TradeTheNews.com EU Market Update: Quiet start to trading week; potential currency war concerns to be brought up at Feb G20
***Notes/Observations***- China Dec Industrial Profits beat expectations; Shanghai Composite hits 7-month highs
- China PBoC Vice Gov: Sees China 2013 GDP at 8%, 2013 inflation at 3%
- ECB official at Davos: ECB is "not very happy" with a step toward competitive devaluations
- PBoC Dep Gov Yi Gang warns on currency wars. Reiterates view that CNY currency was near equilibrium
- EU President Van Rompuy: Euro area no longer in existential treat mode
- Fitch cut Cyprus sovereign ratin on Friday to B from BB-
- Moody's comments on LTRO repayments is a credit positive for money funds
- Italian Jan Consumer confidence was lowest on record (series began in Jan 1996)
- Euro Zone M3 money Supply mixed
- Italy 2014 CTZ yield hits 3-year low at auction
- German 12-month Bubill auction yield turns positive for first time since June
***Economic Data***
- (FI) Finland Jan Consumer Confidence: 4,5 v 5.0e; Business Confidence: -13 v -11 prior
- (TW) Taiwan Dec Leading Index M/M: 0.9% v 0.9% prior; Coincident Index M/M: -0.1 v 0.0% prior
- (ES) Spain Nov Mortgages-capital loaned Y/Y: -34.4% v -21.2% prior; Mortgages on Houses Y/Y: -31.6 v -14.4% prior
- (EU) ECB: ?2.0M borrowed in overnight loan facility vs. ?0.0M prior; ?207.2B parked in deposit facility vs. ?210.3B prior
- (SE) Sweden Dec Trade Balance (SEK): 0.7B v 5.5Be
- (SE) Sweden Dec Household Lending Y/Y: 4.5% v 4.6%e
- (SE) Sweden Dec Retail Sales M/M: 1.2% v 0.3%e; Y/Y: 2.5% v 1.4%e
- (EU) Euro Zone Dec M3 Money Supply Y/Y: 3.3% v 3.9%e; M3 3 month Avg: 3.7% v 3.8%e
- (IT) Italy Jan Consumer Confidence Index: 84.6 v 86.0e
- (BR) Brazil Jan FGV Construction Costs M/M: 0.4% v 0.2%e
- (IT) Italy Dec Hourly Wages M/M: 0.1% v 0.1% prior; Y/Y: 1.7% v 1.6% prior
Fixed Income:
- (IT) Italy Debt Agency (Tesoro) sold ?4.0B vs. ?4.0B indicated in Zero Coupon Dec 2014 CTZs; Avg Yield 1.434% (lowest in almost 3 years) v 1.884% prior; Bid-to- cover: 1.45x v 1.69x prior
- (IT) Italy Debt Agency (Tesoro) sold ?2.625B v ?2.75B indictaed in 1.70% I/L 2018 BTPi;; Real Yield 1.80% v 2.46% prior; Bid-to-cover: 1.38x v 1.75x prior
- (DE) Germany sold ?2.07B in 12-Month BuBills; Avg Yield +0.1319% (first positive yield since June) % vs. -0.0085% prior; Bid-to-cover: 1.8x v 1.8x prior
*** SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM ***
***Equities***
Indices: FTSE 100 flat at 6,281, DAX -0.10% at 7,850, CAC-40 -0.10% at 3,774, IBEX-35 -0.20% at 8,711, FTSE MIB +0.40% at 17,792, SMI +0.30% at 7,479, S&P 500 Futures +0.10% at 1,497
- European equity markets are currently mixed. The FTSE MIB and SMI have outperformed, while the DAX has pared gains after the index rose to a fresh multi-year high earlier during the session. In terms of the European financial sector, most banks are slightly higher, although Spanish banks have lagged. European banks due to report earnings during the week include BBVA, Deutsche bank and Santander. Resource-related firms are mostly lower, amid mixed commodity prices. US companies due to report corporate earnings today include Biogen and Caterpillar.
- UK movers [Filtronic +15% (raised FY guidance),Amino Technologies +6% (FY12 results), Mitie Group +1.5% (interim management statement); Premier Foods -9.5% (named new CEO), Augean Plc -7% (profit warnings),New World Resources -6% (Q1 update), Ryanair -1.5% (reported Q3 results, raised guidance for net profits]
- Germany movers [Gagfah +2% (takeover speculation) Kloeckner +1.5% (CEO comments on 2013); Metro -1% (raised stake in Media-Saturn),Bayer -0.80% (regulatory probe into birth control product)]
- Italy movers [Banca Monte Paschi +5% (Bank of Italy approved bailout plan)]
- Dutch movers [TNT Express +3% (broker commentary)]
Speakers:
- ECB's Coene: There was no currency war at this time and still far from having one
- Chancellor Osborne commented that its domestic economy had both internal and external issues and must also address borrowing and deficit topics
- ECB member Costa (Portugal) commented that Portugal public sector reforms were still not enough for sustainable public finances. He added that some of the reforms had been successful but saw risk of reform fatigue in public sector
- ECB commented on Liikanen report into banking sector reform and called for impact assessment to gauge effects of proposals in EU and could have significantly different impact across the region. ECB supported proposals to bail-in banks' creditors and saw merit in separating risk activities from client activities
- OECD Chief Economist Padoan believed major central banks (FED, BOE and BOJ) should continue quantitative easing measures and that fruits from Euro Zone consolidation efforts would be seen sooner rather than later. He added that the BOJ could be bold given the country's fiscal consolidate while fiscal clarity was key to Fed's QE outlook. The view on currency wars taking place was overstating what is occurring. OECD forecasts from Nov remained valid, but risks have shifted.
- China official: Weaker Japanese Yen impact has been muted but trade might get hit
- US envoy to North Korea Davies: Sees no immediate prospect for diplomacy with North Korea
Currencies:
- A relatively quiet European calendar provided an opportunity for recent FX price action to consolidate. The rhetoric on currency wars has seemed to pick up in the financial press, particularly after the JPY's 10-week decline against the major pairs. The upcoming G20 meeting in February was being cited as the proper venue to discuss FX issues.
- GBP/USD hit 5-month lows of 1.5716 and continued to trade under pressure amid triple dip recession risk after a weak Q4 growth reading last week. Dealers were also taking notice of dovish comments from incoming BOE Gov Carney made over the weekend at Davos.
- The EUR/USD was little changed in subdued trading but remained above the 1.34 handle, which was the breakout level from Friday.
- The JPY currency consolidated from its recent spat of weakness.
Political/ In the Papers:
- (EU) ECB's Coene: Higher than expected LTRO payments could bring down EMU yield spreads further; Euro's level right now is not a problem but may become dangerous; Sees no need for additional monetary easing at the moment; Expects some upside in European and Belgian economies; Ideally, ECB's OMT bond buying program would never be used so as to avoid risk of diminished commitment to austerity
- (EU) ECB official at Davos: ECB is "not very happy" with a step toward competitive devaluations, which should be discussed by G20 at the meeting next month - financial press
-(EU) EU Trade Chief De Gucht: would be good if the euro got a little bit lower; euro appreciation is not good for exports; Cannot see a scenario in which Europe would intervene in the Forex market.
- (EU) Moody's: Bank payment of LTROs is positive for money funds
- (EU) French Fin Min Moscovici: Reiterates view that reviving growth is a priority in the next 6 months; Germany can do more to support domestic demand - financial pres
- (EU) German chancellor Merkel: Does not agree with PM Rajoy calling for looser fiscal spending by some of the wealthier euro area nations - financial press
-Sweden PM Reinfeldt: Not in favor of Germany Chancellor Merkel's suggestion to improve competitiveness, because it would give more national powers to the EU - Handelsblatt
- (EU) Italy Fin Min Grilli: LTRO repayments a good sign, Italy still faces problems of restoring credit channels, Europe real economy will take longer to recover - Davos
-(US) WSJ's Hilsenrath: Fed likely to maintain accommodative policies at this week's meeting; Not all officials to agree with the stance amid improving conditions - financial press; Many Fed officials have been encouraged by signs of an improving economic outlook
-(US) NABE survey: 50% of corporate economists' forecasts 2013 GDP at 2.1% or better - financial press
- According to the Macroeconomic Advisers, the sequester (automatic cuts) could cut 0.7 pct points off of 2013 GDP growth. The article notes that certain Democrats and Republicans may be willing to allow the automatic cuts to occur. Cites comments from politicians including Republican Congressman Ryan.
-(CN) China Academy of Social Sciences (CASS) official 2013 GDP target is 8.4% - financial press citing CASS annual outlook; Sees 2013 CPI at 3.5%; Exports at 8.3%.
- (CN) China Sovereign Wealth Fund (CIC) chief Lou Jiwei: China GDP can grow faster than 8% in 2013; Economy supports large part of global demand - financial press
- (CN) China govt has not yet decided on expanding property tax trial - China press
- (JP) Japan PM Abe's advisor Takenaka: Not fair to say JPY currency has weakened too much; Reiterates that correction from excessive strength has just started with ?95 FX level would be "appropriate"
- (JP) Japan gov't, ruling parties approve FY13 ?92.6T budget proposal (vs FY12 ?92.9T initial budget) - Nikkei News
- (JP) Japan cabinet releases FY13 updated forecasts: Sees FY13/14 Real GDP at 2.5%, CPI at 0.5% - financial press; Sees FY12/13 Real GDP at 1.0%
-(IE) Ireland Dep PM Gilmore cautions failure to reach ECB debt deal catastrophic for Ireland - Irish press; ECB rejected Ireland's preferred plans to reschedule part of the bank debt according to EU sources.
-(EU) Spain PM Rajoy: Spain's 2012 budget deficit fell substantially
***Looking Ahead***
***All times listed for economic events are denominated in Eastern Standard Time (Add 5 hours for GMT equivalent)
- Financial Stability Board parliamentary meeting in Zurich
- (ES) IMF in Spain on banking sector aid
- 06:00 (IE) Ireland Dec Retail Sales M/M: No est v -1.1% prior; Y/Y: No est v -0.5% prior
- 06:00 (IS) Israel to sell 2.5% 2016 Bonds
- 06:00 (IS) Israel to sell I/L 2017, 2022 and 2041 bonds
- 06:30 (US) Daily Libor fixing
- 08:30 (EU) Commissioner Rehn in Madrid
- 08:30 (US) Dec Durable Goods Orders: 2.0%e v 0.8% prior (revised from 0.7%); Durables Ex Transportation: 0.8%e v 1.6% prior; Durables Ex-Defense: No est v 0.8% prior; Capital Goods Orders Non-defense Ex Aircraft: -1.0%e v +2.7% prior; Capital Goods Shipments Non-defense Ex Aircraft: 0.5%e v 1.8% prior
- 08:50 (FR) France Debt Agency (AFT) to sell ?6.3-7.5B in 3-month, 6-month and 12-month Bills
- 09:00 (RO) Romania to sell Bonds
- 10:00 (US) Dec Pending Home Sales M/M: 0.1%e v 1.7% prior; Y/Y: 12.5%e v 8.9% prior
- 10:30 (IS) Israel Central Bank Interest Rate Decision: Expected to leave the Base Rate unchanged at 1.75%
- 10:30 (US) Jan Dallas Fed Manufacturing Activity: 3.0e v 6.8 prior
- 11:00 (US) Fed to purchase $1.25-1.75B in Notes
- 11:30 (US) Treasury to sell $60B in 3-Month and 6-Month Bills
- 13:00 (US) Treasury to sell $35B in 2-Year Notes
- (CO) Colombia Central Bank Interest Rate Decision: Expected to cut the Overnight Lending Rate by 25bps to 4.00%
Source
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