EU Market Update: Sterling sinks as lower UK Manufacturing PMI revives recession concerns; Italian data and US sequester weigh on sentiment



Need to Know


– (CN) China State Council said it will continue to implement home price controls; property price increase expectations have gotten stronger


- JJC: London copper hits 2-month low, COMEX Copper below $3.50/lb, amid PBoC commentary, sharp rise in Shanghai Futures Exchange weekly copper stockpiles, weaker than expected China manufacturing PMI and additional property curbs out of China


– (US) S&P futures down 0.25% with the $8.0B sequester cuts to take effect today. President Obama and congressional leaders have not found a way avoid them. IMF warned the automatic cuts could slow the U.S. and world economies.


- (EU) Euro one Feb manufacturing PMI recap [M/M rises were seen for Spain, Greece, France and Germany; Italy data was weaker than expected


- (UK) UK Feb manufacturing PMI contracts for first time since Nov; Gilt yields move lower amid renewed "triple-dip recession fears. GBP/USD hits over 2.5 year low


- (EU) Euro one Feb CPI lowest since Aug 2010


- (IT) Italy Jan unemployment hits highs not seen since the early 1990s; FTSE MIB equity index again underperforms


- (DE) German Jan retail sales have strongest monthly increase since Dec 2006.


- (NO) Norwegian Krona hits 7-month low on disappointing PMI data; Swedish Krona hits 5-month high vs. Euro on stronger than expected GDP data and Feb PMI.


- (ES) Spain's bonds continue to outperform Italian debt; Spanish 10-yr bond yields hover above 5%


- (AU) Shares of Rio close down 1.5% as it seeks buyer for 58.7% stake valued at $1.7B in Iron Ore Company of Canada


- (UK) Both Glencore and Xstrata trade down 2,5% after they disclosed the merger will not be complete by March 15th ; Still waiting on China approval


- (UK) LLOY.UK trading lower after it Reports FY12 Pretax statutory loss £570M* v loss £3.54B y/y, Underlying Profit £2.61B v £638M y/y, Total underlying income, net of insurance claims £18.37B v £21.05B y/y



Indices


- Indices: FTSE 100 -0.40% at 6,336, DAX -0.80% at 7,682, CAC-40 -1.2% at 3,678, IBEX-35 -0.80% at 8,166, FTSE MIB -1.6% at 15,664, SMI -0.40% at 7,564, S&P 500 Futures -0.20% at 1,509


- European equity markets are broadly lower, led by the FTSE MIB which has been negatively impacted by disappointing Italian data. Also, weak UK manufacturing PMI and US sequester concerns have weighed on the markets. European banks are broadly lower, led by Lloyds (earnings) and Deutsche Bank (cautious broker commentary). The weakness in copper prices and delays related to the Xstrata/Glencore merger have weighed on resource-related companies.


- Germany movers [Lanxess +2% (renewed takeover speculation); Deutsche Bank -3% (broker commentary), Metro -3% (cut FY dividend)


- UK movers [Valiant Petroleum +27% (takeover offer), William Hill +6% (guided FY profits and sales higher y/y); Lloyds -3% (FY Rev declined y/y), Glencore -2.5%, Xstrata -2.5% (merger plan facing delays)]


– France movers [Thales +11.5% (FY12 results above est, sees EBIT growth in FY13)]


– Swit erland movers [Sonova +1% (reaffirmed FY forecast)]


– Belgium movers [Belgacom -6% (FY results below ests)]


– The Netherlands movers [Vopak -9% (FY results below ests)]



Economic Data


- (DE) GERMANY JAN RETAIL SALES M/M: 3.1% V 0.9%E; Y/Y: +2.4% V -1.7%E


– (UK) FEB NATIONWIDE HOUSE PRICES M/M: 0.2% V 0.2%E; Y/Y: 0.0% V -0.2%E


- (ES) SPAIN FEB MANUFACTURING PMI: 46.8 V 46.3E (highest since June 2011)


– (IT) ITALY FEB PMI MANUFACTURING: 45.8 V 47.6E (3-month low)


– (FR) FRANCE FEB FINAL PMI MANUFACTURING: 43.9 V 43.6E


– (EU) EURO ONE FEB FINAL PMI MANUFACTURING: 47.9 V 47.8E


- (IT) ITALY JAN PRELIMINARY UNEMPLOYMENT RATE: 11.7% V 11.3%E (highest since data series began in 1992); UNEMPLOYMENT RATE SEASONALLY ADJ: 11.2% V 11.2%E


– (UK) FEB PMI MANUFACTURING: 47.9 V 51.0E


– (IT) ITALY FEB PRELIMINARY CPI (NIC INCL. TOBACCO) M/M: 0.1% V 0.3%E; Y/Y: 1.9% V 2.1%E


- (EU) EURO ONE JAN UNEMPLOYMENT RATE: 11.9% V 11.8%E


– (EU) EURO ONE FEB CPI ESTIMATE Y/Y: 1.8% V 1.9%E



Currencies


-GBP/USD was the big mover in the session after UK PMI missed estimates by a very large margin. The pair traded from 1.5160 down to 1.5015 on the data. This is more than a 2.5 year low for the pair which was already under pressure after Moody’s cut the UK’s sovereign rating last week.


– EUR/USD traded up about 25 pips to 1.3100 after Spanish PMI beat expectations. That didn’t last very long as Italian PMI came in below expectations and the EUR quickly retraced all its gains. Weak Italy unemployment data follow by very poor UK PMI data pushed the pair down to the 1.3020 level before finding some support and trading back towards the 1.3040 level


– DXY: The dollar index hit a 6 month high trading above 82 on the overall weak European data



Looking Ahead


– 06:00 (IT) Italy 2012 Annual GDP: -2.2%e v +0.4% prior ; Deficit to GDP Ratio: 3.0%e v 3.9% prior


– 06:00 (EU) ECB announces amount of 3-Year LTRO Repayments


– 06:00 (PT) Portugal Jan Industrial Production M/M: No est v -1.3% prior; Y/Y: No est v 4.1% prior


– 06:00 (PT) Portugal Jan Retail Sales M/M: No est v -1.8% prior; Y/Y: No est v 9.7% prior


– 06:10 (UK) DMO to sell combined £2.5B I 1-month, 3-month and 6-month Bills


– 06:30 (CL) Chile Central Bank Meeting Minutes


– 06:30 (US) Daily Libor Fixings


– 07:00 (BR) Bra il Q4 GDP Q/Q: 0.7%e v 0.6% prior; Y/Y: 1.6%e v 0.9% prior; GDP 4Qtrs Accumulated: No est v 0.9% prior


– 08:00 (BR) Bra il Feb PMI Manufacturing: No est v 53.2 prior


– 08:30 (CA) Canada Dec Gross Domestic Product M/M: -0.2%e v +0.3% prior; Y/Y: 1.2%e v 1.3% prior; Q4 Quarterly GDP Annuali ed: 0.6%e v 0.6% prior


- 08:30 (US) Jan Personal Income: -2.4%e v +2.6% prior; Personal Spending: 0.2%e v 0.2% prior


– 08:30 (US) Jan PCE Deflator M/M: 0.1%e v 0.0% prior; Y/Y: 1.2%e v 1.3% prior


– 08:30 (US) Jan PCE Core M/M: 0.2%e v 0.0% prior; Y/Y: 1.3%e v 1.4% prior


– 08:58 (US) Feb Final Markit US PMI Manufacturing: No est v 55.2 prelim


– 09:55 (US) Feb Final University of Michigan Confidence: 76.3e v 76.3 prelim


– 10:00 (US) Jan Construction Spending M/M: 0.4%e v 0.9% prior


– 10:00 (MX) Mexico Central Bank Economist Survey


– 10:00 (US) Feb ISM Manufacturing: 52.5e v 53.1 prior; Prices Paid: 57.3e v 56.5 prior


– 10:00 (MX) Mexico Jan Remittances: $1.5Be v $1.7B prior


– 12:00 (IT) Feb New Car Registrations Y/Y: No est v -17.6% prior


– 13:00 (BR) Bra il Feb Trade Balance: -$0.9Be v -$4.0B prior; Exports: $15.6Be v $16.0B prior; Imports: $16.4Be v $20.0B pror


– 15:30 (MX) Mexico Jan YTD Budget Balance (MXN): No est v -403.6B prior


– 17:00 (US) Feb Total Vehicle Sales: 15.10Me v 15.2M prior; Domestic Vehicle Sales: 12.00Me v 12.08M prior