European equities slump on global growth concerns

European Market Update: Global growth concerns weighs upon European bourses in session; UK July retail sales data disappoints

Economic Data

- (JP) Japan July Nationwide Dept Store Sales Y/Y: -0.1 v +0.3% prior; Tokyo Dept Store Sales Y/Y: -1.3% v +0.4% prior�

- (IN) India Primary Articles WPI w/e Aug 6th Y/Y: 11.6% v 12.2% prior; Food Articles WPI Y/Y: 9.0% v 9.9% prior�

- (RU) Russia Gold & Forex Reserve w/e Aug 12th: $540.2B v $537.7B prior

- (NV) Netherlands Aug Consumer Confidence: -21 v -15e�

- (NV) Netherlands July Unemployment Rate: 5.3% v 5.0%e�

- (SW) Sweden Q2 Industry Capacity: 88.8% v 88.9% prior�

- (GR) Greece Jun Current Account: -?1.6B v -?2.0B prior�

- (HK) Hong Kong July Unemployment Rate: 3.4% v 3.5%e�

- (TT) Taiwan Q2 Final GDP Constant Prices Y/Y: 5.0% v 4.9%e�

- (UK) July Retail Sales Ex Auto Fuel M/M: 0.2% v 0.4%e; Y/Y: -0.2% v +0.1%e�

- (UK) July Retail Sales with Auto Fuel M/M: 0.2% v 0.3%e; Y/Y: 0.0% v 0.3%e

- (EU) Euro Zone Jun Construction Output M/M: -1.8% v +0.1% prior; Y/Y: -11.3% v 0.0% prior

Fixed income

- (UK) DMO sold �4.5B in new 1.75% 2017 Gilts; avg yield 1.507% v 1.789% prior; Bid-to-cover:1.35 x v 1.48x prior; Tail 1.1bps vs. 0.5bps prior

- (HU) Hungary Debt Agency (AKK) sold HUF in 12-Month Bills; avg yield 5.69% v 6.04% prior�

- (IN) India sold INR100B vs. INR100B indicated in 2017, 2022 and 2032 bonds

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Notes/Observations:�

- UK Retails Sales disappoints�

- European equities slump on global growth concerns

Equities:�

FTSE 100 -2.3% at 5209, DAX -4% at 5708, CAC 40 -2.9% at 3160, IBEX 35 -2.7% at 8491, FTSE MIB -3.4% at 15,413, SMI -2% at 5305

- European shares opened lower dragged by overall fears of a global slowdown and the lackluster meeting between Merkel and Sarkozy. Financial banks slid further after reports that the US regulators would intensify oversight of US divisions of European banks on concern over funding. Some dealers attributed the European stock sell-off on rumors that trades would not be allowed to roll Euro stoxx shorts and thus selling transformed itself into the Dax instead. There was also talk about a fat finger trade hitting Dax futures. - In individual names, Holcim [HOLN.SZ] dropped over 5% after reporting lower earnings on a yearly basis and a flat outlook. - Air Berlin [AB1.GE] announced new cost cutting measures after struggling to be profitable. The CEO of the company that has not posted a profit since 2007, offered his resignation.

Speakers:�

- A senior US official commented that China VP Xi was confident with the fundamentals of the US economy and did not show concern regarding US debt�

- German credit association official stated that it could not rule out additional private sector participation in case of further crisis in the EU�

- Luxembourg Fin Min commented that the recent Merkel-Sarkozy meeting did not offer any new ideas and that the EU must implement prior agreements. Euro Zone member States must implement strict budget policies. On France he noted that its budget deficit was too high. He saw Euro bonds as reasonable in a perfect working EU�

- German lawmaker: Merkel's CDU party meeting on Tuesday likely on EFSF approval process�

- PBoC researcher Chang Li said that the central bank is unlikely to raise interest rates "often" in order to deal with negative real rates�

- S&P's European Chief Sirou: Reiterated that France's 'AAA' rating is Stable�

- India Central Bank Dep Gov Sinha: Taming inflation remains the top priority for the RBI

Currencies/Fixed income:�

- The CHF weakened a bit ahead of the European morning as Dealers suspected that the SNB added fresh liquidity via the forward market during the latter of the Asian session. There was no statement from either SNB or Swiss Gov't on the matter. Overall the CHF pair did remain contained in the recent 24-hour ranges. SNB has made it very costly to maintain swissy longs and it has been relatively successful so far in limiting further franc gains without using the currency peg option. The decline in European equities and the simmering risk aversion sentiment did provide the CHF with safe-haven flows and the currency was off its worst levels and only marginally weaker from its Asian opening levels.�

- Speculation that some GBP demand might be due "safe haven activity "or even M&A flows despite the difficult economic conditions in the UK. The GBP/USD remained above the 1.65 handle throughout bulk of European morning despite a softer reading in the UK July retail sales data. The pair was slipping below 1.65 as then NY morning approached�

- The EUR/USD remained in familiar territory hovering around the 1.44 handle. Dealers noting that the 'true test' of the medium term price action might be defined more by the price action at the 1.43 level rather than the recent failure to sustain gains above the 1.45 level.�

- The German Sept Bund futures continued to rally hitting fresh contract highs above 134.70. The recent weak GDP data sparking fears that the euro zone economic recovery was over. Various analysts have cut their view on global GDP growth for the 2011 and 2012 period. The key question is whether the ECB would be poised to reverse its rate hikes in the coming quarters.

Political/ In the Papers:�

- Data released from the Bank of England indicate that they believe in a 1 in 10 chance the UK will experience a double dip recession over the next 18 months, and a 1 in 8 chance that the economy will contract in the current quarter according to an article in the Telegraph. Some analysts see the central bank's forecasts as sign that they are more concerned about a recession now than they were back in 2008.�

- Following yesterday's jobs data, the British press reported part-time employment in the UK hit a record high. Those claiming unemployment increased by about 37K to 1.56M in July, the largest monthly increase since May of 2009. The jobs data cast doubt on whether the private sector was able to compensate for public sector job losses. Though the figure for those in employment increased by 25K to 2.97M, it was due to more take up in part-time work, as full-time positions remains scarce. The figures were even more staggering for youths (16-24 year olds) where unemployment is above 20%.

Looking Ahead�

- (PO) Portugal July Producer Prices M/M: No est v -0.2% prior; Y/Y: No est v 5.8% prior- 6:00 (IR) Ireland July PPI M/M: No est v -0.8% prior; Y/Y: No est v -1.0% prior�

- 7:00 (BR) Brazil Aug FGV Inflation IGP-10 M/M: +0.2%e v -0.1% prior�

- 8:00 (PD) Poland July Sold Industrial Output M/M: -4.3%e v +1.1% prior; Y/Y: 3.5%e v 2.0% prior�

- 8:00 (PD) Poland July Producer Prices M/M: 0.2%e v 0.3% prior; Y/Y: 5.7%e v 5.6% prior�

- 8:35 (US) Fed's Dudley to speak in Newark, NJ�

- 8:30 (CA) Canada July Leading Indicators M/M: 0.2%e v 0.2% prior�

- 8:30 (CA) Canada Jun Wholesale Sales M/M: -0.5%e v +1.9% prior

- 8:30 (CL) Chile Q2 Current Account: $490Me v $722M prior�

- 8:30 (CL) Chile Q2 Gross Domestic Product Y/Y: 6.5%e v 9.8% prior

- 8:30 (US) July Consumer Price Index M/M: +0.2%e v -0.2% prior; CPI Ex Food & Energy M/M: 0.2%e v 0.3% prior; CPI NSA: 225.8e v 225.722 prior

- 8:30 (US) Initial Jobless Claims: 400Ke v 395K prior; Continuing Claims: 3.70Me v 3.69M prior�

- 10:00 (US) July Leading Indicators: 0.2%e v 0.3% prior�

- 10:00 (US) Philadelphia Fed: 4.0e v 3.2 prior�

- 10:00 (US) July Existing Home Sales: 4.90Me v 4.77M prior�

- 10:30 (US) EIA Weekly Natural Gas Inventories�

- 11:00 (GE) German Chancellor Merkel attends State Election Campaign Events in Mecklenburg�

- 13:00 (US) Treasury to sell $12.0B in 5-Year TIPS Reopening�

- 14:30 (US) Fed's Dudley to tour Jersey City, New Jersey�

- 18:00 (CL) Chile Central Bank Interest Rate Decision: Expected to leave the Nominal Overnight Rate Target unchanged at 5.25%

Source: http://www.fxstreet.com/fundamental/analysis-reports/european-market-update/2011-08-18.html

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