EU Market Update: Germany's growth engine continues to sputter as Net Change in Unemployment registers first increase in four months



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Article content EU Market Update: Germany's growth engine continues to sputter as Net Change in Unemployment registers first increase in four months

28.03.2013 12:14 Thursday
- China: banks shares hit after CBRC tightened rules on wealth management product investment; Shanghai Composite ends session -2.8%
- Japan BoJ Gov Kuroda: Foreign bond purchases by BoJ could be seen as an intervention, difficult to implement.
- South Korea cuts its 2013 GDP view to 2.3% from 3.0% prior
- Egan Jones cut UK's sovereign rating to A+ from AA- (1 notch) after European close on Wed
- Cyprus banks reopens after 8-day holiday with Capital controls; stock exchange remained closed; overall atmosphere is calm
- German retail sales data for February surprised on the upside
- Germany's Net Change in Unemployment registers first increase in four months
***Economic Data***
- (ZA) South Africa Feb M3 Money Supply Y/Y: % v 7.2%e; Private Sector Credit Y/Y: % v 8.0%e
- (DE) Germany Feb Retail Sales M/M: +0.4% v -0.6%e Y/Y:-2.2% v + 1.2%e
- (UK) Mar Nationwide House Prices M/M: 0.0% v 0.2%e; Y/Y: 0.8% v 0.9%e
- (DE) German Feb ILO Employment: 41.73M v 41.68M prior; Unemployment Rate: 5.4% v 5.4% prior
- (FI) Finland Jan Final Trade Balance: -€437M v -€425M prelim
- (IN) India FY13 YTD (thru Feb) Fiscal Deficit: INR 5.07T, at 97.4% of target
- (HU) Hungary Q4 Current Account: €242M v €268Me
- (HU) Hungary Feb Unemployment Rate: 11.6% v 11.7%e
- (EU) ECB: €368M borrowed in overnight loan facility vs. €1.8B prior; €145.0B parked in deposit facility vs. €118.2B prior
- (AT) Austria Feb Producer Price Index M/M: 0.0% v 0.1% prior; Y/Y: -0.3% v 0.3% prior
- (HK) Hong Kong Feb M3 Money Supply Y/Y: 8.5% v 14.1% prior; M2 Money Supply Y/Y: 8.5% v 14.1% prior; M1 Money Supply Y/Y: 13.6% v 20.2% prior
- (DE) Germany Mar Unemployment Change: +13K v -2Ke (first increase in 4 months); Unemployment Rate: 6.9% v 6.9%e
- (TW) Taiwan Central Bank left its Benchmark Interest Rate at 1.875%, as expected
- (IT) Italy Mar Business Confidence: 88,9 v 88.0e; Economic Sentiment: 78.0 v 77.6 prior
- (EU) Euro Zone Feb M3 Money Supply Y/Y: 3.1% v 3.2%e; M3 Money Supply 3-month Avg: 3.3% v 3.3%e
- (BE) Belgium Mar CPI M/M: 0.1% v 0.3% prior; Y/Y: 1.1% v 1.2% prior
- (ZA) South Africa Feb PPI M/M: 0.6% v 0.8%e; Y/Y: 5.4% v 5.6%e
- (UK) Jan Index of Services M/M: 0.3% v 0.3%e; 3M/3M: -0.2% v -0.2%e
Fixed Income:
- None seen

FTSE 100 +0.10% at 6,395, DAX +0.10% at 7,797, CAC-40 -0.10% at 3,708, IBEX-35 -0.70% at 7,845, FTSE MIB +0.10% at 15,373, SMI +0.20% at 7,796, S&P 500 Futures -0.20% at 1,554
- European equity markets are currently trading mixed. Spain's IBEX-35 index has continued to underperform amid weakness in the banking sector. Banks are currently mixed. Laggards in the sector include BBVA, Commerzbank and SocGen. Overall traders have focused on the equity declines in China (Shanghai Composite -2.8%), the expected opening for banks in Cyprus and the government formation process in Italy.
- UK movers [Johnson Matthey +4% (acquisition), Petropavlovsk +4% (raised FY13 production forecast), Taylor Wimpey +2% (broker commentary), Evraz +1.5% (asset sale), National Grid +1% (raised FY outlook), Bovis Homes +1% (broker commentary), Tate & Lyle +1% (reaffirmed outlook), Electrocomponents +1% (reaffirmed outlook); RPC Group -10% (profit warning), Qinetiq -3.5% (cautious on US business) ]
- Germany movers [Joyou +5% (FY profits and sales rose y/y); Daimler -1% (broker commentary)]
- France movers [Maurel Et Prom -3% (FY profits below ests)]
- The Netherlands movers [DE Master Blenders +25% (takeover approach), Ziggo +8% (investment from Liberty Global), Pharming +7% (manufacturing site received approval), TNT Express +1.5% (asset sale)]
- Russia Fin Min Siluanov: Ready to ease loan terms to Cyprus after situation clears
- Luxembourg PM Juncker reiterated view that Cyprus situation was a special case and its bailout was not a template for Europe. He added that Luxembourg's banking sector was not a cause for concern
- Germany Fin Min Schaeuble reiterated that Cyprus was a special case and found the right solution to its rescue; Luxembourg cannot be compared
- Italy Econ Min Grili commented the Govt targets could emerge from excessive deficit procedure even with revision from €40B arrears payment. Still sought deficit targets in structural terms even with worsening of budget balance from thr speed up in arrears payment
- Portugal PM Coehlo might have to resign if country's constitutional court does not approve certain 2013 budget measures. Article noted that if the court did not approve the measures, the Govt might not be able to find alternative measures.
- EU's Barnier: May seek to have a stronger separation of banking activities than proposals made by France and Germany
- Poland Central Banker Zielinska-Glebocka: Key for interest rate outlook was whether economy stayed weak or began to show signs of a rebound
- Hungary Quarterly Inflation Report noted that household inflation expectations were down since December but HUF currency weakness (Forint) might increase CPI pressures. It noted that utility price cuts to slow inflation markedly
- Russia Econ Min commented that If current trends continued than 2013 GDP to be below 3.0% (prior view of 3.7%) (*Reminder: Russia Central Bank to meet on Tuesday, April for its next monetary policy decision. This is typically earlier in the window period for the CBR and could amount to prssure by the Russian govt for a rate cut)
- OECD released its Interim Economic Assessment for G7 Economies and urged the central banks to support their economies and that monetary stimulus remained necessary. It saw a strong case for ECB to ease monetary policy but that the need was waning for more US exceptional measures. US and Japan to see marked pickup in Q1 but weaker growth in Q2. Germany to rebound in Q1 and gain traction in Q2 while France to stagnate in H1 and Italy's recession to ease
- South Korea govt cut its 2013 GDP target from 3.0% to 2.3%; Inflation view cut from 2.7% to 2.3% (as speculated. Korea will propose an extra budget in April and unveil a series of stimulus measures over coming weeks covering such areas as employment, living standards, the depressed property market and troubles facing heavily-indebted households.
- South Korea Fin Min Hyun commented that the country's top priority was job growth; April stimulus program will help spur economic growth
- Japan Vice Fin Min Yamaguchi: No plans to change BoJ law; but not ruling out that such a change could occur
- Fitch affirmed Australia's AAA sovereign rating
- The European session began relatively quiet as Cypriot banks were set to reopen after an eight-day extended holiday (stock market remained closed). Dealers seemed little interested in fresh positions ahead of the Easter break and quarter-end, German retail sales data for February surprised on the upside and offset some initial bearishness for the EUR/USD pair. However, the first rise in German net change in unemployment woke up the risk aversion sentiment a bit as the European growth engine continued to sputter.
- Peripheral yields continued to drift higher in the session with both Spain and Italy 10-year bonds higher by over 10bps. The 10-year Italy/German Gov't bond spread was at approx 360bps, wider by almost 10bps to 4-month highs. The German 10-year Bund yield hit 6-month lows below 1.25%
- The risk aversion theme continued to provide an excuse to firm the JPY currency. The USD/JPY pair was back below the 94 handle with EUR/JPY cross moved back below the 120 level.
Political/In the Papers:
-(CY) Cyprus central bank confirms banks will reopen on March 28 between 10:00-16:00GMT (06:00-12:00ET); Capital controls will be evaluated on a daily basis; **NOTE: earlier the capital controls to be put in place were detailed: Cyprus capital controls plan will be in force for 7 days (4 business days through the end of next week) and apply to all accounts and currencies; limits cash withdrawals to €300 per day; Controls will include restrictions on checking accounts and overseas payments. No checks can be cashed; Individuals will be limited to taking €3,000 cash when going abroad. Controls will limit use of credit and debit cards abroad to €5,000 per month. Credit cards have unlimited use within Cyprus; Will not allow early withdrawal of time deposits (CDs)
- (EU) ECB's Mersch (Luxembourg): Cyprus bailout is not a template for other countries, Cyprus was in an exceptional situation - interview; Theoretically there is scope for a rate cut, but there is no evidence a cut is needed.
-(GR) Greece Syriza Party leader Tsipras: Calls for a referendum on Cyprus bailout - ekathimerini
-(IT) FT looks at some of the remaining options that Italy has to form a government; Options include having another center-left politician try to negotiate a broad coalition with Berlusconi's alliance; Other options include naming a new technocrat government or extending the term on Monti's caretaker government until elections are held.
- (US) Fed's Evans (voter, dove): Fed will most likely need to continue asset purchases through the end of 2013; would prefer a 3% inflation threshold; Job growth has been good but not stupendous, would prefer to be seeing 250-300K per month job growth.
- (US) Fed's Kocherlakota (dovish, FOMC alternate): Reiterates unemployment threshold should be reduced to 5.5% from 6.5%; Fed could further clarify conditions that slow or halt asset purchases; Fed will achieve goals for unemployment and inflation by 2018
- (US) Fed's Pianalto (non voter, moderate): Monetary policy needs to remain accommodative
- (CN) Several China cities may issue property curbs measures in April - financial press
- (JP) Japan's ruling LDP party submits drafts proposal to revise BoJ law - Japanese press
- (JP) Japan Fin Min Aso: Not easy to achieve price target in two years - financial press

***Looking Ahead***
***All times listed for economic events are denominated in Eastern Standard Time (Add 4 hours for GMT equivalent)
- (IT) Italy's Bersani could meet Italian President Napolitano on talks to form govt
- (RO) Romania Central Bank Interest Rate Decision: Expected to leave Interest Rates unchanged at 5.25%
- (HK) Hong Kong Feb Govt Monthly Budget Balance (HKD): B v 41.9B prior
- (ES) Spain Feb YTD Budget Balance: No est v -€12.7B prior
- (ES) Spain Debt Agency (Tesoro) gives details bond auction for April 4th
- (PL) Poland gives quarterly funding plan
- (BE) Belgium Debt Agency gives target volume for Apr 2nd Bill auction
- 06:30 (HU) Hungary Debt Agency (AKK) to sell HUF50B in 12-Months Bills
- 07:00 (EU) ECB announces 3-Year LTRO Repayment
- 07:00 (CZ) Czech Republic to sell up to CZK9.0B in 3-month Bills
- 07:00 (RU) Russia Gold & Forex Reserve w/e Mar 22nd: No est v $520.0B prior
- 07:00 (PT) Portugal Feb Industrial Production M/M: No est v 3.6% prior; Y/Y: No est v -1.5% prior
- 07:00 (PT) Portugal Feb Retail Sales M/M: No est v 4.2% prior; Y/Y: No est v -3.7% prior
- 07:00 (IE) Ireland Feb Retail Sales Volume M/M: No est v -1.7% prior; Y/Y: No est v -1.2% prior
- 07:10 (UK) DMO to sell combined £4.0B in 1-month, 3-month and 6-month Bills
- 07:30 (US) Daily Libor Fixing
- 07:30 (IN) India Q4 Current Account Balance: -$30.7Be v -$ 22.3B prior
- 07:30 (BR) Brazil Central Bank Q1 Inflation Report
- 08:00 (CZ) Czech Central Bank Interest Rate Decision: Expected to leave the Repo Rate unchanged at 0.05%
- 08:00 (ZA) South Africa Feb Budget Balance (ZAR): +4.0Be v -29.6B prior
- 08:00 (ZA) South Africa Feb Trade Balance (ZAR): -12.7Be v -24.5B prior
- 08:00 (BR) Brazil Feb Unemployment Rate: 5.7%e v 5.4% prior
- 08:00 (CL) Chile Feb Manufacturing Index: 2.5%e v 4.3% prior
- 08:00 (CL) Chile Feb Retail Sales Y/Y: 8.2%e v 9.5% prior
- 08:00 (CL) Chile Feb Total Copper Production: no est v 474.5K tons prior
- 08:00 (CL) Chile Feb Unemployment Rate: 6.0%e v 6.0% prior
- 08:30 (US) Q4 Final GDP QoQ Annualized: 0.5%e v 0.1% prelim; Personal Consumption: 2.1%e v 2.1% prelim
- 08:30 (US) Q4 Final GDP Price Index: 0.9%e v 0.9% prelim; Core PCE Q/Q: 0.9%e v 0.9% prelim
- 08:30 (US) Initial Jobless Claims: 340Ke v 336K prior; Continuing Claims: 3.041Me v 3.053M prior
- 08:30 (CA) Canada Jan Gross Domestic Product M/M: +0.1%e v -0.2% prior; Y/Y: 0.9%e v 0.8% prior
- 08:30 (CA) Canada Feb Industrial Product Price M/M: 0.5%e v 0.0% prior; Raw Materials Price Index M/M: 2.0%e v 3.8% prior
- 08:30 (US) Weekly Net Export Sales
- 09:00 (US) Mar NAPM-Milwaukee: No est v 56.5 prior
- 09:00 (PL) Poland Q4 Current Account: -€3.4Be v -€3.5B prior
- 09:30 (EU) ECB's Noyer
- 09:45 (US) Mar Chicago Purchasing Manager: 56.5e v 56.8 prior
- 10:30 (US) Weekly EIA Natural Gas Inventories
- 10:30 (EU) ECB calls for bids in 7-Day Main Refinancing Tender
- 10:30 (BR) Brazil to Sell 2013, 2015 and 2016 Bills
- 11:00 (US) Mar Kansas City Fed Manufacturing Activity: -3e v -10 prior
- 11:00 (US) Fed to purchase $4.25-5.25B in Notes
- 13:00 (US) Treasury to sell $29B in 7-Year Notes
- 14:00 (BR) Brazil Feb Nominal Budget Balance (BRL): 1.1BBe v 7.6B prior; Primary Budget Balance: 4.2Be v 30.3B prior; Net Debt to GDP Ratio: 35.2%e v 35.2% prior
- 19:30 (JP) Japan Feb Jobless Rate: 4.2%e v 4.2% prior
- 19:30 (JP) Japan Feb National CPI Y/Y: -0.7%e v -0.3% prior; Ex Foof&Energy -0.9%e v -0.7% prior
- 19:30 (JP) Japan Feb Preliminary Industrial Production M/M: 2.5%e v 0.3% prior; Y/Y: -8.5%e v -5.8% prior