January 13th, 2011 08:15:18 GMT

Update: UK Data: Tesco Sales Growth Weak Before Xmas Due Snow

by

–Adds Dixons, Detail To Version Transmitted At 0730 GMT

LONDON (MNI) – Leading UK supermarket group Tesco saw weak sales
growth in the six weeks through January 8 as consumers stayed at home
due to exceptionally severe winter weather conditions, according to an
interim trading statement.

Like-for-like sales increased just 0.6% over that period.
Electrical goods retailer Dixons Retail also issued a trading statement
Thursday, for the 12 weeks to January 8, which showed total group sales
down 1% and like-for-like sales down 2%.

Dixons said UK operations had performed well although the bad
weather had reduced sales by an estimated 2%.

“Our performance remains solid but was hindered in the run up to
the important Christmas trading period in the UK by the disruptive
effects of the severe winter weather condition,” Tesco Chief Executive
Terry Leahy said.

John Browett, Dixons Group Chief Executive, said “Peak trading has
been solid in a tough market. The adverse weather conditions reduced
footfall in the run up to Christmas Day.”

The Dixons and Tesco announcements follow a raft of other interim
statements from big players in the retail sector; the trading figures
included in those statements give market analysts an early indication of
how the exceptionally cold pre-christmas weather affected retail sales
and the wider UK economy.

Although it is the last major UK supermarket to release its interim
statement, the weaker Tesco data are particularly interesting for
analysts trying to gauge the economic impact of the pre-Christmas cold
snap.

The Tesco data cover the six weeks in the run up to Christmas
whereas the other supermarkets published data for a longer 13/14 week
period which appears to have helped plaster-over the effects of the cold
weather on sales.

Earlier this week, major UK retailer J Sainsbury said its total
sales rose 7.5% in the 14 weeks through January 8 2011 and
like-for-like sales grew 5.4.

Sainsbury also said that it created 6,000 new jobs over that
period.

Commenting on the data, Justin King, Chief Executive said:

“The business continues to perform well in a challenging consumer
environment, as customers are faced with fuel and VAT increases,
combined with uncertain employment prospects,”

On Tuesday, major UK retailer Marks and Spencer said that its total
sales rose 4.0% in the 13 weeks through January 1 2011 and reported
like-for-like sales grew 2.8%.

The upmarket retailer estimates that the exceptionally cold
pre-christmas weather, which many analysts expect to impact official
retail sales data, reduced food sales by 1% and general merchandise
sales by 3%.

Marks and Spencer said that it expects tough trading conditions in
2011.

“We continue to expect the trading conditions ahead to be more
challenging as consumers’ disposable incomes come under pressure from
increased VAT rates and the impact of public spending cuts. In addition,
we are facing increased commodity prices and significantly tougher
comparatives,” the interim statement said.

In another interim statement, released Monday, Morrisons said that
sales saw a slight increase in the six weeks to January 2.

In the six weeks to 2 January total sales excluding fuel were up by
3.1% (4.7% including fuel). Like for like sales grew by 1.0% (4.0%
including fuel), the statement said.

Morrisons also said that 2011 will be a challenging year with
disposable income coming under increasing pressure.

Debenhams, one of the UK’s leading department store groups, also
released an interim statement which showed like-for-like sales for the
19 weeks to January 2011 increased by 0.3% including VAT and decreased
by 1.3% excluding VAT.

Rob Templeman, Chief Executive of Debenhams, said:

“Looking forward, we are cautious about the robustness of consumer
sentiment for the remainder of the financial year,”

–London newsroom: 4420 7862 7492 e:mail ukeditorial@marketnews.com

[TOPICS: M$B$$$,MABDS$]

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January 13th, 2011 08:15:17 GMT

JAPAN DATA: Japan’s orders for machine tools totaled.

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JAPAN DATA: Japan’s orders for machine tools totaled Y98.5 billion,
up 63.5% on year in December, with the pace of increase decelerating
from +104.2% in November, the Japan Machine Tool Builders’ Association
said Thursday. Orders from the domestic market, which are seen as a
leading indicator for Japan’s core machinery orders (Dec figures due
Feb. 10), rose 78.5% on year, also slowing from +102.2% in November.
Orders from overseas increased 57.3%, compared with +105.2% in the
previous month. The association forecast overall machine tool orders
will total Y1.1 trillion in calender 2011, the highest level since Y1.3
trillion in 2008.

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January 13th, 2011 08:12:57 GMT

Cable steady early

by

Sits at 1.5750,  pretty much where it was 3 hours ago.  Talk of sell orders clustered up at  1.5800, stops just above there.

UK data/events today:

09:30 GMT: Industrial production for November expected +0.5% m/m, +3.3% y/y.  Manufacturing production expected +0.4%, +5.3% y/y.

12:00 GMT:  Bank of England rate decision.  Expected to keep rates, QE unchanged at 0.5%, £200 bln respectively.

15:00 GMT:  NIESR’s estimate of UK Q4 GDP.

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January 13th, 2011 08:05:26 GMT

JAPAN DATA: Japan’s economy is estimated to be more..

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JAPAN DATA: Japan’s economy is estimated to be slightly more responsive
to a credit easing by the Bank of Japan than previously believed, data
released by the Cabinet Office showed. According to the ministry’s
short-term economic model which was released Thursday, a 100 basis
point cut in short-term interest rates by the BOJ would boost real GDP
by 0.48% in the following 12 months. According to the previous economic
model released in November 2008, a fall in short-term rates by the same
extent would have raised real GDP by 0.40%. Meanwhile, a business tax
cut equivalent to 1% of nominal GDP will raise real GDP by 0.39% in a
year’s time, a less stimulative impact than estimated in the previous
model (+0.48%). The Kan administration plans to lower the corporate tax
rate by five percentage points from around 40% in the next fiscal year.

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January 13th, 2011 07:59:58 GMT

Talk of EUR, AUD demand at 08:00 GMT fix

by

EUR/USD back up where it closed out in North America, presently at 1.3130.   Major Swiss name notable buyer in early European trade.  Not overly surprising given price action being seen in the EUR/CHF cross, which has rallied strongly. Cross presently at 1.2785 from around 1.2700 when I started, having been as high as 1.2805.

1 Comment

January 13th, 2011 07:55:34 GMT

Moody’s Puts Cyprus’ Aa3 Rating On Review; Possible Downgrade

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PARIS (MNI) – Moody’s Investors Services said Thursday it has
placed Cyprus’s Aa3 local and foreign currency government bond ratings
on review for possible downgrade, given concerns about the government’s
recent fiscal deterioration, competitive challenges and the country’s
bank exposure to Greece.

Following is the text of Moody’s statement on Cyprus:

London, 13 January 2011 — Moody’s Investors Service has today
placed Cyprus’s Aa3 local and foreign currency government bond ratings
on review for possible downgrade. Cyprus’s country ceilings for bonds
and bank deposits are unaffected by the review and remain at Aaa (in
line with the Eurozone’s rating).

Moody’s decision to initiate this review was prompted by (1)
concerns that the recent deterioration in the Cypriot government’s
fiscal metrics is largely structural; (2) competitiveness issues; and
(3) the banking sector’s exposures to macroeconomic stress in Greece.

Moody’s says that the rating could be adjusted downwards by more
than one notch, although the rating is likely to remain in the
investment-grade A category.

RATIONALE FOR REVIEW

“The severe impact of the financial crisis on Cyprus caused a
deterioration in government finances that may prove very difficult to
reverse,” says Sarah Carlson, Vice President-Senior Analyst at Moody’s
Investors Service and lead sovereign analyst for Cyprus. While it is
true that Cyprus’s debt level is currently much lower than that of many
other Eurozone countries, Moody’s notes that it has risen very quickly
and expect it to continue rising in the coming years.

“While the Cypriot government has put forward a 2011 budget that
appears to comply with its commitments under the EU’s Excessive Deficit
Procedure, its plans do not address the structural issues that may
undermine the government’s financial strength over the medium to long
term,” says Ms. Carlson.

FACTORS TO BE CONSIDERED IN THE REVIEW

Firstly, Moody’s rating review will focus on Cyprus’s ability to
reverse the recent deterioration in the government’s fiscal metrics and
maintain this reduction over the medium to long term. “Over the short
term, the government may be able to meet the deficit reduction targets
that it has agreed under the Excessive Deficit Procedure. However, given
the structural rigidities of the state budget, maintaining these
reductions over a number of years may be extremely challenging,” says
Ms. Carlson. During this review, Moody’s will be looking at the
government’s ability to address these rigidities — particularly as they
relate to the public sector payroll and social transfers.

Secondly, Moody’s will also assess the country’s ability to address
competitiveness challenges. At the moment, the Cypriot government
appears to have time to address these issues, but, in Moody’s view, the
challenges currently faced by several governments in the Eurozone
periphery are a vivid reminder of how quickly these problems can become
more immediate concerns.

Thirdly, the rating agency will focus on the Cypriot banking
sector’s exposures to Greece and the downward pressure they are exerting
on the sovereign’s rating. Although reported capital and liquidity
levels are not a source of major concern, the sector’s large size
relative to the size of the economy and its significant exposures to
stressed macroeconomic conditions in Greece will also be a consideration
in Moody’s review.

PREVIOUS RATING ACTION

The previous rating action on Cyprus was implemented on 3 January
2008, when Moody’s upgraded the foreign and local currency government
bond ratings of Cyprus to Aa3 with a stable outlook from A1 further to
the country’s entry to the Eurozone.

METHODOLOGY

The principal methodology used in rating the Government of Cyprus
is Moody’s “Sovereign Bond Ratings” Methodology published in September
2008, which can be found at www.moodys.com. Other methodologies and
factors that may have been considered in the process of rating this
issuer can also be found on Moody’s website.

–Paris Newsroom, +331-42-71-55-40; paris@marketnews.com

[TOPICS: M$X$$$,MGX$$$,M$$CR$]

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January 13th, 2011 07:35:15 GMT

UK Data: Tesco Sales Growth Weak Before Xmas Due Snow

by

LONDON (MNI) – Leading UK supermarket group Tesco saw weak sales
growth in the six weeks through January 8 as consumers stayed at home
due to exceptionally severe winter weather conditions, according to an
interim trading statement.

Like-for-like sales increased just 0.6% over that period.

“Our performance remains solid but was hindered in the run up to
the important Christmas trading period in the UK by the disruptive
effects of the severe winter weather condition,” Tesco Chief Executive
Terry Leahy said.

Tesco’s annoucement follows a raft of other interim statements from
big players in the retail sector; the trading figures included in those
statements give market analysts an early indication of how the
exceptionally cold pre-christmas weather affected retail sales and the
wider UK economy.

Although it is the last major UK supermarket to release its interim
statement, the weaker Tesco data are particularly interesting for
analysts trying to gauge the economic impact of the pre-Christmas cold
snap.

The Tesco data cover the six weeks in the run up to Christmas
whereas the other supermarkets published data for a longer 13/14 week
period which appears to have helped plaster-over the effects of the cold
weather on sales.

Earlier this week, major UK retailer J Sainsbury said its total
sales rose 7.5% in the 14 weeks through January 8 2011 and
like-for-like sales grew 5.4.

Sainsbury also said that it created 6,000 new jobs over that
period.

Commenting on the data, Justin King, Chief Executive said:

“The business continues to perform well in a challenging consumer
environment, as customers are faced with fuel and VAT increases,
combined with uncertain employment prospects,”

On Tuesday, major UK retailer Marks and Spencer said that its total
sales rose 4.0% in the 13 weeks through January 1 2011 and reported
like-for-like sales grew 2.8%.

The upmarket retailer estimates that the exceptionally cold
pre-christmas weather, which many analysts expect to impact official
retail sales data, reduced food sales by 1% and general merchandise
sales by 3%.

Marks and Spencer said that it expects tough trading conditions in
2011.

“We continue to expect the trading conditions ahead to be more
challenging as consumers’ disposable incomes come under pressure from
increased VAT rates and the impact of public spending cuts. In addition,
we are facing increased commodity prices and significantly tougher
comparatives,” the interim statement said.

In another interim statement, released Monday, Morrisons said that
sales saw a slight increase in the six weeks to January 2.

In the six weeks to 2 January total sales excluding fuel were up by
3.1% (4.7% including fuel). Like for like sales grew by 1.0% (4.0%
including fuel), the statement said.

Morrisons also said that 2011 will be a challenging year with
disposable income coming under increasing pressure.

Debenhams, one of the UK’s leading department store groups, also
released an interim statement which showed like-for-like sales for the
19 weeks to January 2011 increased by 0.3% including VAT and decreased
by 1.3% excluding VAT.

Rob Templeman, Chief Executive of Debenhams, said:

“Looking forward, we are cautious about the robustness of consumer
sentiment for the remainder of the financial year,”

–London newsroom: 4420 7862 7492 e:mail ukeditorial@marketnews.com

[TOPICS: M$B$$$,MABDS$]

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January 13th, 2011 07:25:42 GMT

Rpt: Analyst Survey: 1st BOE Hike Q4 ’11; Chance More QE Fades

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–Only 2 Institutions Forecasting More QE; Median Probability Just 15%

LONDON (MNI) – Economists, on balance, are still expecting the
first Bank of England rate hike to come in the fourth quarter of this
year and they now see little chance of more quantitative easing.

The Market News January survey found analysts’ median probability
of more QE this cycle has fallen to 15%, with a handful seeing no chance
whatsoever of further QE. In the latter stage of last year, analysts
assigned around a one in three chance to more QE, with the attached
probability rising from 30% in September to peak at 37.5% in November.

Analysts’ expectations of more QE have moved largely in line with
the apparent shifting balance of views on the BOE’s Monetary Policy
Committee.

Neville Hill, economist at Credit Suisse, notes how the minutes of
the MPC meetings chart a shift from a neutral policy bias back in August
to an easing bias in September and October back to a neutral bias in
November and a tightening one in December.

Back in August the MPC minutes reported “members stood ready to
respond in either direction” while in September and October they said
for some members the probability that further stimulus would be needed
had increased.

By November the line about further stimulus being more likely had
disappeared and the December minutes said most members believed recent
news had “probably shifted the balance of risks to inflation in the
medium term upwards.”

The small band of analysts who had put a greater than 50% chance on
the MPC relaunching QE has dwindled. Economists at BNP Paribas, who
attached a 70% chance to more QE back in November, put just a 20% chance
on it in the January survey.

Economists at JP Morgan retracted their call for more QE back in
November and now see just a 20% chance of it, forecasting the first hike
will come in Q4.

In the Market News January survey, analysts at Capital Economics
and RBS were alone in sticking with a forecast of more QE, with RBS
economists putting a bare minimum 51% chance on it.

A change in the prediction of economists at Citi, who moved to
forecasting two rate hikes in 2011 rather than one, generated market
interest Friday. The call, however, only brings Citi’s end year Bank
Rate forecast, of 1.0%, in line with the median in the January survey.

While some economists predict a couple of 25-basis-point hikes in
the second half of this year, others expect the MPC to start tightening
with a 50bp move in Q4.

Analysts have highlighted the difficulties the MPC faces in getting
a clear fix on how the recovery will evolve in coming weeks and even
months.

Snow and exceptionally cold weather in December followed by a value
added tax hike in January are clouding the outlook for fourth and first
quarter consumption and output.

The data flow in the past few days has fueled the belief fourth
quarter output growth is likely to be low. The December Markit/CIPS
services survey showed showed services output plunging to a 20-month
low, falling just below the 50 breakeven level.

Philip Rush, economist at Nomura, has cut his quarterly growth
forecast to 0.4% for Q4 with Q1 coming in even a little weaker than that
at 0.3% to 0.4%. Hill at Credit Suisse says Q4 GDP could be as low as
0.1% but then expects a rapid rebound in Q1.

Growth in Q4 could well come in weaker than the BOE forecast back
in November. While the BOE’s quarterly forecast is tricky to strip out,
due to their growth “backcasts”, Rush puts the implied forecast for Q4
at 0.6% falling to 0.3% in Q1.

BOE Governor Mervyn King has repeatedly warned against putting much
weight on one or two months of retail sales data, especially around the
Christmas New Year period, and the MPC would rather focus on overall
consumer spending. The MPC, however, will not see any official Q1
consumer spending data until May.

With uncertainty abounding, the January meeting of the MPC is seen
as a non-event. The median probability analysts attached to more QE in
January was zero, with just a 5% chance of a hike.

The full analysts survey is in a separate table accompanying this
report. The MPC will announce its policy decision at 1200 GMT Thursday.

For more information contact UK editorial on 44-20-7862 7491 or e-mail:
drobinson@marketnews.com.

[TOPICS: M$B$$$,M$$BE$]

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