TradeTheNews.com European Market Update: ECB deposits hit fresh record levels following 3-year LTRO operation

 Friday, March 02, 2012 5:49:18 AM TradeTheNews.com European Market Update: ECB deposits hit fresh record levels following 3-year LTRO operation***Economic Data***

- (RU) Russia Narrow Money Supply w/e Feb 27th (RUB): 6.85T v 6.84T prior
- (EU) ECB: €572M borrowed in overnight loan facility v €3.0B prior; €776.9B parked in deposit facility (fresh record high) vs. €475.2B prior - (DE) Germany Jan Retail Sales M/M: -1.6% v +0.5%e; Y/Y: 1.6% v 0.2%e
- (FI) Finland Q4 GDP Q/Q: 0.1%e v 0.9% prior; Y/Y: 1.3%e v 2.7% prior
- (HU) Hungary Dec Final Trade Balance: €325.0M v €352.1M prelim
- (ES) Spain Feb Net Unemployment M/M: +112.3K v +80.0Ke
- (ZA) South Africa Feb Naamsa Vehicle Sales Y/Y: 6.4% v 6.5%e
- (NO) Norway Jan Retail Sales Volume Y/Y: 6.7% v 2.6%e
- (UK) Feb PMI Construction: 54.3 v 51.3e
- (EU) Euro Zone Jan PPI M/M: 0.7% v 0.5%e; Y/Y: 3.7% v 3.5%e
- (IT) Italy 2011 Annual GDP: 0.4% v 0.3%e; Deficit to GDP:% v 4.0%e
*** SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM ***
***Notes/Observations***
- EU's Juncker: There is a plan B if the Greece debt swap fails
- Fed's Williams: More stimulus needed if recovery falters
- Euro Zone Leaders pave way for EU decision on Greek bailout agreement
- China diversifies away from USD
- Germany MoM Retail Sales disappoints
- Spanish Feb Net Unemployment climbs more than expected
Equities: FTSE 100 -0.10% at 5925, DAX flat at 6942, CAC-40 +0.20% at 3508, IBEX-35 +0.50% at 8592, FTSE MIB +0.60% at 16,926, SMI +0.10% at 6135
- European shares rallied lifted by a stronger banking sector which is up following ECB's LTRO allotment this week and press reports that EU leaders may agree to provide capital faster to the €500B permanent bailout fund. EU leaders may pay the first two installment this year and complete the capitalization in 2015, which is one year ahead of the schedule. Goldman Sachs also boosted the financial sector by upgrading European banks to Overweight
- Areva [CEI.FR] , as expected from yesterday's EU session, reported a €2.0B net loss due to provisions, the first loss in its history. However the company reiterated its outlook and noted that it aimed to raise at least €1.2B from asset sales in 2012-13 period. Meanwhile, the company agreed to sell both its stake in Eramet and in Canadian Millenium. Rentokil [RTO.UK] traded down after reporting its earnings and noted that its H1 performance in one of its units would continue to be disappointing.
Speakers: - The European fiscal compact was signed by 25 EU leaders. EU's President Van Rompuy stated that the measure would restore trust among EU states
- Germany Econ Min: Roesler commented in the German press that the supported the idea of placing a European Commissioner in charge of economic development in Greece but could not understand Greek objections to the proposal. He observed that the Greek people were aware of the needed sacrifices, but the Greek elite did not want to give up their privileges.
- BOJ Yamaguchi commented that the central bank might need new tools for its 1% CPI target and was flexible and ready to move if necessary. He noted the BOJ was not thinking about unwinding measures nor saw the need at this time to extend JGB period under program
- Japan Public Pension Fund (GPIF) (world's largest) reported its Oct-Dec qtr returns which rose by 0.58% compared to a prior loss of-3.32% q/q. It noted that it's posted a profit of ¥618.7B due to returns on foreign stocks. Assets at Jan end to head down to ¥108.1T.
- S&P EMEA managing director Fernandez de Heredia commented that Italy could return to an 'A' rating if country moved in the right direction regarding its debt, its growth and reforms. The first step by the rating agency would entail a change of Italy's outlook from negative to stable which depended on the debt, growth and the economic impact of the reforms of PM Monti's government. If Italy goes in the right direction, S&P wouldl take this first step. The recent decrease seen in govt' yields were not enough for the outlook to change, only sustainable impact of the reforms on growth can change the outlook
- Japanese purchasers seek force majeure clause in the event it was unable to pay Iran, or lift Iranian crude for lack of ship insurance coverage
Currencies:
- Concerns that the EU Leaders were waiting for the final outcome of the Greek PSI swap on March 9th and weaker German retail sales data pressured the EUR/USD from the getgo of the session. The record amount of deposits in the ECB's facility seemed to mirror the net new borrowing from the recent 3-year lending LTRO and prompted concerns whether bank would actually lend to assist the real economy.
- The EUR/USD tested 1.3240 before stabilizing in the session but was off some 505 pips from its Asian opening levels.
- The JPY weakness stalled during the mid-morning after testing 81.71. The higher oil prices said to be another factor weighing against the JPY currency sentiment as Japanese demand for oil surged after last year nuclear disaster.
Political/ In the Papers:
- The FT commented on concerns in Germany about the growth of the Bundesbank's balance sheet. The state bank's Target2 balance is about €500B, which reflects the amount that the German central bank has lent to the ECB. According to Commerzbank, Target2 claims are the largest part of the Bundesbank's balance sheet. As a reminder, Target2 is the joint gross clearing system of the ESCB that unifies the technical infrastructure of the 26 central (note-issuing) banks of the EU.
- Prosecutors in Germany raided various properties across Europe as part of an insider trading probe related to allegations that certain investors tried to inflate prices for penny stocks. German officials raided 53 properties in Germany and inquired about 29 other sites outside of Germany.
- The Telegraph's Ambrose Evans-Pritchard suggested that the recent European unemployment data shows a widening prosperity gap between the Northern and Southern EU economies. SocGen analyst Klaus Baader believed the EU's austerity measures are having a more negative than expected impact on the EU's labor markets, particularly in the peripheral countries.
- In an IMF report to the G20 ministers last weekend in Mexico, it was recommended that the ECB lower the target rate to less than 1% in addition to emergency loans to commercial lenders. Monetary policy needed to be kept highly accommodative, which the IMF said could be done by lowering the target policy rate (where there is still room), and by more unconventional measures if necessary.
- In its Credit Review Office (CRO) quarterly report on SMEs, the Ireland Finance Ministry targeted new lending requirements for both Allied Irish and Bank of Ireland. The new plan will require each bank to lend €3.5B in 2012, followed by an additional €4B each in 2013. Lending can take the form of new loans or restructuring old debt.
***Looking Ahead*** - (EU) EU Leaders Summit in Brussels
- (ES) Spain to present new budget targets
- 8:30 (CA) Canada Dec Gross Domestic Product M/M: +0.3%e v -0.1% prior; Y/Y: 1.9%e v 2.0% prior; Quarterly GDP Annualized GDP Y/Y: 1.8%e v 3.5% prior
- 9:45 (US) Feb ISM New York: No est v prior
- 10:00 (DK) Denmark Feb Foreign Currency Reserves (DKK): No est v 492.6B prior
- 16:00 (CO) Colombia Feb Producer Price Index M/M: No est v -0.5% prior; Y/Y: No est v 3.7% prior
- 20:00 (CN) China Feb Non-Manufacturing PMI: No est v 52.9 prior
- 20:00 (US) Fed's Bullard speaks on U.S. Economy in Vancouver
Weekend
Sat: (US) Republican Washington Caucus
Sun 18:00 (EU) Bank of International Settlements (BIS) holds Global Central Bank Meeting
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