EU Market Update: Low volatility dominates price action



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Article content EU Market Update: Low volatility dominates price action

25.06.2014 11:48 Wednesday
- WTI crude popped in early Asia on signs Obama might lift a 40-year ban on oil exports; Commerce Dept clarifies there has been no change in policy on crude oil exports
- Ukraine President might end cease-fire before deadline after separatists shoot down a helicopter
- German July GFK Consumer Confidence at fresh 7-year high (8.9 vs. 8.5e) as it shows a sharp rise in economic expectations; French business confidence disappoints
- US Q1 Final GDP likely to see another downward revision

***Economic Data***
- (DE) Germany July GfK Consumer Confidence: 8.9 v 8.6e; highest since Dec 2006
- (CH) Swiss May UBS Consumption Indicator: 1.77 v 1.68 prior
- (FR) France Jun Business Confidence: 92 v 94e; Manufacturing Confidence: 98 v 99e
- (NL) Netherlands Q1 Final GDP Q/Q: -0.6% v -1.4%e; Y/Y: 0.0% v -0.4%e
- (IT) Italy Apr Retail Sales M/M: 0.4% v 0.0%e; Y/Y: +2.6% v -0.5%e
- (IT) Italy Jun Consumer Confidence Index: 105.7 v 106.4e

Fixed Income:
- (IT) Italy Debt Agency (Tesoro) sold €2.5B vs. €2.5B indicated in Apr 2016 Zero Coupon CTZ; Avg Yield: 0.591% v 0.786% prior; Bid-to-cover: 1.57x v 1.51x prior

Indices [Stoxx50 -0.3%, FTSE 100 -0.6% at 6,747, DAX -0.3% at 9,904, CAC-40 -0.6% at 4,491, IBEX-35 -0.4% at 11,064, FTSE MIB +0.3% at 21,711, SMI -0.6% at 8,623, S&P 500 Futures flat at 1,943]

- Market Focal Points/Key Themes: Equity markets open lower following rise in the S&P 500 VIX index and wider peripheral spreads, Samsung makes cautious comments about Q2, Share placement weighs on GDF Suez, Banca Monte Paschi declines 20% amid ongoing capital raise, Upcoming third/final reading of US Q1 GDP

By Sector
- Healthcare [Basilea BSLN.CH -7% (negative FDA update); Akers Biosciences AKR.UK +16% (distribution agreement)]
- Consumer Discretionary [Experian EXPN.UK -2% (ex-dividend); Metro MEO.DE +1% (broker commentary)]
- Financials [Banco Comercial Portgues BCP.PT +3% (confirmed rights offering)]
- Technology [Soitec SOI.FR -9% (capital raise)]
- Telecom [Drillisch DRI.DE +3% (agreement with Telefonica Deutschland)]
- Utilities [GDF Suez GSZ.FR -2.5% (share placement)]
- Materials [HeidelbergCement HEI.DE -1% (broker commentary)]
- Stoxx50 Sectors [Telecom -1.7%, Utilities -1%, Energy -0.9%, Industrials -0.4%, Consumer Non-Cyclical -0.4%, Technology -0.2%, Consumer Cyclical -0.1%; Financials +0.1%, Basic Materials flat]

- EU leaders to discuss Commission President job at Summit later this week but could leave other top posts open until later stage. EU would vote Commission President if asked
- German Chancellor Merkel: Germany is the economic engine and stability anchor for Europe; To seek broad support for EU initiatives and personnel issues; reiterates her support for Juncker as EU Commission chief
- Bank of Spain (BOS) monthly bulletin reiterated view that economic recovery is extending into Q2
- Russian lawmakers officially rescind use of force in Ukraine (as expected) *
- Iraq PM Maliki rejected formation of salvation government and it would be unconstitutional

Currencies/Fixed Income:
- USD was largely unchanged in a directionless trade. Dealers complained that low volatility and a lack of momentum was keeping many participants on the sidelines
- The EUR/USD hovered above the 1.36 level for the 6th staright session
- USD/JPY lingered just under the 102 handle as PM Abe's "third arrow" details of his economic plan lacked enough clout to lure traders into new positions

Political/In the Papers:
- (US) Fed's Dudley: Market expectations for a mid-2015 rate hike seems to be reasonable
- Syrian warplanes struck targets in western Iraq, killing at
least 50 people. Ukraine President warned that he could cancel a cease-fire after rebels downed a helicopter

**Looking Ahead***
All times listed for economic events are denominated in Eastern Standard Time (Add 4 hours for GMT equivalent)
- (EU) Nato meeting in Brussels
- 06:00 (UK) Jun CBI Industrial Reported Sales: 23e v 16 prior
- 06:00 (IE) Ireland May Property Prices M/M: No est v 1.4% prior; Y/Y: No est v 8.5% prior
- 06:45 (US) Daily Libor Fixing
- 07:00 (RU) Russia to sell RUB10B in 2023 OFZ bonds
- 07:00 (US) MBA Mortgage Applications w/e Jun 20th: No est v -9.2% prior
- 07:00 (BR) Brazil Jun FGV Construction Costs M/M: 1.4%e v 2.1% prior (revised from 1.4% prior
- 07:00 (UK) Prime Minister's Question Time in House of Commons
- 08:00 (ES) ECB's Linde (Spain) in Valencia
- 08:15 Baltic Dry Bulk Index
- 08:30 (US) May Durable Goods: 0.0%e v +0.6% prior (revised from 0.8%); Durables Ex Transportation: 0.3%e v 0.3% prior (revised from 0.1%); Capital Goods Orders Non-defense/Ex-aircraft: +0.5%e v -1.2% prior; Capital Shipments Non-defense/Ex-aircraft:+1.0%e v -0.4% prior; Ex-Defense: no est v -0.8% prior
- 08:30 (US) Q1 Final GDP Annualized Q/Q: -1.8%e v -1.0% prelim; Personal Consumption: 2.5%e v 3.1% prelim
- 08:30 (US) Q1 Final GDP Price Index: 1.3%e v 1.3% prelim; Core PCE Q/Q: 1.2%e v 1.2% prelim
- 08:30 (CL) Chile Central Bank's Traders Survey
- 08:30 (BR) Brazil May Tax Collections (BRL): 90.1Be v 105.9B prior
- 09:00 (DE) ECB's Weidmann (Germany)
- 09:30 (BR) Brazil May Total Outstanding Loans (BRL): No est v 2.777T prior; M/M: No est v 0.6% prior; Private Banks Lending: No est v 1.328T prior; Personal Loan Default Rate: No est v 6.5% prior
- 09:45 (US) Jun Preliminary Markit US Services PMI: 58.0e v 58.1 prior; Composite PMI: No est v 58.4 prior
- 10:30 (US) Weekly DOE Crude Oil Inventories
- 11:00 (BR) Brazil to sell B2014, 2016 and 2018 Bills
- 11:00 (BR) Brazil to sell 2021 and 2025 Fixed-rate bonds
- 11:00 (US) Fed to purchase $2.25-2.75B in Notes
- 11:30 (US) Treasury to sell $13B in 2-Year Floating Rate Notes Reopening
- 11:30 (BR) Brazil weekly Currency Flows
- 12:00 (CA) Canada to sell 10-Year Bonds
- 13:00 (US) Treasury to sell $35B in 5-Year Notes
- 15:00 (AR) Argentina May Industrial Production M/M: No est v 0.9% prior; Y/Y: No est v -4.0% prior
- 17:00 (CO) Colombia Apr Trade Balance: -$0.5Be v -$0.3B prior
- 17:00 (KR) South Korea May Department Store sale: No est v -1.4% prior