EU Market Update: Equities in Italy outperform, amid improving economic data for the country

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EU Market Update: Equities in Italy outperform, amid improving economic data for the country

03.10.2012 12:02 Wednesday
***Economic Data***
- (EU) EURO ZONE SEPT FINAL PMI SERVICES: 46.1 V 46.0E (lowest since July 2009); COMPOSITE: 46.1 V 45.9E (lowest since May 2009)
- (DE) GERMANY SEPT FINAL PMI SERVICES: 49.7 V 50.6E
- (FR) FRANCE SEPT FINAL PMI SERVICES: 45.0 V 46.1E
- (IT) ITALY SEPT PMI SERVICES: 44.5 V 44.0E
- (ES) SPAIN SEPT. SERVICES PMI: 40.2 V 44.0 PRIOR (lowest level sinc Nov 2011)
- (EU) EURO ZONE AUG RETAIL SALES M/M: +0.1% V -0.1%E; Y/Y: -1.3% V -1.9%E
- (UK) SEPT PMI SERVICES: 52.2 V 53.0E
- (SE) SWEDEN SEPT PMI SERVICES: 47.3 V 50.7 PRIOR
- (IE) IRELAND SEPT NCB SERVICES PMI: 53.9 V 51.7 PRIOR (highest level since Feb 2011)
- (RU) RUSSIA SEPT SERVICES PMI: 54.5 V 52.6 PRIOR
- (IC) ICELAND CENTRAL BANK (SEDLABANKI) LEAVES 7-DAY LENDING RATE UNCHANGED AT 5.75%
- (UK) Q2 BOE MORTGAGE EQUITY WITHDRAWALS: £9.8B V £12.5B PRIOR
- (RU) RUSSIA Q3 NET PRIVATE CAPITAL OUTFLOW Q/Q: $13.6B V $9.7B PRIOR
- (BR) BRAZIL SEPT FIPE CPI: 0.6% V 0.5%E
- (TR) TURKEY SEPT PRODUCER PRICES (PPI) M/M: 1.0% V 0.3% PRIOR; Y/Y: 4.0% V 4.6% PRIOR
- (TR) TURKEY SEPT CONSUMER PRICES (CPI) M/M: 1.0% V 1.1%E; Y/Y: 9.2% V 9.2%E; CORE CPI Y/Y: 6.7% V 7.2% PRIOR
- (IC) ICELAND SEPT PRELIMINARY TRADE BALANCE (ISK): 5.5B V 12.5B PRIOR
- (EU) ECB allots $1.98B v $1.58B prior in 7-Day USD Liquidity Tender at fixed 0.65%

Fixed Income:
-(IN) India sells INR100B v INR100B indicated in 3-month and 12-month bills
-(PT) Portugal bought €3.78B in bonds to swap; Sells €3.76B in Oct 2015 bonds; Buys Sept 2013 bonds
-(SE) Sweden sells SEK3.5B v SEK3.5B indicated in 3.5% 2022 bonds; Yield 1.467% v 1.5950% prior

*** SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM ***
***Notes/Observations***

- AUD continues to be weighed down by worsening economic fundamentals
- Australia's 10-year bond yield hits lows not seen since late July on RBA cut and weaker than expected trade data
- Spain's PM Rajoy continues to play down bailout speculation, as Moody's continues to assess the country's sovereign rating.
- Peripheral bond markets trade in quiet manner, ahead of Thursday's ECB meeting; CDS widen
- EUR/USD continues to respect the $1.28-1.30 range
-The major European services PMIs miss expectations
-UK Services PMI expands in Sept, raising hopes that the economy grew in Q3
-Italian FTSE MIB outperforms on better than expected services PMI data
- Italian bonds outperform as debt agency officials foreign interest in the country is rising
-Portuguese 1-yr bonds yields move sharply lower, ahead of debt exchange

***Equities***
-Indices: FTSE 100 -0.10% at 5,801, DAX +0.10% at 7,314, CAC-40 -0.20% at 3,407, IBEX-35 flat at 7,868, FTSE MIB +0.60% at 15,588, SMI -0.20% at 6,600, S&P 500 Futures flat at 1,441

- European equity indices are trading mixed following the lower open. The Italian FTSE MIB has outperformed, while French equities have lagged. Banks are mixed, with the underperformance coming in the Spanish banking sector.
- Shares of UK retailer, Tesco [TSCO.UK] have declined by over 0.50%, following the release of the company's H1 results. Also in the retail space, Sainsbury [SBRY.UK] is trading slightly higher after reporting its Q2 sales figures. First Group [FGP.UK] is lower by more than 10%, as the UK government canceled the firm's contract related to the West Coast Main Line. Shares of oil services company Lamprell [LAM.UK] have declined by over 35%, as the company issued another profit warning. EasyJet [EZJ.UK] has moved higher by over 2%, after raising its FY forecast.

- FTSE 100 movers (Centrica +1.8%, Evraz +1.2%; Schroders -2.2%, Tesco -1.4%, Smith & Nephew -1.3%, Weir Group -1.2%, IMI -1.2%)
- CAC-40 movers (Alcatel-Lucent +2.6%, ArcelorMittal +1.3%; Vallourec -1%)
- DAX movers (Deutsche Bank +1.4%, RWE +1.1%, Volkswagen -1%)
- IBEX-35 movers (Acciona +2.1%, Sacyr +1.8%, Obrascon +1.7%, Endesa +1.6%, Red Electrica +1.5%; Grifols -2.2%, Bankia -2%, Banco Popular -1.8%, ACS -1.3%)
- FTSE MIB movers (Ferragamo +2.4%, Telecom Italia +2%, Banca Monte dei Paschi +1.8%, Impreglio +1.5%, Banco Popolare SC +1.6%; Finmeccanica -2%)
- SMI movers (Holcim +1.6%; Julius Baer -1.3%)

Speakers:
-Ireland PM Kenny said Ireland as EU president will drive hard for bank supervisor in Jan 2013.
-Syria Oil Min said Syria is having problems exporting and importing crude oil due to sanctions.
-Cyprus Fin Min Shiarly will submit 2013 budget to parliament on Oct 20th, will include austerity proposed by troika.
-S&P said worsening relations between China and Japan over disputed islands could weigh heavily on Japan companies.
-Japan Fin Min Jojima said ending deflation top goal of govt and that he will raise the strong yen issue at G-7 meeting.
-Spain Econ Min de Guindos commented that the bad bank will sell assets over 15 year time frame and the bad bank will be financed with senior debt.
-Russia Deputy PM Dvorkovich said Russia is very close to reaching agreement on pension reform.
-Italy Fin Min Grilli said he sees recent signs of great financial stability.
-India RBI's Gokarn said the current account deficit still outside comfort zone, and they may revise inflation forecast at new review meeting.
-Thailand Fin Min said Thailand still can reach 5.5-5.7% GDP in 2012.
-Italy Debt Agency (Tesoro) Official commented they have seen the return of foreign investors at Sept bond auctions, and have placed around 80% of planned issuance for 2012.
-Finland PM Katainen reported that a financial transaction tax would work on a Europe wide basis.
-Japan Vice Finance Min Nakao commented that the G-7 will not issue statement next week, expects the meeting to cover Europe, a China slowdown and the Japan's fiscal situation.
-Japan Vice Fin Min Okubo said Japan must overcome deflation.
- Mizuho expects PBoC to cut the RRR ahead of the change in leadership Nov 8th
-France Fin Min Moscovici said he plans to present bank reform law by year end.

Currencies:
-EUR/USD reversed an early fall after Euro Zone reported a revised higher final services PMI of 46.1. The EU also reported stronger retail sales and it was enough to send EUR/USD above $1.2935, resistance seen at next key level of $1.3000. The weaker PMI data from key Germany, France, Italy and Spain continue to point to a deepening recession in the zone, this sparked some chatter there needs to be fresh stimulus (comments are ahead of this week's ECB meeting). This also caused safe haven flows, copper was weaker while gold and silver were positive. USD/CHF tested CHF0.9355, though stayed in a very modest range for the day. AUD/USD fell to $1.01098, though failed to stay there and instead traded steadily around $1.0225 after recording the largest trade deficit since March 2010. The Sterling was mostly unchanged, with a few small 10 pip dips to the downside, $1.6130.

Political/ In the Papers:
-RBS [RBS.UK]: IPO of Direct Line unit is fully covered within price range - financial press
-Apple [AAPL]: LG Display and AU Optronics have started mass production of iPad Mini LCD screens - Taiwan press
-(US) 2011 US births -1% y/y (4th straight decline) - financial press
-Finland PM Katainen said Spain will not require a full bailout - French Press
-Nokia [NOK1V.FI]: Will sell headquarters in Espoo, Finland as part of its drive to sell non-core assets; Expected to raise €200-300M from the sale - Iltasanomat
-Gecina [GFC.FR]: Spanish shareholders, Alteco and MAG Import, have filed for bankruptcy on €1.6B of debt - El Pais
- Nordea [NDA.SE]: Sweden may sell an additional part of its 13.5% stake in Nordea (worth about SEK36B) - Svenska Dagbladet
- Areva [AREVA.FR]: Areva and China's Guangdong Nuclear Power Corporation Holding (CGNPC) have walked away from the UK's 6-gigawatt Horizon project - FT
- RCS [RCS.IT]: Proto Organization has acquired 2.8% stake in RCS through 4 investors - Italian press
- Generali [G.IT]: Executive committee will meet Oct 19th to talk about reorganization - Italian press
- (ES) Spain seeing less taxes from large international Spanish companies whose foreign profits are taxed abroad - financial press
- (IT) Italy Debt Management Office Chief: Italy's public debt is sustainable and the average yields paid on new government paper issued so far this year are lower than they were before the crisis - Italian press
- (RO) Serbian shipping company workers have ended their blockade of the Danube River over wage disputes (block started last week) - Romania press
- (UK) BoE Exec Dir for Fin Stabillity Haldane: Forced bank separations could boost lending- FT
-(BE) Belgium PM di Rupo able to pass pension reforms that will extend last payment year to age 60, to bring in additional €210M for the budget - De Tijd
- (CY) Cyprus Fin Min Shiarly: Expecting a full bailout for Cyprus - comments ahead of IMF meeting
-(EU) China Investment Corp (CIC) Chairman Jin: Eurobonds backed by core eurozone nations would be more attractive to international investors than peripheral eurozone nation debt; It is unrealistic to expect China to invest in bonds issue by heavily indebted eurozone nations until their fundamental problems are resolved.
-(EU) France President Hollande: Hopeful decisions on Greece and Spain can be made within the coming weeks
-(EU) France PM Ayrault: Any exits from the EMU need to be ruled out - comments at National Assembly
-(EU) factors which led to Draghi proposing the OMT bond buying plan included fears that there could be market chaos during the summer. Additionally, Draghi saw stress in the financial indicators that he looks at on a daily basis, including bond yields for Italy and Spain - US financial press
-(EU) All 17 euro zone countries may be forced to commit to fiscal reform through binding contract with Brussels as part of a joint euro zone budget - FT citing EU draft
- (FR) France Fin Min Moscovici: Plans to present bank reform law by year end
-(GR) Greece officials are still hopeful that a deal can be reached with Troika before the end of the week; Sticking points over €1.5B in cuts in 2013 and €2.0B in Rev for 2014 - ekathimerini
-(GR) Greece Fin Min Stournaras: Uncertain whether or not a deal with Troika can be reached before the EU summit; talks are continuing; Note: The EU summit is scheduled for Oct 18-19
- (IT) Italy Debt Agency (Tesoro) Official: Has seen return of foreign investors at Sept bond auctions
- (ES) Central Spain govt agrees to loosen deficit targets for the autonomous regions - El Pais
-(ES) Spain PM Rajoy: Support for fiscal consolidation proposals by the Regions has been unanimous; reiterates aid request is not imminent
-(ES) Moodys affirms to release Spain ratings review at some point this month; still studying many factors ; Moody's notes it is still reviewing banking capital needs along with the budget and size of reforms measures
- (ES) Spain to provide €400M line of credit to Morocco - ABC

***Looking Ahead***
***All times listed for economic events are denominated in Eastern Standard Time (Add 4 hours for GMT equivalent)

- 06:00 (IE) Ireland Sept Live Register Monthly Change: No est v -2.0K prior; Unemployment Rate: no est v 14.7% prior
- 06:00 (CZ) Czech Republic to sell 2018 and 2023 Bonds
- 06:30 (US) Daily Libor fixing
- 07:00 (US) MBA Mortgage Applications w/e Sept 28th: No est v 2.8% prior
- 07:30 (CL) Chile Central Bank Meeting Minutes
- 08:15 (US) Sept ADP Employment Change: 140Ke v 201K prior
- 09:00 (BR) Brazil Sept PMI Services: No est v 48.1 prior
- 10:00 (US) Sept ISM Non-Manufacturing: 53.2e v 53.7 prior
- 10:30 (US) Weekly DOE Crude Oil Inventories
- 11:30 (BR) Brazil Central Bank Posts weekly Currency flows
- 21:00 (US) First U.S. Presidential Debate in Colorado
- (ES) German and Spanish finance ministers to meet in Madrid today as part of "routine visit"

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