News
CZ: Neutral – MinFin sells CZK 7.5bn CZGB VAR/23 (CZK 8bn on offer): bid/cover 1.54, yield 12M PRIBOR + 49.5bp (p2)
LV: Positive – President names Valdis Dombrovskis as new PM (p2)
PL: Mixed – September IP growth slows to 7.7% yoy, PPI accelerates to 8.1% yoy / new 5y POLGB bmrk sees very solid demand (p2)
Today’s Events
ES: September PPI / HU: HUF20bn 2014, HUF15bn 2017 and HUF 8bn 2028 GB auctions, October Econ Sentiments, Business and Consumer Confidence / PL: September core inflation / RO: RON0.6bn 2014 GB auction / SRB: RSD4bn 6M t-bill auction / RU: International reserves as of Oct., 14th / SL: September PPI / TU: Policy rate decision
EEMEA Markets
* Global backdrop: following the comments last nigh about the weekend EU summit markets are opening on a weak footing with Asian equities down more than 1% whilst the DAX dropping by 1.5% in the open. EUR/USD is down about 0.5% whilst CEEMEA credit is opening about 6/7bp wider. The main event of the day will be the Turkish policy rate decision and bond auctions in Hungary and Romania.
* Sept data show that the Polish and Russian economies are holding up well: There are plentiful concerns about the extent of the slowdown in economic activity globally, as well as in the CEE region. Wednesday saw the release of some of the first macro indicators in the region for September. While focused on only two countries, Poland and Russia, the data does not come close to signalling recession but instead robust growth momentum. In Poland industrial production posted gains of 1.9% mom SA in September. Given that August posted gains of 2.2% mom, a flat or even modestly negative reading should not have been too surprising. qoq annualised, IP showed gains of 6.1% in 3Q. Assuming industrial production shows no further monthly gains (or declines) in 4Q, the positive carryover means that IP on average in 4Q will be 8.1% (annualised) above 3Q. This IP reading puts Poland on track for qoq GDP growth of approximately 1% in 3Q, broadly in line with 1Q and 2Q. Should GDP remain flat in 4Q, Poland will post full year 2011 growth in excess of 4.0%. With inflation above target until at least mid next year, GDP growth in line with potential and PLN having contributed to a significant weakening in monetary conditions in the past few months, it is difficult to argue that the NBP should feel pressure to cut rates. In Russia domestic demand growth appears to be gaining steam. With inflation easing, real consumer purchasing power in on the up. September saw real wage growth of 6.2%, by far its highest rate of growth this year. The rate of decline in unemployment is slowly, with September showing unemployment down 0.6pp from Sep-10, but with unemployment at 6.0%, below Aug-08 rates, that is only to be expected. Retail sales growth accelerated to 9.2% yoy, its fastest pace of growth since Aug-08. After a very weak start to the year, investment growth is clearly recovering, up 8.5% yoy in September. Relative to Poland, industrial production dynamics are considerably weaker, down 0.3% mom SA in September. For the quarter as a whole industrial production was up a lacklustre but not terrible 3.4% SA and annualized.
* Turkey: the CBT is holding a rate setting meeting today (decision announced at 12am ldn time). Although several investors are expecting a rate hike we believe the bank will keep rates unchanged. We nevertheless recommended to pay 1y1y TRY CCS rates yesterday morning given the level of risk premium seems to inconsistent with the banks effort to battle the TRY depreciation. We would continue to hold onto this trade with an initial target at 7.25%.
* CEEMEA bond auctions: Hungary will sell HGBs (2014/D, 17/A and 28/A papers). The offered amount is HUF43bn. We remain cautious with Hungary local currency debt and do not recommend participating at the auction. Romania will plan to sell RON600mn 10/14 ROMGB. Given the MinFin still maintains the yield cap we expect only partial filling or even full rejection of the bids. Yesterday MinFin announce that Romania is planning to tap international markets in Q4 with either an EUR or USD bond.
Click here to read the full report:
http://www.easyforexnews.net/wp-content/uploads/2011/10/EEMEA-Daily_20oct11.pdf
Gillian Edgeworth / Gyula Toth
UniCredit Research