- According to German Die Zeit newspaper, German government is planning Greek debt restructuring, and Germany wants Greece to buyback bonds with EFSF help. However, this news was promptly denied by the Greek and German Ministry of Finance
- German Schatz auction, Portuguese 12-month T-Bill auction, and UK’s Gilt auction were all well bid
- Moody's and S&P assigned AAA rating to EFSF's first issuance programme
- RANsquawk European Morning Briefing Video: http://www.youtube.com/watch?v=1TS1wOuNUMM
Market Re-Cap
The overall news flow has been quiet this morning, and Bund futures traded higher in early European trade, however pared back earlier gains following a well received Schatz auction from Germany, which resulted in a rise in long-end of the yield curve. The Greek/German 10-year government bond yield spread widened following news in the German Die Zeit newspaper that Germany is planning Greek debt restructuring, however the news was promptly denied by the Greek and German Ministry of Finance. In other fixed income news, markets observed a successful 12-month T-Bill auction from Portugal, allied with a well-bid conventional Gilt auction from the UK, which led Gilt futures to spike around 15 ticks.
Moving forward, markets look ahead to US corporate earnings from Goldman Sachs, and Wells Fargo, amid others, allied with housing and building permits data from the US, as well as another Fed's Outright Treasury Coupon Purchase in the maturity range of Jul'13 - Dec'14, with purchase target of USD 6-8bln.
Asia Headlines:
Chinese consumer prices rose 4.6 percent in the year to December, Hong Kong media reported, a slowdown from a 5.1 percent pace in November that would alleviate the need for aggressive monetary tightening, citing an unnamed central bank source. The source added China’s GDP grew 10.3% last year. (Phoenix Television) China’s CPI and GDP is scheduled for release tomorrow.
US Headlines:
· US MBA Mortgage Applications (Jan 14) W/W 5.0% vs. Prev. 2.2%
· ABC Consumer Confidence (Jan 16) W/W -43 vs. Exp. -40 (Prev. -40) (RTRS)
EU and UK Headlines:
ECB's Nowotny said we do not see need for rate changes in near term, adding that Trichet’s CPI statements were interpreted in a 'one sided way'. (RTRS)
In other news, Irish PM Cowen’s party backed his leadership, promoting the resignation of his main challenger, Foreign Minister Michael Martin. Cowen, won a secret ballot of 71 Fianna Fail lawmakers, according to spokesman John Curran. (RTE)
· UK Jobless Claims Change (Dec) M/M -4.1K vs. Exp. 0.0K (Prev. -1.2K, Rev. to -3.2%)
· UK Claimant Count (Dec) M/M 4.5% vs. Exp. 4.5% (Prev. 4.5%)
· UK ILO Unemployment Rate (Nov) 3M/Y 7.9% vs. Exp. 7.9% (Prev. 7.9%) (RTRS)
· German Schatz auction for EUR 4.912bln, 1% 14-Dec-12, bid/cover 2.1 vs. Prev. 1.1 (yield 1.17% vs. Prev. 0.92%), retention 18.1% vs. Prev. 19.9%
· Portuguese 12-month T-Bill auction for EUR 750mln, bid/cover 3.1 vs. Prev. 2.5 (yield 4.029% vs. Prev. 5.281%)
· UK DMO sells GBP 2.25bln, 4.25% conventional gilts due 2036, bid/cover 2.11 vs. Prev. 1.62 (RTRS)
EQUITIES
Most European bourses traded in minor negative territory, with financials showing underperformance ahead of corporate earnings from some of the major US banks later in the session, given worse than expected quarterly earnings
from Citigroup yesterday. Moving into the North American open, equities continue to show minor weakness, with consumer goods and technology being the worst performing sectors.
If you require further information regarding US corporate news please refer to the RANsquawk ‘US equity opening news’ sheet or visit RANsquawk.com.
Index | DAX | CAC | FTSE | EUROSTOXX | SMI |
Level | 7143.64 | 4008.08 | 6043.18 | 2943.95 | 6618.83 |
Change (ticks) | 0.19 | -4.60 | -13.25 | -1.67 | -16.1 |
FX
Weakness in the USD-index helped support EUR/USD and GBP/USD, with GBP/USD gaining further strength from a decline in the Jobless Claims data from the UK. Moving forward, option expiry is seen in EUR/USD at 1.3500, with stops seen at 1.3520, and then barriers seen at 1.3550.
Currency | EURUSD | GBPUSD | USDJPY |
Level | 1.3473 | 1.6004 | 82.21 |
Change (pips) | 0.0086 | 0.0041 | -0.3500 |
COMMMODITIES
WTI Crude futures have edged higher towards the USD 92 level during European trade, supported by a weaker USD Index. (-0.53%)
Oil & Gas News:
· Bernstein analysts have written that oil demand from China will rise over the next five years to 12.5mln BPD, a rate faster than the IEA’s current predication of up to 11.7mln BPD, led by an increasing demand for transportation fuels.
· Barclays Capital analysts have written that US natural gas prices will stay at the USD 4 level during 2011, although the might fall to USD 2 in the short term.
· BP have released their 2030 energy outlook and written that annual energy demand growth will rise 1.7% annually through to 2030, with OPECs share of global oil output rising to 46% while consumption by non-OECD countries will be 68% higher.
· In its 2010 round up report Ernst & Young said M&A activity in the industry recovered last year with total industry deal value in the first three quarters up by 50% over the same period of 2009. Factors responsible include the oil majors continuing to divest non core assets, moves into the US shale gas sector by the big international oil companies, and diversification by the Asian NOCs.
Geopolitical News:
· US President Obama and his Chinese counterpart Hu Jintao will meet today at the start of the Chinese state visit to the US. North Korea is one of the subjects to be discussed. Meanwhile Japan has said that they are keen for the US and China to have good stable ties for the sake of world stability.
· South Korea is seeking clearance from the US to make its own ballistic missile capable of hitting all of rival North Korea. Currently a 2001 pact limits production to missiles with a range of 300km and a payload of up to 500kg.
Commodity | WTI Nymex | OTC Spot Gold |
Level | 91.97 | 1374.13 |
Change (USD) | 0.59 | 5.88 |
LOOKING AHEAD
Economic Releases
CST | GMT |
| DATA | EXP | PREV |
0645 | 1245 | US | ICSC Chain Stores W/W (Jan 19) |
| -3.2% |
0645 | 1245 | US | ICSC Chain Stores Y/Y (Jan 9) |
| 3.5% |
0730 | 1330 | US | Housing Starts M/M (Dec) | 550K | 555K |
0730 | 1330 | US | Housing Starts (%) M/M (Dec) | -0.9% | 3.9% |
0730 | 1330 | US | Building Permits M/M (Dec) | 555K | 530K |
0730 | 1330 | US | Building Permits (%) M/M (Dec) | 2.0% | -4.0% |
0730 | 1330 | CA | Manufacturing Sales M/M (Nov) | 0.3% | 1.7% |
0755 | 1355 | US | Redbook M/M (Jan 19) |
| -0.5% |
0755 | 1355 | US | Redbook Y/Y (Jan 19) |
| 2.8% |
0930 | 1530 | CA | Monetary Policy Report |
|
|
1530 | 2130 | US | API Crude Oil Inventories W/W (Jan 14) |
| 57K |
1530 | 2130 | US | API Cushing Crude OK Inventory W/W (Jan 14) |
| 301K |
1530 | 2130 | US | API Distillate Inventory W/W (Jan 14) |
| 1554K |
1530 | 2130 | US | API Gasoline Inventories W/W (Jan 14) |
| 7036K |
1530 | 2130 | NZ | Business PMI M/M (Dec) |
| 52.7 |
1545 | 2145 | NZ | Consumer Prices Q/Q (Q4) | 2.4% | 1.1% |
1545 | 2145 | NZ | Consumer Prices Y/Y (Q4) | 4.1% | 1.5% |
1730 | 2330 | AU | Consumer Inflation Expectation M/M (Jan) |
| 2.8% |
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Speakers | |||||
0700 | 1300 | GE | Economic Minister Bruederle | ||
0730 | 1330 | EU | ECB’s Noyer | ||
0900 | 1500 | US | China President Hu Jintao and US Obama meet, press conference expected at 1805 GMT | ||
1100 | 1700 | UK | BOE’s Posen | ||
1130 | 1730 | EU | Bundesbank board member Dombrat | ||
1200 | 1800 | EU | ECB’s Stark | ||
N/A | N/A | US | US House Republicans to open debate on Spending cuts | ||
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Auction | |||||
1000 | 1600 | US | Fed’s Outright Treasury Coup. Purch. Jul 2013 – Dec 2014 (USD 6-8bln) | ||
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Earnings | |||||
US | eBay, Goldman Sachs, Seagate Technology, Wells Fargo, Xilinx | ||||
Prices taken at 1211 GMT