reaffirmed outlook)]
Healthcare [Novozymes NZYMB.DK -3% (cut sales forecast), UCB UCB.BE -2% (9-month sales declined y/y); Morphosys MOR.DE +3% (positive outlook)]
Telecom [Belgacom BELG.BE -4%(Q3 sales below ests)]
Financials [BBVA BBVA.ES -1.5% (Q3 revenues declined y/y, bad loans rose, cut dividend)]
Basic Materials/Resources [Wacker Chemie WCH.DE -5% (broker commentary)]
Eurostoxx50 Sectors [Telecom -1%, Industrials -0.70%, Financials -0.6%, Consumer Cyclical -0.5%, Technology -0.5%, Consumer Non-cyclical -0.2%, Utilities -0.1%; Basic Materials +0.4%, Energy +0.1%]
Speakers:
ECB's Asmussen: Don't have any specific worry on exchange rates, reiterates view that currency within its historical band
German IFO Economisr Wohlrabe noted that the decline in business sentiment was only a mild damper and did not change the current trend. Manufacturing production plans and export expectations have been revised higher and that forecasts showed continued rise in exports to the US despite the budget dispute
UK Office of National Stats (ONS) stated that the domestic UK economy was growing at an annualized rate of 3.2%, but still 2.5% lower than before pre-crisis peak
UK Treasury commented that the domestic recovery had real momentum, but economic risks remained; hard work was paying off and the country was back on the path towards prosperity.
Currencies/Fixed Income:
The USD continued to be on the defensive but a softer German IFO reading halted the slide (at least for now). The Asian session saw further reports of reserve diversification out of the greenback and this has aided other currencies ( EUR, GBP and even AUD ). Various central banks appeared not too concern of FX price action at this time. ECB's Asmussen echoed Draghi comments from earlier this month when he noted that he did not have any 'specific worry' on exchange rates and reiterated view that currency was within its historical band since its launch in 1999 (0.82-1.60). The CNY continued to hit 20-year highs against the USD. Reports out of China that the CNY currency (Yuan) appreciation was not perceived as too fast but PBoC might intervene fx market if appreciation accelerated
The EUR/USD was capped at 1.38030 after German IFO missed expectations with Business Sentiment registering its first MoM decline in six months. Dealers noted that greater of concern was the drop in M3 and continuing drop in loans to private sector
The GBP/USD got a small boost from the UK Q3 GDP reading. The pair tested 1.6240 in the session
The negative Nikkei/yen cycle continued as a stronger Yen weighed on exporters and sent the Nikkei down 2% in the session to a two-week low. The USD/JPY remained below its 200-day moving average of 97.32
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