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•Greek PSI talks are ongoing. The Greek Conservative Leader Samaras has said he expects the bond swap deal to be completed by March 5th.

•UK Debt reaches the GBP 1tln mark for the first time.

•European equities are trading negatively following French bank downgrades and underperforming earnings reports from the Telecommunications sector.

•RANsquawk European Morning Briefing Video:

Market Re-Cap

Despite German and French Manufacturing and Services PMI data outperforming expectations, European equity indices are trading down at the mid-point of the European session on extended concerns over the still-not-settled Greek PSI agreement.

Further downward pressure on German markets came from Siemens' earnings report earlier this morning, with the company missing their revenue targets and foreseeing a difficult economic environment for them in Q2 of this year.

In UK news, despite an unexpected fall in government spending, UK debt has topped the GBP 1tln mark for the first time.

US Headlines

BarCap US Treasury month end extension seen at +0.01yrs.

Looking forward to the rest of the session, Richmond Fed Manufacturing Index is due at 1500GMT, as well as API inventories later on in the afternoon.

Asian Headlines

Bank of Japan has forecast that their economy will contract in this current fiscal year, but they have kept monetary policy steady at 0-0.1%, further forecasting that the economy will make a steady recovery later in the year fuelled by exports to emerging markets. (RTRS)

EU and UK Headlines

Comments from the Greek Conservative leader Samaras have highlighted March 5th as a completion date for the bond swap deal. (RTRS)

EFSF's Regling has said an S&P downgrade will not reduce the EFSF's lending capacity. Regling went on to say that they have obtained about EUR 60bln in commitments for EFSF co-investment funds. (Sources)

The Eurogroup agreed on an ESM based on a Finnish proposal according to the Finnish finance ministry. The Finnish finance ministry highlighted concerns that the fund would be allowed to make loans without unanimous consent from the governments. The ESM is to include a reserve fund when emergency voting is used with the ESM deal set to be signed on Jan 30th. (Sources)

Following European Manufacturing & Services PMI outperforming expectations, this failed to prevent European markets from falling, with all European indices trading down at this point amid the ongoing Greek PSI agreement troubles.
Eurozone PMI Manufacturing M/M (Jan A) 48.7 vs. 47.2 (Exp. 46.9)
Eurozone PMI Services M/M (Jan A) 50.5 vs. Exp. 49.0 (Prev. 48.8)
German Manufacturing PMI (Jan A) M/M 50.9 vs. Exp. 49.0 (Prev. 48.4)
German Services PMI (Jan A) M/M 54.5 vs. Exp. 52.6 (Prev. 52.4)
French PMI Manufacturing M/M (Jan P) 48.5 vs. Exp. 49.0 (Prev. 48.9)
French PMI Services (Jan P) 51.7 vs. Exp. 50.4 (Prev. 50.3)

UK government borrowing data came in with a surprise fall in spending, however UK debt has topped the GBP 1tln mark for the first time in history.
UK Public Finances (PSNCR) M/M (Dec) 22.9bln vs. Exp. 19.0bln (Prev. 10.6bln)
UK Public Sector Net Borrowing M/M (Dec) 10.8bln vs. Exp. 12.1bln (Prev. 15.2bln, Rev. 15.1bln)
UK Public Sector Net Borrowing ex Interventions M/M (Dec) 13.7bln vs. Exp. 14.9bln (Prev. 18.1bln, Rev. 17.9bln)


European equities are trading in negative territory at the mid-point of the European session with Financials showing the largest fall following S&P action on French banks Credit Agricole, Societe Generale and Groupe BPCE, downgrading the three banks one notch to single-A with a stable outlook. (Sources)

Further focus in the equity markets fell on Industrials, with German market participants placing their attention on Siemens, who have missed revenue targets and foreseen a difficult economic environment for Q2 this year.

The Telecommunications sector has been troubled by KPN who announced a 63% drop in Q4 income, causing shares to fall by as much as 9.7%, the largest drop since 2008. (Sources)

-Q1 Net from continuing ops EUR 1.36bln vs. Exp. EUR 1.47bln.
-Q1 Sales EUR 17.9bln vs. Exp. EUR 18.28bln. (Sources) Top performing sectors in BE500: Utilities (+0.86%), Health Care (-0.02%), Consumer Goods (-0.50%)
Worst performing sectors in BE500: Financials (-2.38%), Industrials (-2.26%), Technology (-1.84%)

**Note: For US equity news in detail, kindly refer to the RANsquawk Daily US Equity Opening News report.


Major currency pairs this morning are trading relatively flat following USD index strength earlier in the session, however these losses have been pared, EURUSD continues to trade around the 1.3000 level a touted intraday option expiry. BarCap's Chief interest rate strategist has said he expects the EURUSD 1.2000. (Sources)

The Japanese government have commented on the volatility of their FX markets saying that excessive movements in FX is bad for their economy and they will monitor the markets closely, taking decisive steps when needed. (Sources)

The Turkish central bank has said that from Jan 25th Forex selling auctions are to be halted. (Sources)


Both Brent and WTI Crude are trading down at this point in the European session due to a slightly stronger USD index and further European concerns over a Greek PSI agreement that is yet to arise. Iran have come under further sanction warnings from Australia and the UK which have said that if necessary, additional forces can be sent to the Gulf to ensure shipping remains uninterrupted.

Oil & Gas News:

•US President Obama is to encourage US booming natural gas output in his State of the Union address, while defending his administration's energy record, according to reports.
•A boom in US oil production could raise US domestic crude output by a fifth over the next decade, helping to slash the country's dependence on foreign oil imports, according to a report by the US Energy Information Administration.
•South Sudan has started shutting down oil production amid a deepening dispute with its northern neighbour, Sudan, over transportation fees for its exports.
•India refiners are seeking renewed Iranian oil supply deals.

Geopolitical News:

•UK Defence Secretary Hammond has said the UK will send additional military forces to the Persian Gulf if necessary to keep the Strait of Hormuz open for shipping.
•The Australian Foreign Minister, Rudd, has said Australia will follow the EU in banning imports of Iranian oil.
•Saudi Arabia has promised Spain that it will make up for supplies of oil it loses as a result of EU sanctions on Iran and at the same price, according to the Spanish Foreign Minister.

**Note: For commodities news in detail, kindly refer to the RANsquawk Daily Energy Commentary report.

**Note: Chinese Market Holiday

'Market talk' - Signifies information that has not been formally tested through traditional journalistic channels and therefore is to be treated as unsubstantiated. Any interpretation of the talk is taken at the readers own risk and is a representation of the rumours within the market place and never generated by ourselves.

Prices taken at 1225GMT