Eur/usd - page 62
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Eurozone Construction Output Declines For Third Month
Eurozone construction output shrunk for the third consecutive month in November, data released by the statistical office Eurostat showed on Friday.
Total construction declined 0.6 percent month-on-month, following a 1.1 percent fall in October, which was revised from a 1.2 percent fall reported initially.
Building construction decreased 1.1 percent, while civil engineering output rose 1 percent.
In EU 28, construction output fell 1.1 percent monthly, after a 0.3 percent decline in the previous month. Output decreased for the third successive month.
The biggest monthly declines were noted in the Czech Republic, Romania and the U.K. The largest increases were witnessed in Slovenia, Poland and Hungary.
Year-on-year, euro area construction output shrunk 1.7 percent in November, after a 2.3 percent slump in October, revised from a 2.4 percent fall.
In EU 28, output dropped 1.6 percent, following a 1 percent decrease in October, which was revised from a 0.8 percent decline.
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Spain Leading Index Continues To Rise
Spain's leading index continued to climb in November, helped by strong order book balances, a survey from the Conference Board said on Friday.
The Conference Board Leading Economic Index for Spain rose 0.3 percent in November to 105.4, following a 0.2 percent increase in October and 0.4 percent climb in September. In the six months to November, the index gained 1.5 percent.
Among the six components of the index, four increased in November. They were the order books survey, the long-term government bond yield, job vacancies, and the Spanish contribution to Euro M2. Negative contribution came from the Spanish equity price index. Meanwhile, the capital equipment component of industrial production was unchanged.
The coincident index of the survey edged up 0.1 percent in November, following a similar increase in October and a 0.1 percent fall in November.
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EUR/USD Forecast January 20-24
EUR/USD was on the back foot, as the euro gave a fight but eventually surrendered to the dollar. The ZEW Economic Sentiment, Flash Manufacturing and Services PMIs and the Spanish unemployment are the highlights of this week. Here is an outlook on the major events and an updated technical analysis for EUR/USD.
Eurozone CPI was confirmed at low levels, raising the pressure on the ECB. The central bank aims to keep inflation below but close to 2% is not concerned about deflation, but is talking about it more than ever. In the US, inflation seems somewhat more solid, and with the help of OK retail sales as well as a strong Empire State Manufacturing Index, the dollar rode higher across the board, and the euro was no exception.
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European Banks Face $1 Trillion Gap Before Review, Study Shows
European banks have a capital shortfall of as much as 767 billion euros ($1 trillion) before the European Central Bank’s probe into the financial health of the region’s lenders, according to a study.
French banks show the biggest gap of 285 billion euros, followed by German lenders with as much as 199 billion euros, Sascha Steffen of the European School of Management and Technology in Berlin and Viral Acharya at New York University said in their study dated Jan. 15. The figures assume a benchmark capital ratio for other book measures of leverage of 7 percent, they wrote.
“A comprehensive and decisive AQR will most likely reveal a substantial lack of capital in many peripheral and core European banks,” the authors wrote, referring to the central bank’s Asset Quality Review stage of the Comprehensive Assessment.
The Frankfurt-based ECB is conducting a three-stage assessment of bank assets before it assumes oversight of about 130 lenders across the 18-member currency bloc this November. Steffen and Acharya examined 109 of the 124 euro-area banks that will be part of the AQR, including Deutsche Bank AG (DBK), Credit Agricole (ACA) SA, BNP Paribas SA (BNP) and Banco Santander.
The authors see particularly high risks among German state-owned banks, or Landesbanken. “Germany has many government-owned institutions that may require capital issuances and/or bail-ins,” they wrote.
Spanish banks have a shortfall of 92 billion euros, while Italian banks lack 45 billion euros, the study showed.
“Our results suggest that with common equity issuance and haircuts on subordinated creditors, it should be possible to deal with many banks’ capital needs,” the authors wrote. “Some will, however, require public backstops, especially if bail-ins are difficult to implement without imposing losses on bondholders, who may themselves be other banks and systemically important financial institutions.”
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Deutsche Bank books pretax loss
Deutsche Bank AG said Sunday it booked a pretax loss for the fourth quarter, as Germany's biggest bank took charges for valuation adjustments, litigation costs and others, but also on weaker revenues at the investment banking operations.
Co-Chief Executives Juergen Fitschen and Anshu Jain said they expect "2014 to be a year of further challenges and disciplined implementation; however, we are confident of reaching our 2015 targets and delivering on our strategic vision for Deutsche Bank."
The bank's fourth-quarter pretax loss was 1.2 billion euros on charges of some EUR1.66 billion combined for valuation adjustments in the areas of credit, debt and funding and others. For litigation costs alone, Deutsche Bank took a EUR528 million charge in the final quarter. The bank had settled a number of legal disputes in 2013, but still faces others, potentially costly, this year.
Quarterly revenues were down 16% at EUR6.6 billion, largely due to losses in the investment bank.
The figures confirm a story by The Wall Street Journal, which reported Friday Germany's biggest bank will likely tell investors that fourth-quarter results will fall short of expectations, citing people familiar with the matter. The report caused a 3% decline in the bank's share price in U.S. trading Friday.
Analysts surveyed by Bloomberg had estimated Deutsche Bank's fourth-quarter profits will be about EUR698 million ($951 million).
For the full year, pretax profit was EUR2.1 billion, while net revenues were down 5% from the year earlier.
The bank had also issued a profit warning in the fourth quarter of 2012, before reporting a EUR2.2 billion loss.
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German Producer Prices Fall For Fifth Month
Germany's producer prices declined for the fifth consecutive month in December, Destatis reported Monday.
Producer prices dropped 0.5 percent from the preceding year, which was slower than the 0.8 percent fall seen in November and 0.6 percent decline forecast by economists.
Cost of intermediate goods and energy decreased 1.8 percent and 1.1 percent, respectively. Meanwhile, consumer goods advanced 1.5 percent and durable goods prices by 1.1 percent. Capital goods prices moved up 0.7 percent.
Month-on-month, producer prices gained 0.1 percent, offsetting the 0.1 percent fall in November.
In 2013, the index of producer prices for industrial products fell slightly by 0.1 percent on an annual average from the prior year, after rising 1.6 percent in 2012, the report showed.
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The Chart That Shows Why EU's Barroso Is A Liar
Despite record levels of unemployment across Europe (most specifically among the youth), record high (and surging) levels of loan delinquencies, and collapsing credit creation, the leaders of the EU continue to peddle their own brand of dis-information and willful blindness. While UKIP's Nigel Farage tongue-lashings are normally enough, EU's Barroso this morning unleashed the following:
*EU'S BARROSO SAYS ECONOMIC GROWTH 'SLOWLY RETURNING'
*EU'S BARROSO SAYS EU AT TURNING POINT IN CRISIS
However, as the following chart of earnings estimated for European firms shows, there is absolutely none, zero, nada sign on a 'turning point' and, as we have noted previously, unless the EUR weakens significantly, Europe will rapidly dip back into re-re-recession once again.
Via Goldman Sachs:
While being a strong year for equity returns, 2013 has been poor on the earnings side. Consensus now expects 2013 earnings to shrink by 3.5% and the level of earnings has been revised down by close to 15% YTD. Looking at actual earnings rather than consensus expectations, with the exception of the second quarter of 2013, earnings seasons have been poor through 2013.
Spot the "Turning point" in that chart...
and still think the collapse in EM is not a problem... (Companies exposed to emerging markets saw markedly more negative sales surprise than the overall market. 39 companies from our EM exposure basket reported sales in 3Q. Out of these 39 companies, 25 missed estimates by more than 2% while only 2 beat estimates by more than 2%.)
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Deutsche Bank to rein in global bond trading in profit push
Deutsche Bank (DBK.DE) is to rein in global trading ambitions to put more emphasis on profitability than size at its core bond trading business where a sharp drop in revenues contributed to a big fourth quarter loss.
The 1.15 billion euro ($1.56 billion) loss compounds problems that have dogged Germany's biggest bank over the past year, including a list of lawsuits and regulatory wrangles and the need to shore up its balance sheet.
Co-Chief Executive Anshu Jain stuck by the bank's promise to meet its 2015 targets while predicting a tough 2014.
"We are forecasting that 2014 will represent the turning point where the bulk of our legacy losses, litigation and derisking costs ... will be behind us," he told analysts in a conference call on Monday.
Jain said Deutsche's debt downturn was structural and required shifting activities away from Europe and toward the more vibrant U.S., and away from size and towards profitability.
"This is a change," Jain said. "We could afford to carry those businesses in the past, we no longer can."
Deutsche's shares fell six percent in response to the unexpected loss. This compared with a decline of 0.8 percent in an index of its peers (.SX7P). The bank, which published the results on Sunday, had originally been set to report on January 29.
Revenue at Deutsche's debt-trading business, which accounts for nearly three quarters of its trading revenue, fell by almost a third, much more than at U.S. rivals which also suffered from a bond trading slowdown ahead of a cut in the Federal Reserve's bond buying to help the U.S. economy.
At Goldman Sachs (GS.N) and Citi (C.N), for example, revenue from bond trading fell 11 percent and 15 percent respectively in the fourth quarter.
Deutsche, one of Europe's major bond trading houses, has been able to vacuum up business from rival banks that are scaling back. But tougher regulatory demands after the financial crisis have forced it to shed assets itself.
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European Economics Preview: German Economic Confidence Data Due
Economic confidence survey from Germany is the major report due on Tuesday, headlining a light day for the European economic news.
At 2.00 am ET, Statistics Finland is set to release unemployment data for December. The jobless rate is forecast to fall to 7.4 percent from 7.9 percent in November.
At 3.00 am ET, the Hungarian Central Statistical Office is scheduled to publish average gross wages for November. Wages were up 5.7 percent annually in October.
Half an hour later, Statistics Netherlands is slated to issue consumer confidence figures. The index is seen rising to -14 in January from -16 in December.
At 5.00 am ET, Germany's ZEW economic confidence survey results are due. The sentiment index is seen at 64 in January, up from 62 in December.
At 6.00 am ET, the Confederation of British Industry is set to release Industrial Trends survey data. The index is expected to fall to 10 percent in January from 12 percent in December.
Turkey's central bank decision is due at 7.00 am ET. The central bank is expected to keep its key rates unchanged.
At 8.00 am ET, Hungary's central bank is scheduled to announce its rate decision. Economists forecast the bank to cut its base rate to 2.9 percent from 3 percent.
The International Monetary Fund is slated to release an update on the World Economic Outlook at 9.30 am ET.
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German ZEW Economic Sentiment ticks lower – EURUSD follows
The German ZEW Economic Sentiment indicator dropped from 62 to 61.7 points. It was expected to tick up from 62 to 63.4 points, extending its gains on high ground and reflecting optimism for the German economy. The all-European number carried expectations for a rise from 68.3 to 70 points. This less important one surprised by rising to 73.3 points. The small miss in the headline German figure weighs on the euro.
EUR/USD was pressured to the downside towards the publication, trading at around 1.3540, below the 1.3550 battle line. It slides after the release to 1.3530.
Another important business survey comes from IFO, which is sometimes considered Germany’s No. 1 think tank. Nevertheless, the early release from ZEW gives it added weight. The euro sometimes feels German releases more than all-European numbers.
Support lies at 1.3515, and more serious resistance is at 1.3625.
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