European Market Update

Daily Forex Fundamentals | Written by Trade The News | Feb 19 09 11:02 GMT |

Poland's recent move to convert EU funds helps to ease Eastern European concerns; Norway GDP better than expectations; Japanese Gov't downgrades its economic assessment (again) ECONOMIC DATA (JP) BOJ leaves its target interest rate at 0.10%, as expected; Plans to start purchasing up to ¥1T in corporate bonds outright as early as March (RU) Russian Jan Retail Sales M/M: -27.0% v 16.7% prior; Y/Y: 2.4% v 0.8%e (RU) Russia Jan Unemployment rate: 8.1% v 8.2%e Russian Gold & Forex Reserves w/e Feb 13th: $386.6B v $383.5B prior (SZ) Swiss Jan Trade Balance: CHF2.03B v CHF 0.0B prior. Exports: 6.7% v -13.3% prior; Imports: 0.8% v -5.0% prior (DE) Danish Feb Consumer Confidence Indicator: -11.3 v -10.5e (NE) Dutch Jan Unemployment Rate: 3.9% v 4.0%e (NE) Dutch Feb Consumer Confidence Indicator: -30 v -30e (SW) Swedish Jan CPI Level: 297.88 v 297.34e (SW) Swedish Jan CPI Headline Rate M/M: -0.4% v-0.7%e; Y/Y: 1.3% v1.0%e (SW) Swedish Jan Underlying Inflation M/M: -0.5% v -0.6%e; Y/Y: 1.7% v 1.6%e (SW) Swedish Jan Unemployment Rate: 7.3% v 7.4%e (IT) Italian Dec Total Trade Balance: -€0.4B v -€1.01Be; Trade Balance EU: -€345M v €111M prior (NO) Norwegian Q4 GDP Q/Q: +1.3% v -0.3%e; Mainland GDP Q/Q: -0.2% v -0.6%e (UK) Jan Public Finances (PSNCR): -£-25.1B v-£7.7Be; Net Borrowing: -£-3.3B v -£7.0Be (UK) Jan Prelim M4 Money Supply M/M: 2.5% v 1.2%e; Y/Y: 17.5% v 15.7%e (SZ) Swiss Feb ZEW Survey (Expectations): -57.7 v -66.7 prior SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM Equities: BNP Paribas [BNP.FR] Reported Q4 Net loss of €1.37B v loss €838M expected. The firm cuts its dividend to €1/shr from €3.35/shr in 2007. Its 2008 Tier 1 ratio came in at 7.8% compared to 7.6% y/y. It forecasted its Tier 1 ratio to rise to 8.4% after receipt of capital injection from French state. (v 7.6% y/y) || Nestle [NESN.SZ] Reported FY08 Net profit of CHF18B below the CHF20.2B consensus. It revenues were CHF109.9B slightly below the CHF110.6B estimates. It saw 2009 Organic Growth at least approaching 5% and improvement In EBIT margin at constant currencies. It planned to invest around CHF4B in repurchasing shares|| || Continental [CON.GE] Reported Q4 EBIT €267.7M versus €261.0M consensus. Revenues were €5.09Be below the €5.4B forecasts. The firm noted it would not pay dividend. It Expected markets to decline in a range of 10%-25% in 2009 and has initiated further cost cutting and expects substantial restructuring. Talks continue with Schaffler and noted it was expected to meet loan obligations || Reed Elsevier [REL.UK] Reported Preliminary 2008 revenues of £5.33B compared to consensus £5.17B. It noted that its term debt maturities well spaced and that adjusted earnings growth at constant currencies expected to be positive. It did note a challenging economic environment with its Business-To-Business markets more impacted || || Tecnip [TEC.FR] Reported Q4 Net profit of €134M better than the €99.4M estimates. Revenues were €1.91B above consensus of €1.79B. The firm noted that it had seen significant delays in non-conventional oil projects coupled with significant delays in US refining and petrochemical projects || BAE Systems [BA.UK] Reported FY08 Net profit of £1.75B above estimates of £1.32B. Its revenues were £18.5B also above expectations of £17.9B. It noted that weakness in Sterling FX rates continue benefit the company. Current order book stood at £46.5B compared to year-ago levels of £38.6B and saw further growth in 2009 with strong order book persisting into 2009 || Swiss Re [RUKN.SZ] Reported FY08 net loss CHF864M better than the net loss CHF1.02B expected. It cuts its dividend to CHF0.10/share. Its FY08 premiums earned CHF25.5B compared to CHF31.6B y/y. it noted that demand for reinsurance products has risen in market || Deutsche post bank [DPB.GE] Reported FY08 Net loss €821M slightly better than the loss €845M expected. Net Interest Rev €2.50B above the €2.33B forecast. It reported Q4 Trading loss €406M compared to a profit €24M y/y, Net interest income €738M v €602M y/y || Schneider Electric [SU.FR] Reported FY08 Net profit €1.68B slightly below €1.71B estimates with EBITA at €2.75B below the €3.16B forecasts. Its revenues came in at €18.31B compared to consensus of €18.28B. It proposed raising dividend 5% to €3.45/share. Guidance for the near term was difficult as visibility remained low. The company reaffirmed FY09 EBITA margin view of at least 12% || Man AG [MAN.GE] Reported FY08 Net profit of €1.25B in line with €1.28B estimates. Its operating profit of €1.73B in line with forecasts of €1.72B. Annual revenue was €14.90B versus €14.85B estimates. It saw big decline in 2009 commercial vehicle revenues and return noting that the 2009 Outlook was subject to major uncertainties || Impala Platinum [IMP.SA] Reported H1 net ZAR5.3B v ZAR4.7B y/y, Sales ZAR16.24B vs. ZAR16.32B y/y - H1 gross platinum production 878K oz (-14.8% y/y), gross refined PGM production -13% q/q- Does not expect any major recovery in automotive demand, expects the market to register a small surplus for 2009 Speakers: BoJ's Shirakawa commented that economic conditions to remain severe this quarter. Ther was no dissent at today's BOJ decision to leave interest rates unchanged at 0.10% and that ZERO rates were not discussed. He commented that lowering overnight rates does not always translate to lower long-term rates. The BOJ expects CPI to fall in spring as demand weakens. The BOJ's Corporate bond purchase program could improve market functionality and would continue to take extraordinary steps as needed. The recent -12.7% Q4 GDP reading could be revised upwards.|| Japan's government cut its economic assessment for the fifth straight month. It noted that the Japanese economy was 'Worsening Rapidly' and in a 'Severe Situation'. The Gov't also downgraded its views on consumption, exports and the global economy || German Chambers of Commerce (DIHK) revised lower its German 2009 GDP to -3.0% from its November forecast of -0.5% growth. It saw 2009 German exports contracting by 9.5% y/y, and imports down 5.0% y/y. it did note that the EUR/USD exchange rate was developing more positively for Euro-Zone exporters || Thai Central Bank stated that it could lower its 2009 GDP outlook from current 0% to2% level. It expected the Bah currency to weaken further in 2009 due to USD strength || German Chemical Association VCI to cut 2009 production outlook to -3.5% from -1.0% prior forecast . It saw Q4 Production declined by more than 10% q/q, which was the fastest decline in over 30 years. Current capacity utilization at 75% compared to 82-86% in past years. Lastly it forecasted industry wide job cuts in 2009 || IMF's Strauss-Kahn reiterated that the outlook for global economy was 'gloomier' than recent forecasts || In Currencies: The USD was maintaining a softer tone in the session as dealers note the market was extremely bearish the Euro due to Eastern European factors. The move by Poland yesterday to convert EU funds was essentially intervention but not from its reserves. The EUR/USD was moving towards the 1.27 area on position squaring. Dealer chatter that a large macro funds closed short Hungarian Forint trades and Goldman Sachs offseting its CE4 basket trade. Overall, the pressures in Eastern Europe in particular, and the associated vulnerabilities of Western European banks, viewed to limit EUR/USD's upside at the 1.2730 area|| The catalyst for the firmer GBP sentiment in the early part of the European session attributed to a “veiled attack from ECB's Bini-Smaghi in which EU countries should not allow their currencies to slide in order to gain an economic advantage|| JPY mixed as dealers note the recent currency weakness corresponding to the Japan net foreign bond investment up ¥1435Bin week ended Feb 14. Japan's government cut its economic assessment for the fifth straight month || CHF was softer as some concerns over the Swiss bank secrecy reputation was again tarnished. WSJ reported that UBS would name about 250 account holders as a result of $780M settlement with IRS || Fixed income: A combination of risk appetite and supply has seen fixed income exhibit a softer tone in Europe this morning, with short end underperformance leading to flatter yield curves in both the Eurozone and UK.|| Spain sold €3.3B in 7 and 20y Bono's with reasonable results in light of the recent pressure on Euro-zone perhiperal debt. France sold €7.4B in 2,4 and 5y BTAN's and the UK sold £3.25B in 3y Gilts with strong results, the latter pushing Gilt futures towards their best levels of the morning. In Energy: Reportedly most OPEC members are against productions cuts at coming March meeting but could decide on further 1.6M bpd cut in Q2 of 2009 || South Korea's Knowledge Minister: Expects Korea's refiners to export $18.6B over FY09 v $36.8B y/y || Petroleum Geo-Services [PGS.NO] Reported Q4 Op loss $27M v loss $15M consensus. Revenues were $462M versus $505M estimate. it reaffirmed FY09 EBITDA seen at $800-925M compared to $801.9Me || NOTES BOJ left its target interest rate at 0.10%, as expected and planned to start purchasing up to ¥1T in corporate bonds outright as early as March Demand for USD and gold has abated in the session as some pressures recently exhibited in the Eastern European block has eased a bit. There is speculation that the EU will devise a plan to assist Eastern European countries to stave off the fallout from the global economic crisis. The better Norwegian GDP data and increase in Russian reserves also provided a rational for position unwinding. China Central Bank talked down possibility of further rate cuts. Looking Ahead: 8:00 (PD) Polish Jan Producer Prices M?M: 1.0% expected v -0.5% prior; Y?Y: 2.3% expected v 2.6% prior 8:30 (CA) Canadian Leading Indicators M/M: -0.7% expected v -0.6% prior 8:30 (US) Producer Price Index M/M: 0.3% expected v -1.9% prior; Y/Y: -2.4% expected v -0.9% prior. PPI Ex- Food & Energy M/M: 0.1% expected v 0.2% prior; Y?Y: 3.8% expected v 4.3% prior 8:30 (US) Initial Jobless Claims w/e Feb 14th: 620k expected v 623k prior; Continuing Claims: 4.83M v 4.81M prior 10:00 (US) Jan Leading Indicators: 0.0% expected v 0.3% prior 10 :00 (SU) Feb Philadelphia Fed: -25.0 expected v -24.3 prior (RU) Russian Gold & Forex Reserves w/e Feb 13: No expectations v $383.5B prior (GR) Greek Dec Current Account: No expectations v -€3.46B prior Trade The News Staff Trade The News, Inc. Legal disclaimer and risk disclosure All information provided by Trade The News (a product of Trade The News, Inc. "referred to as TTN hereafter") is for informational purposes only. 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