From RanSquawk [17]
- Standard & Poor’s downgrade 16 Spanish banks including Banco Santander and BBVA.
- Eurozone CPI Estimate (Apr) M/M 2.6% vs. Exp. 2.5% (Prev. 2.7%).
- Spanish GDP (Constant SA) (Q1 P) Q/Q -0.3% vs. Exp. -0.4% (Prev. -0.3%).
- Volumes relatively light ahead of a European market holiday tomorrow.
Market Re-Cap
All major European bourses are trading lower with the exception of the DAX, which holds just above the open by a modest margin. Adidas ranks among the top performers in the German index, following the report of a strong set of sales figures, contributing to the positive trade.
Spanish concerns continue to build up as Standard & Poor’s took ratings action on 16 of the country’s banks, downgrading the notable names of Banco Santander and BBVA. Although the move was not a surprise as this is the usual procedure following a sovereign downgrade, both Santander and BBVA, along with the IBEX are in negative territory.
The Bund is seen higher amid a generally risk-off theme to markets this morning. Volumes have been relatively light, however a slight pick-up has been observed in recent trade, grinding the security upwards in the last hour or so.
EUR/USD continues to experience weakness and now trades close to a touted option expiry of 1.3200, as traders seek the safety of the USD across a number of currency crosses.
Looking ahead in the session, participants look towards personal spending data from the US as well as Canadian GDP figures as the next risk events of the day. Both sets of data are due at 1330BST/0730CDT.
Asian Headlines
Ex-PBOC Adviser Li said that China’s inflation will likely ease to 2-3% between May and August, and the full-year 2012 inflation will likely fall to around 3.1% given a slowdown in the domestic economy. (Sources)
Note: Chinese & Japanese market holiday
US Headlines
The projected cost to the US government to pay social security retirement and disability benefits over the next 10 years has nearly doubled from 2011 projections, which is credit negative for the government, according to Moody’s. (Sources)
BarCap US Treasury month end extension seen at +0.01yrs.
EU and UK Headlines
Eurozone inflation continues to trouble as April CPI came in slightly above expectations; however the rate has slowed slightly back towards the ECB’s target of 2.0%.
Euro-Zone CPI Estimate (Apr) Y/Y 2.6% vs. Exp. 2.5% (Prev. 2.7%) (Sources)
Spanish GDP (Constant SA) (Q1 P) Q/Q -0.3% vs. Exp. -0.4% (Prev. -0.3%)
Spanish GDP (Constant SA) (Q1 P) Y/Y -0.4% vs. Exp. -0.6% (Prev. 0.3%) (Sources)
Chancellor Merkel announced that a growth agenda will be on the menu of the EU summit in June, and also advocated the strengthening of the resources of the EIB and a more flexible infrastructure fund. (Les Echoes)
On the fiscal pact, European officials including German finance minister Schaeuble, EU’s Barnier and ECB’s Asmussen have said the EU fiscal pact will come into force, calling for a common plan in the next few weeks. The officials have said a complete renegotiation of the pact is a myth and it must be kept in its current form. (Die Welt)
Spain’s government and its banks are discussing a new scheme to segregate problematic property loans into one or more asset management companies to relieve the burden on struggling lenders, according to officials and bankers. (FT-More [18])
Moody’s have said Spain’s new fiscal measures that are expected to create ‘substantial’ savings in healthcare and education are credit-positive for the sovereign and sub-sovereigns as they would help regions reduce their deficits this year and demonstration commitment to credibility. (Sources)
Dublin’s campaign to ratify the Eurozone fiscal pact is failing to build momentum against a backdrop of weakening economic growth and a wider European debate about austerity, with almost one in five voters still undecided. (FT-More [19]) An opinion poll has shown 47% of likely voters will back the treaty, 35% will say no and 18% remain undecided.
UK Hometrack Housing Survey (Apr) M/M 0.1% (Prev. 0.2%)
UK Hometrack Housing Survey (Apr) Y/Y -0.9% (Prev. -1.0%) (Sources)
UK house prices rose in April for a second month in a row; however the gains may not be sustained as demand fails to keep up with supply. Demand may be undermined by Britain’s return to recession and a continued squeeze on consumers from higher energy prices, according to Hometrack.
The Ernst & Young ITEM Club said lending to businesses would not return to pre-crisis levels until 2016, exacerbating the funding squeeze faced by small and medium-sized companies. It also forecast a 7.6% fall in consumer credit this year, which would be the sharpest on record. (Telegraph)
BarCap Pan Euro Agg month end extension seen at +0.11yrs.
BarCap Sterling Aggregate Index month end extension seen at +0.06yrs.
EQUITIES
European equities are trading lower across the board with the exception of the DAX index, decoupling from the other core European bourses after some strong performance from individual stocks. Credit ratings action against Spanish banks by Standard & Poor’s has dampened sentiment in the periphery, however the move was somewhat expected following last week’s sovereign downgrade of Spain.
Adidas are one of the stronger performers of the day, assisting the German index’s moves into positive territory following the reports of a strong set of sales figures for Q1. Adidas beat analyst’s expectations with a sales figure of EUR 3.8bln against expectations of EUR 3.59bln. The company has also forecast a growth rate of 10% for their sales across 2012. As such, company shares trade higher by around 4.8%.
UK listed Man Group are seen markedly lower as North America comes to market. The group had been a speculated takeover target according to various reports, but with nothing yet materialising, investor appetite has waned. As such, Man Group shares currently trade lower by 5%.
Top performing sectors in the BE500: Health Care (+0.60%), Telecoms (-0.02%), Consumer Services (-0.16%)
Worst performing sectors in the BE500: Industrials (-0.70%), Utilities (-0.66%), Basic Materials (-0.56%)
FX
GBP/USD hit a fresh 8-month high early in the session; tipping over the 1.6300 level after an option barrier at that mark was targeted. The pair has since sold off and trades roughly flat on the session. GBP strength combined with EUR weakness has also allowed EUR/GBP to fall to multi-month lows below 0.8125.
EUR/USD was able to make some upwards trade, hitting session highs of 1.3268 early in the session, with USD selling aiding the move. The gains have been capped by selling in the pair amid unconfirmed market talk of a US name offering, and is now retreating back towards 1.3200, a touted option expiry for the 10am NY cut.
USD/JPY continues to move against the BoJ’s wishes despite their monetary easing actions last Friday and trades in modest negative territory. It should be noted that a market holiday in Japan and China left the pair relatively quiet overnight.
COMMODITIES
WTI and Brent crude futures are trading in a tight range, currently in modest negative territory ahead of the NYMEX pit open, moving in parallel with the risk-off theme in European markets so far in the session.
Oil & Gas News:
• Speculator positioning in US crude oil futures and options was mixed in the week ending April 24th, with traders cutting their positions on the NYMEX, but raising them in London.
• Iran have discovered one of the biggest natural gas fields in the Middle East, comparable to reserves of the South Pars field, according to an industry official on the state-run news agency. In related news, Iran plan to increase their storage capacity for natural gas to 14bln cubic meters by the end of 2015, according to another oil industry official.
• South Korea have cut their March imports of LNG from Qatar by 13%, as prices climbed 40% from one year ago, according in trade data.
• Nigeria’s NNPC have extended the deadline for 2012/2013 crude oil term contract applications to May 11th.
Geopolitical News:
• Iran hopes the May 23rd talks with world powers in Baghdad over its disputed nuclear program will result in success, according to the Iranian foreign minister.
• The US expects North Korea may conduct a third nuclear test as early as this week, according to an unidentified Washington official familiar with the issue.