Sunday, January 30, 2011

Risk appetite eyeing US GDP data for direction

!! Economic Data !!

*- (RU) Russia Money Supply w/e Jan 24th (RUB):* 5.64T v 5.66T prior

*- (FI) Finland Q4 House Prices Q/Q: 0.3% v 0.4% prior; Y/Y:* 5.4% v
7.8% prior

*- (SP) Spain Q4 Unemployment Rate: 20.3% v 20.2%e*

*- (HU) Hungary Dec Unemployment Rate:* 10.8% v 10.8%e

*- (NO) Norway Jan Unemployment Rate:* 3.1% v 2.8%e

*- (TU) Turkey Dec Trade Balance (TRY):* -8.7B v -8.2Be

*- (SW) Sweden Dec Retail Sales M/M: -0.8% v 0.1%e; Y/Y:* 3.1% v 4.6%e

*- (SW) Sweden Dec Household Lending Y/Y:* 7.8% v 8.4% prior

*- (EU) Euro Zone Dec M3 Money Supply Y/Y: 1.7% v 1.9%e; M3
Three-Month Avg: 1.6% v 1.6%e*

*- (IT) Italy Dec Hourly Wages M/M: 0.1% v 0.2%e; Y/Y:* 1.7% v 1.7%e

- *(PD) Poland 2010 GDP:* 3.8% v 3.7%e

*- (IT) Italy Jan Consumer Confidence:* 105.9 v 109.0e, five month low

*- (BR) Brazil Jan FGV Inflation IGP-M M/M: 0.8% v 0.8%e; Y/Y:* 11.5%
v 11.5%e

*- (GR) Greece Dec PPI M/M: 1.8% v 1.3% prior, Y/Y:* 7.6% v 5.9%
prior; seven month high

*- (SZ) Swiss Jan KOF Leading Indicator: 2.10 v 2.05e*

*Fixed Income*

- (IT) *Italy Debt Agency (Tesoro)* sold €7.0B vs. €5.25-6.75B
Indicated in 2013 and 2021 Bonds

*- Sold €3.5B vs €3.5B Indicated in Nov2.25% 2013 BTP; Avg yield
3.12% v 3.25% prior; Bid-to-cover:* 1.40x v 1.39x prior

*- Sold €3.25B vs. €3.25B Indicated in Mar 3.75% 2021 BTP; Avg
yield 4.73% v 4.80% prior; Bid-to-cover:* 1.45x v 1.29x prior

- Sold €1.398B vs €1.5B Indicated in floating 2017 CCT; yield
2.55%

!! SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM
!!

*Notes/Observations:*

- Risk appetite to be determined by US GDP data

*Equities:*

*FTSE 100 -0.60% at 5927,* DAX +0.10% at 7165, CAC 40 flat at about
4058, IBEX 35 +0.46% at 10877, FTSE MIB +0.20% at 22,360, SMI .20% at
65732

*- European shares were trading lower during the session with FTSE100
being in negative territory.* Miners were the biggest decliners
pressured by continued worries that China may raise rates to contain
inflation while Japan's downgrade by S&P continues to haunt the
markets. Investors are looking ahead to key US GDP data due early NY
morning for short term direction. Strength in financial stocks and
German automakers helped offset some of the losses.
*Sanofi Aventis* [SAN.FR] lost about 3% after reporting that Phase III
study for metastatic triple-negative breast cancer drug Iniparib
failed to meet pre-specified criteria. Actelion [ATLN.SZ] also dropped
by 2.5% after reporting that it was discontinuing the development of
Phase III of the drug Almoxerant

*Speakers:*

*- US Treasury Secy Geithner* commented at davos that the worst of the
global crisis was over. On the fiscal front he noted that the US wasin
better position to meet the challenges in debt compared to other
countries. He did concede that the US fiscal position was
unsustainable in the long run and would require change in
circumstances. The US did lack the "device" to enforce long-term
deficit cuts and there were no alternative to dealing with entitlement
obligations. On the economy he stated that the US was going to be
growing at a "reasonable rate" and benefited from emerging markets
with rising export growth. There was a sense of growing confidence
that growth was becoming sustainable

*- Japan MoF official Igarashi* reiterates the view that JPY currency
was overvalued given the current economic conditions in Japan and the
ministry must take decisive steps against fx moves

- *ECB's Trichet* reiterated that the Euro was credible. He stated
that the economic recovery in the Euro Zone was confirmed but added it
was not creating enough jobs

*- ECB Bini Smaghi* commented that the Irish Gov't must help restore
market confidence and the drama in the country was partly due to
government delays on rescue measures. The terms of Ireland were more
or less standard and it was not in the interest of Ireland to default

*- Ireland PM Cowen:* To dissolve parliament on Tuesday Feb 1st, to
announce official date for General Election

*- China Premier Wen* reiterated that China would continue to support
Europe during the debt crisis and supported Germany in its role to
deal with the crisis.

*- France Fin Min Lagarde* commented that the gov't to maintain its
2011 GDP growth forecast at 2.0. Improving rescue fund was a question
of efficiency and not size. - Developing a comprehensive package to
strengthen foundations of the Euro zone and that putting a debt brake
in constitutions a good idea. She also noted that using euro-zone fund
to buy bonds was an option

*- German Finance Min Official* reiterated the view that both Germany
and France would safeguard the Euro. The official also reiterated that
it was very confident that Greece would continue down the road of
consolidation. He added that he had not heard any confirmation that
EFSF should fund Greece debt buyback

- German Employers Association commented that the current pay demands
were unrealistic as pre-crisis growth levels would only be reached
only at year end

- Japan Finance Ministry noted that FY12 new JGB issuance could be
around ¥49.5T vs. ¥44.0B previously planned

*- Former PBoC Adviser* commented that he believed it is time to allow
faster CNY currency appreciation in order to help contain inflation
and lower China's trade surplus

- World Bank pres Zoellick reiterated that USD to remain the
predominant reserve currency but saw other possible reserve currencies

*- Canada Finance Min Flaherty* stated that the long-term value of CAD
currency was determined by the market and would not consider
intervention. However, he added that he would take short-term measures
only if irregularities occurred

*- Bank of Canada's Carney:* Reiterates that a stronger CAD is a risk
for growth

*- China PBoC advisor Li Daokui:* Sees China's trade surplus to
decrease $150B for the year

*- OPEC Gen Sec El-Badri* stated that Saudi Arabia was abiding by its
output quota and did not see a shortage of oil. He was not
uncomfortable with oil price at $100/barrel and that OPEC would
release spare capacity if needed in the market

*Currencies/Fixed income:*

- Over the FX markets were quiet with the USD mixed against the major
pairs. The EUR/USD maintained a hold above 1.37 aided by chatter that
the EU was looking at a possible Greek debt buyback between € 50-
60B and comments China Premier Wen reiterating his support for
European debt. The euro maintained a supportive interest on dips with
pick up hawkish rhetoric from ECB officials cited as a factor.

- The CAD was steady in the session. Canadian Fin Min noted that it
was the market that determined the FX rate and the ministry did not
consider intervention.

*Geo-Political/ In the Papers:*

- With a vote in Congress to lift borrowing capacity looming, PIMCO's
Bill Gross said that the 'battle' regarding the US debt ceiling is not
acceptable, believing that US treasuries will decline as the debate
over the debt ceiling continues. The current federal limit stands at
approximately $14.3 trillion, with the possibilities that the level
may be reached by the April-May period.

- According to the Telegraph's Evans-Pritchard the S&P's downgrade of
Japan was a warning shot for both the US and Europe. He noted comments
from Federal Reserve board member Bullard, in which he said that the
US was closer to a Japanese-style outcome today than at any time in
recent history. In terms of Japan's sovereign downgrade, some are
concerned that if bond yields move sharply higher, it could cause
Japanese financial companies to repatriate large sums to cover losses
and this could lead to a global decline in assets.

- Following S&P downgrade of Japan's sovereign rating, a Moody's
analyst stated today that Japan has been able to make the necessary
fiscal adjustments in the past. Moody's Stable outlook at Aa2 is
prefaced on undertaking needed reform. The analyst expected the
government to carry out the necessary reforms in the coming months,
and added that the Japanese government can still fund itself at the
lowest cost than any other country despite its massive debt. The
analyst also supplied commentary on the sovereign rating of the US,
reiterating the 'AAA' rating, and stable outlook. The outlook is
contingent on its deficit reduction measures, with the outlook risks
seen as minor though rising.

!! Looking Ahead !!

- 6:30 (CL) Chile Central Bank Meeting Minutes

*- 7:00 (CL) Chile Dec Industrial Production Y/Y: 3.9%e v 2.5% prior;
Industrial Sales Y/Y:* 4.9%e v 4.8% prior

*- 7:00 (CL) Chile Dec Total Copper Production:* No est v 467.5K tons
prior

*- 7:30 (BR) Brazil Dec Central Gov't Budget (BRL):* 8.6Be v 1.1B
prior

*- 8:30 (US) Q4 Employment Cost Index:* 0.5%e v 0.4% prior

*- 8:30 (US) Q4 Advanced GDP Q/Q Annualized: 3.5%e v 2.6% prior;
Personal Consumption: 4.0%e v 2.4% prior*

*- 8:30 (US) Q4 Advanced GDP Price Index: 1.6%e v 2.1% prior; Core PCE
Q/Q:* 0.4%e v 0.5% prior

*- 9:55 (US) Jan Final University of Michigan Confidence:* 73.3e v
72.7 prelim

- 11:00 (US) Fed to purchase $7-9B in Notes/Bond

- 11:30 (GE) German Chancellor Merkel to speak at Davos, Switzerland

Source: Fxstreet.com

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