European Market Wrap-Up

Economic Data

French Consumer spending -1.0% in August from -1.2% in July against expectations of +0.6%
French Corporate Business Index rose to 85.0 in Sept from 79.0 in July, expectations of 81.0
French flash Composite PMI 53.9 in Sept from 51.3
French flash Manufacturing PMI 52.5 in Sept from 50.8, expectations 51.3
French flash Service PMI 52.2 in Sept from 49.3, expectations 50.0
German flash Composite PMI 52.2 in Sept. from 54.0
German flash Service PMI 52.2 in Sept. from 53.8, expectations 54.0
German flash Manufacturing PMI 49.8 in Sept. from 49.2, expectations 50.7
Euro zone flash Composite PMI 50.8 in Sept. from 50.4, expectations 51.0
Euro zone flash Service PMI 50.6 in Sept. from 49.9, expectations 50.5. This was the first growth in 16 months.
Euro zone flash Manufacturing PMI 49.0 in Sept. from 48.2, expectations 49.7
UK BBA house mortgage approvals 38,095 in August from 38,186, +81.4% y/y
Euro zone Industrial New Orders +2.6% m/m in Sept. from +4.0% (revised from +3.1%), expectations +2.0%. -24.3% y/y in Sept from -25.1%, expectations -25.0%

News

The Confederation of British Industry has revised its June GDP forecast and says that GDP will rise 0.3% in Q3 and 0.4% in Q4.
The CBI also believe that the Bank of England will stop buying bonds in a bid to boost money supply.
A German poll shows that German Chancellor Angela Merkel’s Conservative party has enough support to form a centre-right coalition.
ECB Governing Council Member Nowotny is quoted as saying that economic recovery will be “L” shaped rather than “V’ shaped, meaning it has gone down sharply and will come back very slowly.
ECB member Kranjec said that price falls are calming down or have already stopped. He sees inflation in the second half of the year will be at or close to their goal. It is also time that financial regulations become more stringent.
In minutes released today of its MPC meeting earlier this month the Bank of England revealed that the committee had voted 9 – 0 in favor of leaving the QE at GBP 175 billion and interest rates at 0.5%. Other highlights from the minutes were that MPC members who had wanted a bigger QE rise in August still felt justified but agreed to stick with the plan. Lack of big news in the mid-term also outweighed any change. World economic data was generally stronger than had been expected at the time of the August inflation report. Construction and Industrial Output data also suggested further upward revision was likely to Q2 UK GDP. Near term downside risks to the economy were smaller and CPI could be higher than expected in the short term.
Ahead of the G20 meeting in Pittsburgh China in response to a US proposal for closer co-operation among G20 countries to tackle global imbalances said it supported international policy co-ordination.
European Union unveils a supervision law to set up a European Risk Board, to supervise banks, insurers and markets. Barasso from the EU Commission says he hopes this European supervisory board will lead to a global one.

Currencies

Sterling opened the session around 1.6390 briefly peaking at 1.6415 in early European trading before gradually drifting lower through the early part of the European morning. The move helped by sellers of sterling across the board as we neared the release of the MPC minutes making a low of 1.6330 before the announcement. On the news sterling spiked initially to 1.6405 and then 1.6435 as the market digested the sentiment of the minutes. Sterling then gave back some of its gains and currently trades between 1.6395 and 1.6405. Sterling also came under pressure in particular against the Euro but also against the Yen. Prior to the MPC announcement sterling made a 5 month low of 0.9060 against the Euro before immediately bouncing back to around 0.9000 and Sterling-yen rose from 148.55 to 149.30.
Euro-dollar has had a comparatively quiet European morning with the focus being primarily on Sterling. Having posted an early session high of 1.4820 the currency pair has drifted lower and has been trading for the last couple of hours in the 1.4780 – 1.4800 range but looking softer.
Dollar-yen started the session at 90.80 and then for the best part of the session was stuck around 90.70 before edging higher as the dollar gained some strength and then gaining more momentum pushing through 91.00 aided by the interest in sterling-yen to a high of 91.35.
Dollar-Swiss traded a range of 1.0210 – 1.0245 and the highlight here was a US name selling a “chunk” of dollar-Swiss pushing the currency from 1.4235 to 1.4220.
The Australian dollar has traded in a range of 0.8735 to 0.8775 with the topside being possibly protected by an unconfirmed option at 0.8800.
The New Zealand dollar having seen the action earlier in its own time zone settled into a 0.7240 – 0.7275 range through the European morning.
Gold having traded a high of 1018.00 at the European open held the 1014.50 – 1016.50 for most of the morning before slipping lower to 1012.00 and has now recovered slightly to 1014.00.

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