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LONDON, June 25 (IFR) - European credit markets are openingon the back foot after a fairly soggy night in Asia that saw theNikkei drop by just over 100 points and a 0.6% fall in theShanghai Composite.
As of 7:45am London time according to Tradeweb, the Main is1bp wider at 59bp, the Crossover 4bp wider at 232bp and theSenior Financials 1.5bp wider at 60.5bp.
For most of the European session yesterday, watching thescreens was very much like watching paint dry. Credit indices,Bunds or equities. You name it, they pretty much flatlined.
And the same was true initially in the US. As the sessionprogressed, though, we finally saw some profit taking creepinginto US stocks after opening more or less at record intradayhighs again.
The catalyst for that profit taking was not quite clear. Itcould easily have been yet another uptick in geopoliticaltensions in both the Ukraine and Iraq. Given how fickle themarket is these days, though, it could just as easily have beenEngland's penultimate ball defeat in the second test match orbore draw in the World Cup against Costa Rica. Who knows.
Nevertheless, by the end of the session, the Dow was offover 100 points, while the S&P was down by 0.7%, and that is thereason for the wider open this morning.
So will that minor bout of profit taking morph into a welloverdue full blown correction? Probably not, but you never know.
On the agenda we have the two biggest data releases of theweek in the US in the form of the final reading of Q1 GDP -which is not expected to be pretty - and May durable goods. Wealso get some peripheral supply from Italy after yields gotclose to the euro-era lows again yesterday, although a sternertest of appetite for Italian paper awaits on Friday with 5 and10yr BTP taps.
In reality, one suspects it will be another quiet Europeansession, which will allow us all to concentrate on the third dayof Wimbledon followed by more action from the World Cup later,where groups E and F reach their conclusion.
Overnight News:
US: Fed's Dudley says accommodative policy still veryappropriate; unemployment can fall more before inflation wouldbe a problem; market view of mid-2015 rate hikes looksreasonable.
Fed's Williams says US approx two years from normalunemployment and inflation; Fed has tools to remove stimulusdespite the large balance sheet; cites use of IoER.
Europe: LCH Clearnet cut margin requirements for Spanish andItalian bonds; raised some margins and cut others on Frenchbonds.
Italian Tesoro will sell up to EUR8bn in 5 and 10yy BTPs and5yr CCTs in Friday's auctions; will launch new 5y and 10y BTPsover Q3.
Ukraine: Ukraine helicopter downed by rebels near Slaviansk;nine dead.
Ukraine president does not rule out cancelling cease fireafter helicopter downing; orders security to open fire ifattacked.
Putin says a seven-day ceasefire is not sufficient forpeace; reiterates call for dialogue; cancelling resolutionallowing use of Russia military does not mean Russia will stopprotecting interests of Russian minorities.
Iraq: WSJ reports Syrian air strikes killed 50+ people inwestern Iraq; second consecutive day of air strikes.
Asia: PBoC says regional growth to remain stable; need tomonitor possible risks in financial sector.
Other: Pakistan air flight attacked at Peshwar Airport; onewomen confirmed dead.
French govt is selling 3.1% of GDF Suez via accelerated bookbuild, worth approx EUR1.5bn; could be increased to 3.6%.
European banks including DB, UniCredit and Credit Agricoleare concerned they may now be hit with bigger than expectedpenalties in US after the BNPP fine according to the WSJ.
On the Agenda:
Data: US: Final Q1 GDP is expected at -1.7%; sales expectedflat.
May durable goods expected at flat m/m; ex-transportexpected at 0.4%.
Flash Markit svcs PMI for June is expected at 58.0.
Europe: German GfK consumer sentiment for July prints at 8.9versus consensus of 8.5.
Italian retail sales for April at 9am, while an hour laterwe get June consumer confidence, which is expected at 106.3.
Supply: Italian Tesoro taps the April 2016 CTZ forEUR2-2.5bn and also taps the 10yr linker for EUR0.5-1bn; biddingdeadline 10am, results 15 mins later.
ECONOMIC CALENDAR:
See Reuters TGM2417, Bloomberg TG2417, orwww.ifrmarkets.com/rates/global/economics/global-economic-calendar
PRIMARY MARKET MANDATES and NEWS:
SSA:
The UK debut sukuk is still in the wings.
FIG:
Lloyds Bank (A1/A/A) is arranging a series of fixed incomemeetings focused on Environmental, Social & Governance (ESG)investors in London and Edinburgh starting June 26. A sterlingESG transaction aligned to Lloyds' "Helping Britain Prosper"agenda may follow.
Pensions co Phoenix Group Holdings has mandated Citigroup,HSBC, JP Morgan Cazenove and Lloyds Bank to arrange a series ofinvestor meetings in London and Edinburgh commencing 25 June. Asterling senior deal issued by PGH Capital Limited, a financingsubsidiary of Phoenix Group Holdings, may follow.
CORPORATE/HY/EM:
German pharmaceutical and chemical giant Bayer has mandatedBNP Paribas as structuring advisor and Barclays, BNP Paribas,Citi and HSBC as active book runners for a dual-tranche Reg Seuro dated hybrid.
For the full pipeline of upcoming deals see ReutersTGM17546, Bloomberg TG17546, orwww.ifrmarkets.com/credit/europe/deal-pipeline/international-europe-asia
All of the day's pricings on Reuters TGM17522, BloombergTG17522, orwww.ifrmarkets.com/credit/europe/deal-summary/international-europe-asia
RATINGS:
Moody's downgraded Corporate Commercial Bank's depositratings to B3 from B1 and put ratings on review for furtherdowngrade; affirmed Affinity Water's ratings, stable outlook;rated Bayer's new hybrid notes Baa2; assigned B2 CFR to IthacaEnergy outlook stable.
Fitch affirmed Rabobank at AA-, outlook negative; Nordea atAA- outlook stable; OP-Pohjola at A+ outlook stable; SvenskaHandelsbanken at AA- outlook stable; Revised SEB's Outlook toPositive and affirmed A+; Revised Swedbank's Outlook to Positiveand affirmed IDR at A+; Downgraded Wind to B+ and rated newNotes BB-(EXP)/ RR2(EXP); affirmed ICAP at BBB, stable; affirmedTullett Prebon at BBB-, stable; affirmed BGC Partners at BBB-,stable; cut GFI Group to BB-, still negative.
S&P affirmed Delta Lloyd N.V. BBB+; upgraded BaslerVersicherung AG to A; cut Rand Water to BBB-; affirmed RedElectrica Corporacion at BBB; affirmed Wind Acquisition FinanceSA B (secured BB). (Reporting by Adam Parry, editing by Julian Baker)
