Economic Data
- (PH) Philippines Oct Overseas Workers Remittances: $1.7B v $1.6B prior
- (FI) Finland Oct Final Retail Sales Volume Y/Y: 2.7% v 2.4% prelim
- (EU) EU 25 New Car Registrations: -7.1% v -16.6% prior
- (SP) Spain Nov Consumer Price Index M/M: 0.5% v 0.5%e; Y/Y: 2.3% v 2.3%e
- (SP) Spain Nov CPI EU Harmonized M/M: 0.5% v 0.5%e; Y/Y: 2.2% v 2.2%e
- (SP) Spain Nov CPI Core M/M: 0.5% v 0.4%e; Y/Y: 1.2% v 1.0%e
- (CZ) Czech Oct Export Price Index Y/Y: 0.0% v 2.3% prior; Import Price Index Y/Y: 3.8% v 6.2% prior
- (CZ) Czech Nov PPI Industrial M/M: 0.5% v 0.2%e; Y/Y: 2.7% v 2.5%e
- (HU) Hungary Oct Final Industrial Output M/M: -1.0% v -1.0% prelim; Y/Y: 8.3% v 8.3% prelim
- (TU) Turkey Sept Unemployment Rate: 11.3% v 11.4% prior
- (FI) Finland Oct Current Account: €2.0B v €400M prior
- (SW) Sweden Central Bank (Riksbank) raised its Repo Rate by 25bps to 1.25%; As Expected; Maintains its current rate path
- (DE) Denmark Nov Wholesale Prices M/M: 0.3% v 0.3% prior; Y/Y: 5.9% v 6.2% prior
- (IT) Italy Oct Total Trade Balance: -€2.0B v -€1.6Be; Trade Balance EU: -€1.0B v -€415M prior
- (NO) Norway Nov Trade Balance (SEK): 31.1B v 23.4B prior
- (SA) South Africa Nov PPI M/M: 0.7% v 0.4%e; Y/Y: 6.2% v 6.0%e
- (UK) Nov Jobless Claims Change: -1.2K v -3.0Ke; Claimant Count Rate: 4.5% v 4.5%e
- (UK) Oct Average Weekly Earnings 3M/Y: 2.2% v 2.1%e; Weekly Earnings ex-Bonus 3M/Y: 2.3% v 2.4%e
- (UK) Oct ILO Unemployment Rate: 7.9% v 7.7%e
- (EU) Euro zone Q3 Employment Q/Q: 0.0% v 0.1% prior; Y/Y: -0.2% v 0.6% prior
- (SZ) Dec Credit Suisse ZEW Expectations Survey: -12.5 v -30.9 prior
Fixed income:
- (EU) ECB allotted $75M in 7-day USD liquidity operation at fixed 1.18%
- (UK) DMO sold £3.5B in 2% Jan 2016 Gilts; avg Yield 2.564% v 1.958% prior; Bid-to-cover: 1.93x v 2.0x prior; Tail 0.6bps
- (PO) Portugal Debt Agency (IGCP) sold €500M vs €500M Indicated in 3-month Bills ; Avg Yield 3.403% v 1.818% prior; Bid-to-Cover: 1.9x v 2.2x prior
SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM
Notes/Observations:
- Fed: Recovery insufficient to bring down unemployment
- Moody's places Spain's 'Aa1' sovereign rating on review for possible downgrade
- EUR/CHF currency cross hits fresh life-time lows below 1.2760
Equities:
Eurostoxx50 at 2830, -1.09%, FTSE100 at 5867, -0.40%, CAC40 at 3869, -0.87%, DAX at 6973, -0.78%
- European shares are trading in negative territory erasing previous week's gains. As expected, the FOMC did not announce any major changes to its QE2 policy but noted that the economic recovery was not strong enough to reduce unemployment. However, a significant pressure came from Moody's announcement placing Spain's Aa1 sovereign rating on review for a possible downgrade. Weakness in Spanish banks dragged on European banks which traded lower throughout the session. Both Banco Santander and BBVA lost over 2% in the European session.
- Spanish retailer Inditex [ITX.SP] fell over 4% following its earnings report. Net profit came in line with expectations while revenue had increased slightly over the year but the figures indicate a slowing in profit growth. Hennes & Mauritz [HMB.SW] reported its November same store sales and total sales which exceeded expectations but shares are trading in the red nonetheless. Novartis [NOVN.SZ] opened higher by 2.5% after acquiring Alcon for $168/shr and resuming share buyback program. Siemens [SIE.GE] also rose after selling Siemens IT solutions for €850M to Atos. Fiat [F.IT] is trading in positive territory after announcing it would invest BRL3B in Brazil to build a car factory which would boost sales. Meanwhile, Unicredit [UCG.IT] fell approximately 3% after JP Morgan downgraded the bank to Neutral from Overweight.
Speakers:
- During that latter part of the Asian session Moody's placed Spain's 'Aa1' sovereign rating on review for possible downgrade It noted that its review would most likely conclude that Spain's rating to remain in the "Aa" range . The sovereign analyst commented afterwards that they could not rule that Spain would apply for a bailout but added that such a scenario was unlikely. Lastly it noted that Spain was on track to achieve its 2011 fiscal targets.
- EU Commission's Rehn commented that both Portugal and Spain were taking strong measures to deal with debt issues
- Germany Chancellor Merkel reiterated that the Euro was stable according to domestic and foreign valuation. She added that the currency was above its historical long-term average.
- Austria Central Bank presented Financial Stability Report. It noted that global uncertainties presented challenges for country's banking sector and highlighted a continued deterioration of credit quality in the central and eastern European regions. It cautioned that relatively weak economies of Southern Europe also posed risks for Austrian banks
Currencies:
- The session was again centered upon the euro-area debt situation after Moody's placed Spain's sovereign outlook on review for possible downgrade. The risk aversion flows were dominate as a result of the peripheral situation.
Throughout the month of Dec had seen the EUR/CHF cross price action persistent move lower and the cross hit a fresh life-time low below 1.2760 before stabilizing. The EUR/USD pair struggled to stay above the 1.33 handle following the comments from Moody's in late Asia and was roughly 505 pips lower from its Tokyo open.
Throughout the month of Dec had seen the EUR/CHF cross price action persistent move lower and the cross hit a fresh life-time low below 1.2760 before stabilizing. The EUR/USD pair struggled to stay above the 1.33 handle following the comments from Moody's in late Asia and was roughly 505 pips lower from its Tokyo open.
- Mixed unemployment data did not bode well for GBP/USD as the pair tested below the 1.57 handle. Dealers noted that UK labor market was expected to struggle in 2011 as the wrath of austerity takes effect.
- Sweden Central Bank raised its Repo rate as expected and maintained its outlook for the rate path. EUR/SEK off its lows to test 9.10 in the session
Geo-Political/ In the Papers:
- In addition to providing an assessment on Spain, Moody's also provided an outlook for the French insurance industry stating that it continues to be negative. Given the high cost of climatic events thus far, and the continuous high level of attritional claims, the rating agency expects combined ratios to remain high in 2010.
- In the Financial Times, Investor George Soros said the next Irish government is 'bound to' decline bailout package. He stated the markets realize the aid deal will not hold, giving evidence that there was no relief in bond yields from the rescue. He argued that higher rates on aid package, relative to EU lending rates, make it impossible for weaker euro countries to further competitiveness in relation to the euro system. Soros alternatively suggests that the funds from the rescue package be directed into banks at lower rates versus lending to the government.
- According to the London Telegraph, the British inflation data for November may have lessened the chance of additional quantitative easing (QE) by the Bank of England. The article noted that BNP Paribas' Alan Clarke expected that the inflation outlook to worsen in the months ahead and thus no longer expected additional QE out of the UK.
- The Telegraph's Evans-Pritchard looked at the concerns expressed by the S&P and the IMF related to Belgium, including the political situation. He noted the recent rise in the Belgium/German 10-yr yield spread could present funding difficulties for Belgium in 2011 as the company has to refinance debt of about 11% of GDP next year. In terms of Belgium's banking system, banking assets equal about 340% of GDP and banks in the country including Dexia and KBC have $54B in exposure to Ireland (BIS).
Looking Ahead:
- 6:00 (RU) Russia to Sell up to RUB6.4B in OFZ Bonds
- 6:00 (UK) Dec CBI Distributive Trade Reported Sales: 38e v 43 prior
- 7:00 (US) MBA Mortgage Applications w/e Dec 10th: No est v -0.9% prior
- 8:00 (NO) Norway Central Bank (Norges) Interest Rate Decision Expected to maintain the Deposit Rates at 2.00%
- 8:25 (US) Fed's Lockhart Speaks on Atlanta Regional Economy
- 8:30 (CA) Canada Oct Manufacturing Sales M/M: 0.5%e v -0.6% prior
- 8:30 (US) Nov Consumer Price Index M/M: 0.2%e v 0.2% prior; CPI Ex Food & Energy M/M: 0.1%e v 0.0% prior; CPI NSA: 218.600e v 218.711 prior
- 8:30 (US) Dec Empire Manufacturing: +5.0e v -11.14 prior
- 9:00 (US) Oct Total Net TIC Flows: $51.0Be v $81.7B prior; Net Long-term TIC Flows: No est v $81.0B prior
- 9:00 (PD) Poland Nov YTD Budget Level (PLN) No est v -41.8B prior; Budget Performance YTD: No est v 80.1% prior
- 9:15 (US) Nov Industrial Production: 0.3%e v 0.0% prior; Capacity Utilization: 75.0%e v 74.8% prior
- 10:00 (US) Dec NAHB Housing Market Index: 16e v 16 prior
- 10:30 (US) Weekly DOE Energy Inventories: Crude: -2.5Me; Gasoline:+2Me; Distillate: -500Ke; Utilization: 86.7%e
- 11:30 (IS) Israel Nov Consumer Prices M/M: 0.2%e v 0.3% prior; Y/Y: 2.4%e v 2.5% prior
- 13:00 (AR) Argentina Nov Wholesale Price Index M/M: No est v 0.9% prior; Y/Y: No est v 15.1% prior
- 14:00 (AR) Argentina Nov Consumer Price Index M/M: 0.8%e v 0.8% prior: Y/Y: 11.2%e v 11.1% prior
- 16:00 (CO) Colombia Oct Trade Balance: -$376.0Me v -$491.8M prior
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