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US Morning Briefing
Fri, Feb 12 2010, 12:44 GMT
JGBs slipped slightly as a pledge by European leaders to support heavily indebted Greece eased risk aversion, lifting Tokyo shares (Nikkei +1.3%) and hurting US Treasuries. JGBs were trading at 139.40 (-0.03) at 0610 GMT. Nikkei rose 1.3% with investors hunting bargains in exporters and other shares after a pledge by European leaders to support debt-laden Greece eased fears of a broader Eurozone crisis. Mitsubishi Corp and other resources shares gained after metals rose on Chinese data showing banks had made stronger-than-forecast loans in January, while consumer inflation moderated more than expected in the year to January. (RTRS)
Japan Consumer Confidence (Jan) M/M 39.4 vs. Prev. 37.9 (BBG)
China central bank raised reserve requirements by 0.5%, effective February 25th, the second hike in a month. (RTRS/BBG)
IMF chief economist Blanchard said he would strongly argue for an inflation target of 4%, instead of the 2% favoured by most policy makers. (BBG) Also, IMF’s Lipsky said that we all agree about the need to stop bank bailouts, adding that interest rate is a blunt tool in tackling asset markets. (Sources)
Japanese banking minister Kamei said that Japan Post, the government-owned postal and financial conglomerate, could buy more US Treasuries as one way to reduce its current heavy focus on domestic government debt. (RTRS)
In other news, about 25% of the 8.4mln positions cut in the US since the recession started won’t be filled again. (WSJ) Also in the news, foreign central bank US debt holdings rose USD 7.867bln to USD 2.956trl in the week ended February 10. (RTRS)
German 10-year bund futures opened positive on the back of ongoing concerns over Greece as Eurozone finance ministers’ meeting failed to provide clear solutions on Greece to the market. Further into the European open, more strength was observed following worse than expected Eurozone GDP and Industrial Production figures, PBOC raising the reserve requirements that adversely affected European equities, downward revision of Greece Q1, Q2 and Q3 GDP, as well as comments from EU source that next week’s EcoFin is unlikely to make concrete decisions on Greece.
In related news, ECB’s Trichet said that ECB and Commission will monitor Greece’s progress, and may propose additional measures. Trichet also said that the ECB is permanently alert on Greece. Also, ECB’s Nowotny said that ECB can’t intervene on Greece, and aid decisions can only be made by the EU, adding that Greece’s problem isn’t only deficit but credibility, however, idea of Euro-area break-up is absurd. In related news, ECB’s Stark said that Eurozone bond would not solve structural problems of countries like Greece, adding that he doesn’t see need for IMF help for Greece, and Greece must correct its errors. (BBG/Der Standard/RTRS)
Eurozone GDP SA (Q4 A) Q/Q 0.1% vs. Exp. 0.3% (Prev. 0.4%)
Eurozone GDP SA (Q4 A) Y/Y -2.1% vs. Exp. -1.9% (Prev. -4.0%)
Eurozone Industrial Production SA (Dec) M/M -1.7% vs. Exp. 0.1% (Prev. 1.0%, Rev. to 1.4%)
Eurozone Industrial Production WDA (Dec) Y/Y -5.0% vs. Exp. -1.7% (Prev. -7.1%, Rev. to -6.9%) (BBG)
Italian BTP Tap auction for EUR 3.5bln, 3% 15-Apr-15, Bid/Cover 1.27 vs. Prev. 1.46
Italian BTP Tap auction for EUR 1.701bln, 3.75% 01-Aug-21, Bid/Cover 1.663
Italian BTP Tap auction for EUR 2.5bln, 5% 01-Mar-25, Bid/Cover 1.554 (BBG)
NYSE LIFFE Gilt futures opened in minor positive territory amid risk-averse trade, and later in the European session gained further strength on the back of strength in bund futures as well as weakness in equities as the PBOC raised reserve requirements for the second time in a month.
UK’s PM Brown said that evidence is that 0.1% Q4 GDP growth will be revised higher, adding that danger for UK is if fiscal stimulus is withdrawn too quickly. He also said that UK deficit plan is clear, will halve deficit in four years. Brown said that not being in Euro gives UK flexibility many other EU countries do not have. (RTRS)
UK and European bourses opened higher but declined as the morning progressed on a combination of continued uncertainty over Greece, China reserve requirement ratio hike, and weak economic data out of the Euro-Zone.
Financials were once again the underperforming sector and basic material stocks were weighed by a stronger USD which rose in risk adverse trade.
USD index traded in the positive territory into the European open on the back of risk-averse trade, and gained further strength following delays in decisive action from the EU over Greece problems as well as weaker than expected Eurozone GDP and Industrial Production figures. Also, the EUR remained under pressure due to worse than expected Eurozone GDP and Industrial Production data, as well as continuing uncertainty over Greece situation. Elsewhere, NZD came under pressure following the release of worse than expected New Zealand Retail Sales and House Sales figures.
Heading into the North American open, WTI crude futures are trading lower, after China unexpectedly hiked reserve requirement ratio which caused investors to fret over the sustainability of demand for commodity products from the world’s largest exporter.
OPEC should not change output quotas at its next meeting in March because of high inventories and no sign of demand recovering, Venezuela’s Oil Minister said.
French UN envoy said that it is essential to work with China on Iran even if it means “waiting a bit” with new sanctions.
North Korea’s chief negotiator to nuclear disarmament talks may visit the US in March for follow-up discussions on the communist country’s nuclear weapons programme.
The Nigerian militant group, Joint Revolutionary Council (JRC), has claimed attacks on oil and gas facilities in the southern Niger Delta region. However, Royal Dutch Shell said it has no report of attack on Nigeria oil operations after claims by militants.
CME Eurodollar Feb. options expiry
**Prices taken at 12.24 GMT