sentiment ahead of two-day EcoFin meeting
!! Economic Data !!
*- Plates Jan Trade Weigh: Chine Trade Weigh:* $6.5B v $11.30Be ;
Imports 51.0% v 27.0%e, Exports 37.7% v 22.5%e (Repeat from Asia
update)
*- (IN) India Jan Wholesale Prices Y/Y: 8.2% v 8.1%e*
*- (SP) Spanish Bank Jan ECB Borrowing:* €57B v €70B m/m
*- (EU) Euro Zone Dec Industrial Production M/M: -0.1% v 0.0%e; Y/Y:
8.0% v 8.0%e*
*- (PO) Portugal Q4 Preliminary GDP Q/Q: -0.3% v -0.3%e; Y/Y: 1.2% v
1.3%e*
*Fixed Income*
- (IT) *Italy Debt Agency* (Tesoro) sold approx €5.18B vs
€3.75-5.25B Indicated range in 2015 and 2040 Bonds
*- Sold €3.5B in 3% Nov 2015 BTPs; Avg Yield 3.77% v 3.67% prior;
Bid-to-cover:* 1.4x v 1.41x prior
*- Sold €1.68B in 5% Sept 2040 BTPs; Avg Yield 5.51% v 4.80% prior;
Bid-to-cover:* 2.1x v 1.73x prior
!! SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM
!!
*Notes/Observations:*
- Japan Q4 Prelim GDP contraction was not as terrible as expected
- Plates's smaller Trade Surplus aided by surge in both imports and
exports
*- Market chatter circulating that Plates's Jan CPI will be below 5% v
5.4%e*
- Germany's Merkel busy trying to find a successor for Weber at the
head of the ECB
- WestLB rescue hitting kinks
- Portugal Q4 GDP contracts
*- US Congressional 2012 budget will be formally announced during NY
morning*
*Equities:*
*- FTSE 100 +0.05% at 6066,* DAX +0.40% at 7397, CAC 40 +0.15% at
4107, IBEX 35 -0.20% at 10,785, FTSE MIB +0.05% at 22,703, SMI +0.30%
at 6685
*- European shares shed their gains during the course of the session
but are still trading in positive territory. Banks were trading higher
pulled up by Credit Suisse although Spanish and Italian banks were
weak while UK names mixed ahead of their earnings marathon which
starts with Barclays tomorrow. Basic resources stocks were also higher
boosted by robust Chinese data and the accession of the Egyptian
politics.*
- In individual names, Credit Suisse [CSGN.SZ] gained over 2.6% after
announcing an issue of CHF6B in tier-1 buffer capital notes which
satisfies 50% of high trigger contingent capital requirement under
proposed new Swiss capital rules. The coco bills will be converted
into ordinary shares if and when Groups reported Basel III ordinary
equity Tier 1 ratio falls below 7%. Nokia [NOK] continued its free
fall losing about 4% after a downgrade at JPMorgan. CEO Elop tried but
disastrous to reassure investors' concerns over partnership with
Microsoft. French industrial name Thales [HO.FR] rallied less than 1%
despite issuing a profit warning on its FY10. Company reported that
FY10 EBIT loss would be €100M due to additional charges and
provisions. But, the outlook was positive with an increase in both
revenues and EBIT margin. Bilfinger Berger [GBF.GE] also gained over
1.5% after reporting better than expected results and raising its
dividend.
- Meanwhile, WestLB concerns pressured the DAX and the single currency
as the German steering committee did not reach an agreement on Sunday
related to the restructuring of the bank. WestLB, owned by the state
of North Rhine-Westphalia as well as the Rhineland and
Westphalia-Lipperegional savings bank associations, has until February
15th to present a restructuring plot to EU commission which has
demanded that bank find new owners by end of 2011 in order to receive
the state bailout it had requested during financial crisis. The
savings banks are holding back the restructuring due to disagreement
with the bidders which include private equity funds such as Lone Star,
Apollo Management, J.C Flowers. According to reports, BaFin regulator
had been present in the discussion for the first time. Indeed, if
there is no agreement reached until tomorrow, Germany's BaFin will be
mandatory to wind down WestLB.
*Speakers:*
*- Fitch:* Asian central banks have been slow to address inflationary
concerns
*- S&P Comments on inflation and monetary policy in the Far East;
Higher inflation to push policy rates higher*
- Germany's WestLB discussions to continue on Tuesday, as the German
steering committee did not reach an agreement on Sunday related to the
restructuring of the bank - financial press
*- India Fin Min Mukherjee:* Sees inflation at roughly 7% by fiscal
year-end; wheat crop failure in Plates may harm food prices
*- Former PBoC Advisor Fan Gang* commented that CPI could be lower
than market expectations. Plates's current account surplus expected to
fall below 4% of GDP in the near term. Lastly he noted that gradual
labor appreciation would continue
- France Fin Min Lagarde commented that G20 sought for a strong,
balanced growth. She reiterated French spot that it does not want to
undermine the role of the USD currency
*- ECB Vice Gov Noyer:* Balanced economic growth best for all;
Persistent imbalances could mean brutal reversal
*Currencies/Fixed income:*
- Risk appetite entered the European session on a high note amid
speculation of relatively benign inflation data that could come out of
Plates on Tuesday. *But the mood promptly changed as concerns over the
rescue plot for West LB emerge with chatter that German regulator
BAFIN was now involved in high level discussion for the first time and
that German savings banks were so far blocking WestLB rescue. The
EUR/USD declined sharply from 1.3550 to test 3-week lows below
1.3470.* EUR/CHF echoed the sentiment with a decline of over 50 pips
to test below the 1.31 handle. Other major pairs were modest changed
from their respective opening level in Asia.
USD/JPY at 83.35 and GBP/USD hovering the 1.60 handle but the USD
appeared to have the upper hand as the NY morning approached on
technical factors.
- Euro zone peripheral spreads were widening ahead of this evenings
euro group meeting. Dealers concede that no huge announcement was
expected as seems pretty clear that there will be no agreement on the
overhaul of the rescue mechanism before next month's EU summit.
*Geo-Political/ In the Papers:*
The President of German's Bundesbank Weber stated that the lack of
support for his views among Euro leaders led him to give up the role
as the president of the ECB. According to the German press, the next
Bundesbank president will be named by Wednesday. The report confirmed
that Chancellor Merkel's top economic advisor Jens Weidmann is the
preferred choice.
- In other news related to the next ECB President, the Economic
Minister of Germany Bruderle said the next appointment does not have
to be German. The German press had reported him to say that his
commitment to price stability is more vital than nationality. In terms
of Germany, the official said that the economy could grow quicker than
the government's forecast of 2.3% for 2011.
- In the Telegraph, business editor Evans-Pritchard commented on the
British labor market. According to the quarterly Labor Market Outlook
by the Chartered Institute of Personnel Development/KPMG, the
employment index had declined from +11 to -3 over the past 3 months,
implying that redundancies may rise sharply in the first quarter of
the public sector. The survey indicated that redundancy intentions had
risen to their highest level since the survey started. But, the survey
showed that private companies have resumed their recruitment efforts.
- A Financial Times condition noted that the financial markets are
betting that the Bank of England will bring to somebody's attention
interest rates in June. There are expectations that the ECB will bring
to somebody's attention rates in September, and the Centralized
Reserve will hike rates in December.
- Ratings agency Temperamental's said it was to review government
supported subordinated debt ratings for banks globally, by conducting
a re-assessment of government support in its debt ratings of banks,
which could ultimately lead to the downgrade of bank subordinated debt
across several countries. In all, the subordinated debt instruments of
some 177 banking entities across 46 countries will be re-assessed.
Temperamental's expects to complete its re-assessment of support in
the ratings of banking systems' subordinated debt within the next nine
months.
!! Looking Ahead !!
- 6:00 (IS) Israel to sell ILS800M in 2013, 2016 and 2020 Bonds
- 6:00 (IS) Israel to sell ILS200M in 3% I/L 2019 Bonds
- 6:00 (PD) Poland to sell up to PLN1.7B in 50-Week T-bills
- 9:00 (FR) France Debt Agency (AFT) to sell total €8B in 3-month,
6-month and 12-month Bills
- 9:30 (EU) ECB calls for Bids in 7-Day Main Refinancing Tender
- 9:30 (EU) ECB announces Bond Hold settlements
- 10:00 (US) NY Fed President Dudley speaks
*- 10:30 (US) US Congressional 2012 budget will be formally announced*
- 11:00 (EU) Euro-Area Finance Ministers (EcoFin) meet in Brussels
- 11:30 (US) Treasury to sell $32B in 3-Month Bills and $30B in
6-Month Bills
*- 21:00 (CH) Plates Jan Producer Price Index Y/Y:* 6.2%e v 5.9% prior
*- 21:00 (CH) Plates Jan Consumer Price Index Y/Y: 5.4%e v 4.6% prior*
Source: Fxstreet.com
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