Reuters Insider - Inside the News: Euro Spreads Tighten But Belgium Lags
13/06/2016 11:10
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Source: Thomson Reuters
Description: Peripheral euro zone spreads have tightened after
the successful debt auctions this week, but
Belgium is lagging behind and the likelihood is it
will catch up, says Reuters Analyst Vincenzo
Albano.
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Transcript (May be auto-generated)
0900 GMT: Investors take profit on growth trades and adjust for a surprisingly
hawkish ECB. The Euro hits a one-month high against the Dollar after ECB
President Trichet highlights rising inflation risks yesterday, bringing forward
ECB rate hike expectations. The currency is up 4.4% this week on track for its
fourth-biggest weekly rise ever. Banks, as always, divided, Goldman went long
Euro-Dollar yesterday at 1.31, targeting 1.37; Morgan Stanley opening shorts at
1.3333, targeting 1.27.
Euro zone bond spreads holding near their tightest levels of the week following
this week's smooth debt auctions from Spain, Portugal and Italy, US Treasuries
prices are lower after Fed Chairman Bernanke says the risk of deflation has
receded considerably. US CPI and retail sales data due out later on today.
European stocks are falling back. Resource and energy shares are lower, while
bank stocks underperform, having posted solid gains this week. Losses may be
limited, however, after strong numbers from Intel, after the bell in the US,
Thursday. Brent crude steadies above $98 after gaining more than 4% this week,
outpacing US benchmark oil prices. Peripheral Euro zone spreads tighten. But
Belgium's CDS basis still lags behind. For more on Belgium's spread, we're
joined now by Vincenzo Albano, Reuters Fixed Income Analyst. Vincenzo, how are
spreads in peripheral Euro zone reacted to yesterday's auctions? Well,
peripheral Euro zone spreads have tightened after successful bond auctions, but
Belgium lags behind. Its CDS is now in line with Italy, while the boundaries of
core and peripheral Euro zone are redefined, Belgium may be subject to further
volatility. In fact, it's just on the edge. CDS basis is higher than in Italy
and in Spain, and in fact, the Belgium CDS are in line with the periphery, while
yields are at the top end of the core Euro zone. In any case, we think that the
CDS basis should tighten, either on CDS level retracing or the benchmark curve
bear steepening. Possibly from the current 97 area, the basis may tighten in
line with Italy between 70 and 60 basis points. Back to you, Axel. Okay, many
thanks, Vincenzo. Carrefour, Europe's biggest retailer announced forecast
beating Q4 sales, after the close of trade yesterday. Earlier, I asked our
Equities Analyst, Richard Muller, how valuations compare. The stock's not out of
the woods yet. You know, in terms of StarMine relative valuation ranking, it is
in the top 20% of the market. But the overall valuation momentum scores in the
bottom 30% of the market, so we don't expect the stock to significantly
outperform over the next 12 months. Just before we go, a quick check on the
FTSEurofirst 300. Right now, we are down 0.6% at 1,150.65 is where we stand
right now. Next news update at 1000 GMT. Stay with us for updates on the hour,
every hour. I'm Axel Threlfall. This is Reuters