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| Email Friday, May 27, 2011 5:45:31 AM TradeTheNews.com European Market Update: Fitch lowers Japan's sovereign outlook to negative; CHF currency continues to benefit from safe-haven flows***Economic Data***
- (FI) Finland May Business Confidence: 8.0 v 7.0 prior; Consumer Confidence: 15.4 v 18.0e
- (UK) May Nationwide House Prices M/M: 0.3% v 0.1%e; Y/Y: -1.5% v -1.7%e
- (GE) Germany May CPI Saxony M/M: -0.1% v +0.4% prior; Y/Y: 2.3% v 2.5% prior
- (DE) Denmark Apr Unemployment Rate: 3.8% v 4.0%e; Unemployment Rate Gross Rate: 5.8% v 5.9%e
- (SP) Spain Apr Adjusted Real Retail Sales Y/Y: -2.0% v -4.7%e; Real Retail Sales Y/Y: -2.0% v -7.9% prior
- (TH) Thailand Apr Total Capacity Utilization: 54.6% v 66.1% prior; Manufacturing Production Index: 180.8 v 187.0 prior
- (SW) Sweden Q1 GDP Q/Q: 0.8% v 0.9%e; Y/Y: 6.4% v 6.4%e
- (EU) Euro Zone Apr M3 Money Supply Y/Y: 2.0% v 2.4%e; M3 Three-Month Avg: 2.1% v 2.3%e
- (GE) Germany May CPI Brandenburg M/M: -0.1% v 0.2% prior; Y/Y: 1.9% v 2.2% prior
- (GE) Germany May CPI Hesse M/M: -0.2% v +0.3% prior; Y/Y: 2.0% v 2.1% prior
- (IT) Italy Apr Hourly Wages M/M: 0.1% v 0.2%e; Y/Y: 1.8% v 2.0%e
- (NO) Norway Q1 Manufacturing Wage Index Q/Q: 0.2% v 1.1% prior
- (TT) Taiwan Apr Leading Index M/M: 0.3% v 0.3% prior; Coincident Index: 0.6% v 0.7% prior
- (EU) Euro Zone May Business Climate: 0.99 v 1.20e; Consumer Confidence: -9.8 v -9.7e; Economic Confidence: 105.5 v 105.7e; Industrial Confidence: 3.9 v 5.3e; Services Confidence: 9.2 v 10.0e
- (PO) Portugal May Consumer Confidence: -50.3v -49.5 prior; Economic Climate: -2.0 v -1.8 prior
- (SZ) Swiss May KOF Leading Indicator: 2.30 v 2.22e
- (GE) Germany May CPI Bavaria M/M: -0.2% v +0.3% prior; Y/Y: 2.1% v 2.5% prior
- (IR) Ireland Apr Retail Sales Volume M/M": -0.8% v 0.0% prior; Y/Y: -3.9% v -1.9% priorFixed Income
- (SA) South Africa sold total ZAR605M in 2022 and 2033 inflation-linked bonds
- (IT) Italy Debt Agency sold €1.5B vs. €1.2B indicated in 2.1% Inflation-Linked 2021 BTPi; Avg yield 2.51% v 2.69% prior; Bid-to-cover: 1.51x*** SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM ***
***Notes/Observations:
- Moody's downgrades New Zealand's major banks
- Fitch lowers Japan's sovereign outlook to negative
- CHF currency continues to benefit from safe-haven flowsEquities:
FTSE 100 +0.80% at 5928, DAX +0.30% at 7137, CAC 40 +0.80% at 3947, IBEX 35 +0.40% at 10238, FTSE MIB +0.60% at 20796, SMI +0.40% at 6491- European shares advanced and traded in positive territory throughout the session on continuing strong commodities prices. Banks traded higher following an FT report which noted that EU banks may be allowed to include more of their insurance subsidiary-held capital under the upcoming BASEL III requirements. Furthermore, Citi raised European banks to Overweight. British Confidence according to GFK jumped the most in 18 years showing that consumers had become less pessimistic about their finances and economy.
Speakers:
- Fitch revised Japan's sovereign outlook to negative from stable. Fitch looked to important fiscal policy statements expected in coming months including the revised Medium-Term Fiscal Framework, proposals on tax and social security reform, and the FY12 budget. The emergence of a stronger and more credible consolidation plan backed by credible political commitment to its implementation could see the ratings revert to Stable Outlook.
- Japan Dep Chief cabinet sec (following Fitch comments) stated that it would continue to work on social security and fiscal reform
- G8 formal communiqunoted that the global economic recovery was becoming more self sustained, however it did note that commodity prices were a concern. G8 noted that Europe, US and Japan should all aim for sustainable public finances
- Diplomatic source stated that the G8 members were to have noted the EUR's strength but that was the only discussion regarding FX. This contrasted yesterday's report that the US was worried by euro weakness against the USD referring to fluctuations caused by the euro zone debt crisis. The US was said to have "asked for a serious debate about the euro's weakness against the dollar that could create problems for U.S. exports"
- ECB's Kranjec commented that there could be no restructuring until deficits and budgets can be balanced. He noted that a Greek debt restructuring was not being considered
- Japan's Fin Min Noda commented that the increase in debt-servicing costs could increase in tax revenue
- South Africa's Central Bank Minele stated that the country's household consumption might be leveling off
- Bureau for Economic Research (BER) trims South Africa's 2011 and 2012 GDP growth outlook while raising its2011 CPI view to 5.0% from 4.7%. The BER forecasted that the central bank (SARB) would begin raising interest rates in Sept compared to their prior view of a Nov hike It also saw the repo rate rising by 200bps in 2012.
- Philippines Central Bank Gov Tetangco stated that the BSP would take additional policy action on inflation as required and that its policy action was deemed to meet 2011 inflation target.
- Chinese researcher Chen Jie suggested that China use its forex reserves to invest in foreign agricultural assets
- Czech Central Bank Gov Singer commented that the Euro was not a practical issue at the moment as Euro-Zone turmoil made Euro adoption unattractive. He added that Euro adoption issue was not timely for the next 2-3 years
- India Chief Economic Adviser commented that its FY12 economic growth forecast to be revised lowerCurrencies/Fixed income:
- The USD entered the European session on a soft note with dealers citing the prospects of an extended period of ultra-easy Fed policy being the primary catalyst after yesterday's disappointing US data. The US yields have been under pressure since Thursday. The EUR/USD was aided by short-covering rally as European officials 'clarified' Juncker's comment that IMF might not release the next tranche to Greece in June into expectations that Greece would receive its next loan payment. The EUR/USD tested 1.4278 before consolidation ensued. The Fitch lowering of Japan sovereign outlook had more of an impact on European pairs. The EUR/USD moved below the 1.42 handle as the peripheral spreads reversed its earlier moves and then widened against the German Bund. The 10-year Irish/German Gov't bond spread was at approx 790bps, wider by almost 10bps to a fresh EMU record level.
- The CHF currency was firmer in the aftermath of commentary by the IMF. On Thursday the IMF commented that the SNB's interest rate stance was unsustainable and the central bank should start raising rates 'in the near term'. The Asian session took full advantage of thinning market conditions to elect stops in various CHF-related pairs. EUR/CHF continued to hit fresh all-time lows testing below 1.2165 aided by better KOF data and renewed safe-haven flows on widening peripheral spreads.
- The JPY was mixed in the session after Fitch revised Japan's outlook to negative from stable, citing considerable risk to public finances from the "still unknown" costs from the Fukushima nuclear power plain cleanup. USD/JPY moved back above the 81 handle while EUR/JPY cross moved off its earlier highs.Political/ In the Papers:
***Looking Ahead***
- According to an article in the US financial press, the Bank of England has been ignoring its inflation target. Recent comments by Bank of England member Bean came close to admitting that the central bank has abandoned its inflation target. As a reminder, on May 19th, Bean noted that the MPC had chosen to accept a temporary period of inflation above the current target of 2%.
- The Irish Independent reported US investment bank Goldman Sachs is avoiding Irish sovereign debt. Andrew Wilson of Goldman Sachs' Asset Management unit said bonds of Indonesia and Brazil were more attractive than those of Ireland, Greece and Portugal. The US investment bank made it more difficult for Ireland to re-enter the bond market after the company said it was avoiding Irish debt. Though Irish debt trades in the secondary markets, attempts to engage larger buyers has not worked, with spreads continuing to remain over 10.5%.
- Greek political leaders are to meet Friday at 0930 GMT regarding the President's initiative for new bid to reach a consensus on the pending economic crisis per reports by state media. The meeting, called by Greece's president at the request of Prime Minister Papandreou, will include the heads of the opposition parties.
- (GE) Germany May Preliminary Consumer Price Index M/M: 0.0%e v 0.2% prior; Y/Y: 2.3%e v 2.4% prior
- (GE) Germany May Preliminary CPI EU Harmonized M/M: 0.1%e v 0.3% prior; Y/Y: 2.7%e v 2.7% prior
- (GE) Germany May CPI Baden Wuerttemberg M/M: No est v 0.3% prior; Y/Y: No est v 2.6% prior
- 8:30 (CL) Chile Central Bank Meeting Minutes
- 8:30 (US) Apr Personal Income: 0.4%e v 0.5% prior; Personal Spending: 0.5%e v 0.6% prior
- 8:30 (US) Apr PCE Core M/M: 0.2%e v 0.1% prior; Y/Y: 1.0%e v 0.9% prior; PCE Deflator Y/Y: 2.2%e v 1.8% prior
- 9:55 (US) May Final University of Michigan Confidence: 72.4e v 72.4 prelim
- 10:00 (MX) Mexico Central Bank Interest Rate Decision: Expected to leaves the Overnight Rate unchanged at 4.50%
- 10:00 (US) Apr Pending Home Sales M/M: -1.0%e v 5.1% prior; Y/Y: No est v -11.5% prior
- 15:00 (AR) Argentina Apr Shop Center Sales Y/Y: No est v 18.7% prior 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. Information provided is not meant as investment advice nor is it a recommendation to Buy or Sell securities. Although information is taken from sources deemed reliable, no guarantees or assurances can be made to the accuracy of any information provided. 1. Information can be inaccurate and/or incomplete 2. Information can be mistakenly re-released or be delayed, 3. Information may be incorrect, misread, misinterpreted or misunderstood 4. Human error is a business risk you are willing to assume 5. Technology can crash or be interrupted without notice 6. Trading decisions are the responsibility of traders, not those providing additional information. Trade The News is not liable (financial and/or non-financial) for any losses that may arise from any information provided by TTN. Trading securities involves a high degree of risk, and financial losses can and do occur on a regular basis and are part of the risk of trading and investing. Daily Forex Market News
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