European Market Update

Daily Forex Fundamentals | Written by Trade The News | Sep 09 08 09:55 GMT |

European Equities continue to rally post GSE bailout; UK data highlights slowing economy
Data

(GE) July Current Account €11.8B v €15.0Be; Trade Balance: €13.9B v €17.5Be; Imports M/M: 7.4% v 0.3%e; Exports M/M: -1.7% v -1.1%e

(NE) July Industrial Production M/M: -2.0% v 0.1%e; Y/Y: -2.6% v -0.1%e
(NE) July Industrial Sales Y/Y: 11.6% v 8.9% prior

(SW) August CPI Level: 301.98 v 302.13e
(SW) August CPI - Headline Rate: M/M 0.2% v 0.0%e; Y/Y 4.3% v 4.4%e; CPI - Underlying Inflation: M/M 0.1% v -0.1%e; Y/Y 3.2% v 3.3%e;

(UK) July Industrial Production: M/M: % v -0.1%e; Y/Y: % v -1.4%
(UK) July Manufacturing Production M/M: % v -0.1%e; Y/Y: % v -1.1%e ;

(NE) Dutch sold €2.1B in 4% 2018 bonds; avg yield 4.313%
SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Novartis [NOVN.SZ] Awarded FDA priority review for kidney cancer drug RAD001 || Hermes [RMS.FR] Seeks to open 3 to 4 new stores in China annually during the next three years - Exec || Tullow Oil [TLW.UK] Announced oil discovery at Kigogole-1 exploration well in the Butiaba region of Block 2, Uganda || Vendanta resources [VED.UK] Confirmed press speculation that it would simplify group structure into three commodity focused group; Company also announced that it would invest $9.8B to boost fully integrated aluminum smelting capacity to approx 2.6 mtpa by 2016 || Qinetiq [QQ.UK] UK govt will sell 18.9% stake in company || Origin Energy [ORG.AU] BG Group [BG.UK] stated it would not extend its takeover bid for Origin Energy nor raise the offer price || Oxford Biomedical [OXB.UK] Announced promising interim results from the Phase I/II trial of its novel gene therapy, ProSavin, for the treatment of Parkinson's disease. || Conergy [CGY.GE] solds its Wind unit to Warburg Pincus, noting Sale would result in a one time gain of approximately €35M from discontinued operations. || Siemens [SIE.GE] awarded contract to supply 500 wind turbines for E.On. Turbines to be installed in 2010-2011 will have an output of 1,150 MW. || Bayer [BAY.GE] Session strength attributed to chatter of a possible takeover bid with Pfizer mentioned as a possible suitor.

In speakers : EU's Almunia reiterated that signs of second round effects of inflation are surfacing, but added that perhaps inflation peaked at 3.8% in August. He Added that the recent inflation spike has lowered GDP outlook. Almunia noted that calls for wage-inflation linked deals to end. Almunia noted that ECB was doing a good job despite difficult conditions, but saw little signs of improvement in financial market turmoil.

IMF's Lipsky stated in a German speech that the Global economic slowdown would likely deepen in H2 of the year, which could help to contain inflation. He noted that the situation is the most difficult in years. Given the current environment, the FED, ECB and BOJ can afford to hold interest rates steady. Interms of growth, consumption in the US faced strong headwinds and strong but slowing economic momentum in the emerging market economies.

India Chief Gov Statistician stated that it saw double digit inflation by the end of 2008 but added that it expected inflation to decline during 2009.

Spanish Finance Minister commented that the Spanish economy could worsen further in coming quarters and the risk of recession remains. However he saw potential that the economy could bottom out in 2009 and back head back towards its potential growth in 2010. He noted that inflation continues to remain at high levels but would likely decline in 2009

(TH) Thailand court rules PM Samak violated the constitution and must resign

Energy: Saudi Arabia Oil Min Naimi noted that his country has been working hard since June to raise its production output to help bring prices to current levels. Saudi reiterated that the market remains adequately well balanced. OPEC President Khelil stated that there was no need for production cuts at this time and noted that prices would continue to decline even if OPEC cut supply. The Iranian OPEC Gov says some OPEC Members see the need for quota adherence. A Libya says general mood in OPEC focuses towards enforcing compliance, not a cut in output ceiling. Libya stated that the world could cope with oil at $100 per barrel. The National Hurricane Center noted that Hurricane Ike was weakening and currently a category 1 storm. Ike was Expected to be in the South-Eastern Gulf of Mexico on Wednesday.

In fixed-income: (BE) Belgium Debt Chief stated that the remaining 2008 financial needs seen around €3.4B || German set a 4% coupon on new 2-year issue to be sold on Wed and sought ; seeks bids on €8.0B || (UK) Jul Mortgage lending dropped 54% y/y according to the Commission Mortgage Lenders || (NE) the Dutch sold €2.1B in 4% 2018 bonds; with an avg yield 4.313%; (UK) BoE stated that UK Mortgage interest rates fell during the month of August. || ECB alloted €176.B in 7-Day Main Refi Operations v €156.5B benchmark; marginal rate at 4.39%

In currencies, the USD saw its earlier gains achieved in Asia erode throughout the European morning. Chatter of Asian central banks returning to divest some USD holdings and European M&A rumors prompted the greenback to encounter a bit of profit-taking. Firmer equity market helped the carry-related pairs move off their Asian session lows.
NOTES

European equities continued their post GSE bailout rally aided by lower oil prices following remarks from a Saudi official ahead of the opening September OPEC policy meeting. The OPEC President Khelil also stressed that there was no need for production cuts and that prices will continue to decline even if OPEC cut supply. The economic releases continued to suggest the clouds on the economic horizon as UK production data was below expectations and comments from the IMF, EU's Alumia and the Spanish finance minister Solbes throughout the morning. The financial market turmoil remains on the front burner evident by recent high profile analyst comments which ebbed away at EPS estimates as highlighted by Oppenheimer's Whitney and Ladenburg's Bove. Lastly, potential EUR 60B M&A chatter of Germany's BAY.GE from a potential US acquirer was an excuse for the EUR/USD to move off fresh 11 month lows

Looking ahead for the NY session

8:15 (CA) Aug Housing Starts: K v 191.0Ke
10:00 (US) Jul Wholesale Inventories: % v 0.7%e
10:00 (US) Jul M/M: % v -1.5%ePending Home sales
10:00 (US) Sept IBD/TIPP Economic Optimisim: v 44.0e
10:00 (MX) Aug Consumer Prices M/M: % v 0.56%e; Y/Y: % v 5.55%e; CPI Core M/M: % v 0.38%e

Trade The News Staff
Trade The News, Inc.

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