- (FI) Finland Nov PPI M/M: 0.0% v 0.1% prior; Y/Y: 6.6% v 7.3% prior
- (FR) France Dec Business Confidence: 103 v 102e; Production Outlook: 10 v 8 prior; Own-Company Production: 8 v 6 prior
- (HU) Hungary Oct Avg Gross Wages Y/Y: 1.2% v 2.5%e
- (NO) Norway Dec Unemployment Rate: 2.7% v 2.8%e
- (GE) Germany Dec IFO Business Climate: 109.9 v 109.0e; Current Assessment: 112.9 v 112.5e; Expectations Survey: 106.9 v 106.0e
- (IT) Italy Oct Industrial Orders M/M: 0.0% v 0.6%e; Y/Y: 12.4% v 16.0%e
- (IT) Italy Oct Industrial Sales M/M: +1.0% v -0.3% prior; Y/Y: 13.3% v 10.9% prior
- (RU) Russia Nov Unemployment: 6.7% v 7.0%e
- (EU) Euro Zone Oct Construction Output M/M: 0.0% v -1.6% prior; Y/Y: -6.8% v -7.7% prior
- (EU) Euro-Zone Oct Trade Balance: €5.2B v €2.5Be; Trade Balance Seasonally Adj: €3,6B v €2.0B prior
- (IT) Italy Oct Current Account: -€2.6B v -€8.1B prior
SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM
Notes/Observations:
- Bank of England (BOE) Stability Report: UK banks facing an even larger funding challenge in 2011
- Moody's slashes Ireland Sovereign rating by five notches
- China Think tank CASS: Interest Rate liberalization coupled with more flexibility in Yuan Exchange Rate needed for Yuan internationalization, which would require open capital account
- Germany's economic engine continues to grind in a higher gear; IFO exceeds expectations
Equities:
Eurostoxx50 at 2841m -0.15%, FTSE100 at 5862 -0.31%, CAC40 at 3888, +0.00%, DAX at 7007 -0.24%
- European shares were trading between gains and loss but resh concerns regarding EU debt concens following Moody's 5-notch downgrade of Ireland did not have a significant impact on equities. Irish banks were lower during the session as a result of the downgrade. Meanwhile, EU leaders declared their readiness to ensure the stability of the euro area and to ensure adequate EFSF funding.
- In individual names, Suedzucker [SZU.GE] reported growth in both operating profit and revenue and raised its FY11 revenue guidance to €6B from the prior estimate of €5.8B. The shares gained over 1.7% following the news. SAP [SAP.GE] was also among the winners in the DAX following positive results from Oracle. Meanwhile Deutsche Telekom [DTE.GE] slipped by less than 1% after Nomura downgraded their recommendation to Neutral from Buy. Aggreko [AGK.UK] declined over 3.5% despite a positive update guiding strong growth in revenues and pre tax profits.The decline is attributed to profit taking. Punch Taverns [PUB.UK] rose in the session after providing a positive interim statement where like-for-like sales had grown by 2.2%. Astrazeneca[AZN.UK] traded down by 4% after FDA is yet to approve its blood thinner drug Brilinta. FDA requested additional analysis of the PLATO data.
Speakers:
- Moody's downgraded Ireland's sovereign rating to 'Baa1' from 'Aa2' (five notches) with an negative outlook. The negative outlook on the ratings of the government of Ireland was based on the risk that the Irish government's financial strength could decline further if economic growth were to be weaker than currently projected or the costs of stabilizing the banking system turn out to be higher than currently forecast.
- EU Summit Draft Statement noted that leaders have taken decisive steps to ensure stability in the region and would do whatever was necessary to ensure stability. It noted that EU fundamentals remained sound with growth prospects strengthening. It approved a treaty amendment for ESM and called for acceleration of work on economic governance. EU leaders have expressed their full support for the ECB
- ECB Bini Smaghi wrote an opinion piece in the FT that the fear of a sovereign bond default would threaten the financial soundness of the system and such an event would be worse than the disease itself. He noted that bond-buyers after 2013 to incur no greater risk than now
- ECB's Weber commented that the European rescue fund better suited to deal with crisis than Eurobonds. He reiterates that Germany had benefited from the Euro and the currency was in everyone interest.
- IFO Abberger and Nerb made comments after the stronger Dec IFO data for Germany. Both members cited that the German recovery was being increasingly supported by consumption. Abberger cautioned that although the fundamental trend was for Q4 growth to be positive it could be impacted by weather. Lastly ECB should keep interest rates at current levels
- North Korea warned South Korea of retaliation if planned drills are to continue with retaliation to be more severe than prior incident. South Korea Defense Ministry stated that it would proceed with scheduled live ammunition drill
- Swiss Dec KOF Institute Semi-annual Economic forecast had a familiar ring with other views in the region (aka Germany). It noted that economic growth would continue in 2011 but at a slower pace. The Swiss currency could maintain its status as a safe haven due to the euro crisis
Currencies:
- The Moody's downgrade of Ireland was a timely reminder that euro zone tensions are far from resolved. The market seemed to take EU Leaders at their face value that decisive steps have been taken to ensure stability in the region. Despite the 5-notch sovereign cut on Ireland the EUR/USD maintained a firm tone in the session. Heading into the session the USD was a bit on the defensive as dealers noted the recent acute relationship between the USD price action and the 10-year US Gov't bond yield. The 10-year touched above 3.50% on Thursday and is currently back below 3.42%. Lastly The EUR/USD also held above the weekly low of 1.3160 on Thursday where Far East Sovereign names had been cited as consistent Euro buyers.
- The stronger German IFO data was the catalyst for the currency markets as the EUR/USD tested above 1.3350.
- The GBP underperform throughout the session after Bank of England (BOE) Stability Report (released during Asia) noted that UK banks faced an even larger funding challenge in 2011
- The CHF currency maintained its safe-haven status in the session. EUR/CHF hit fresh all-time lows below 1.2720 after Moody's rating action on Ireland.
Geo-Political/ In the Papers:
- The stance between the two Korean nations continued to encounter difficulties as North Korea warned their southern counterparts of retaliation if planned drills were to continue. They further added that the penalties were to be more severe than the prior incident. South Korea also made comments stating that they plan to continue with yesterday's announced live-fire exercises, which may occur as early as this Saturday.
- The Financial Times commented on a secret plan by France, Britain and Germany to freeze the EU's budget until 2020. According to the article, the officials from the three European nations wanted the development to remain secret because they believed that governments from the poorer European states would oppose the measure. For 2011, the EU budget is expected to be about €126.5B.
- The Telegraph's Evans-Pritchard commented on the high yields which the Spanish government had to pay in its December 16th auction of both 10 and 15-year debt. The article quotes analysts as noting that high borrowing costs paid by Spain are a reflection of concerns about Spain's credit quality and peripheral markets continuing to require the support of policy makers.
Looking Ahead:
- (PH) Philippines Nov Balance of Payments: No est v $2.7B
- (CO) Colombia Central Bank Interest Rate Decision: Expected to maintain the Overnight Lending Rate at 3.00%
- 6:00 (BR) Brazil Nov Unemployment Rate: 6.0%e v 6.1% prior
- 7:30 (IC) Iceland to sell Bonds
- 7:45 (EU) ECB Honohan
- 8:00 (PD) Poland Nov Sold Industrial Output M/M: -1.1%e v -1.6% prior; Y/Y: 10.1%e v 8.0% prior
- 8:00 (PD) Poland Nov Producer Prices M/M: 0.1%e v 0.0% prior; Y/Y: 4.5%e v 4.0% prior
- 9:00 (BE) Belgium Dec Consumer Confidence: No est v 0 (flat) prior
- 10:00 (US) Nov Leading Indicators: 1.1%e v 0.5% prior
- 11:00 (US) Fed to buy notes/bonds
- 14:00 (AR) Argentina Q3 Current Account: No est v $3.1B prior
- 14:00 (AR) Argentina Q3 Quarterly GDP Constant Total : No est v 11.8% prior
- 14:00 (AR) Argentina Nov Industrial Production M/M: No est v -0.4% prior; Y/Y: 8.1%e v 8.4% prior
- 16:00 (CO) Colombia Oct Industrial Production Y/Y: 3.5%e v 2.8% prior; Retail Sales Y/Y: 14.7%e v 18.6% prior
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