EURO CREDIT-Losses grow as Glencore, VW weigh

LONDON, Sept 29 (IFR) - It (Other OTC: ITGL - news) has been a rough night in Asia to follow some heavy falls for stocks in the US. That has spawned another wider start for European credit, only this time more resolutely so than Monday's open, with the Main +4bp at 94.5bp, the Crossover +17bp at 389.25bp, and the Sen Fin +4bp at 100bp. All three opened gently wider yesterday but picked up the pace soon afterwards to close on or within sight of the daily wides, out 6, 25 and 6.5bp respectively.

The reasons for the fragile tone remain unchanged. On the micro front, spreading commodity sector weakness overnight has followed the epic Glencore (Xetra: A1JAGV - news) sell-off, and there is no sign of an end or even a hint of the beginning of an end to the VW crisis.

Macro-wise broader markets are still feeling the effects of yesterday's weak industrial profits data out of China, although perversely the Shanghai Comp has outperformed, again, and is down only 2% at 3,035 under threat of the usual splurge of state support around the 3,000 level.

And then there is the question of lift-off in the US, where all too predictably clarity is still lacking after the first of this week's flood of Fed speakers yesterday.

On to today and those same themes will rumble on, although it is all quiet on the latter front for the first and only time this week.

The data calendar is a touch more meaningful than we had to start the week. The European highlight should be preliminary German inflation this afternoon at 1pm. That is forecast at -0.1% m/m and flat y/y, which if replicated in tomorrow's area-wide print is bound to ratchet up knee-jerk calls for more QE.

US markets have CaseShiller house prices, consumer confidence and Dallas Fed, but there are bigger fish to fry over the last three days of the week so their impact should be only transitory.

Overnight news:

Fed's Evans sees mid 2016 as appropriate to raise rates; need evidence of true upward inflation to hike; likely approach 2% by end of 2018. In Q&A, says more accommodation needed should things 'weaken very much'; Fed closer to hiking and should communicate this; Fed to consider stronger dollar; sees 3x25bp rate hikes by end 2016; could be open to hiking this year but needs to see better data.

Fed's Williams still expects a hike this year; Sept was a close call; starting to see signs of imbalances/excess in financial markets, highlighting real estate; inflation still lower than would like; must be willing to hike, then reassess policy; nothing in last month or two implies China growth is worse than expected.

EU's Dombrovskis says Greek rescue and bank review need progress; rescue 'more or less on track'.

Greek fin ministry confirmed Greece will annul VAT exemptions for Greek islands, as required by the bailout deal.

China announced a second round of 206 Public/Private Partnership projects worth CNY659bn.

PBoC injected CNY40bn via 2wk reverse repos; overall drained 10bn on week (no ops Thurs given the public holidays).

RBI cut repo and rev repo rates 50bp versus 25bp expected.

Equities:

VW CEO sees fewer than 11m cars affected by scandal.

VW CFO says 6.5bn provisions do not cover legal fees or potential damages.

VW orders in Japan are over 10% below expectations after the emissions scandal, according to the Nikkei.

Qatar sovereign wealth fund lost $5.9bn in 10 days on stakes in Glencore and VW, according to Bloomberg.

Citi notes Glencore a "buy"; balance sheet not stressed and can sell businesses if needed.

ECONOMIC CALENDAR:

See Reuters TGM2417, Bloomberg TG2417, or www.ifrmarkets.com/rates/global/economics/global-economic-calend ar

PRIMARY MARKET MANDATES and NEWS (Other OTC: NWSAL - news) :

SSA:

KfW, Aaa/AAA/AAA (all stable) and guaranteed by Germany, has mandated Barclays (LSE: BARC.L - news) , HSBC and UniCredit (EUREX: DE000A163206.EX - news) for a euro 3yr Global benchmark issue IV/2015.

FIG/COVEREDS:

Banca Carige (Dusseldorf: -BJ51.DU - news) has mandated Commerzbank (Xetra: CBK100 - news) , Mediobanca (Milan: MB.MI - news) , Natixis (Paris: FR0000120685 - news) , Nomura and UBS (NYSEArca: FBGX - news) to arrange investor meetings across Europe starting on Tuesday October 6. A euro benchmark mortgage covered bond transaction with expected ratings Ba1/BBB- (Moody's/Fitch) may follow.

Rothesay Life Limited has mandated Barclays, Goldman, HSBC and Lloyds to arrange investor meetings in the UK commencing 29 September. A GBP bullet sub may follow.

CORPORATE/HY/EM:

Finnair (LSE: 0EG8.L - news) has mandated Danske Bank (Copenhagen: DANSKE.CO - news) and Morgan Stanley (Xetra: 885836 - news) (structuring advisers) and Pohjola to arrange investor meetings ahead of a Reg S euro hybrid. Unrated. Meetings began in Copenhagen on Monday, switch to Helsinki and Stockholm on Tuesday before finishing in Switzerland on Wednesday.

For the full pipeline of upcoming deals see Reuters TGM17546, Bloomberg TG17546, or www.ifrmarkets.com/credit/europe/deal-pipeline/international-eur ope-asia

All of the day's pricings on Reuters TGM17522, Bloomberg TG17522, or www.ifrmarkets.com/credit/europe/deal-summary/international-euro pe-asia (Reporting by Julian Baker)