European Market Update: Risk appetite continues to find some relief in the aftermath of Greek Parliament austerity vote

 Monday, February 13, 2012 5:45:20 AM
 TradeTheNews.com European Market Update: Risk appetite continues to find some relief in the aftermath of Greek Parliament austerity vote
***Economic Data***
- (EU) ECB: €1.2B borrowed in overnight loan facility v €1.6B prior; €507.9B parked in deposit facility vs. €496.1B prior
- (DE) Germany Jan Wholesale Price Index M/M: 1.2% v 0.0% prior; Y/Y: 3.0% v 3.0% prior
- (TR) Turkey Dec Current Account: -$6.6B v -$6.5Be
- (CH) Swiss Jan Producer & Import Prices M/M: 0.0% v 0.2%e; Y/Y: -2.4% v -2.2%e
- (NV) Netherlands Dec Trade Balance: +€4.3B v +€4.4B prior -
- (CZ) Czech Dec Current Account: (CZK) -8.9B v -3.3B e
- (UK) BoE: Project Merlin 2011 credit to business at £214.9B v £190.0B target

Fixed Income
- (IT) Italy Debt Agency (Tesoro) sold total €12.0B vs. €12.0B indicated in 4-month and 12-month Bills
- Sold €3.5B vs. €3.5Be in flexible 4-month Bills; Avg Yield 1.546% v 1.644% prior; Bid-to-cover: 2.45x vs. 1.85x prior
- Sold €8.5B vs. €8.5Be in 12-month Bills; Avg Yield 2.230% v 2.735% prior; Bid-to-cover: 1.09x v 1.47x prior
- (SO) Slovakia Debt Agency (ARDAL) buys back €186.8M in May 2012 Bonds in reverse auction
- (NO) Norway sold NOK3.0B vs. NOK3.0B indicated in 7-month Bills; Yield 1.80%
- (DE) Germany sells € in 6-Month BuBills; Avg Yield +0.0761% v -0.0122%; Bid-to-cover: 1.5x v 1.8x prior
- (HU) Hungary Debt Agency (AKK) sold HUF60B in 6-Week Bills; Yield 7.15%, bid-to-cover: 2.47x
*** SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM ***
***Notes/Observations***
- Japan Q4 Preliminary GDP weaker than expected
- Greek Parliament passes austerity commitments; Ruling coalition expels 45 members for voting against party lines
- Chinese officials quite vocal on Europe and US ahead of key visits to both regions
Equities: FTSE 100 +0.90% at 5907, DAX +0.50% at 6727, CAC-40 +0.50% at 3389, IBEX-35 +0.4% at 8832, FTSE MIB +0.90% at 16,503, SMI +0.60% at 6165
- European shares rose after Greek parliament passed a €3.0B austerity package, crucial for the second round of bailout measures. The approval of the austerity measures prompted violent protests in Athens which may be an indicator of the difficulty that the Greek government will face in implementing the measures. Banks were higher as a result
- Corporate news were thin but Cable & Wireless [CW.UK] rallied after Vodafone confirmed that it was in early initial stages of evaluating CWW on possible offer. Sunday Times had speculated that the offer is in the amount of £700M. After the EU close, important names like Deutsche Boerse [DB1.DE] and L'Oreal [OR.FR] are expected to report their earnings.
Speakers: - German Econ Min Roesler commented that the Greek Parliament vote on austerity was step in the right direction but still needed Troika report before any Greek vote in the German Parliament
- China sovereign wealth fund (CIC) chief Lou commented that Europe would inevitably enter into a recession and that the global economic recovery would be very slow. He noted that European gov't bonds were not ideal for long-term investors and difficult for CIC to invest in Italian bonds. China had achieved an economic soft landing but still faced inflationary risks
- China Foreign Min spokesperson Liu Weimin commented that the European debt crisis is at critical juncture and urged "structural and long term reforms" in Europe.
- China Vice Premier Xi commented ahead of his US visit that he hoped US will loosen its high-tech export limits
- China's National Development and Reform Commission (NDRC) Official commented that it expected Feb CPI to fall below 4% level compared to the 4.5% rise seen in Jan
- China State Administration of Foreign Exchange (SAFE) reiterated view that it would further develop the fx market (Standard commentary)
- PBOC advisor Xia Bin commented that the US Treasuries should remain China's FX investment choice. He added that China's economy to slow due to weakening external demand.
- Former PBoC Official Wu Xiaoling stated that significant loosening of policy was not likely in 2012
- Former-PBoC advisor Yu Yongding commented that debt issues in the US was more serious than those in the EU and must remain on 'high alert'. The key to resolving the European crisis lies with Germany but the Greek parliament's passage of bills that would enable a second European bailout was good news
- Austria Fin Min Fekter commented in the press that the country's 'AAA' sovereign rating was being scrutinized again
- Spain Econ Min Guindos commented that the country's deficit target would be dependent on Brussels
- Kuwait Central Bank Gov Al-Sabah confirms resignation after 25-year in the position to protest against the increase in state spending
Currencies:
- Risk appetite weighed upon the USD as some of the political tensions eased in Europe. The USD was softer against the various European pairs as some relief was expressed over the Greek Parliament vote. The EUR/USD was hovering around the 1.3260 area in quiet trading and contained within last week's range.
- The USD/JPY was a touch higher ahead of the BOJ rate decision on Tuesday.
The BOJ started its two-day policy meeting on Monday to study the impact of the euro zone debt crisis and other downside risks overshadowing the Japanese economy, but it is expected to refrain from taking additional monetary easing steps. The 78.30 level remains the initial key resistance in the USD/JPY pair
- Net USD longs cut again in week ending Feb 7 to lowest levels since mid Nov according to CFTC data.
Political/ In the Papers:
- The Confederation of British Industry (CBI) cut its 2012 UK GDP growth forecast to 0.9% from 1.2%, although it does not expect a recession. Additionally, the CBI is not expecting any additional quantitative easing out of the BoE. Similarly, in a report by the Chartered Institute of Personnel and Development (CIPD), the UK is facing the worst employment prospects since the recession due to increase in planned cuts by private sector employers and public sector cuts.
- Certain Portuguese and Spanish banks are expected to issue 'Co-co' bonds, or contingent convertible bonds converted into equity under certain circumstances, in order to meet their capital shortfalls. Some banks expected to issue Co-co's include Banco Commercial Portugues and Banco BPI.
- The German government's plan to accelerate solar incentive cuts to April from July has led to rushed orders. Demand in the solar industry has seen a rebound in Q1 amid lower inventory levels. Industry sources expect demand levels to start to decline in March.
- The Telegraph's Evans-Pritchard suggested austerity measures being imposed on Greece have pushed the country's economy into a downward spiral. His article suggested that the design flaws in the EU/IMF austerity plan for Greece have caused the country's output to contract sharply. Greece's recession has caused more than 60,000 firms to go out of business since the summer, and there are an additional 50,000 firms at risk of filing for bankruptcy over the next 6 months.
***Looking Ahead***
- 6:00 OECD Dec Leading Indicator: No est v 100.2 prior
- 6:00 (TU) Turkey to sell Zero Coupon 2013 Bonds and 9% 2016 Bonds
- 6:00 (IC) Iceland to sell Bills
- 6:00 (IS) Israel sells total ILS vs. ILS800M indicated in 2014, 2016 and 2022 Bonds
- 6:00 (IS) Israel sells total ILS vs. ILS450M indicated in I/L 2022 and 2041 Bonds
- 8:00 (CZ) Czech Finance Ministry publishes March debt-auction calendar
- 8:00 (PL) Poland Dec Current Account: -€1.2Be v -€1.0B prior; Trade Balance: -€901e v -€749M prior
- 9:00 (MX) Mexico Dec Industrial Production M/M: 0.5%e v 0.1% prior; Y/Y: 2.8%e v 3.2% prior
- 9:00 (HU) Chinese Ambassador to Hungary Speaks on China/EU Relations
- 9:00 (FR) France Debt Agency (AFT) to sell up to €8.5B in bills
- 9:30 (EU) ECB calls for bids in 7-Day Main Refinancing Tender
- 9:30 (EU) ECB calls for bids in 1-Month Tender
- 9:30 (EU) ECB announces weekly settlements in its Govt Bond Purchases (SMP) vs. €124M prior
- 9:45 (UK) BOE to buy £1.5B in 2015-2018 Gilts in reverse auction
- 11:00 (US) Fed to Purchase $1.5-2.0B in Notes
- 11:30 (US) Treasury to sell 3-Month and 6-Month Bills
- 11:45 (CA) Ontario Minister of Finance Duncan speaks in Toronto
- 11:00 (IC) Iceland Jan International Reserves (ISK): No est v 1.049T prior
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