Submitted by Tyler Durden.
- Greek Syriza party leader Tsipras will attempt to create a stable governing coalition today.
- German Industrial Production SA (Mar) M/M 2.8% vs. Exp. 0.8% (Prev. -1.3%, Rev. -0.3%).
- Spanish Ministry denies intent to seize Bankia.
European equity markets are seen trading in negative territory across the board at the midway point as the lack of a Greek governing coalition continues to weigh on sentiment. As such, an earlier Greek T-Bill auction passed by with an unsurprising increase in borrowing costs for the country. The concern over sovereign debt is clear elsewhere, as the spread between peripheral 10-year government bond yields remain wider against the German Bund.
Very strong German Industrial Production data has failed to provide relief for the DAX index as concerns on the periphery outweigh the strength in the core. The monthly reading for March beat expectations, coming in at 2.8% against estimates of 0.8%.
HSBC released a confident set of Q1 earnings halfway through the morning, reporting an increase in their pre-tax profits; reassuring investors that they have made a strong start to the year and the company will continue to make good progress with implementing their strategy. Following the release, HSBC shares initially spiked higher by 5%. Shares have come off those levels in recent trade but remain outperforming the Financials sector in Europe.
Overnight reports from the Spanish press concerning a government intervention in the lender Bankia have been denied by the Spanish Ministry, commenting that the aim for the company is a cleanup and restructuring, not a seizure. EU’s Almunia has commented on the developments, saying that it seems likely the bank will receive state aid.
Looking ahead, markets await any commentary from the Greek Syriza party leader Tsipras regarding coalition talks as well as US JOLTs Job Openings and IBD/TIPP Economic Optimism data.
Japan’s finance minister Azumi has said it is possible the national government will enact the sales tax bill during the current session; set to conclude on June 21st. (Sources) Azumi also commented that he is convinced Japanese economic data is set to improve.
Fed’s Lacker has said further stimulus is unlikely to lower unemployment and risks pushing inflation higher. (Sources)
House Republicans have advanced a plan to reduce spending on Healthcare programs, food aid and major domestic initiatives of the Obama administration in an effort to spare the defence budget from spending cuts. (WSJ) The bill would cut USD 261bln in domestic spending over the next ten years.
EU and UK Headlines
Eurogroup’s Juncker has said he told the French President-Elect that the EU fiscal pact cannot be renegotiated. (Sources)
The Greek New Democracy leader Samaras announced he was unable to form a coalition government, and handed the mandate back to the Greek President. (Sources) The Greek Syriza leader Tsipras is now scheduled to meet the Greek President at 1200BST in Athens today before being given the mandate to try and form a coalition government and will have until May 12th to do so. In related news a Greek government official said that Greece has enough money to make it through the end of July without further financing from international creditors.
The German economy minister has said Germany will not back down with their call for austerity, reiterating that his country opposes debt-funded growth packages. (Sources) The minister concludes that Europe’s fiscal pact will not be changed. The German foreign affairs minister Westerwelle has said the conditions of the Greek bailout deal are not up for renegotiation.
German Industrial Production SA (Mar) M/M 2.8% vs. Exp. 0.8% (Prev. -1.3%. Rev. -0.3%)
German Industrial Production NSA WDA (Mar) Y/Y 1.6% vs. Exp. -1.2% (Prev. -1.0%, Rev. 0.0%) (Sources)
The German Economy Ministry has put the strong results down to a recovery from February, and a gain in pace for industrial activity. The ministry adds that the outlook for industry has improved significantly.
ECB’s funding to Italian banks EUR 270.973bln in April from EUR 270bln in March. (Sources)
The Italian PDL party have challenged the Italian PM Monti over his commitment to a speedy ratification of the EU fiscal compact. (FT) The PDL have said that Monti must change his economic policies in order to avoid early elections. A spokesman for the PDL has said the fiscal compact must be amended to give the ECB the authority to take part in government auctions and allow for commonly issued debt; Eurozone bonds. Echoing the sentiment in elections across the rest of Europe, Italy has seen anti-establishment parties gaining ground in local elections, according to preliminary results. (WSJ)
ECB’s Weidmann writes in the FT, reiterating that central bank’s firepower is not unlimited, especially not in a monetary union. Weidmann argues that ECB funding of banks places an irresponsible burden on the taxpayer and is an action that should only be taken by national governments. He adds that further easing by the ECB would ignore the lessons learnt from the financial crisis, and the bank must make sure that the recovery is not setting the stage for the next crisis. (FT)
European bourses are seen lower with underperformance noted particularly in the CAC 40 and FTSE-MIB. The Basic Materials sector leads the way down in Europe, followed closely by Industrials. Investors still remain wary over the political volatility in Greece, as no agreement on a governing coalition has been reached as yet.
HSBC reported their Q1 earnings halfway through the morning, reporting an underlying pre-tax profit of USD 6.8bln, previously USD 5.4bln in Q1 2011. HSBC further reported that their loan impairments have reduced significantly across the last three months, and have proposed a dividend of USD 0.09 per ordinary share. HSBC’s CEO has said the company has had a good start to the year and will continue to make good progress with implementing their strategy. HSBC shares saw immediate volatility following the release, spiking higher by 5%. The shares have come off their highest levels but still remain elevated above the European Financials sector; higher by around 1.5%.
Actelion are seen making heavy losses as North America comes to market following the release of their Q1 earnings. The company have reported that they are to speed up cost-cutting and plan to return to growth in 2014, adding that their top line will not be extraordinary this year. Following the downbeat earnings, Actelion shares trade lower by over 3%.
European Macroeconomic concerns continue to weigh on the European currency, and EUR/USD remains in negative territory, but firmly above 1.3000 for the European session. There remains a touted option expiry at that level for the 10am NY cut. EUR-related crosses are likely to fluctuations should any commentary regarding a possible Greek coalition emerge. Some moves to the upside are noted in the pair in recent trade, but EUR/USD continues to trade in a relatively tight range for the past few hours.
USD strength is observed across the board as the currency sees risk averse flows away from Europe. As such, GBP/USD is also seen lower but has seen some upwards movement in recent trade, coming off the lowest levels of the day at 1.6124.
Elsewhere, USD/JPY is seen marginally lower, again benefitting from a strong USD, and now trades in close proximity to a touted option expiry between 79.75-80 for the 10am NY cut (1500BST).
WTI and Brent crude futures are seen lower ahead of the NYMEX pit open, moving alongside the European equity markets. Saudi Arabia’s Naimi has also reassured markets by promising to meet any disruption in crude supplies with oil reserves.
Oil & Gas News:
- Saudi Arabia’s Naimi has said his country is pumping approximately 10MBPD and is storing 80mln BBLs to meet any sudden disruption in supplies.
- Chinese energy research company C1 Energy has said China may cut their retail gasoline and diesel prices as early as tomorrow and likely by May 10th as crude costs decline.
- The Chinese NDRC are scheduled to meet today, however domestic news services have said they may not announce a fuel price cut.
- The Japanese industry minister Edano is set to meet with Saudi Arabia’s oil minister later today in order to discuss stability of oil supplies and the possibility of plant exports to Saudi Arabia
- The Kuwaiti Oil Minister has said prices at USD 100/BBL is fair, adding that his country is currently producing 3.1MBPD.
- Iran is accepting CNY payments for some crude oil supplied to China, according to the Iranian ambassador to the UAE.
- The US is now working with India to secure alternative sources of oil supply from Iran, and US negotiators are set to travel to India next week to discuss the issue.
- Israeli PM Netanyahu has called off plans for early elections in the country and has formed a unity government in a surprise move that could give him more freedom to confront Iran’s nuclear plans.