IMF warns of two-speed recovery; UK Q4 GDP contracts with officials
blaming poor weather.
Economic Data
* *(IN) India Central Bank (RBI) raised its key rates by 25bps; As
expected. The Repo and Reverse Repo Rates each increased by 25bps
each to 6.50% and 5.50% respectively*
* *(GE) Germany Feb GfK Consumer Confidence Survey:* 5.7 v 5.4e
* *(FI) Finland Dec Unemployment Rate:* 7.9% v 7.0%e
* *(SA) South Africa Nov Leading Indicator:* 129.7 v 129.8 prior
* *(SZ) Swiss Dec UBS Consumption Indicator:* 1.84 v 1.62 prior
* *(FR) France Dec Consumer Spending M/M: 0.6% v 0.3%e; Y/Y:* 0.4% v
0.5%e
* *(CZ) Czech Jan Business Confidence: 15.6 v 15.8 prior; Consumer
Confidence: -9.8 v -9.3 prior; Composite:* 10.5 v 10.8 prior
* *(HU) Hungary Nov Retail Trade Y/Y:* -0.3% v 0.1%e
* *(SP) Spain Dec Producer Prices M/M: 0.9% v 0.6%e; Y/Y:* 5.3% v
5.0%e
* *(HK) Hong Kong Dec Trade Balance (HKD): -43.5B v -36.5Be; Exports
Y/Y: 12.5% v 15.9%e; Imports Y/Y:* 14.8% v 15.5%e
* *(UK) Q4 Advanced GDP Q/Q: -0.5% v +0.5%e; Y/Y: 1.7% v 2.6%e*
* *(UK) Q4 Nov Index of Services M/M: 0.0% v 0.5%e; 3M/3M:* 0.5% v
0.8%e
* *(UK) Dec Public Finances (PSNCR): £25.5B v £16.3Be; Public
Sector Net Borrowing: £15.3B v £18.0Be; PSNB ex Interventions:
£16.8B v £20.0Be*
Fixed Income
* (SP) *Spain Debt Agency* (Tesoro) sells approx €2.25B vs €2-3B
Indicated in 3-month and 6-month Bills
* *Sold €945M in 3-month Bills; avg yield 0.980% v 1.804% prior;
Bid-to-cover:* 5.48x v 2.14x prior
* *Sold € in 6-month Bills; avg yield 1.801% v 2.597% prior;
Bid-to-cover:*5.11 x v5.15 x prior
* (NV) *Netherlands Debt Agency* (DSTA) sold total €2.7B vs.
€2-3B Indicated in2012 and 2017 Bonds
* Sold €1.2B in 5.0% Jul 2012 DSL; avg yield 1.108% v 1.400% prior
* Sold €1.5B in 4.5% Jul 2017 DSL; avg yield 2.812% v 2.305% prior
* (HU) *Hungary Debt Agency* (AKK) sold HUF50B in 3-Month Bills; avg
yield 5.93% v 5.63% prior
SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM
*Notes/Observations:*
* EFSF Debut Bond
* BOJ leaves rates unchanged
* India's RBI raises key rates by 25bps with members considering
more
* IMF raises its 2011 GDP view a touch higher but risks remain
* UK GDP contracts in Q4 with Dec weather blamed
*Equities:*
*Eurostoxx at 2965, -0.5%* FTSE100 at 5913, -0.5%, CAC40 at 4034,unch,
DAX at 7080, +0.2%
* *European equity markets opened the session broadly higher,* but
markets have since moved off of the best levels on factors
including weaker than expected quarterly UK GDP data and concerns
about the capital levels of certain Spanish banks. The weaknesses
in markets are being led by declines in the peripheral exchanges,
as banks have weighed on the Spanish IBEX 35 and Italian FTSE MIB.
Coupled with the weakness in banks, the declines in miners are
adding to the downside on the FTSE 100.
* In terms of individual stocks, Germany's Siemens[SIE.GE] is higher
by more than 1%, following the company's quarterly earnings, while
chipmaker Infineon is benefitting from results out of Texas
Instruments. In UK equity movers, shares of PZ Cussons [PZC.UK]
and Misys[MSY.UK] are both sharply lower following their
respective trading updates. In France, STMicroelectronics [STM.FR]
has declined by more than 3% after giving quarterly results and
guidance.
*Speakers:*
* *IMF released its World Economic Outlook* and raised the 2011
global growth to 4.4% from 4.2% prior view. The IMF noted that it
saw a two-speed global recovery with growth subdued in the
advanced economies. Monetary accommodation needed to be continued
in advanced economies and tightening should either begin or
continue in emerging markets. The IMF noted that emerging markets
needed policies to avoid overheating and implement global
rebalancing. It also needed to monitor asset bubbles and excessive
credit.
* *Bank of Japan* (BoJ) Gov Shirakawa commented in his post rate
decision press conference that economic risks were largely
balanced and that the country was moving towards long-term price.
Japan might emerge from slowdown in Q1 as exports likely to resume
a gradual rise and output likely to turn positive. Commodity
prices were likely to continue gradually rise and its effects had
both good and bad on the economy. Policy duration effects to limit
long-term rate increases.
* *Czech Central Bank Gov Singer* reiterated that a stronger CZK
currency limited inflation
* *UK Business Sec Cable* commented that it was reasonable consensus
that Q4 was a "pretty bad" quarter for UK. He noted that low
long-term rates were helping to support UK economic recovery.
Government's policy on deficit has helped lower market rates. He
noted that the BoE has to take its own reading on inflation and
deflation risks and that the central bank had a number of policy
options on the table.
* France Treasury Official reiterated the view that it is in the
collective interest to allow the EFSF to buy debt on the secondary
market
* *German Bundesbank* commented that the country's banking sector
was quite optimistic on 2011 lending.
* *India Central Bank Gov Subbarao* reiterated that inflation
remained the top concern for the RBI and that its did consider a
50bps rate hike in key rates earlier today.
* *Turkey Central Bank Gov Yilmaz* commented that the slowdown in 3Q
growth was unlikely to be permanent. He noted that the current
monetary policy mix of cutting the key interest rate while hiking
banks' reserve ratios was "the best choice" for Turkey. He noted
that it raised its 2011 CPI forecast to 5.9% from 5.4% prior.
* Germany Industry Association (BDI) stated that it saw 2011 GDP
growth at 2.5% and added that GDP would reach pre-crisis level
this year. It saw 2011 exports seen up about 7.3% and imports +7%
*Currencies/Fixed income:*
* Dealers noted that focus in Europe was suppose to be the first
EFSF bond being issued today but instead switched to risk aversion
concerns after the release of key UK data.
* The GBP was drifting lower throughout the session after testing
above 1.60 in Asia. The pair was hovering above the 1.59 handle
ahead of the UK Prelim Q4 GDP data following the comments from the
Business Sec that the data was 'pretty bad'. The confirmation of a
quarterly contraction sent the GBP weaker across the board with
gasps of 'double-dip' being thought by market participants. did
not help sentiment. GBP/USD was off over two big figures as the NY
morning approached and below the 1.58 handle. EUR/GBP was above
the 0.8610 area and GBP/JPY cross probing the 129 neighborhood and
lower by almost 200pips in that pair. The UK officials noted that
the unexpected decline in the GDP data was attributed to bad
weather in Dec but no comfort was found in the 'revised' flat
reading excluding weather effects. The data was simply as bad as
the weather. Several analysts were now calling for GBP/USD to dip
below the 1.50 level in the weeks/months ahead.
* The EUR/USD stalled ahead of 1.3700 as the session began and
drifting below the 1.36 level as the peripheral spreads widened.
The 10-year Portuguese/German Gov't bond spread was at approx
380bps, wider by almost 10bps and this was attributed to chatter
of a possible syndication issue circulating for Portugal. The
launch of the EFSF drew a flood of orders totaling almost €50B.
* The risk aversion flow benefited the CHF and JPY pairs.
*Geo-Political/ In the Papers:*
* In his final major speech, the director-general of the
Confederation of British Industry Sir Richard Lambert criticized
the coalition's economic policies. He said the policies carried
out by the government are harming businesses and job creation.
Effectively he noted that the government has placed politics ahead
of growth, and requested that the coalition focus on assisting
small businesses and entrepreneurs. Sir Lambert is to be succeeded
by John Cridland, the deputy director general, following his
departure later this week.
* The political parties in Ireland have agreed to pass the Finance
Bill through both houses of parliament by the end of the week. The
meeting yesterday also allowed general election date to be moved
forward to February 25th from the previous set date of March 11th.
* Following up on yesterday's press reports that former Foreign
Minister Michael Martin was the front-runner as Fianna Fail's next
leader, the coalition party confirmed today its leadership
candidates. Four candidates will contest for the party leadership,
with former with Martin remaining the favored. The other
candidates include Finance Minister Brian Lenihan, Minister for
Tourism, Culture and Sport Mary Hanafin, and Minister for Social
Protection Eamon O Cuiv. The new party leader will be chosen at
14.00 local time on Wednesday, January 26th.
* In the Financial Times, it was reported that some German companies
are increasing their planned investments. The increased investment
is being driven by the need to ease capacity constraints which are
being driven by higher demand. Companies from Volkswagen to
Siemens have announced large spending increases for 2011.
Similarly, financing conditions for Spanish companies may be
moderating. The article noted that recently Iberdrola and
Telefonica had sold bonds, in the first debt sales by Spanish
non-financial companies since October.
Looking Ahead
* *6:00 (IR) Ireland Dec PPI M/M: % v 1.6% prior; Y/Y:* % v 0.0%
prior
* 6:30 (EU) EU's Barroso speaks at Think Tank conference
* *7:00 (EU) ECB to drain €76.5B in 7-day Term Deposit facility*
* *7:00 (CA) Canada Dec Consumer Price Index M/M: 0.1%e; Y/Y: 2.5%e
v 2.0% prior*
* *7:00 (CA) Canada Dec Core CPI M/M: -0.1%e v 0.0% prior; Y/Y:
1.6%e v 1.4% prior*
* 7:45 (US) ICSC Weekly Chain Store Sales
* 8:55 (US) Redbook Weekly Retail Sales
* *9:00 (MX) Mexico Dec Preliminary Trade Balance:* -$375Me v -105M
prior
* *9:00 (US) Nov S&P/CaseShiller Home Price Index: No est v 145.32
prior; S&P/CS 20 City M/M: -0.8%e v -0.99% prior; Y/Y:* -1.6%e v
-0.8% prior
* *10:00 (US) Jan Consumer Confidence: 54.0e v 52.5 prior*
* *10:00 (US) Nov House Price Index M/M: 0.0%e v 0.7% prior*
* *10:00 (US) Jan Richmond Fed Manufacturing:* 23.0e v 25.0 prior
* 11:00 (EU) EU's Van Rompuy speaks at Think Tank Conference
* 11:00 (US) Fed to purchase $6-8B in Notes/Bonds
* 11:30 (US) Treasury to sell 4-week Bills
* *13:00 (US) Treasury to sell $35B in 2-Year Notes*
* *16:00 (CO) Colombia Nov Trade Balance:* $95.0Me v $150.7M prior
* 16:30 (US) Weekly API Energy Inventories
* *17:00 (US) ABC Consumer Confidence w/e Jan 23rd:* -42e v -43
prior
Source: ActionForex.Com
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