EURO CREDIT-Wider start after equity profit taking

LONDON, June 25 (IFR) - European credit markets are opening on the back foot after a fairly soggy night in Asia that saw the Nikkei drop by just over 100 points and a 0.6% fall in the Shanghai Composite.

As of 7:45am London time according to Tradeweb, the Main is 1bp wider at 59bp, the Crossover 4bp wider at 232bp and the Senior Financials 1.5bp wider at 60.5bp.

For most of the European session yesterday, watching the screens 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 session progressed, though, we finally saw some profit taking creeping into US stocks after opening more or less at record intraday highs again.

The catalyst for that profit taking was not quite clear. It could easily have been yet another uptick in geopolitical tensions in both the Ukraine and Iraq. Given how fickle the market is these days, though, it could just as easily have been England's penultimate ball defeat in the second test match or bore draw in the World Cup against Costa Rica. Who knows.

Nevertheless, by the end of the session, the Dow was off over 100 points, while the S&P was down by 0.7%, and that is the reason for the wider open this morning.

So will that minor bout of profit taking morph into a well overdue full blown correction? Probably not, but you never know.

On the agenda we have the two biggest data releases of the week in the US in the form of the final reading of Q1 GDP - which is not expected to be pretty - and May durable goods. We also get some peripheral supply from Italy after yields got close to the euro-era lows again yesterday, although a sterner test of appetite for Italian paper awaits on Friday with 5 and 10yr BTP taps.

In reality, one suspects it will be another quiet European session, which will allow us all to concentrate on the third day of 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 very appropriate; unemployment can fall more before inflation would be a problem; market view of mid-2015 rate hikes looks reasonable.

Fed's Williams says US approx two years from normal unemployment and inflation; Fed has tools to remove stimulus despite the large balance sheet; cites use of IoER.

Europe: LCH Clearnet cut margin requirements for Spanish and Italian bonds; raised some margins and cut others on French bonds.

Italian Tesoro will sell up to EUR8bn in 5 and 10yy BTPs and 5yr CCTs in Friday's auctions; will launch new 5y and 10y BTPs over Q3.

Ukraine: Ukraine helicopter downed by rebels near Slaviansk; nine dead.

Ukraine president does not rule out cancelling cease fire after helicopter downing; orders security to open fire if attacked.

Putin says a seven-day ceasefire is not sufficient for peace; reiterates call for dialogue; cancelling resolution allowing use of Russia military does not mean Russia will stop protecting interests of Russian minorities.

Iraq: WSJ reports Syrian air strikes killed 50+ people in western Iraq; second consecutive day of air strikes.

Asia: PBoC says regional growth to remain stable; need to monitor possible risks in financial sector.

Other: Pakistan air flight attacked at Peshwar Airport; one women confirmed dead.

French govt is selling 3.1% of GDF Suez (TLO: GAZ-U.TI - news) via accelerated book build, worth approx EUR1.5bn; could be increased to 3.6%.

European banks including DB, UniCredit (EUREX: CR5H.EX - news) and Credit Agricole (TLO: ACA.TI - news) are concerned they may now be hit with bigger than expected penalties in US after the BNPP fine according to the WSJ.

On the Agenda:

Data: US: Final Q1 GDP is expected at -1.7%; sales expected flat.

May durable goods expected at flat m/m; ex-transport expected at 0.4%.

Flash Markit svcs PMI for June is expected at 58.0.

Europe: German GfK consumer sentiment for July prints at 8.9 versus consensus of 8.5.

Italian retail sales for April at 9am, while an hour later we get June consumer confidence, which is expected at 106.3.

Supply: Italian Tesoro taps the April 2016 CTZ for EUR2-2.5bn and also taps the 10yr linker for EUR0.5-1bn; bidding deadline 10am, results 15 mins later.

ECONOMIC CALENDAR:

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

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 income meetings focused on Environmental, Social & Governance (ESG) investors in London and Edinburgh starting June 26. A sterling ESG transaction aligned to Lloyds' "Helping Britain Prosper" agenda may follow.

Pensions co Phoenix Group Holdings has mandated Citigroup (NYSE: C - news) , HSBC, JP Morgan Cazenove and Lloyds Bank to arrange a series of investor meetings in London and Edinburgh commencing 25 June. A sterling senior deal issued by PGH Capital Limited, a financing subsidiary of Phoenix Group Holdings, may follow.

CORPORATE/HY/EM:

German pharmaceutical and chemical giant Bayer (Milan: BAY.MI - news) has mandated BNP Paribas (Xetra: BNP.DE - news) as structuring advisor and Barclays (LSE: BARC.L - news) , BNP Paribas, Citi and HSBC as active book runners for a dual-tranche Reg S euro dated hybrid.

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

RATINGS:

Moody's downgraded Corporate Commercial Bank's deposit ratings to B3 from B1 and put ratings on review for further downgrade; affirmed Affinity Water's ratings, stable outlook; rated Bayer's new hybrid notes Baa2; assigned B2 CFR to Ithaca Energy outlook stable.

Fitch affirmed Rabobank at AA-, outlook negative; Nordea at AA- outlook stable; OP-Pohjola at A+ outlook stable; Svenska Handelsbanken at AA- outlook stable; Revised SEB's Outlook to Positive and affirmed A+; Revised Swedbank's Outlook to Positive and affirmed IDR at A+; Downgraded Wind to B+ and rated new Notes BB-(EXP)/ RR2(EXP); affirmed ICAP (LSE: IAP.L - news) at BBB, stable; affirmed Tullett Prebon (LSE: TLPR.L - news) at BBB-, stable; affirmed BGC Partners (NYSE: BGCA - news) at BBB-, stable; cut GFI Group (NYSE: GFIG - news) to BB-, still negative.

S&P affirmed Delta Lloyd N.V (Other OTC: DLLLF - news) . BBB+; upgraded Basler (Berlin: BSL.BE - news) Versicherung AG to A; cut Rand Water to BBB-; affirmed Red Electrica Corporacion at BBB; affirmed Wind Acquisition Finance SA B (secured BB). (Reporting by Adam Parry, editing by Julian Baker)