European Market Update

Daily Forex Fundamentals | Written by Trade The News | Apr 30 09 09:59 GMT |

Euro-Zone Unemployment at 2 1/2 year high; Capital rotation continues into stocks from Bonds as 'Green Shoots' speculation rises ECONOMIC DATA (GE) German ILO Unemployment Rate. 7.6% v 7.5%e (SA) South Africa March M3 Money Supply Y/Y: 10.6% v 12.4%e (UK) Nationwide House Prices M/M: -0.4% v -1.2%e; Y/Y: -15.0% v -15.8%e (FR) French Producer Prices M/M: -0.4% v -0.4%e; Y/Y: -5.5% v -5.3%e (SP) Spain Apr CPI EU Harmonized Y/Y: -0.1% v -0.1%e (HU) Hungarian Feb Final Trade Balance: €310.7M v €279.2M prior (SA) South African March PPI M/M: 0.1% v 0.4%e; Y/Y: 5.3% v 5.6%e (SP) Spain Feb Current Account: -€10.2B v -€6.6B prior (RU) Russia Central Bank Gold/FX Reserves W/W: $380.6B v $384.8B prior (DE) Denmark Unemployment Rate: 2.9% v 2.7%e (GE) German April Unemployment Change: 58K v 65Ke; Unemployment Rate: 8.3% v 8.2%e (UK) UK Year-Ahead Apr CPI Expectations 1.8% v 1.8% prior month -YouGov (IT) Italian Feb Large Company Employment Rate: -1.0% v -0.7% prior (NO) Norwegian March Retail Sales M/M: -0.5% v 0.3%e; Y/Y: 1.9% v -0.6%e (NO) Norwegian April Unemployment Rate: 2.8% v 2.9%e (IT) Italian April Prelim CPI M/M: % v 0.2%e; Y/Y: % v 1.1%e; (IT) Italian Apr CPI- EU Harmonized M/M: 0.6% v 0.5%e; Y/Y: 1.1% v 1.1%e (EU) Euro-Zone Apr CPI Estimate Y/Y: 0.6% v 0.7%e (EU) Euro-zone Mar Unemployment Rate: 8.9% v 8.7%e; Highest since Nov 2005 SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM In equities: Earning dominated the European morning and premarket session. With numbers out of large cap firms including Lufthansa [LHA.GE] and Renault [RNO.FR] after the close yesterday and BASF [BAS.GE] Standard Life [SL.UK] British Sky Broadcasting [BSY.UK] Technip [TEC.FR] MAN Ag [MAN.GE] and Erste Bank [EBS.AS] all reporting in the European morning. Strength from the US session bleed into Asia and transferred into Europe. Earnings coming in broadly above reduced consensus estimates added further lightness. Despite a rise in the WHO pandemic alert level and the WSJ noting an imminent bankruptcy filing at Chrysler, confidence appears to be continuing to return to equity markets. On the open, equities gapped up from Wednesdays closing highs with the DAX30 printing it 2009 session highs. Looking at sector performance, materials, led by BASF moved sharply higher along with auto names (following earnings out of Renault and MAN-which were better than peers Volvo and Scania) and financials (following upgrades out of RBS on most UK names). Markets continued their upward momentum until 3:55EST at which time the Germany April unemployment number was leaked (as usual), the figure of 58K was lower than expected but the overall unemployment rate came in higher than expected at 8.3%. By 5:30EST, markets had shaken unemployment figures for both Germany and the Euro-zone pushing off to session highs near the +2% mark across the European bourses. *Reminder: EuroNext and Deutsche Bourse will not hold equity trading tomorrow, May1 due to May Day Holiday. The London Stock Exchange will be open and trading, but will be closed Monday, May 4, due to May Day Bank Holiday. In company specific news: BASF [BAS.GE] Reports Q1 Net €375M v €174.5Me. Rev €12.2B v €12.4Be, to cut at least 2.000 jobs (about 2.1% of workforce) in 2009. In 2009, despite the acquisitions of Ciba Holding AG and Revus Energy ASA, BASF expects a decline in sales compared with 2008 and an even greater decline in income from operations, which will be negatively impacted by integration costs. ||Ericsson [ERICB.SW] Reports Q1 Net SEK1.72B v SEK2.03Be, Rev SEK49.6B v SEK50.94Be, Q1 Gross Margin 36.3% v 35.2% q/q, Q1 Networks sales SEK33.5B v 45.8B q/q. || BG [BG.UK] Reports Q1 Net income £706M v £612Me, Rev £3.1B v £3.08Be, Reaffirms prior outlook remains unchanged. || British Sky Broadcasting [BSY.UK] Reports 9-month Op Profit £589M v £521M y/y, Rev £3.96B v £3.71B y/y, Op Margin 14.9% v 14.1% y/y. || Technip [TEC.FR] Reports Q1 Net €99M v €78Me, Rev €1.57B v €1.57Be, Guides FY Rev €6.1B - €6.4B v €6.2Be , Reports Q1 EBITA €191M v €174.0Me. || Renault [RNO.FR] Reports Q1 R€7.08B v €7.7Be; reiterates global market sales target of 55M units in 2009, Q1 sales down 31% y/y, Q1 new vehicle inventories -35.4%. || Man Ag [MAN.GE] Reports Q1 Net income €181M v €69.7Me, Op profit €100M, Rev €2.56B v €2.45Be. Q1 Total orders €2.3B, -53% y/y, Q1 Commercial €1.4B, -61% y/y. Does not expect economic situation to improve in near term. || Lufthansa [LHA.GE] Reports Q1 net loss -€44M v loss -€176.6Me , R€5.0B v €5.00Be; Affirms outlook . Expects FY revenue to decline and reasonable drop in operating results. || Aker Solutions [AKSO.NO] Reports Q1 Net NOK603M v NOK581.3Me, EBITDA NOK1.1B v NOK1.08Be Rev NOK14.9B v NOK13.86Be; Maintain FY09 outlook, Q1 order intake at NOk10.7B. || Speakers: ECB's Nowotny commented that the global macro economic framework would emerge from financial and economic crisis a changed entity. He reiterated the central bank view that economic growth would return in 2010. Lastly, that high uncertainty over economy calls for 'steady hand' policy. He also commented that there were signs of 'Green Shoots' taking root inside the European economy || BOJ's Gov Shirakawa commented that the central bank's Board fully discussed deflation risk at today's policy meeting. He noted that the BOJ would not rule out any policy steps. He did not believe Japanese deflation risk was high and stated that there was a slim risk of any deflationary spiral. Bond buying was part of BOJ's monetary policy and should not be used to fund government spending. Bond buying for Gov't spending could damage credibility and in turn affect bond yields. He did comment that the global economy might not recover as prior cycles and that lower growth potential had no impact on short term monetary policy. || BoJ cut its economic outlook to -3.1% for 2009 from its January estimate of -2.0% || UK Trade Minister also observed that signs that the global economy was stabilizing || German Fin Ministry commented that the Govt was likely to seek extra budget in 2009 and that its credit needs exceed €50B. Fin Min Steinbrueck commented that would present any supplementary budget request after new tax revenues estimates are released in May. In Currencies: Month end saw the USD and JPY currencies remain on the defensive as rising risk appetite continues. This has translated into stronger European and commodity-related currencies. The week saw a plethora of comments from both government and central bank officials that signs of economic stabilization seem to be taking root. Such comments again echoed in the session by ECB's Nowotny and UK Trade Minister Davies. Basic metals and higher oil prices aiding the CAD and AUD sentiment. EUR/USD probed towards the 1.34 handle after igniting some upside technical momentum on Wednesday. However, however giddy the prospects for potential growth is hampered by rising unemployment. The EUR/USD retracing towards the lower portion of the 1.33 neighbor hood following the Euro-Zone March unemployment rising towards it highest level since Nov 2005 and concerns over a supplementary German budget. Dealers noting that 1.3260 is the short term pivot point support in the pair || Norwegian Central Bank commented that it would not purchase currencies in May for its oil sovereign wealth fund || USD/CNY pair, the USD retraced its 2009 gains against the CNY during the month of April. The pair at 6.8170 level. In Fixed Income: With investors appetite for riskier assets on the rise government bond markets have suffered this morning. Gilt markets absorbed £1.1B in 2022 linker supply but despite a strong auction, covered 2.08 times, UK debt has underperformed its peers. Treasuries have held up the best ahead of the NY Fed's coupon purchases, however the yield on the 10y Note is firmly above the 3.00% level with traders looking at 3.30% as the next level of support. The Long Bond smoked yesterday after the treasury increased its issuance schedule, is also being sold in European hours, with the yield now above 4.05% In Energy: Russian Dep Min Sechin commented that the Ukraine needs to purchase and store at least 19B CM of natural gas to ensure transit pipeline to Europe NOTES World Health Organization (WHO) confirms Phase 5 level of 6 in total; verge of the first influenza pandemic since 1968 GM's bond holders plan to reject company's debt exchange offer and would present an alternative offer on Thursday Traders noting tat $1.0B inflow into Taiwan stocks today, which is the 4th highest daily equity inflow on record. Money coming back to work. German DAX Index briefly went into positive territory YTD Lots of official talk of 'Green Shoots' taking roots in economy; but unemployment continues to rise. Market conditions thinning out ahead of Japan's Golden Week and Europe's May Day holidays Looking Ahead: Big US Corp earnings day. Some of the more notable names prior to the NYSE open include: Astrazeneca [AZN]; Cardnial Health [CAH]; Comcast [CMCSA]; Coviden [COV]; Dominion [D]; Dow Chemical [DOW]; General Motors [GM]; Kellogg [K]; KBR [KBR]; Motorola [MOT]; Mylan Labs [MYL]; NRG Energy [NRG]; Proter & Gamble [PG]; Shire [SHPGY]; Safeway [SWY]; Travelers [TRV] Viacom [VIA.B]; Exxon Mobil [XOM] 8:00 (SA) South African March Trade Balance: -ZAR3.6B expected v ZAR0.6B prior 8:30 (CA) Canadian Feb GDP M/M: -0.1% expected v -0.7% prior 8:30 (CA) Canadian March Industrial Product Price M/M: 0.5% expected v 0.4% prior 8:30 (CA) Industrial Product Price M/M: 0.5% expected v 0.4% prior, Raw Material Price Index M/M: 2.0% expected v 1.7% prior 8:30 (US) March Personal Income (last -0.2%), March Personal Spending (last 0.2%), 8:30 (US) March PCE Deflator y/y (last 1.0%), March PCE Core (last m/m 0.2%, y/y 1.8%), 8:30 (US) Initial Jobless Claims (last 640K), Continuing Claims (last 6.137M) 9:45 (US) April Chicago Purchasing Manager Index (last 31.4) 10:00 (US) April NAPM-Milwaukee (last 30) 10:30 (US) Natural Gas Inventories 11:00 (US) NY Fed to repurchase 08/15/2019 - 02/15/2026 T-Notes Trade The News Staff Trade The News, Inc. 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