Economy, Markets, Ratings, Statistics and Rates - September 4, 12 (3rd update)

MARKETS and RATINGS

09:00 AM

Morning Call: European Markets Lower Ahead of ECB Meeting Thursday

European equities are trading little changed this morning managing to hold on to their gains from yesterday as they continue to benefit from remarks by ECB chief Draghi yesterday that he would be comfortable buying shorter dated bonds to bring periphery yields down.

With the economic data schedule being on the light side in Europe today, focus will be on meetings between Chancellor Merkel and European Union President Van Rompuy and between Italian Prime Minister Monti and French President Hollande with the European financial crisis, much needed stimulus measures to restart growth in the Euro-zone and austerity measures once again being the main topics on the agenda.
Overall trading is expected to remain range-bound with many traders staying on the sidelines and are unwilling to enter in any large scale positions ahead of Thursday’s all important ECB meeting where many expect ECB Draghi to release more details regarding his bond buying plans.
In the afternoon attention will shift towards important US data mainly the ISM manufacturing index which is expected to stabilise around the crucial 50 mark, with many considering a figure below 50 as an indication that manufacturing is shrinking.
Furthermore traders will keep a close eye on vehicles sales for August with major carmakers releasing their figures throughout the day, so far this year sales have been better than expected mainly due to very attractive incentives offered by car dealers and car manufacturers. Trading volume will be most likely below average with some traders still on an extended break due to yesterday’s Labor day.

Markus Huber - ETX Capital - www.etxcapital.com

12:00

Moody's places EU on negative outlook
The European Union (EU) could see its top-notch credit rating get reduced in the near future, it has emerged.
In a new report published this morning (4 September), Moody's Investors Service has revealed it has placed the economic bloc on negative outlook, meaning it may be stripped of its AAA score in the coming months.

FSA warns banks over software glitches
Major UK banks have been urged to make sure they put strong measures in place to prevent any software glitches occurring in their company.
The Financial Services Authority (FSA) has written to the country's nine largest banks and building societies to warn them against allowing an issue such as the Royal Bank of Scotland's (RBS) computer crash to happen again, the Financial Times reports.

12:30

European stock indices are on the back foot today with investors cutting exposure to risk ahead of the ECB’s monthly meeting on Thursday. We are seeing investors consolidate yesterday’s gains in today’s session with no major data from the euro zone to offer direction. Euro zone PPI came in line with expectations and thus a very muted response, with all eyes now turning to the US ISM manufacturing number later on this afternoon.

Overall, volumes remain thin, with no strong leads as the U.S. was closed for a public holiday yesterday – investors here in Europe are sitting on their hands in a “wait and see mode”, as they don’t want to get caught in the event of the ECB failing to deliver on a policy that would ease tensions in the debt markets. Yesterday, ECB head Draghi reportedly said to EU committee members that buying government bonds with shorted dated maturities [three years or less] would be within the bank’s mandate, effectively indicating to the market that the ECB has options on the table other than outright bond buying but more importantly, that opposing forces in Germany and Finland will have to step aside and let the ECB get to work.

The only way we will see a meaningful response by the ECB in the near term is if Germany and it’s Bundesbank can come to an agreement with the ECB and southern European nations over future policies and if nations like Spain and Italy can convince Germany over their commitment to austerity measures and servicing their toxic debt piles. Admittedly, the implications and the strain on the German economy in the event of aggressive stimulus plans by the ECB, such as eurozone bonds worries the German government.

The key test will be later on next week when the German Constitutional Court votes on the legality of the euro zone’s permanent bailout fund, the ESM. Already today, the EU Commission said it is not ruling out options on an ESM banking licence – this would be one closer step to eurozone bonds. Looking ahead to today’s session, we have US ISM manufacturing data which will take centre stage after readings from the UK, euro zone and China yesterday. ETX Capital currently sees the DJIA opening up around 21 points and the S&P 500 up around two points.

Ishaq Siddiqi - ETX Capital - www.etxcapital.com

ECONOMY

(Economy commentaries from Wednesday, September 5, 2012).

STATISTICS of the day

SUISSE
Les chiffres d’affaires du commerce de détail en juillet 2012
Hausse des chiffres d'affaires de 3,2% en termes réels

Selon les résultats provisoires de l'Office fédéral de la statistique (OFS), les chiffres d'affaires du commerce de détail, corrigés de l’effet des jours ouvrables et des jours fériés, ont augmenté de 3,2% en termes réels en juillet 2012 par rapport à juillet 2011 (+0,9% en termes nominaux). Ajustés des variations saisonnières, les chiffres d’affaires du commerce de détail ont reculé de 0,4% en termes réels en juillet 2012 par rapport au mois précédent (-0,5% en termes nominaux).

SWISS
Retail trade turnover growth in July 2012
Real turnover growth of 3.2%

Neuchâtel, 03.09.2012 (FSO) – According to provisional results from the Federal Statistical Office (FSO), real turnover in the retail sector adjusted for sales days and holidays rose by 3.2% in July 2012 compared with July 2011 (in nominal terms +0.9%). Real, seasonally adjusted turnover in the retail sector fell by 0.4% in July 2012 compared with June 2012 (in nominal terms -0.5%).

CHINA
China's Non-manufacturing PMI Dropped in August
National Bureau of Statistics of China 2012-09-04 09:48:46

Department of Service Statistics of NBS
China Federation of Logistics and Purchasing (CFLP)

In August, non-manufacturing purchasing manager index was 56.3 percent, 0.7 percentage points higher than that in the previous month, still staying above the threshold.
In view of different industries, the purchasing manager index of construction was 61.1 percent, 0.7 percentage points higher than that in the previous month, still positioned in the high level of the range. The purchasing manager index of service was 55.1 percent, increased 0.7 percentage points month-on-month, of which, air transport, leasing and business services, accommodations, television and satellite transmission services industry positioned above the threshold, the total amount of the business maintained growth, railway transport, residents service and repair industry, and road transport positioned below the threshold, the total enterprise business decreased.

CHINA
China's PMI Decreased in August
National Bureau of Statistics of China 2012-09-04 08:34:23

Department of Service Statistics of NBS
China Federation of Logistics and Purchases (CFLP)

In August, China's manufacturing purchasing managers index (PMI) was 49.2 percent, down by 0.9 percentage points month-on-month. In view of the sizes of enterprises, the PMI of large-sized enterprises was 49.1 percent, decreased 1.2 percentage points month-on-month, that of medium-sized enterprises was 49.9 percent, decreased 0.3 percentage points month-on-month, that of small-sized enterprises was 47.7 percent, decreased 0.4 percentage points month-on-month.

RATES

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