Friday, August 6, 2010

UK Production data comes in below expectations


Forex Special

European Market Update: UK Production data comes in below expectations; Alls quiet ahead of US payroll report

Economic Data

- (SZ) Swiss July Unemployment Rate: 3.6% v 3.6%e; Unemployment Rate Seasonally Adj: 3.8% v 3.9%e
- (FI) Finland GDP Indicator: 4.2% v 2.9% prior
- (FR) France Jun Trade Balance: -€3.8B v -€4.4B; Central Govt. Balance: -€61.7B v -€67.9B prior
- (RU) Russia July Official Reserve Assets: $475.3B v $475.3B prior
- (HU) Hungary Jun Preliminary Trade Balance: €566.9M v €440Me
- (CZ) Czech Jun Trade Balance (CZK): 10.4B v 18.5B
- (CZ) Czech Jun Industrial Output Y/Y: 9.7% v 10.3%e; Construction Output Y/Y: -4.7% v 0.5% prior
- (CZ) Czech Jun Retail Sales Y/Y: 6.6% v 1.4%e
- (SW) Sweden July Budget Balance (SEK) +12.5B v -23.8B prior
- (NV) Netherlands Jun Industrial Production M/M: -1.2% v -1.0% prior; Y/Y: 7.0% v 7.2% prior; Industrial Sales Y/Y: 18.8% v 15.8% prior
- (AS) Austria July Wholesale Price Index M/M: -0.5% v 0.0% prior; Y/Y: 5.0% v 4.0% prior
- (SP) Bank of Spain Q2 Preliminary GDP Q/Q: +0.2% v +0.1% prior; Y/Y: -0.2% v -1.4% prior
- (IT) Italy Jun Industrial Production M/M: 0.6% v 0.7%e; Y/Y: 8.1% v 9.7%e; Industrial Production WDA Y/Y: 8.2% v 8.5%e
- (NO) Norway Jun Industrial Production M/M: -1.7% v 0.2% prior; Y/Y: -4.4% v 0.8% prior
- (NO) Norway Jun Industrial Production Manufacturing M/M: 3.3% v 0.6%e; Y/Y: 7.2% v 2.2% prior
- (UK) July PPI Input M/M: -1.0% v -0.5%e; Y/Y: 10.8% v 11.4%e
- (UK) July PPI Output M/M: 0.1% v 0.0%e; Y/Y: 5.0% v 4.9%e
- (UK) July PPI Output Core M/M: 0.2% v 0.1%e; Y/Y: 4.7% v 4.5%e
- (UK) Jun Industrial Production M/M: -0.5% v 0.1%e; Y/Y: 1.3% v 1.9%e
- (UK) Jun Manufacturing Production M/M: 0.3% v 0.4%e; Y/Y: 4.1% v 4.1%e
- (GR) Greece July Consumer Price Index Y/Y: 5.5% v 5.5%e; CPI - EU Harmonized Y/Y: 5.5% v 5.5%e
- (IT) Italy Q2 Preliminary GDP Q/Q: 0.4% v 0.4%e; Y/Y: 1.1% v 1.2%e
- (IC) Iceland July Preliminary Trade Balance (ISK): 4.5B v 8.7B prior
- (GE) Germany Jun Industrial Production M/M: -0.6% v 0.5%e; Y/Y: 10.9% v 11.6%e
Fixed Income:
(IN) India to sell total INR130B in three bond tranches; as expected
- Sold INR50B in 7.46% 2017 bond; avg yield 7.9302% v 7.94e
- Sold INR50B in 8.13% 2022 bond; avg yield 8.1268% v 8.17%e
- Sold INR30B in 8.32% 2032 bond; avg yield 8.4102% v 8.37%e

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM 

Notes/Observations
- Wheat extended a rally to the highest price in almost two years on concern that other nations may follow Russia's export ban
- RBS reports a profit for the first time in three years
- Employment component of US ISM data adds hops for a better Non-Farm payroll surprise
- Equities
- As of 5:30am ET Euro Stoxx 50 Index +0.1%% at 2,823; DAX Index +0.1% at 6,339; CAC-40 Index +0.2% at 3,770 and FTSE 100 Index +0.3% at 5,380
RBS [RBS.UK] opened up 3.56% and lifted FTSE after bank swung to a net profit in three years in its first half and second quarter. Analysts were expecting a loss of £47M in first half. Bank noted a slight decrease in provisions in yearly basis as most of its European peers. However the CFO expected subdued trends in investment banking to continue. Also the outlook for impairment losses was not positive as bank expected the impairment trends to decline more slowly. Dexia [DEXB.BE]reported a mixed quarter given that its net income was in reality boosted by a €119M positive impact from deferred taxes. Revenues and pretax earnings failed to surpass analysts' estimates but the net profit was down 12.4% on a yearly basis. The results were further marred by a hike in impairments due to legal charges. However, shares opened up 0.9%.
- Two major European insurers, Old Mutual [OLM.UK] and Allianz [ALV.GE], which is the biggest European insurer, reported today. Both followed the trend of their peers in reporting improving revenues. Allianz reiterated its EBITDA outlook and reported a decrease in its sovereign debt exposure. Shares opened up at 0.8% after results. Old Mutual also reported an increase in operating profit to £735M from £513M on a yearly basis. The ROE was also stronger and the company was positive for its outlook. Old Mutual was the biggest gainer in the FTSE, opening up 4.3% after results.
- French utility name Veolia [VIE.FR] reported in line with estimates, with net profit slightly beating estimates. It reiterated its FY10 outlook and expected to generate positive free cash flow after dividend payment. However, the CEO declined to give a detailed guidance given the forex volatility and the uncertain macro conditions. Shares opened up by 1.3%.
Speakers:
- Former BoJ member Taya commented that the BOJ might ease policy further if USD fell below 80 level (historic low from 1995 period). He added that the MOF was unlikely to intervene unless dollar moved 300 to 400 pips in a day. The BOJ's most likely that option on strong yen currency was to expand amount of fixed rate funding operations
- Philippines Finance Under Secretary Beltran commented that the country might target a 2011 budget deficit around PHP300B (equates to 3.3% of GDP). This would comprise of revenue of PHP1.41T (comprised of PHP940B from Tax Bureau and PHP320B from Customs Bureau) and PHP1.71T in proposed spending
- Bank of Spain commented that it saw a continued recovery in domestic consumption in medium term
- ECB's Bini-Smaghi commented that he did not see deflation in near future
- S&P Withdraws its "AAA" on the Swiss National Bank (SNB) citing that the SNB had no rated debt outstanding and, consequently, because of the lack of market interest in the ratings
- Currencies: A rash of European data failed to inspire much price action ahead of the key US payroll report later today. The GBP did exhibit a bit of weakness following the softer PPI Input and Industrial Production data. Overall the USD was little changed against the major pairs from the opening levels seen in Tokyo today. The CHF weakened just ahead of the NY morning after S&P withdrew its "AAA" on the Swiss National Bank citing that it had no debt outstanding. EUR/CHF spiked up to 1.3845 and USD/CHF tested 1.0510 on the initial headline. Looking ahead dealers were hoping that perhaps the recent employment component on ISM data might translate into a better than expected payroll reading (at least in the private sector). EUR/USD dancing around the 1.32 hadle during the session while GBP/USD saw its early gains evaporate and test 1.5850 mid- morning. The USD/JPY hovering around 86.00 with continued salivation over a potential test of sub-85 to see who or what lurks below.
In the Papers-Geopolitical:
-The Financial Times commented on the impact of rising wheat prices on consumer staples, mentioning that several companies are announcing price hikes on bread goods. The article points to today's 5% decline in Unilever and over 2% drop for General Mills and Nestle
- In the Telegraph, Evans-Pritchard commented on fears about possible 'agflation' following Russia's plan to limit grain exports. According to the chief grain economist at the UN and Agriculture Organization, the recent spike in wheat prices is 'very serious', as it caught most people off guard. London School of Economics Professor Charles Goodhart is concerned that rising food prices may add 0.5% to the UK's inflation rate.
- It was reported that Ukraine implemented more strict quality inspection rules for wheat exports. According to the report, the rules are leading to cancellation of transactions and shipment delays. If such a slide were to occur, property related share prices could decline by about 60% on avg.

Looking Ahead 

- 7:00 (CA) Canada July Net Change in Employment: 12.5Ke v 93.2K prior; Unemployment Rate: 7.9%e v 7.9% prior; Full Time Employment Change: No est v 48.9K prior; Part Time Employment Change: No est v 44.2K prior
- 8:00 (BR) Brazil July IBGE Inflation IPCA M/M: 0.0%e v 0.0% prior; Y/Y: 4.6%e v 4.8% prior
- 8:00 (CL) Chile July CPI M/M: 0.7%e v 0.0% prior; Y/Y: 2.3%e v 1.2% prior; CPI Ex Perishables & Fuel M/M: 0.6%e v 0.3% prior
- 8:30 (US) July Change in Nonfarm Payrolls: -60Ke v -125K prior; Change in Private Payrolls: 90Ke v 83K prior; Change in Manufacturing Payrolls: 10Ke v 9K prior
- 8:30 (US) July Unemployment Rate: 9.6%e v 9.5% prior
- 8:30 (US) July Avg Hourly Earning 0.1%e v -0.1% prior; Avg Weekly Hours: 34.1e v 34.1 prior
- 10:00 (CA) Canada July Ivey Purchasing Managers Index: 55.5e v 58.9prior
- 10:00 (UK) July NIESR GDP Estimate: No est v 0.7% prior
- 15:00 (US) Jun Consumer Credit: -$5.6Be v -$9.1B prior
- (CO) Colombia Central Bank Monetary Policy Minutes

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