European Market Update

European Equities Higher Ahead of US Holiday

ECONOMIC DATA

UK Feb Rightmove House Prices: M/M 3.2% v -0.8% prior || Y/Y 5.8% v 3.4% prior

SZ Dec Adjusted Real Retail Sales Y/Y: 1.2% v 5.2%e

SPEAKERS COMMENTS

ECB's Noyer: Euro-Zone growth may be weaker than we hoped for || EU area not immune from any weakness in US economy and sub-prime-triggered financial turmoil || French banks relative exposure to the US sub-prime market still low compared to others || Before French banks are seriously hit, many others will have suffered much more [Financial Times]

FR Finance Minister Lagarde: Sees France's 2007 economic growth at 2.0% || Provisional Q4 GDP data showed annual growth of 1.9%.

Rightmove: Interest Rate Cuts Have Given Sellers Some Hope

GE State bank Bayern LB is planning a €650M capital increase [wires] Reminger: According to a key politician in the German coalition government, BayernLB needs to record writedowns of up to €2.5B vs. the prior estimate of €100M [Leipziger Volkszeiting]

ECB Liikanen: Threat of higher inflation expectations has risen || There is exceptionally great uncertainty about the economic outlook || Downside economic risks are clearly larger than before || EMU growth is slowing amid the market turmoil and eroding morale || World growth may slow more than expected

GE IMK Think Tank: ECB should cut rates || Suggests that the ECB should cut rates and that Germany should adopt a growth stimulus program to prevent an economic downswing [Berliner Zeitung]

GE Bundesbank Monthly Bulletin: The ECB is still worried about long-term long-term price risks || Sees stability risks due to strong inflation || Euro-region economy remains robust || Risks to German growth have increased a bit || Germany economy in robust and solid shape || Germany does not need a US style stimulus plan || Sees risk of revenue shortfalls on economic outlook

BOE's Besley: Policy faces difficult period ahead || Energy, and food costs will boost CPI || BOE rate impact will depend on market conditions || Weaker growth and faster inflation may pose a challenge || Global growth poses downside risks to the UK economy

FIXED INCOME/FX/COMMODITIES/ERRATUM

On the equity front the European indices are trading much higher across the board as rumors circulate and speculation increases about consolidation in the European banking sector. Shares of Merck are trading lower in Germany after the company reported mixed results ahead of the equity open in Europe. IKB formally announced that it plans to propose a €1.48B capital increase at its AGM on March 27. According to press reports overnight German state bank BayernLB is planning a €650M capital increase. The UK government finally concluded that Northern Rock will be nationalized temporarily as the government was unable to provide funding to support a private sector solution for the bank. There are no earnings expected in the US as it is a holiday today, however market participants will be looking out for earnings from Wal-Mart during the US pre-market on Tuesday.

On the commodity front, crude oil remains above the $95-handle in thin volume today. Chevron reported a unit failure at its 260k bpd Los Angeles refinery overnight; no further details were disclosed. According to a Saudi official 500K bpd of oil will be available from the Khursaniyah Field within 2 months. Elsewhere in energy, according to an article in Nature Genetics, US scientists have identified a key gene that determines oil yield in corn. The gene encodes a catalyzing enzyme (DGATI-2), which carries out the final step in a plant's oil-making process. According to the study, a variant in the gene can boost the yield of oil by up to 41%. Looking at the metals, spot gold has held above the $900-handle throughout the session, and spot silver is currently unchanged, while copper futures are trading higher on the back of a decline in stockpiles. Platinum is also trading higher, but is off of its best levels after profit taking set in when the metal reached a new all time high during Asian trading.

European fixed income futures are trading lower in the session on the back of strong trading in equities as well as profit taking following Friday's rally. Despite today's decline some analysts speculate that European fixed income will continue to rise in the near-term as uncertainty about both the US economic outlook, and the global economic outlook will maintain its role as the prevalent theme in the marketplace. In new supply this week Portugal, France, and the Netherlands are due to provide an aggregate €9.95B in new issuance this week. The Netherlands it due to sell a new 4.00% July 2018 DSL on Tuesday. Portugal will conduct a reverse auction for its 3.25% July 2008 OT issue in a reverse auction. In France, the AFT will sell a 2.50% July 2010 BTAN, as well as a 3.50% July 2011 BTAN, and a 3.72% January 2013 BTAN, all on Thursday.

Trade The News Staff
Trade The News, Inc.

Posted in: Forex