German Bundesbank cuts Germany's growth forecast for 2013
Majority of ECB governing council said to support rate cut according to sources and ECB's Makuch says rate cut possible in 2013
A 7.3 earthquake struck off the east coast of Japan causing initial strength in JPY and tsunami warnings were issued
RANsquawk European Morning Briefing Video: http://youtu.be/FRCpc_bhhb0
Equities in Europe traded lower throughout the session today, as concerns over growth prospects in the bloc remained at the forefront after the Bundesbank cut its German 2013 GDP forecast to 0.4% from 1.6%. In addition to that, the central bank noted that risks to economic outlook are on downside and that German economy will likely shrink in Q4. Bleak outlook for the locomotive of the bloc was further reinforced by the release of weaker than expected German IP, which came in much weaker than expected at -2.6% vs. Exp. 0.0%. In tandem with weaker stocks, EUR/USD also trended lower, as markets continued to re-price potential of negative deposit rates, as evidenced by negative EONIA FWD.
Looking elsewhere, upon the news of the Japanese earthquake, the JPY saw initial strength, on the back of expectations of repatriation flows from Japanese Insurers before bouncing off lows after it was reported that there were no irregularities in any of the nearby power plants. Finally, it is worth bearing in mind that Greek 2023 bonds are trading at 40.30, above the max. price set by the PDMA at 40.10, to carry out debt buyback plan, the bond buyback closes at 1700GMT today and this morning Greek finance ministry source said that the country has no plans to extend the deadline for bids beyond today. Going forward, market participants will now await the release of the latest NFP report by the BLS at 1330GMT which will likely be littered with special factors.
A 7.3 magnitude earthquake hit on the east coast of Japan this morning which shook buildings in Japan. Initially, a 1 metre Tsunami warning was issued for north-east Japan although this was later lifted. Upon the announcement of the Japanese quake, risk-off was observed in the FX markets, with the JPY strengthening against the USD in the initial move.
China's Sichuan province is to invest CNY 2trl in urbanisation in 2012, according to Shanghai Securities News reports on China urbanisation plans.
EU & UK Headlines
Germany's Bundesbank today cut German 2013 GDP forecast to 0.4% from 1.6%. The Bundesbank sees German 2014 growth at 1.9% and said risks to Germany's economic outlook are on downside. The Bundesbank also said German economy will shrink in Q4 and stagnate in Q1.
Sources say majority of ECB governing council support a rate cut which followed comments from ECB's Makuch, who said ECB's rate cut possible in 2013. Sources say there is a possibility of a reduction early next year if the economy doesn't pick up. Yesterday ECB president Draghi said that a rate cut had been discussed but did not imply how many officials were in favour of a cut to rates.
Greek banks have proposed to their boards to approve participation in government bond buyback by up to 100% according to banking sources. The management of Greece's four largest banks earlier scheduled board meetings after last minute consultations with the Greek finance minister in order to decide whether to participate in the Greek bond buyback scheme.
UK Industrial Production and Manufacturing Production missed expectations as oil production was effected by North Sea Buzzard oilfield maintenance. Year on year, UK October oil and gas extraction down 26.9% which was the biggest fall on record.
Monster US online employment index (Nov) M/M 158 (Prev. 156)
European bourses are in the red today as the German Bundesbank cut their 2013 GDP growth forecast for Germany to 0.4% from 1.6%. Weak data out of Germany and the UK has further weighed on sentiment although focus firmly remains on US Non-Farm Payrolls.
In terms of individual stocks news, Nokia shares continue to move to the upside and have seen gains of over 3% today and around 15% during the week after the announcement they are to sell their Lumia phone in China with China Mobile. Shares have further been boosted by Apple's weakness. Alcatel-Lucent shares have fallen over 3% today after it was announced the company is to be removed from the CAC and replaced by Gemalto.
JPY saw strength on the back of today's earthquake in Japan on the back of expectations of repatriation flows from Japanese Insurers. As further details emerged that the earthquake wasn't as devastating as the one in March 2011, USD/JPY recovered some of the losses seen.
EUR has weakened in early trade after the Bundesbank cut their German GDP forecast for 2013 which saw EUR/USD move to the downside and print fresh lows. Heading into the North-American crossover, markets will be paying close attention to US Non-Farm Payrolls data.
EUR/CHF traded sideways throughout the session after the SNB said that during November FX reserves fell from CHF427bln to CHF425bln implying that in order to maintain the floor the SNB did not need to intervene in markets.
WTI crude futures are trading in minor negative territory, continuing on from some of the large losses seen after yesterday's ECB press conference where a weakening economic outlook weighed on oil prices.
The US Treasury said they plan new restrictions on Iranian oil trade which will require oil payments to Iran to stay inside the importers' borders according to a US official.
Oil demand in China may expand 3.4% next year amid an economic recover according to Deutsche Bank. Deutsche Bank also say China to be 40% of 2013 global oil growth.
- Dollar index December options expiry (2000GMT/1400CST)
- End of Greek bond buyback scheme (1700GMT)
Print 13:01, 07 Dec 2012 - Market Analysis - Source: RANsquawk
RANsquawk provides audio news and commentary for over 15,000 professional traders and brokers worldwide. Services include: