Germany's Constitutional Court has decided to refer a complaint against the European Central Bank's Outright Monetary Transactions (OMT) program, which allows the ECB to buy sovereign debt in the secondary market, to the European Court.
The German court believes there are "important reasons to assume that it exceeds the European Central Bank's monetary policy mandate and thus infringes the powers of the member states, and that it violates the prohibition of monetary financing of the budget."
However, the court "also considers it possible that if the OMT Decision were interpreted restrictively," it could be legal.
The court is due to rule on the legality of the eurozone's permanent bailout scheme, the European Stability Mechanism, on March 18.
This is "huge," tweets Reuters Jamie McGeever. Is "Germany giving up (its) veto, opening (the) door to outright QE?"
The euro, which was bumbling fairly innocuously, has taken a bit of a dive and is -0.2% at $1.3564. The DAX is -0.1%. (PR)
Putting a dampener on any optimism that may have been engendered by more encouraging eurozone PMI data, Eurostat reports that retail sales volumes in the bloc slumped a greater-than-expected 1.6% on month in December after rising 0.9% in November. Consensus was for a drop of 0.5%.
On year, sales -1% vs +1.3% prior and forecasts of +1.5%.
Eurozone composite PMI rose to 52.9 in January (flash 53.2) from 52.1 in December.
Services PMI edged up to 51.6 (flash 51.9) from 51.
Spain's composite PMI hit a 6 1/2 year peak of 54.8.
Employment has stabilized over the past two months.
"Companies are reporting the strongest growth of business activity for two-and-a-half years, putting the economy on course to grow by 0.5% in the first quarter if this pace is sustained," Markit says.
"Spain and Ireland are now seeing robust growth, undergoing their strongest phases of expansion since 2007, while Italy is also returning to growth and France's business sector is also showing signs of stabilizing," Markit adds.
Eurozone inflation edged down to 0.7% on year in January from 0.8% in December although consensus was for a rise to 0.9%.
Core eurozone inflation nudged up to 0.8% from 0.7%.
Overall CPI is now under half that of Japan, which hit 1.6% last month. A question for policy makers in the eurozone is how big a threat is deflation? At the end of last month, ECB President Mario Draghi indicated that he wasn't too concerned. "We don't have a situation as in Japan," he said. (PR)
Meanwhile, unemployment held steady at 12% in December, coming in slightly below consensus for a rise to 12.1%.
The euro takes a bit of a dive and is -0.2% at $1.3531. (PR)
Who could have thought raising interest rates 425 basis points would be bearish? A curious rally following Turkey's defense of the lira - it jacked rates to 12% from 7.75% - has completely reversed. One feels a 1992-like vibe where the Bank of England hiked like crazy to defend the pound, but then ultimately had to let it go (also creating a bottom in stocks).
In Europe, the Stoxx 50 (FEZ) is off 1.3%, with Turkey (TUR) now down 2.3%.
South Africa joins the party, unexpectedly hiking its benchmark interest rate by 50 basis points to 5.5%. EZA -2.8%.
A check of Brazil (EWZ -1.3%) and India (EPI -1.1%) - where monetary policy has also been tightened this week - finds them lower as well.
The money is flowing into U.S. Treasurys which continue a big 2014 rally. The 10-year yield is off five basis points to 2.71%. TLT +0.3%, TBT -0.5%.
Germany's price-adjusted GDP growth eased to 0.4% in 2013 from 0.7% in 2012 and missed consensus of 0.5%.
"The German economy suffered from the continuing recession in some European countries and from restrained growth of the global economy," says Roderich Egeler, President of the Federal Statistical Office. "The strong domestic demand could offset those factors only to a limited extent."
"Final consumption expenditure was the main driving force for German economic growth," the stats office says. Household final consumption +0.9%, government final consumption expenditure +1.1%.
However, gross fixed capital formation fell.
Exports +0.6% and imports +1.3%, so the trade balance hurt growth by –0.3 percentage point. That might assuage criticism that Germany relies too much on exports for its growth.
The DAX is +0.6%, while the euro slides and is -0.3%. (PR)
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