- (EU) ECB: €2.8B borrowed in overnight loan facility v €1.5B prior; parked in deposit facility (second highest level on record) vs. €488.7B prior
- (UK) Jan Halifax House Prices M/M: 0.6% v 0.1%e; 3M/Y: -1.8% v -2.1%e
- (CZ) Czech Dec Industrial Output Y/Y: 2.0% v 1.3%e; Construction Output Y/Y: +14.6% v -2.3% prior
- (TW) Taiwan Jan CPI Y/Y: 2.4% v 2.2%e; WPI Y/Y: 4.3% v 4.1%e
- (TW) Taiwan Jan Foreign Exchange Reserves: $390.3B v $385.5B prior
- (SE) Sweden Dec Service Production M/M:0.0% v 0.2%e; Y/Y: 3.0% v 2.2%e
- (UK) UK Jan new car registration Y/Y: 0.0% v -3.7% prior - SMMT
- (EU) Euro Zone Feb Sentix Investor Confidence: -11.1 v -15.0e
- (DE) Germany Dec Factory Orders M/M: 1.7% v 1.0%e; Y/Y: 0.0% v -0.4%e
Fixed Income:
- (NO) Norway sold NOK3.0B vs. NOK3.0B indicated in 4.5% 2019 Bonds; Yield 2.10%
- (SK) Slovakia Debt Agency (ARDAL)sold €304M in 12-month Bills; Yield 1.6416% v 1.7044% prior; Bid-to-cover 1.18x v 2.85x prior
- (NL) Netherlands Debt Agency (DSTA) sold €2.2B vs. €4.0B indicated in 3-month and 6-month Bills
- Sold €1.11B vs.€2.0Be in 79-Day Bills; Yield 0.032% vs. 0.11% prior; bid-to-cover: 3.82x v 2.51x prior
- Sold €1.09B vs €2.0B in 174-Day Bills; Yield 0.05% vs. 0.009% prior; bid-to-cover: 3,53x v 4.00x prior
*** SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM ***
***Notes/Observations***
- ECB deposits at 2nd all-time highest level and back above $500B
- Greek ruling coalition fractured on austerity measures
- German Chancellor to meet French President Sarkozy in Paris likely will discuss the Greek impasse.
- Euro zone finance ministers may hold a meeting later this week in Brussels
about Greece's debt restructuring and the second bailout program.
- DjBlue as Giants win Super bowl; New Jersey fails to provide team with its promised tickertape parade
Equities: FTSE 100 +0.50% at 5825, DAX +0.40% at 6681, CAC-40 +0.50% at 3391, FTSE MIB +0.30% at 16,327, SMI +0.50% at 6095
- European equity indices opened the session lower, led by declines in French equities. European banks are mostly in negative territory amid continued concerns related to Greece and Portugal. Additionally, there has been speculation that European banking officials might have reservations about some of the capital plans presented byb anks, while the daily use of the ECB's deposit facility has moved back towards the recent record highs. Underperformers include Credit Agricole [ACA.FR] and SocGen [GLE.FR].
- In individual movers, Greek banks have risen by over 5% on continued hopes that they will not be nationalized. In the UK, shares of miners Xstrata [XTA.UK] and Glencore [GLEN.UK] have each moved lower by over 1%, as the companies have gained in recent sessions after confirming that they were in talks. Government services provider RM Plc [RM.UK] has declined by more than 10%, after reporting its FY11 results. In Switzerland, Julius Baer [BAER.CH] has declined by over 3%, after cutting its medium term pre-tax profit margin target. Most European airlines are trading lower amid the reports of cold weather conditions in various parts of Europe over the weekend. Also, China's government confirmed that Chinese airlines can be exempt from certain EU-imposed carbon emissions rules.
Speakers: - Greek press report noted that the country's coalition members must tell the European Union by noon on Monday local time (10:00 GMT) whether they accepted the painful terms of a new bailout worth €130B in order to avoid a disorderly default, with euro zone ministers postponing a meeting planned for Monday due to the delay in Athens.
- An unnamed Greek official stated that the political parties to meet regarding Troika deal around midday local time and denied that there was an 11:00 local time deadline on the talks. The official noted that the only deadline was for Greek government, EU/IMF inspectors and political leaders to reach a deal before the Eurogroup meeting
- Bavaria Fin Min Soeder commented that Greece would not be able to avoid a default and reiterated the view that the country was an absolute exception. A Greek insolvency could be a chance for a new beginning for the country and needed to be assured that a Greek default was not a default of Europe. He added that Italy was capable to solve its own problems.
- Fitch commented on Greece and expected the country to undertake an orderly debt restructuring but an disorderly default could not be wholly discounted. A disorderly default would disrupt payment systems leading right down to structured finance note holders. Interruption of interest payments by an issuer would constitute a note default, though amounts due may still be recovered eventually. An exit from the Euro zone would compound the problem as a devalued new drachma would almost certainly result in a shortfall on euro denominated notes.
- European Banking Authority (EBA) commented that the 'overwhelming majority' of measures outlined in bank recapitalization plans were in line with spirits of its requirements. The EBA would provide update after its Feb 8-9th Board meeting
- Brazil Central Bank's Pereira reiterated the view that there was more room to cut Selic interest rate
- Netherlands Central Bank said to oppose have the financial transaction tax
- Poland Finance Ministry's Dziennik commented that the Debt agency had no plans to increase Q1 debt sales and would not surprise the markets with large debt sales. Poland might reduce Q1 T-bills sales and remained flexible as one-third of 2012 needs have been met
- Romania PM Emil Boc resigned to "defuse political and social tension" in the country following weeks of protests over austerity measures
- IMF Romanian mission chief saw no reason for market volatility related to the recent resignation in Romania. IMF was willing to negotiate with the new gov't. and saw no reason for resignation to have impact on IMF-led aid package
Currencies:
- Risk aversion sentiment was rising during the session as the Greek situation remained in focus. Market chatter of a political deadline was in play as the coalition fought to accept the painful economic terms needed to secure a second bailout package. The EUR/USD remained contained within its January trading range and was trading at 1.3050 area as the NY morning approached.
Political/ In the Papers:
- The Evans-Pritchard piece in the Telegraph's commented on the risks the French presidential elections could present amid signs of austerity fatigue in France. Under President Sarkozy there is large support for the austerity policies of Germany. However, the German economy has benefitted more from the adoption of austerity. It was suggested that austerity measures were one of the things that cost France its AAA sovereign rating.
- There were concerns about Portugal's low reliance on exports reported in the financial press. Portugal's economy is similar to Greece's as both countries have small export sectors, which could make the economies particularly vulnerable to the impact of sharp budget cuts. Portugal's low level of exports has raised concerns that the country' austerity measures will further worsen growth In Greece and Portugal, exports make up 25% and 35% of GDP respectively, whereas in Ireland, exports are about 100% of GDP.
- Spain's city of Madrid, in addition to privatizing the metro system, plans to sell 20-30% of the water company Canal Isabel II by the summer. According to insiders, the sale process for Canal Isabel II, valued at €3B-€3.5B, is in advanced stages. The city added that it planned to maintain at least 51% of the water company. Madrid currently owes about €8.89B.
- According to three separate reports, significant declines in bank lending to smaller firms, and low confidence across the sector will add to concerns that the economy is about to enter a second recession in three years. The Markit/CIPS UK services PMI poll found that service firms were more optimistic on their outlook, even though figures indicated that the UK economy contracted in Q4. The E&Y Item Club expected to report 2012 bank lending to be the lowest since the recession of 2009. ICAEW discovered business confidence declined at a record rate, and firms were planning to reduce investment; job creation plans remained subdued.
***Looking Ahead***
- 6:30 ( (DE) German Chancellor Merkel and France President Sarkozy press conference
- 6:30 (CL) Chile Dec Economic Activity Index M/M: No est v 0.8% prior; Y/Y: 3.9%e v 4.0% prior
- 7:30 (BR) Brazil Jan Vehicle Production: No est v 262.0K prior; Vehicle Sales: No est v 348.4K prior; Vehicle Exports: No est v 48.4K prior
- 8:55 (US) Fed's Bullard speaks on Inflation Targeting in Chicago
- 9:00 (FR) France Debt Agency (AFT) to sell €8.5B in 3-month, 6-month and 12-month Bills
- 9:30 (EU) ECB calls for Bids in 7-Day Main Refinancing Tender
- 9:30 (EU) ECB announces weekly settlements in Govt Bond Purchase Program (SMP)
- 10:00 (CA) Canada Jan Ivey Purchasing Managers Index: 59.7e v 63.5 prior
- 10:00 (US) S&P analyst on US and European credit outlook
- 10:05 (EU) EU Lawmakers to discuss Anti-Market Abuse Law
- 11:30 (BR) Brazil Dec CNI Capacity Utilization: 81.7%e v 81.5% prior
- 11:30 (US) Treasury to sell 3-Month and 6-Month Bills
- 12:00 (DE) European Council President Van Rompuy speech: in Berlin
- 12:00 (IT) Italy PM Monti with OECD chied Gurria
- 12:15 (US) Fed's Fisher speaks on economy in Washington
- 12:45 (DE) German Chancellor Merkel and France President Sarkozy
- 14:55 ((US) Fed's Bullard
- 22:30 (AU) Australia Central Bank (RBA) Interest Rate decision: Expected to cut the Cash Target by 25bps to 4.00%
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