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ITALY: Fitch Rataings said the increases in Italian banks' loan impairment
charges are likely to continue through 2013 because of the weak economy. "Our
outlook for the sector remains negative as the banks face another challenging
year dominated by economic uncertainty", said Fitch, adding "We believe the
stronger banks should be able to manage the increase in provisioning through
earnings generation despite the weakened outlook for profits". Banks with weaker
pre-impairment operating income could find covering bad debt charges with
earnings more challenging. Lower valuations for collateral and longer recovery
times have increased expected losses for new impaired loans, which we think will
lead to higher loan impairment charges, added Fitch.
SPAIN: Moody's said the outlook for Spain's banking system is negative, as it
has been since 2008. The main driver of the outlook is the rating agency's
expectation that the banks will continue to operate in a recessionary economy,
burdened by high levels on non-performing assets that are expected to
significantly deteriorate further across all asset classes, with continued
pressure on profitability and capital, said Moody's in a new Banking System
Outlook published Friday. The outlook also takes into account (1)
still-restricted market access; (2) banks' elevated reliance on ECB funding; and
(3) banks' sizable credit exposures to the Spanish government (Baa3 negative).
Improved bank capital levels, partly because of current recapitalisation
efforts, do not fully offset these sources of rating pressure, especially if the
economy does not improve notably during 2013. This results in an ongoing
negative outlook for the domestic Spanish banking system.
GREECE: Greek PM Samaras is feeling more upbeat on the economy, eKathimerini
says, and believes that 2013 is likely to be the last year of recession as the
general mood on the economy picks up.
EUROZONE: UK press picking up on comments from a Cypriot government official,
noting that the economy could shrink as much as 13% in 2013.
UK PRESS: UK retailer HMV is set to be sabved in srg 50 bn deal, the Telegraph
reports, a move that could safeguard up to 2500 jobs.
DOLLAR: Heading into Friday's non-farm payroll number, there is great
debate about what the dollar will do on a weaker-than/stronger-than result.
MNI's median is +190k, range +140k to +225k, with the unemployment rate seen
unchanged at 7.7% and private payrolls at +200k. In the wake of of Wed's ADP and
weak ISM non-mfg data, some analysts have revised their forecasts lower, with
whisper numbers now around 165k. So a jobs report in line with MNI's median
would likely help to bring back the notion of US outperformance (over Europe)
and send the dollar higher. Conversely, a sub 150k report would disappoint.
EURO-DOLLAR: Closed in NY at $1.2931, after rate had bounced aggressively off
initial Draghi react lows of $1.2745 to $1.2949, before consolidating this
recovery into the close. Also of note, the rate closed back above its 200-dma,
which yesterday was at $1.2892, today at $1.2894. All focus overnight in Asia
was on yen, with trade in euro-dollar through Asia contained within a tight
range of $1.2920/38, opening Europe around $1.2925. Offers remain in place into
$1.2950, more toward $1.2965 with talk of stops placed above. Support remains at
$1.2920, with stronger interest noted at $1.2900 (23.6% $1.2745-1.2949). EZ
retail sales due for release at 0900GMT and Germany factory orders at 1000GMT
and could provide some morning interest but this will be overshadowed by this
afternoon's US employment report. Headline watchers will also be on the lookout
for any comments concerning the ECB discussions ahead of yesterday's rate
decision/Draghi press conference to gauge interest rate outlook.
EURO-DOLLAR: Macro sales from $1.2930 cited for the move back below $1.2920.
Rate currently trades around $1.2919. Bids seen into $1.2900 ($1.2901 23.6%
$1.2745-1.2949).
CABLE: Closed in NY Thursday at $1.5234, after being driven off earlier lows of
$1.5051 to a high of $1.5245 as rate tracked euro-dollar's sharp bounce, with
strong demand for sterling-yen (general strong sales of yen seen) aiding the
recovery. Euro-sterling through Asia was contained within a range of
stg0.8485/96 leaving cable to take direction from euro-dollar moves, though with
most attention remaining on yen both pairs were left on the sidelines, cable
being held overnight between $1.5215/43 as it consolidated Thursday's move. BOE
Spencer Dale due to speak at 0800GMT, followed by the release at 0830GMT of BOE
Financial Policy committee Minutes, provides the morning's domestic interest but
this will be overshadowed by this afternoon's release of key US jobs data at
1230GMT. Cable offers seen from $1.5245 and seen extending toward $1.5260
($1.5259 Apr2 high), a break here to open a move toward $1.5280 (Mar25 high)
ahead of $1.5300. Support seen from $1.5215 through to $1.5200. A break here to
open a deeper move toward $1.5170. For euro-sterling, resistance back again into
stg0.8500, a break to expose Thursday highs at stg0.8521. Support stg0.8485/80
ahead of stg0.8465/60.
YEN: Yen remained under pressure into early Asian dealing with dollar-yen able
to extend the post ECB Draghi rally from its NY close at Y96.36 (session high
Y96.42) to bring pressure to bear on the reported barrier level at Y97.00.
Traders had been made aware that large Y97.00 strikes had been bought Thursday
for Monday expiry. The initial break took rate to Y97.06, but this move met
strong take profit sell interest that eased rate back to Y96.64. Option gamma
demand cushioned the move and allowed for another assault on the Y97.00 level,
this time taking the rate on to highs of Y97.19 where it met option linked
offers placed into Y97.20. Euro-yen moved higher in tandem, extended its
recovery highs to Y125.60 off NY closing level of Y124.61. The post BOJ euphoria
stalled with the Nikkei and JGB's stalling before turning sharply lower
prompting a quick move back into the yen. Dollar-yen dropped to fresh intraday
lows of Y96.14, while the cross dropped to Y124.38. Traders have suggested that
the Japanese market were looking for further operations from the BOJ but none
forthcoming the market was quick to turn tail and cover back.
DOLLAR-YEN: Directional name seen on the offer through Y96.30, traders flash.
Rate extends corrective pullback off the Asian high to currently deal Y96.17.
JAPAN STOCKS CLOSE: Japan's benchmark stocks are trading sharply higher Friday,
after a wild afternoon session, well shy of the session best levels at 13,225.
The Nikkei 225 was higher by 199.10 points, or 1.58%, at 12833.64. Into the
close, the broader-based TOPIX was higher by 29.19 points at 1066.95. Market
breadth indicators saw 150 issue higher, 69 lower and 6 unchanged. Preliminary
volume stood at 4.35 bn shares.
OPTIONS: FX: Option expiries for today's 1000ET cut,
* Euro-dollar; $1.2800, $1.2850, $1.2900, $1.2920, $1.2950-55, $1.3000, $1.3060
* Dollar-yen; Y94.00, Y95.00, Y95.50, Y96.00, Y96.50
* Euro-yen; Y123.50
* Cable $1.4990, $1.5100, $1.5200
* Euro-sterling; stg0.8550
* Aussie; $1.0400, $1.0510, $1.0525
* Euro-Aussie; A$1.2550
* Dollar-Canada; C$1.0100, C$1.0290
EUROZONE ISSUANCE: Sovereign bond issuance in the eurozone for this week has now
been completed and totals E15.28bln vs E21.0bln sold last week. As a recap,
Germany re-opened its 5-year benchmark 0.50% Feb 2018 Bobl issue for E3.288bln.
On Thursday, Spain sold a new 3-year benchmark 3.30% July 2016 Bono and taps its
4.10% July 2018 Obligacion and also 5.50% Apr 2021 Obligacion issues for
combined size of E4.307bln vs target E3.0bln-E4.0bln. Also on Thursday, France
conducted its regular OAT auctions, where the AFT tap its 10-year benchmark
2.25% Oct 2022 OAT and also off-the-run OAT issues 3.50% Apr 2020 OAT and 3.75%
Apr 2021 OAT issues for combined size of E6.971bln. In terms of reinvestment
flows, there are no redemptions due and minor coupon payments from Italy
E0.22bln and Spain E0.11bln -- to leave net cash flow negative to the tune of
E15.0bln versus -E1.2bln last week. For full details of forthcoming issues,
please see eurozone bond auction calendar & MNI Eurozone Net Cash Flow Matrix.
EUROZONE: Timeline of key events in the eurozone for next few weeks:
- Apr 5 ECB publishes its 3-year LTRO repayment amount for following week
- Apr 7 Italian March Target 2 data and central bank lending figures
- Apr 8 ESM Regling speaks at FDEF Conference on "Is the Euro crisis over?"
- Apr 10 Italy T-bill auction
- Apr 11 Eurogroup meeting in Dublin
- Apr 11 Spanish March Target 2 data and central bank lending figures
- Apr 12/13 Informal ECOFIN meeting in Dublin
- Apr 12 Italy T-bill redemption for E8.8bln
- Apr 15 Italy joint session of parliament called to elect new President
- Apr 15 Italy bond redemption of 4.25% 2013 BTP for E16.7bln
- Apr 16 Spain 6-/12-month T-bill auctions
- Apr 16/17 IMF publishes Global Financial Stability Report
- Apr 18/19 G20 FinMin & Central Bank Governors' meeting
- Apr 18 Spain bond auction
- Apr 18 Ireland bond redemption
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