(*) EURUSD Higher Ahead at NY Open as Asia and Europe Digest NFPs

04 June 2012 13:39 GMT Fundamental Headlines
- Growth Slowdown Seen for Third Year in U.S. Dodging a Recession – Bloomberg
- S&P 500 Valuation Slips 19% Below ’11 – Bloomberg
- Europe Mulls Major Step toward “Fiscal Union” – Reuters
- Feds Eye MF’s False Promise – WSJ
- Germany Signals Crisis Shift – WSJ
Asian/European Session Summary
The first full week of June brings about new opportunity after a dismal May, in which it is looking increasingly like that the Federal Reserve will be forced to implement another round of stimulus to spur the US economy. Nevertheless, the concerns over the Asian and European growth pictures remain at the forefront of global investors’ minds and the start of the week has been relatively bearish in terms of desire for higher yielding currencies and risk-correlated assets.
Although they’ve since bounced back, the Australian and New Zealand Dollars were leading losses among the majors through early Monday as Asian traders dumped the commodity-linked currencies amid the deteriorating growth picture for the world’s largest economy, the US. The downside pressure in the Asian-Oceanic currencies comes ahead of the Reserve Bank of Australia’s June meeting on Tuesday, in which basis swaps are suggesting another 50-basis point rate cut is coming down the pipe. Given the increasingly negative sentiment surrounding the Australian Dollar, there is capacity for the Aussie to rebound if the RBA only cuts by 25-bps instead.
The Japanese Yen also remains quite stronger, now one of the top performing currencies year-to-date behind the US Dollar and the British Pound. In the first quarter, the Yen depreciated by 10.08 percent against the majors covered by DailyFX (AUD, CAD, CHF, GBP, EUR, NZD, USD); but in the second quarter thus far, the Yen has appreciated by 11.13 percent against the same currencies. Indeed, the flight to safety (in this case, the more liquid currencies like the Japanese Yen and the US Dollar) has hampered efforts by the Bank of Japan and the Japanese Ministry of Finance to stem the Yen’s appreciation. Earlier today, BoJ Governor Masaaki Shirakawa said that the BoJ is monitoring “the recent appreciation of the Yen,” while also noting that “the bank carefully monitors the development of the foreign exchange rate from the viewpoint of how it affects the economy through its impact on business sentiment.” While the continued flight to safety will keep demand for the Yen high, it is likely that the BoJ steps in to halt the Yen’s strength, if only momentarily.
Taking a look at credit, US Treasuries have started to come off a bit, with the 10-year Note yield rising back to 1.514 percent ahead of the cash equity open. In Europe, peripheral yields have improved as well, led by Greece and Italy on the longer-end of the curve and by Italy and Portugal on the shorter-end. The Portuguese 2-year note yield dropped by 17.9-bps to 9.552 percent, while the Italian 2-year note yield fell back to 4.100 percent. Undoubtedly the positive developments have been in part due to the positive results of the European Troika’s fourth quarterly review of Portugal’s economic program.
EURUSD 5-min Chart: June 4, 2012

Charts Created using Marketscope – Prepared by Christopher Vecchio
The New Zealand Dollar has been the top performer, gaining 0.62 percent against the US Dollar to start the week. The Japanese Yen has been the worst performer, with the USDJPY appreciating by 0.20 percent. The Euro’s rally has really picked up steam around the US cash equity open, and the EURUSD is now up 0.46 percent on the day. Quizzically, the Swiss Franc is the second best performer, up 0.49 percent.
24-Hour Price Action

Key Levels: 12:45 GMT


Thus far, on Monday, the Dow Jones FXCM Dollar Index (Ticker: USDOLLAR) is trading lower, at 10211.64 at the time this report was written, after opening at 10257.60. The index has traded mostly lower, with the high at 10271.92 and the low at 10211.64.

A need for Europe to intensify and to react immediately's leaders

Leadership needs to step up now Impact of Greek eurozone exit would be catastrophic Currencies oversold and still in need of some corrective action Spanish GDP meets expectation. Spanish auction well received We have now reached a point where a serious emergence of leadership in the Eurozone is needed. While some would argue that a Greece exit would be best, as it would rid the rest of the Eurozone from having to deal with the Greek financial crisis, we contend that a Greek exit would be catastrophic, as it would only open the door for exits by other ailing economies within the Eurozone. It is true that in the grand scheme, Greece is a rather small threat to the broader economy, goal if investors started to expect such exits from other countries as a result, this would truly be an unwelcome development which would significantly undermine the Euro's prospects.
Relative performance versus the USD Thursday (as of 11: 20GMT)
JPY + 0.17 %
AUD + 0.04 %
NZD + 0.03 %
CAD - 0.18 %
CHF - 0.19 %
EUR - 0.20 %
GBP - 0.45 %
As such, we feel that the proper response, in the interests of stability, is for Eurozone leadership to act fast and make the necessary commitment to ensure that they will be there through the worst of times, despite the costs associated with such a commitment. It is easy to stay loyal and show commitment when it is not needed, but it is in times of crisis when one is really tested to step up and back up beliefs. Now is the time for European leadership to step up and swallow whatever necessary to keep the local and global economy from slipping deeper into the abyss. One of the major critics of the Eurozone is the ability for so many different countries to stand together under one economic umbrella. Clearly this is now being tested, and the only way to respond is through a unified commitment at whatever the cost.
Markets were mostly caught in consolidation in European trade on Thursday, but it is worth noting that trading volumes were a good deal lighter given the European holiday session. The only key developments in the session year were as expected Spanish GDP and fairly well received Spanish auction. Still, the Euro remained pressured by weekly lows and seemed intent on an immediate retest of the January yearly lows at 1.2625 before contemplating highly oversold technical studies. As of today, the Euro will need to break back above 1.2760 to take the pressure off of the downside. Looking ahead, there is a decent amount of data due in the North American session, highlighted by the Philly Fed.
ECONOMIC CALENDAR

TECHNICAL OUTLOOK

EUR/USD: The market remains under intense pressure and the focus for now is squarely on a retest of the lows from January at 1.2625 2012. While we would not rule out a possibility of a test of this level over the coming sessions, short-term technical studies are well oversold and are showing a need for some form of a corrective bounce from where a lower top is sought out fresh. Ultimately however, any rallies should now be very well capped by previous support turned resistance at 1.3000 in favor of additional weakness over the medium-term that projects deeper setbacks into the lower 1. 2000's.

USD/JPY: The market continues to consolidate around 80.00 and is in the process of looking for a medium-term higher low ahead of the next major upside extension back above the yearly highs at UST and towards 90.00 further up. However, for the time being it remains in question whether the market will still head lower towards the 200 - Day SMA by 78.50 before ultimately reversing higher. The key level to watch above comes in by 80.60, and a break and close above this level will officially alleviate downside pressures and suggest that a higher low has now been carved in the 79. 00's.

GBP/USD: The latest daily close below 1.6050 now opens the door for an acceleration of declines over the coming days back down towards next key support in the 1. 5800's. At this point, look for any intraday rallies to be very well capped ahead of 1.6200, while only back above 1.6300 would negate outlook and give reason for pause.

USD/CHF: Overall the structure remains highly constructive and we continue to project additional upside over the coming months back above parity. For now, the latest break and close above 0.9335 is expected to accelerate gains for a retest of the yearly highs by 0.9600, while any pullbacks should be very well supported ahead of 0.9200 intraday. Ultimately, only back under 0.9000 would negate outlook and give reason for pause.

$$$ Dollar: JPMorgan Fiasco Fails to Set Off Crisis, Back to Europe

Dollar: JPMorgan Fiasco Fails to Set Off Crisis, Back to Europe Euro Facing a Fundamental Mine Field with Crisis Meetings, GDP Reports British Pound Traders Starting to Question Stimulus Outlook Again Japanese Yen: Would a Strong Rebound in 1Q GDP Add to BoJ’s Trouble? Canadian Dollar Rallies after Best Back-to-Back Jobs Showing in Decades Australian Dollar Facing Parity Against USD as Rate Outlook Levels Off Gold’s Worst Weekly Performance this Year Ushers in Possible Trend Change Dollar: JPMorgan Fiasco Fails to Set Off Crisis, Back to Europe
Any way you cut it, the dollar’s recent performance is impressive. So far this month, the Dow Jones FXCM Dollar Index (ticker = USDollar) has climbed 1.9 percent to its highest weekly close since the middle of December. Looking at currency’s performance in specific corners of the market, we find the EURUSD is below 1.3000, AUDUSD is at its lowest level this year and the greenback has even been able to muscle gold (another safe haven) into a potentially critical reversal of a trend that goes back over three years. This is a remarkable performance, but it still isn’t the definitive return to bull trend that has eluded the benchmark currency since the first half of 2010. We need more than just a passive unwinding of the most at-risk carry and capital positions. We need the disorderly deleveraging that bolsters the greenback’s liquidity status.
If we are looking for the visual evidence of said dramatic shift, we need look no further than the Dollar Index’s move above 10,100 and the Dow Jones Industrial Average’s slide below 12,750. In those two readings, we will see that demand for liquidity is trumping the anemic yield that the greenback has to offer and the threat of stimulus that has propped up US equities simply can’t maintain the market’s indecision any longer. Fundamental traders that want to monitor the transition need to keep an eye on those drivers that can be reasonably expected to trigger such a significant change in sentiment. Expecting inflation or retail sales data from the US next week to accomplish this task is unrealistic. If you want to find the fire, you move towards the heat. For the global markets, the greatest threat to stability is the Euro-area’s debt and economic troubles.
Euro Facing a Fundamental Mine Field with Crisis Meetings, GDP Reports
The euro, without doubt, is the most fundamentally loaded currency heading into next week. Through the close of this past week, the currency won temporary stays on two of the most critical threats to regional stability: the Greek election turmoil and Spanish financial troubles. Yet, both situations can quickly flare up once again. For Greece, the short-term concern is creating a new government and seeing whether it assimilates to the Euro Zone’s austerity push. The top three political parties each failed to garner a coalition and the President is likely to meet the same frustration. That means we will see another election. In the short-term (the next few weeks at least), they have received the necessary funds from the EFSF to cover their debts, but the medium-term concern is that they will simply decide to exit the monetary union. As for Spain, the relief in the Bankia nationalization (the region’s largest holder of bad real estate assets) has been muddied by the Economic Minister’s announcement that another €30 billion would need to be set aside for further losses and audits would be done of the region’s banks.
Discussing the particular economic risks, European Union ministers are scheduled to meet in Brussels Monday. At this point, the potential and capability of sweeping reform / rescue is low. Perhaps a little more proactive in its infliction of pain on the Euro Monday are the scheduled Spanish and Italy government bond auctions – like miniature confidence tests that are propped up by government mandates (buy with LTRO capital). It is worth nothing Greek and EFSF bond sales as well the following day. In the end, the greatest net risk to the Euro’s fundamental health next week is the dense round of 1Q GDP readings. Tuesday in particular brings German, French, Portuguese and Greek numbers.
British Pound Traders Starting to Question Stimulus Outlook Again
Just a few weeks ago, the sterling was running under its own fundamental steam – climbing as the market realized the Bank of England’s most dovish member may have marked a turn from an expansive monetary policy regime. A return to recession reported a week later changed the view however. We are still seeing the pound slowly pull back from its heights as the market tries to get a reading on growth, fiscal austerity and monetary stimulus. The docket for the upcoming week will help speed up the assessment. On the health of the economy, we have the April jobs figures and a jobless rate expected to retest 17-year highs. For monetary policy, there is the BoE’s Quarterly Inflation report.
Japanese Yen: Would a Strong Rebound in 1Q GDP Add to BoJ’s Trouble?
Japanese officials’ tactics to devalue the currency are varied but ultimately ineffective. After many failed attempts to threaten the currency lower, outright manipulation and most recently an ignored BoJ stimulus pump; the central bank said it was prepared to use its reserves to stabilize any swells in financial instability. Alongside EFSF purchases and encouraging foreign investment, this is another creative way to push the exchange rate. Meanwhile, risk aversion continues to build. Further, we are expected a big jump in 1Q Japanese GDP. Bullish drive and carry unwind?
Canadian Dollar Rallies after Best Back-to-Back Jobs Showing in Decades
Though its reaction would likely have been greater to an equivalent disappointment, the Canadian dollar nevertheless showed a remarkable rally following an impressive jump in April jobs figures. The 58,200-position increase in payrolls was nearly six times the forecast, but the real impression was made alongside the previous month’s 82,300 increase – the biggest back-to-back improvement in the labor markets in over 30 years. The loonie is standing out more and more against its Aussie and kiwi counterparts. Let’s see if next week’s CPI can elevate its position.
Australian Dollar Facing Parity Against USD as Rate Outlook Levels Off
Over the past two months, the Australian dollar has suffered so prolifically due to a combination of its deteriorating interest rate standing, ties to an ailing China and general deterioration in risk trends. While the outlook for capital markets and speculative interests seems to be at high risk heading into the new week, the other two fundamental nodes could find quick boosters. There has long been talk of a Chinese move to ease monetary policy and the Aussie rate outlook has started to slowly pull up. But, if capital markets collapse, this will all matter little.
Gold’s Worst Weekly Performance this Year Ushers in Possible Trend Change
Last week, gold suffered a 3.8 percent tumble – its worst performance since December’s massive 6.6 percent drop. Though this recent decline was a sizable one, the real concern is in the progress that was forged – driving us to new lows since the opening week of the year and further turning a three-and-a-half year old trend. As with the dollar, the concern is volatility. If fear peaks, liquidity demand will hurt the metal.
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ECONOMIC DATA
Next 24 Hours
Performance Services Index (APR)
NZ economy experiencing modest growth
Retail Sales Ex Inflation (QoQ) (1Q)
Japanese inflation remains below BoJ’s 1-percent target, maintaining pressure for continued easing
Loans & Discounts Corp YoY (MAR)
Real-estate market cited by RBA as area of weakness in Australian economy
Owner-Occupied Home Loan Value MoM (MAR)
Producer & Import Prices (MoM) (APR)
CHF near SNB floor continues to exert downward pressure on prices in Switzerland
Producer & Import Prices (YoY) (APR)
Italian CPI (NIC incl. tobacco) (MoM) (APR F)
Italian inflation pushed higher by Sept VAT increase, but sluggish growth on government austerity to dampen inflationary pressures
Italian CPI (NIC incl. tobacco) (YoY) (APR F)
Italian CPI - EU Harmonized (MoM) (APR F)
Italian CPI - EU Harmonized (YoY) (APR F)
Italian General Government Debt (MAR)
Bond Auction – Spain Sells 364 and 518-Day Bills
Bond Auction – Italy Sells 2015, 2020, 2022, 2025
Euro-Zone Ind. Prod. wda (YoY) (MAR)
Eurozone manufacturing has been in contraction for 9 months
Euro-Zone Ind. Prod. sa (MoM) (MAR)
EU Ministers Expected to Discuss Greece and Spain in Meeting
RBA Deputy Gov. Lowe Speaks in Melbourne
Eurozone Finance Ministers Meet in Brussels
SNB President Jordan Speaks in Zurich
SUPPORT AND RESISTANCE LEVELS
To see updated SUPPORT AND RESISTANCE LEVELS for the Majors, visit Technical Analysis Portal
To see updated PIVOT POINT LEVELS for the Majors and Crosses, visit our Pivot Point Table
CLASSIC SUPPORT AND RESISTANCE –EMERGING MARKETS 18:00 GMTSCANDIES CURRENCIES 18:00 GMT
INTRA-DAY PROBABILITY BANDS 18:00 GMT

::: Commodities Sold as Risk Appetite Fades in Europe, US Jobs Data on Tap

Currency Strategist 04 May 2012 08:59 GMT Talking Points
Crude Oil, Copper Sold as Risk Aversion Grips Europe, All Eyes on US Jobs Data Gold and Silver Outlook Clouded Along with That of US Dollar Pre-NFP Result All eyes are on the US Employment report into the week-end. Expectations call for the nonfarm payrolls to rise 160,000 in April after rising 120,000 in the previous month. The release presents a variety of divergent scenarios for the financial markets.
On one hand, a stronger-than-expected result can be interpreted as broadly supportive for risk appetite and drive growth-geared commodities including crude oil and copper higher while weighing on the US Dollar amid waning safe haven demand, an outcome supportive for gold and silver. Alternatively, such an outcome can be viewed as USD-supportive in that it would reduce the probability of a Fed QE3 program, weighing on precious metals and likely hurting risky assets hoping the choppy US recovery will benefit from added help from monetary policy.
Similarly, a disappointing print can be rationalized from both perspectives as well, driving USD higher amid risk aversion or sinking it as stimulus hopes are reinforced. The former seems clearly negative for the spectrum of commodity prices while the latter is supportive. Furthermore, it is not outside the realm of possibility to see precious metals take the QE3-themed route while cycle-sensitive commodities focus on the global growth implications of the result.
With this in mind, a clear bearing is difficult to establish. The markets appear likewise puzzled, with S&P 500 index futures flat before the opening bell on Wall Street, though price action in early European trade reflects risk-averse cues as traders turn defensive and pare exposure ahead of the weekend’s elections in Greece and France. On balance, it seems prudent to treat the jobs report as an opportunity to gauge the context within which to interpret US data going forward rather than a discrete trading opportunity in its own right.
WTI Crude Oil (NY Close): $102.54 // -2.68 // -2.55%
Prices followed a Harami candlestick pattern below resistance at a falling trend line set from late February indentified yesterday with a sharp move lower. Sellers are now upward-slowing support established since mid-December, with a break lower exposing the 50% Fibonacci expansion at 101.60. Near-term resistance lines up at 104.13, the 23.6% Fib.

Daily Chart - Created Using FXCM Marketscope 2.0
Spot Gold (NY Close): $1635.98 // -17.52 // -1.06%
Prices followed a Spinning Top candle below trend line resistance capping gains since late March with a push below support at 1637.95, the 23.6% Fibonacci expansion. Sellers now target the 38.2% Fib at 1611.77. The 1637.95 level has been recast as near-term resistance, followed by the trend line at 1663.54.

Daily Chart - Created Using FXCM Marketscope 2.0
Spot Silver (NY Close): $30.09 // -0.55 // -1.80%
Prices are recoiling from resistance at 31.36, a former support reinforced by a downward-sloping trend line set from the April 3 high. Sellers face initial barriers at 29.96, the April 25 low, followed by the bottom of a falling channel set from early March now at 29.44. Near-term resistance is at 30.99.

Daily Chart - Created Using FXCM Marketscope 2.0
COMEX E-Mini Copper (NY Close): $3.736 // -0.052 // -1.37%
Prices turned lower as expected after putting in a Hammer candlestick below support-turned-resistance at a rising trend line set from mid-February. Initial support lines up at 3.713. Trend line resistance is now at 3.859.

Daily Chart - Created Using FXCM Marketscope 2.0

TradeTheNews.com Asian Market Update: PBoC Zhou commits China resources to Europe; Yen weakens

- (NZ) NEW ZEALAND Q4 RETAIL SALES EX-INFLATION AND EX-AUTOS/FUEL Q/Q: 2.2% V 1.2%E >- (KR) SOUTH KOREA JAN UNEMPLOYMENT RATE: 3.2% V 3.2%E (4-month high)
- (JP) JAPAN JAN FINAL MACHINE TOOL ORDERS Y/Y: -6.9% V -6.6% PRELIM
- (JP) BANK OF JAPAN (BOJ) FEB MONTHLY REPORT: Maintains economic assessment; Japanese economy has been flat and is expected to remain so for the time being
- (SG) SINGAPORE DEC RETAIL SALES M/M: -2.4% V -0.1%E; Y/Y: 4.2% V 5.2%E; EX-AUTO Y/Y: 8.1% V 5.0%E
- (KR) SOUTH KOREA JAN EXPORT PRICE INDEX M/M: 1.1% V 0.3% PRIOR; Y/Y: 4.6% V 2.5% PRIOR; IMPORT PRICE INDEX M/M: 0.8% V 0.2% PRIOR; Y/Y: 7.9% V 7.1% PRIOR
- (NZ) NEW ZEALAND JAN NON RESIDENT BOND HOLDINGS: 59.3% V 59.1% PRIOR
- (JP) JAPAN NOV CONFERENCE BOARD LEADING ECONOMIC INDEX: -0.1% V -0.2% PRIOR
- (AU) AUSTRALIA JAN NEW MOTOR VEHICLE SALES M/M: +1.3% V -2.7% PRIOR (5-month high); Y/Y: 2.7% V -3.0% PRIOR
- (AU) AUSTRALIA FEB WESTPAC CONSUMER CONFIDENCE INDEX: 101.1 V 97.1 PRIOR
- (CL) CHILE CENTRAL BANK LEAVES NOMINAL INTEREST RATE AT 5.00%; AS EXPECTED
- (PH) PHILIPPINES DEC OVERSEAS REMITTANCES Y/Y: 6.2% V 10.6% PRIOR; OVERSEAS WORKERS REMITTANCES: $1.8B V $1.78B PRIOR
- (JP) BANK OF JAPAN (BOJ) FEB MONTHLY REPORT: Maintains economic assessment; Japanese economy has been flat and is expected to remain so for the time being.
- (NZ) New Zealand Jan Skilled Job Vacancies +0.8% m/m
***Markets Snapshot (as of 05:30GMT)***
- Nikkei225 +2.6%
- S&P/ASX +0.3%
- Kospi +1.2%
- Taiwan Taiex +1.5%
- Singapore Straits Times +0.8%
- Shanghai Composite +0.9%
- Hang Seng +2.1%
- S&P Futures +0.7% at 1,356
- April gold +0.6% at $1,728/oz
- March Crude +0.9% at $101.69
***Overview/Top Headlines***
- Markets rallied after PBoC Gov Zhou said China would expand its investments in Europe, saying that China has not cut its reserve exposure to Europe during the crisis. Zhou affirmed that China would play a bigger role in the crisis through participation in EFSF and IMF, saying it can assist through the Central Bank and sovereign wealth fund. He is hopeful that that EU can offer more attractive investment products. This is the clearest statement from a Chinese official on how it may assist the EU. Markets soared on the comments, March S&P500 futures were up over 7 handles above 1,355 on the comments. EUR/USD gained 35 pips around the $1.3165 area, EUR/JPY also gained around 35 pips to ¥103.38. Right before the US session close Greece party leaders Papandreou (PASOK) and Samaras (ND) said they would commit to austerity measures in letter to Troika to be sent tomorrow. This boosted the EUR/USD back above the $1.31 handle. Nikkei225 had a record day after the BoJ announced new easing measures yesterday. It ended at the highest close in 5-months. 5-year JGB yields fell below 0.32% as 3-month low and the 2-year note fell below 0.11% a 16-month low on the news that the additional ¥10.0T in easing would be used exclusively for JGB buying. USD/JPY hit fresh 3-month highs above ¥78.65. Copper and silver both gained over 1% while wheat and corn gained over 0.2%.
***Speakers/Geopolitical/In the press***
- (NZ) New Zealand Fin Min English: Asset sales will reduce debt, boost savings and improve company performance; Benefit budget by NZ$800M
- (AU) Australia Dept of Education, Employment and Workplace Relations leading employment indicator fell for the first time in 5 consecutive months from Jan to Feb - Australian press
- (CN) China Banking Regulatory Commission (CBRC) has asked banks for more local government financing information - China Daily
- (US) Fed's Lockhart: Monetary policy stance is appropriate for moderate growth until there is further proof of sustained improvement
***Equities***
- Samsung Electronics, 005930.KR: Considering spinning off LCD operations into its own company; Should make it more competitive - financial press
- Elpida Memory, 6665.JP: Exec: There is "uncertainty" over remaining in business because it still doesn't have the necessary financing to repay debts coming due in April - Japan press
- FMG.AU: Reports H1 Net $801M v $840Me; Rev $3.36B v $2.53B y/y
- MTR Corporation, 66.HK: Reports 350M shoppers visited its 12 malls in 2011, +40% y/y - HK press
- OZL.AU: Reports FY11 Net A$275M v A$268Me; Rev A$1.12B v A$1.1B y/y
- CBA.AU: Reports H1 Net A$3.6B v A$3.5Be
***US Equities***
- AAPL: CEO: Company is 'judicious' about how the company spends its cash [in response to question about a potential dividend] - Goldman conf; +0.4% after hours
- ZNGA: Reports Q4 $0.05 v $0.03e, R$311.2M v $301Me; -7.0% after hours
- FTI: Reports Q4 $0.41 v $0.51e, R$1.5B v $1.4Be; -3.3% after hours
- PEET: Reports Q4 $0.42 v $0.43e, R$101.6M v $103Me; -4.1% after hours
***FX/Fixed Income/Commodities***
- (US) API PETROLEUM INVENTORIES CRUDE: +2.9M V +1.5ME (largest build in 3 weeks); GASOLINE: +1.81M V +500KE; DISTILLATE: -2.16M V -1ME; UTILIZATION: 83.7% V 83.9% W/W
- USD/CNY: Pres Obama to tell visiting China Vice Premier Xi that Yuan is still undervalued - financial press
- GLD: SPDR Gold Trust ETF daily holdings fall by 0.3 tons to 1,278.3 tons (first decline since Jan 23rd)
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European Market Update: German ZEW Expectations survey turns positive for the first time since May 2011; China reiterates support for Europe

 Tuesday, February 14, 2012 5:54:21 AM
 TradeTheNews.com European Market Update: German ZEW Expectations survey turns positive for the first time since May 2011; China reiterates support for Europe
***Economic Data***
- (EU) ECB: €1.1B borrowed in overnight loan facility v €1.2B prior; €510.2B parked in deposit facility vs. €507.9B prior
- (ES) Spain Jan ECB Banks Borrowings: €161.4B v €132.4B m/m
- (IN) India Jan Monthly Wholesale Prices Y/Y: 6.6% v 6.7%e
- (FI) Finland Dec Final Retail Sales Volume Y/Y: 2.1% v 1.8% prelim
- (SE) Sweden Jan PES Unemployment Rate: 4.8% v 4.9%e
- (FR) France Q4 Preliminary Non-Farm Payrolls Q/Q: -0.2% v -0.2%e; Wages Q/Q: 0.3% v 0.3% prior
- (HU) Hungary Jan Consumer Prices M/M: 2.1% v 1.7%e; Y/Y: 5.5% v 5.0%e
- (HU) Hungary Dec Final Industrial Production M/M: -7.4% v -7.4% prelim; Y/Y: -6.7% v -6.7% prelim
- (ES) Spain Dec Industrial Orders Y/Y: -4.0% v -1.6% prior
- (FR) France Jan Real Retail Sales (seasonally adj) M/M: +0.6% v +0.2% prior; Y/Y: +0.7% v -3.1% prior - Bank of France Survey
- (NL) Netherlands Dec Retail Sales: 1.0% v 1.3% prior
- (SE) Sweden Q4 Total Number of Employees Y/Y: 3.1% v 3.5% prior
- (UK) Dec DCLG UK House Prices Y/Y: +0.1% v -0.3% prior
- (UK) Jan CPI M/M: -0.5% v -0.5%e; Y/Y: 3.6% v 3.6%e; Core CPI Y/Y: 2.6% v 2.6%e - (UK) Jan RPI M/M: -0.6% v -0.4%e; Y/Y: 3.9% v 4.1%e; RPI-X Y/Y: 4.0% v 4.2%e; Retail Price Index: 238.0 v 238.4e
- (DE) Germany Feb ZEW Economic Sentiment: +5.4 v -11.8e (first positive reading since May 2011); Current Conditions: 40.3 v 30.5e
- (EU) Euro Zone Dec Industrial Production M/M: -1.1% v -1.2%e; Y/Y: -2.0% v -1.2%e
- (EU) Euro Zone Feb ZEW Economic Sentiment: -8,1 v -32.5 prior
- (GR) Greece Q4 Preliminary GDP: Y/Y: -7.0% v -5.0% prior
- (PT) Portugal Q4 Preliminary GDP Q/Q: -1.5%e v -0.6% prior; Y/Y: -2.8%e v -1.7% prior
Fixed Income - (NL) Netherlands Debt Agency (DSTA) sold €3.98B vs €3.0-4.0B indicated range in 2.5% 2017 DSL Bond; Avg Yield 1.347% v 1.777% prior
- (ES) Spain Debt Agency sold total €5.44B vs. €4.5-5.5B indicated range in 12-Month and 18-Month Bills
- Sold €2.94B in 12-month Bills; Avg Yield 1.899% v 2.049% prior; Bid-to-cover: 2.3 x v 3.55x prior; Max Yield 1.949% v 2.150% prior
- Sold €2.5B in 18-month Bills; Avg Yield 2.308% v 2.399% prior; Bid-to-cover: 2.88x v 3.23x prior; Max Yield 2.395% v 2.490% prior
- (GR) Greece Debt Agency (PDMA) sold €1.3B vs. €1.0B indicaqted in 13-week treasury bills; Avg Yield 4.61% v 4.64% prior; Bid-to-cover:2.70 x v 2.90x prior
- (IT) Italy Debt Agency (Tesoro) sold €6.0B vs. €6.0B in 2014, 2015 and 2017 Bonds
- Sold €4.0B in 6.0% Nov 2014 BTPs; Avg Yield 3.41% v 4.83% prior; Bid-to-cover: 1.40x v 1.22x prior
- Sold €687M in 3.0% Nov 2015 BTPs; Avg Yield 3.77%; Bid-to-cover: 2.37x
- Sold €1.31B in 4.0% Feb 2017 BTPs; Avg Yield 4.26% v 4.93% prior; Bid-to-cover: 1.71x v 2.3x prior****Note: -
- (EU) ECB allotted €142.8B in 7-Day Main Refinancing Tender vs. €115Be
- (EU) ECB allotted €14.3B in 1-Month Tender vs. €30.0Be
- (HU) Hungary Debt Agency (AKK) sold HUF60B in 3-Month Bills; Avg yield 7.32% v 7.32% prior; Bid-to-cover: 2.52x v 2.69x prior
- (BE) Belgium Debt Agency sold total €3.2B vs. €3.0B indicated in 3-month and 12-month Bills
- Sold €1.80B in 3-month Bills; Avg Yield 0.291% v 0.506% prior; Bid-to-cover: 2.51x v 2.70x prior
- Sold €1.41B in 12-month Bills; Avg Yield 0.892% v 1.162% prior; Bid-to-cover: 2.64x v 2.06x prior
*** SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM ***
***Notes/Observations***
- Moody's downgrades 6 European sovereigns (Italy, Spain, Portugal, Slovakia, Slovenia & Malta) lowers outlook on several AAA (UK, Austria and France)
- BOJ sets an inflation target (and cranks up the printing press); Announced further easing measures (first since Oct)
- Fed's Williams (voting member): Vital to keep policy throttle wide open.
- Germany ZEW Survey registers its first positive reading since May 2011
- UK inflation data declines in Jan as expected by BOE
Equities: FTSE 100 +0.20% at 5915, DAX +0.60% at 6779, CAC-40 +0.30% at 3395, IBEX-35 +0.40% at 16,504, SMI +0.10% at 6182
- European shares traded mixed during today's session hurt by Moody's action which downgraded 6 European states, including Italy and Spain. The most worrying action for the markets is Moody's cutting UK's and France's outlook to negative from stable. However, Italy sold its debt in the indicated range. Losses were limited after Germany's ZEW increased and was a positive number, beating analysts' estimates.
- In individual names, Thyssenkrupp [TKA.DE] fell after reporting a larger than expected loss. The steel maker had already stated that Q1 EBIT would be considerably lower than last year's and was unable to give an outlook for FY12. Swedbank [SWEDA.SE] reported a lower than expected operating profit although net interest income was higher than estimates. The bank however decided to withdraw its capital targets and would decide on new ones when the situation was more stable. Among winners, MAN [MAN.DE] reported better than expected earnings.
Speakers: - China Premier Wen met key European officials in Beijing and hereiterated that China was ready to "get more involved" to help Euro debt and maintained confidence in Euro. He also hoped EU maintained its stability and prosperity and supported strengthening of fiscal discipline in Europe
- EU President Van Rompuy welcomed China's PM Wen support for Europe and noted that both regions were becoming increasingly inter-dependent. China was making progress on its CNY currency rate and rebalancing its economy. China showed "solid interest" on EFSF investment
- EU's Barroso commented from Beijing that EU was doing what was necessary to restore confidence and that the region was seeking more investment access in China
- Austria Fin Min Fekter commented that she was confident that Greece would get more help. She noted that no Austrian banks have asked for aid
- Bank of Japan Gov Shirakawa commented at his post rate decision press conference that the BOJ would not end its inflation targeting until the 1% CPI rise was in sight. He stressed that the BOJ would ensure Japan's economic recovery through its policy and that the central bank was not pressured by gov't in today's action but both did share the perspective of what is deemed as price stability. Today's decision meant buying JGBs at a faster pace
But not use JGB purchases for monetizing debt. The change in wording on prices aimed at clarifying BoJ's determination to deal with deflation.
- ZEW Economists commented after the better Feb data that the economic slowdown in Germany was unlikely to last as domestic demand expected to support economic growth. It stressed that a solution to Euro Zone crisis remained an important issue but progress with Greek creditors might have reduced uncertainty. Lastly it noted that Germany might see slight uplift in H2 2012
- ECB's Nowotny reiterated the central bank view that it did not see risk of inflation. He cautioned that Euro region needed to avoid the same fate as Japan's. The main objective was to avoid longer periods of stagnation.
- ECB's Coeure commented that the ECB should distribute profits on Greek debt to member nations who could use it to contribute to sustainability of Greek debt
- Bank of England released its inflation letter noting that inflation was falling broadly as expected and expected to hit around target of 2.0% by end of 2012. Impact of factors that pushed up inflation was now waning. CPI decline due to VAT and energy prices but cautioned that a risk of an oil shock was possible due to political tensions. Extent of CPI decline was highly uncertain with key uncertainties of wages and profit margin building. To focus on spare capacity and inflationary expectations and that the key policy outlook was the medium-term view
- France Fin Min Baroin commented on Moody's lower revision of the French sovereign outlook that the Govt will continue to seek an increase its economic growth and competitiveness. He noted that Moody's action was due to risks associated with the Euro Zone. He confirmed France 2012 GDP growth forecast of 0.5%
- Poland Fin Min Rostowski Greece's Euro exit would be less damaging at this time compared to 2011 but would pose legal obstacles. Greek default would have less impact with new EU policies because of the European Central Bank's liquidity measures. He noted that it was not clear how it would be possible for Greece to leave the euro zone under its legal system
- China State Administration of Foreign Exchange (SAFE) reiterated it stance to enhance monitoring of two-way cross-border capital flows and improve policy response to impact of capital flows.
- Turkey Econ Min Babacan commented that the country's 2011 imports came in at $240.8B and added that he was not comfortable with the level of imports
Currencies:
- The session shrugged off the initial effects of the multi-country European sovereign downgrade and revisions to AAA outlooks. The EUR/USD clawed its way from late Asian session lows of 1.3128 and moved above 1.32 handle by the NY morning following better German ZEW data and commentary of out China's Premier Wen.
- The USD/JPY was probing the upper end of its three-month range with 78.30 being the key resistance following the BOJ policy decision to set a inflation target. Some dealers noting that the continued threat of BOJ FX intervention would be more successful if enacted above the pivotal 78.30 level
- The GBP/USD recovered from its Far east session lows of 1.5686 after Moody's became the first major rating agency to cut the UK's sovereign outlook to negative. The pair was only slightly negative ahead of the NY morning at 1.5755
Political/ In the Papers:
- Portugal is to hold a fresh round of discussions with its international creditors this week before the next tranche of funds are set. Troika officials and the IMF will arrive Wednesday for a two-week review of the country. If approved, then it will be given the next tranche of €14.9B.
- The Independent looked at who could replace the current Bank of England Governor King next year when his term expires. The decision on the succession will be made by the Prime Minister, and advised by the Chancellor and the Cabinet Secretary. Note that the last two Governors were chosen from within the Bank, which places the leading internal candidate, the present deputy governor, Paul Tucker, in a strong position. Other candidates include Andy Haldane, external candidate Lord Turner, Sir John Vickers, John Varley, and former HSBC chairman Lord Green.
- The UK federation of trade unions, Trades Union Congress (TUC), released a report that finds true unemployment in the country may be as high as 6.3M, over twice the official figure of 2.68M released last month. The higher figure was found by using an American measure, which includes part-time employment due to the lack of full-time jobs, recent redundancies. TUC found that under-employment (those taking on temporary or part-time work because they cannot find permanent, full-time work) increased to 1.3M (record).
***Looking Ahead***
- (US) China Vice premier Xi Jinping will visit the White House on Feb 14th
- (IT) Italy PM Monti in Parliament
- 6:00 (BR) Brazil Dec Retail Sales M/M: 0.1%e v 1.3% prior; Y/Y: 6.0%e v 6.8% prior; Broad Retail Sales Y/Y: No est v 3.2% prior
- 6:00 (TR) Turkey to sell 10% 2013 and fixed 2022 Bonds
- 6:00 (TR) Turkey to sell 2021 Inflation Linked Bonds
- 6:30 (DE) OECD chief Gurria presents German Economic Survey in Berlin
- 7:00 (EU) ECB announces allotment in 7-Day Term Deposits to offset Govt Bond purchases
- 7:00 (IC) Iceland Jan Unemployment Rate: No est v 7.3% prior
- 7:30 (US) Jan NFIB Small Business Optimism: 95.0e v 93.8 prior
- 7:45 (US) Weekly ICSC Chain Store Sales
- 8:00 (PL) Poland Jan M3 Money Supply: -1.4%e v +3.2% prior
- 8:30 (US) Jan Import Price Index M/M: +0.3%e v -0.1% prior; Y/Y: 7.2%e v 8.5% prior - 8:30 (US) Jan Advance Retail Sales: 0.8%e v 0.1% prior; Retail Sales Less Autos: +0.5%e v -0.2% prior; Retail Sales Ex Auto & Gas: 0.5%e v 0.0% prior
- 8:45 (US) Fed's Plosser speaks on Economy in Newark, Delaware
- 8:55 (US) Weekly Redbook Retail Sales
- 9:00 (EU) Weekly ECB Forex Reserves
- 9:45 (UK) BOE to buy £1.5B in 2027-2060 Gilts in reverse auction
- 10:00 (US) Treasury Sec Geithner testifies before Senate
- 10:00 (US) Dec Business Inventories: 0.5%e v 0.3% prior
- 10:00 (MX) Mexico International Reserves w/e Feb 10th
- 10:00 (MX) Mexico Jan Vehicle Production: 211.0Ke v 180.2K prior; Vehicle Domestic Sales: No est v 115.7K prior; Vehicle Exports: No est v 171.3K prior
- 11:00 (US) Fed to purchase $4.25-5.00B in Notes
- 13:00 (US) Treasury to sell 4-Week Bills
- 16:00 (CL) Chile Central Bank Interest Rate Decision: Expected to cut the Nominal Overnight Rate Target by 13bps to 4.88%
- 16:00 (KW) South Korea Jan Export Price Index M/M: No est v 0.3% prior; Y/Y: No est v 2.5% prior
- 16:00 (KW) South Korea Jan Import Price Index M/M: No est v 0.2% prior; Y/Y: No est v 7.1% prior
- 16:30 (US) Weekly API Energy Inventories
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All information provided by Trade The News (a product of Trade The News, Inc. "referred to as TTN hereafter") is for informational purposes only. Information provided is not meant as investment advice nor is it a recommendation to Buy or Sell securities. Although information is taken from sources deemed reliable, no guarantees or assurances can be made to the accuracy of any information provided. 1. Information can be inaccurate and/or incomplete 2. Information can be mistakenly re-released or be delayed, 3. Information may be incorrect, misread, misinterpreted or misunderstood 4. Human error is a business risk you are willing to assume 5. Technology can crash or be interrupted without notice 6. Trading decisions are the responsibility of traders, not those providing additional information. Trade The News is not liable (financial and/or non-financial) for any losses that may arise from any information provided by TTN. Trading securities involves a high degree of risk, and financial losses can and do occur on a regular basis and are part of the risk of trading and investing.

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TradeTheNews.com European Market Update: Spanish unemployment surges in January; China stresses that Europe must first address its structural issues before seeking outside assistance

Thursday, February 02, 2012 5:50:37 AM
 TradeTheNews.com European Market Update: Spanish unemployment surges in January; China stresses that Europe must first address its structural issues before seeking outside assistance
***Economic Data***
- (EU) ECB: €2.0B borrowed in overnight loan facility v €1.6B prior; €486.4B parked in deposit facility vs. €472.5B prior
- (BR) Brazil Jan FIPE CPI: 0.7% v 0.7%e
- (CH) Swiss Dec Trade Balance (CHF): 2.1B v 2.5Be; Real Exports real M/M: +6.1% v -4.8% prior; Real Imports M/M: +7.6% v -8.2% prior
- (ES) Spain Jan Net Unemployment M/M: 177.5K v 127.0Ke
- (HK) Hong Kong Dec Retail Sales Value Y/Y: 23.4% v 20.5%e; Retail Sales Volume Y/Y: 17.1% v 15.1%e
- (ZA) South Africa Jan Naamsa Vehicle Sales Y/Y: 7.0% v 9.8%e
- (NO) Norway Jan Unemployment Rate: 2.8% v 2.8%e
- (UK) Jan PMI Construction: 51.4 v 52.5e
- (RU) Russia Gold & Forex Reserves w/e Jan 27th: $504.0B v $499.7B prior
- EU) Euro Zone Dec PPI M/M: -0.2% v -0.1%e; Y/Y: 4.3% v 4.3%e

Fixed Income: - (ES) Spain Debt Agency (Tesoro) sold €4.55B vs. €3.5-4.5B indicated range in 2015, 2016, 2017 Bonds
- Sold €2.25B in 4.0% July 2015 Bono ; Avg Yield 2.861% v 3.384% prior; Bid-to-cover: 1.63x v 1.80x prior; Maximum Yield 2.989% v 3.576% prior
- Sells €984M in 4.25% Oct 2016 Bono; Avg Yield 3.455% v 4.029% prior; Bid-to-cover: 3.57x v 3.2x; Max Yield 3.557% v 4.050% prior
- Sold €1.05 in 3.80% Jan 2017 Bono; Avg Yield 3.565% v 5.544% prior; Bid-to-cover: 2.70x v 2.69x prior; Max Yield 3.704% v 5.560% prior
- (FR) France Debt Agency (AFT) sold approx €7.96B vs. €6.5-8.0B indicated range in 2018, 2020 and 2022 Bonds (OAT)
- Sold €1.01Bin 4.25% Oct 2018 Oat; Avg Yield 2.44% v 3.27% prior; Bid-to-cover: 4.34x v 2.92x prior
- Sold €1.25B in 2.5% 2020 Bonds; Avg Yield 2.91% v 3.64% prior; Bid-to-cover: 3.99x v 3.34x prior
- Sold €5.7B in new 3.0% April 2022 OAT; Avg Yield 3.13%; Bid-to-cover: 1.71x
- (HU) Hungary Debt Agency (AKK) sold HUF50B in 12-Month Bills; Avg Yield 7.85% v 8.19% prior; Bid-to-cover:1.97x v 1.58x prior
- (UK) DMO sold £1.25B in 0.125% I/L 2029 Gilts; Avg Yield -0.188%; Bid-to-cover:2.27 x
*** SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM ***
***Notes/Observations***
- Brazil posted its first trade deficit in 2 years in January
- Day 6 of the imminent Greek PSI deal
- Japanese officials continue verbal FX intervention
- Xstrata confirmed talks with Glencore; Rec'd approach regarding a merger of equals
- Spain Jan unemployment surges by 177K
- Spanish borrowing costs decline at 3-tranch bond auction
- China stresses that Europe must help itself first
Equities: FTSE 100 -0.20% at 5781, DAX +0.20% at 6626, CAC-40 flat at 3366, IBEX 35 at 8717, FTSE MIB -0.20% at 16,228, SMI -0.40% at 6045
- European shares erased gains during the session after drop in oil -related names offset the rally following merger talks between Xstrata and Glencore. Xstrata [XTA.UK] rallied over 12% after confirming that Glencore made an approach for a merger of equals. Glencore already owns 34% of Xstrata shares. However, overall earnings for European companies were disappointing.
- Among notable names, Shell [RSDA.NL] declined after missing its net adjusted profit. Company noted that earnings had been affected by a downturn in industry refining margins and natural gas prices. The downside move affected its peer BP. Deutsche Bank [DBK.DE] also declined after reporting a decline in the Q4 profit as trading was adversely affected by the Eurozone debt crisis. Unilever [UNA.NL] also declined after noting that expect the external macro-economic environment to remain difficult in 2012 and input cost headwinds will persist
Speakers: - China Premier Wen commented that China was considering involvement in EFSF and ESM facilities and reiterated its view that it was important to resolve the European debt crisis. Europe must rely on itself and reduce its debt load and introduce structural reforms
- German Chancellor Merkel commented from Beijing that China believed that Europe must do their 'homework' first regarding the crisis, then prepared to work for a stable euro
- Greece govt official commented that the bulk of discussions with EU/IMF/ECB Troika were basically completed but a few sticking points remain
- Germany BDB Banking Assoc President Schmitz stated that it must separate European monetary and fiscal policies to avoid a renewed crisis of confidence in the euro zone
- OECD chief Gurria commented that the ECB should purchase more bonds and contribute to cutting the Greek debt stock and cautioned that long term remedies would be doomed if the short-term issues are not addressed. He did note that Ireland's EU/IMF program was making good progress
- BoJ official Yamaguchi commented that the JPY currency has been appreciating recently although needed more time to assess market trend
- India Central Bank (RBI) Gov Subbarao commented that it needed to be unpredictable about forex interventions; Unreasonable for RBI to target inflation. He did concede that the RBI was biased toward containing inflation rather than managing growth.
- BoE's Posen commented in a radio interview that banks were not doing enough to support the economy
- Norway Fin Fin Johnsen commented that its economy was brighter compared to others but traditional exports did face challenge. He cautioned that banks must prepare for turmoil. Development in housing market were a concern as rising debt made sector 'extremely vulnerable' when interest rates go higher
- Italy minister said to have informed unions the gov't is to go ahead with labor refomrs regardless of agreement
- Moodys analyst Byrne commented that there was not much risk to Asian sovereign ratings in 2012
- S&P report noted that a Euro zone recession could end in late 2012 but the severity of recession was a 'close call'. The euro zone should gradually climb out of its mild recession in the second half of this year and into 2013. The core countries would likely lead the way back to growth, with other member countries delivering diverging performances. The S&P baseline forecast for 2012-2013 projected flat GDP growth for the euro zone as a whole in 2012 and 1% growth in 2013. S&P currently assigned a 60% probability to our baseline forecast, versus 40% for our alternative forecast of a true double dip. This would have a particularly adverse impact in countries like Spain, Portugal, and Italy.
Currencies:
- The FX markets maintained its recent ranges as the risk appetite tried to continue maintaining its recent momentum.
- The EUR/USD still had difficulty to break above the 1.32 handle and tested lower following the Spanish unemployment data. The pair probed below the 1.3130 area but did steady a bit after the Spanish and French bond auction results. Dealers did note that 2-way flows were prevalent with a plethora of option-related orders. Comments by China Premier Wen that it was considering involvement in EFSF and ESM facilities while German Chancellor Merkel visited the country on a three-day State visit. Wen did clarify that Europe must rely on itself and reduce its debt load and introduce structural reforms.
- The USD/JPY continued to hold above the 76.00 level with continued rhetoric from Japanese officials.
- The SNB still has yet to defend its 1.2000 floor in the EUR/CHF cross as speculators were performing the task for them. The cross was in the mid-1.20 area.
Political/ In the Papers:
- In an interview with the BBC, Bank of England's Posen said British banks are not doing enough to support the economy. He suggested that the banking sector needs more competition. In terms of policy, he supported the position that the UK would have been far worse without Quantitative Easing (QE).
- The Telegraph's Evans-Pritchard made note on the differences between the IMF and EU with regards to Greece. There are risks that policy makers in Greece could resist the new demands being made by the Troika officials. Both Germany and the Netherlands are opposed to giving Greece any more money, amid recent reports that Greece's second rescue package might have to be raised by €15B.
On the topic of the Bundesbank's liability related to the EU debt crisis, he added that the central bank has about €250B in liabilities related to the euro zone system. The Bundesbank has already provided €496B to countries including Greece, Ireland, Italy and Spain. A large portion of Bundesbank's liabilities are related to the ECB's 'TARGET2' automatic payments network, which deals with transactions between national central banks. According to Professor Frank Westermann of Osnabruck University, the liabilities of the Bundesbank are approaching the 'danger point'. A break-up of the EU would present large risks to the German central bank.
- In Ireland, NAMA reported only one in five loans were performing, with approximately €18.8B in arrears. Its recent quarterly report indicates 83% of the non-performing loans are four months in arrears; the agency must now either restructure these loans or move against developers through the courts. Prior to being transferred to NAMA, the value of performing loans were valued at €56.1B against the current value of €18.8B. NAMA chairman Frank Daly and chief executive Brendan McDonagh stated the number of non-performing loans was likely to continue rising.
***Looking Ahead***
- (EU) NATO Defense Min meet in Brussels
- (EU) EU Commission Rehn meets Netherland PM Rutte and Fin Min De Jager
- (CN) German Chancellor Merkel continues official China visit
- (US) US Senate banking committee vote on additional Iranian sanctions
- (US) Jan ICSC Chain Store Sales Y/Y: No est v 3.5% prior
- 6:00 (EU) EU Parliament votes on Iran nuclear ban
- 6:00 (EU) EU Parliament votes on Euro Bond resolution
- 6:00 (ZA) South Africa Dec Electricity Consumption Y/Y: No est v 0.2% prior; Electricity Production Y/Y: No est v 0.2% prior
- 7:00 (CZ) Czech Central Bank Interest Rate Decision: Expected to XXX the Repo Rate from the current 0.75% level
- 7:30 (US) Jan Challenger Job Cuts Y/Y: No est v 30.6% prior
- 8:00 (IT) Unicredit presents 2012 Economic Outlook
- 8:00 (US) Feb RBC Consumer Outlook Index: No est v 45.8 prior
- 8:00 (RO) Romania to sell Bonds
- 8:30 (US) Q4 Preliminary Nonfarm Productivity: 0.8e%e v 2.3% prior; Unit Labor Costs: +0.8%e v -2.5% prior - 8:30 (US) Initial Jobless Claims: 371Ke v 377K prior; Continuing Claims: No est v 3.554M prior
- 8:45 (US) ISM NY: No est v 51.1 prior
- 9:00 (US) Fed's Evans speaks to reporters in Chicago
- 9:00 (UK) BOE member Posen
- 9:15 (EU) EU Commissioner Rehn
- 10:00 (US) Fed Chairman Bernanke testifies before House Budget Committee
- 10:00 (DK) Denmark Jan Foreign Currency Reserves (DKK): 3.535Me v 481.7B prior
- 10:30 (US) Weekly Natural Gas Inventories
- 19:15 (US) Fed's Fisher speaks in Austin, Texas
- 20:00 (CN) China Jan Non-manufacturing PMI: no est v 56.0 prior - 21:30 (CN) China Jan HSBC Services PMI: No est v 52.5 prior
Legal disclaimer and risk disclosure
All information provided by Trade The News (a product of Trade The News, Inc. "referred to as TTN hereafter") is for informational purposes only. Information provided is not meant as investment advice nor is it a recommendation to Buy or Sell securities. Although information is taken from sources deemed reliable, no guarantees or assurances can be made to the accuracy of any information provided. 1. Information can be inaccurate and/or incomplete 2. Information can be mistakenly re-released or be delayed, 3. Information may be incorrect, misread, misinterpreted or misunderstood 4. Human error is a business risk you are willing to assume 5. Technology can crash or be interrupted without notice 6. Trading decisions are the responsibility of traders, not those providing additional information. Trade The News is not liable (financial and/or non-financial) for any losses that may arise from any information provided by TTN. Trading securities involves a high degree of risk, and financial losses can and do occur on a regular basis and are part of the risk of trading and investing.

TradeTheNews.com European market update: risk appetite benefits such as Europe inches on the way to the tax

Tuesday, January 31, 2012 5:45:19 AM

  European Market Update: Risk appetite benefits as Europe inches towards fiscal union

***Economic Data***
- (EU) ECB: €2.2B borrowed in overnight loan facility v €2.4B prior; €479.4B parked in deposit facility vs. €488.9B prior
- (IN) India FY11 annual GDP Y/Y: 8.4% v 8.4% prior (Revision)
- (ZA) South Africa Dec Private Sector Credit Y/Y: 6.3%e v 5.9% prior; M3 Money Supply Y/Y: 8.2% v 7.6%e
- (DE) Germany Dec Retail Sales M/M: -1.4%% v 0.8%e; Y/Y: -0.9% v 0.9%e
- (DE) Germany Dec ILO Employment : 41.26M v 41.19M prior; Unemployment: 5.5% v 5.5% prior
- (FI) Finland Nov Final Trade Balance: -€358.0M v -€260M prelim
- (CH) Swiss Dec UBS Consumption Indicator: 0.92 v 0.78 prior
- (TW) Taiwan Dec Leading Index M/M: 0.5% v 0.5% prior; Coincident Index M/M: -0.6% v -0.6% prior
- (TH) Thailand Dec Business Sentiment Index: 48.5 v 39.0 prior
- (TH) Thailand Dec Current Account Balance: +1.9B v -$1.0Be; Total Trade Account Balance: -$238M v +$218M prior; Overall Trade Balance: -$1.0B v -$1.5B prior
- (FR) France Dec Producer Prices M/M: -0.1% v -0.1%e; Y/Y: 4.7% v 4.7%e
- (FR) France Dec Consumer Spending M/M: -0.7% v +0.2%e; Y/Y: -3.1% v -2.1%e
- (ES) Spain Nov Total Housing Permits M/M: -13.2 v -22.0% prior; Housing Permits Y/Y: -31.5% v -2.9% prior
- (CH) Swiss Central Bank publishes Dec Balance Sheet Data: Currency Holdings (CHF): 257.5B v 261.9B prior
- (HU) Hungary Dec Unemployment Rate: 10.7% v 10.%e
- (HU) Hungary Dec Producer Prices M/M: -0.5% v +2.5% prior; Y/Y: 7.5% v 7.4%e
- (ES) Spain January Preliminary Consumer Price Index Y/Y: 2.0% v 2.3%e; CPI EU Harmonized Y/Y: 2.0% v 2.2%e
- (TR) Turkey Dec Trade Balance: -$8.1B v -$8.6Be
- (TW) Taiwan Q4 Preliminary GDP Constant Prices Y/Y: 1.9% v 2.8%e
- (DE) Germany Jan Unemployment Change: -34K v -10Ke; Unemployment Rate: 6.7% v 6.8%e
- (HK) Hong Kong Dec M2 Money Supply Y/Y: 4.6% v 3.6% prior; M3 Money Supply Y/Y: 4.6% v 3.5% prior; M1 Money Supply Y/Y: 8/8% v 3.1% prior
- (HK) Hong Kong Dec Govt Mthly Budget Budget (HKD): +38.3BB v -1.4B prior
- (CZ) Czech Dec Money Supply Y/Y: 5.2% v 5.2% prior
- (IC) Iceland Dec Final Trade Balance (ISK): 6.9B v 14.5B prelim
- (IT) Italy Dec Preliminary Unemployment Rate: 8.9% v 8.7%e
- (NO) Norway Dec Credit Indicator Growth Y/Y: 6.7% v 6.5%e
- (NO) Norway Dec Retail sales Volume M/M: -0.3 v +0.2%e; Y/Y: 2.6% v 2.2%e
- (ES) Spain Nov Current Account: -€4.1B v +€0.5B prior
- (UK) Dec Net Consumer Credit: -£0.4B v +£0.4Be; Net Lending: £0.7B v £0.8Be
- (UK) Dec Mortgage Approvals: 52.9K v 54.0Ke
- (UK) Dec M4 Money Supply M/M: -1.4% v -0.5% prior (largest monthly decline on record); Y/Y: -2.5% v -2.5% prior; M4 Ex OFCs 3M Annualized: -0.8 v +3.2% prior
- (EU) Euro Zone Dec Unemployment Rate: 10.4% 10.4%e (highest level since April 1998)
- (BE) Belgium Dec Unemployment Rate: 7.2% v 7.2% prior
- (IT) Italy Dec PPI M/M: +0.1% v -0.1%e; Y/Y: 3.8% v 3.7%e
- (GR) Greece Nov Retail Sales Value Y/Y: -6.3% v -8.1% prior; Retail Sales Volume Y/Y: -8.9% v -10.8% prior
- (MA) Malaysia Central Bank left the Overnight Rate unchanged at 3.00%; as expected
- (EU) OECD Dec Inflation Y/Y: 2.9% v 3.1% prior
- (BR) Brazil Dec Industrial Production M/M: 0.9% v 1.0 %e; Y/Y: --1.2% v 0.8%e
- (PT) Portugal Dec Industrial Production M/M: -1.5 v -2.3 % prior; Y/Y: -8.7 v -3.0% prior
- (PT) Portugal Dec Retail Sales M/M: +2.3% v -2.5% prior; Y/Y: -10.3% v -9.2% prior

Fixed Income:
- (ZA) South Africa sold total ZAR2.1B vs. ZAR2.1B indicated in 2018, 2020 and 2031 Bonds
- (EU) ECB allotted €115.6B vs. €120Be in 7-Day Main Refinancing Tender
- (HU) Hungary Debt Agency (AKK) sold HUF50B in 3-Month Bills; avg yield 7.41% v 7.94% prior; Bid-to-cover: 2.73x v 3.15x prior
- (BE) Belgium Debt Agency sold total €2.58B vs. €3.0B indicated in 3-month and 6-month Bills
- Sold €1.64B vs. €1.8Be in 3-month Bills; Avg Yield 0.506% v 0.429% prior; Bid-to-cover: 2.70x v 2.23x prior
- Sold €940M vs. €1.2Be in 6-month Bills, Avg Yield 0.710% v 0.364% prior; Bid-to-cover: 4.02x v 2.01x prior

*** SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM ***
***Notes/Observations***
- EU Governments appear to be closer to fiscal union arrangement and agreement on €500B ESM Bailout Fund
-ECB Draghi: Fiscal Pact is first step toward fiscal union
- Continued optimism on progress in Greek PSI talks
- German Jan unemployment data beats expectations
- Italy Dec Unemployment data higher than expectations
- Euro Zone Dec Unemployment of 10.4% is the highest since 1998

Equities:
FTSE 100 +0.80% at 5715, DAX +0.90% at 6503, CAC-40 +1.1% at 3302, IBEX-35 +0.40% at 8553, FTSE MIB +1.5% at 15,983, SMI +0.30% at 5989

- European shares rose during the session as markets adopted a risk-on attitude following EU summit. European leaders agreed on stricter budget plan while Greece's PM Papademos noted that debt talks had advanced significantly. Continental banks rose on optimism while UK banks declined after Santander [SAN.ES] expected a tough 2012 for UK banks. Oil stocks were also up tracking gains in crude.
- ARM Holdings [ARM.UK] reported higher than expected earnings which pushed the stock higher.

Speakers:
- EU's Juncker commented that there was no need for a special commissioner to monitor Greece and forecasted an agreement between Greece and private creditors possible by end of week and Monday 'at the latest' and heinsisted to Greek PM Papademos that PSI be settled asap. He added that Mersch was the best candidate for ECB executive board.
- China Premier Wen reiterated the view that China would fine tune its economic policy and step up credit support for the economy at a State Council meeting. He commented that it would promote reasonable decline in housing prices
- German Chancellor Merkel was said to be seeking support of Chinese investors and lobby for joint euro stabilization in China ahead of her Official Visit to the Far East (set for Feb 1st thru 4th)
- BOE Tucker commented that bank rules must expose debt and equity investors to losses
- India PM Econ Advisor Rangarajan commented that the country needed to use all tools to combat inflation and lowerits budget deficit to deliver higher economic growth. He stressed that India should target a current account deficit below 2.5% of GDP

Currencies:
- Risk appetite was bolstered by the outcome of the EU Leader Summit on Monday which moved closer fiscal union for 25 States (Except UK and Czech Republic) and to finally sign off on the details of a €500B permanent bailout fund. The final shape of the deal to reduce Greece's debt is still unknown after
months of wrangling between the Greek government but optimism continued to prevail
- The USD maintained a softer tone against the major pairs. The EUR/USD was back testing the 1.32 handle but was unable to take out last Friday's intra-day high of 1.3220. The pair was off its best levels as the various European data continued to highlight the two-tier economies of Europe. German unemployment data was at record lows while the whole the Euro Zone unemployment was at its highest level since early 1998. German retail sales did show that its economy had pockets of weakness.
- The JPY strength remained apparent with USD/JPY probing the lower end of the 76 handle and some two big figures from last week's high in the pair. EUR/JPY was at 100.67

Political/ In the Papers:
- The FT commented that European banks may ask for further funds from the ECB. Banks in Europe may tap the ECBs funding scheme for up to two times more than the ECB supplied in €489 billion auction last month, indicating a possible further liquidity squeeze. Several large European banks said they may double, or even triple funding requests in February's auction (29th Feb). US banks Goldman Sachs informed their clients that banks could ask for twice as much as the auction in December; one senior banker stated that banks could easily do another €1 trillion.
- Various press articles out of Europe commented on the rising borrowing costs in Portugal, as it hit record highs following fears that it could follow in Greece's footstep towards a debt write-down. SocGen economist Nixon said Portugal may struggle in its plans to return to the capital markets by the end of next year. It may require additional finances, which may mean a second bailout, or possibly a similar Greek-like debt write-down. Evans-Pritchard also noted contagion concerns related to Greece have weighed on Portuguese bonds with Investors doubting EU officials' pledges that haircuts would not be applied to debt.
- Following its FY12 cut in economic forecasts (from 1% to just 0.9%), the IBEC (Irish Business and Employers' Confederation) reiterated a call for measures aimed at stimulating consumer spending. One suggestion was to allow people to draw down part of private pensions or other voluntary contributions to spend at this time.

***Looking Ahead***
- (RU) Russia 2011 Annual Real GDP Y/Y: No est v 4.0% prior
- 7:00 (EU) ECB announces allotment in 7-Day Term Deposits; To drain €219.0B
- 7:00 (CL) Chile Dec Unemployment Rate: 7.1%e v 7.1% prior
- 7:00 (ZA) South Africa Dec Trade Balance: -1.6Be v -8.0B prior
- 7:30 (BR) Brazil Dec Primary Budget Balance: 1.B v 8.2B prior; Nominal Budget Balance: no est v -10.2B prior; Net debt to GDP: 36.4%e v 36.6% prior
- 7:45 (US) Weekly ICSC Chain Store sales
- 8:00 (BR) Brazil ABRAS Dec Supermarket Sales
- 8:00 (PL) Poland Central Bank Jan Inflation Expectations: No est v 4.8% prior
- 8:30 (US) Q4 Employment Cost Index: 0.4%e v 0.3% prior
- 8:30 (CA) Canada Dec Industrial Product Price M/M: -0.1%e v +0.2% prior; Raw Materials Price Index M/M: 0.0%e v 3.8% prior
- 8:30 (CA) Canada Nov Gross Domestic Product M/M: 0.2%e v 0.0% prior; Y/Y: 2.3%e v 2.7% prior
- 8:55 (US) Redbook Weekly Retail Sales
- 9:00 (US) Nov S&P/CaseShiller 20 City M/M: -0.50%e v -0.62% prior; Y/Y: -3.3%e v -3.4% prior; Home Price Index: No est v 140.3 prior
- 9:45 (US) Jan Chicago Purchasing Manager: 63.0e v 62.2 prior
- 9:45 (UK) BOE to buy £1.7B in 2038-2060 Gilts in reverse auction
- 10:00 (US) Revisions to ISM's 2012 Seasonal Adjustments
- 10:00 (US) Jan Consumer Confidence: 68.0e v 64.5 prior
- 10:00 (US) Jan NAPM Milwaukee: 57.5e v 57.8 prior
- 10:00 (MX) Mexico International Reserves w/e Jan 27th
- 11:00 (US) CBO releases economic outlook
- 11:00 (CO) Colombia Dec Urban Unemployment Rate: 10.3%e v 10.3% prior
- 11:00 (US) Fed to purchase $2.25-2.75B in Notes
- 11:30 (US) Treasury to sell 4-Week Bills
- 12:00 (DE) German Econ Min Roesler
- 14:00 (AR) Argentina Dec Construction Activity M/M: No est v -1.3% prior; Y/Y: No est v 3.2% prior
- 16:30 (US) Weekly API Energy Inventories
- 21:30 (CN) China Jan HSBC Manufacturing PMI: No est v 48.7 prior
- (US) Republican Florida Primary

Legal disclaimer and risk disclosure

All information provided by Trade The News (a product of Trade The News, Inc. "referred to as TTN hereafter") is for informational purposes only. Information provided is not meant as investment advice nor is it a recommendation to Buy or Sell securities. Although information is taken from sources deemed reliable, no guarantees or assurances can be made to the accuracy of any information provided. 1. Information can be inaccurate and/or incomplete 2. Information can be mistakenly re-released or be delayed, 3. Information may be incorrect, misread, misinterpreted or misunderstood 4. Human error is a business risk you are willing to assume 5. Technology can crash or be interrupted without notice 6. Trading decisions are the responsibility of traders, not those providing additional information. Trade The News is not liable (financial and/or non-financial) for any losses that may arise from any information provided by TTN. Trading securities involves a high degree of risk, and financial losses can and do occur on a regular basis and are part of the risk of trading and investing.

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TradeTheNews.com European market update: Spanish unemployment rate surges in January; China stressed that Europe must first address of its structural problems before looking for help

Thursday, February 02, 2012 5:50:37 AM

 TradeTheNews.com European Market Update: Spanish unemployment surges in January; China stresses that Europe must first address its structural issues before seeking outside assistance

***Economic Data***
- (EU) ECB: €2.0B borrowed in overnight loan facility v €1.6B prior; €486.4B parked in deposit facility vs. €472.5B prior
- (BR) Brazil Jan FIPE CPI: 0.7% v 0.7%e
- (CH) Swiss Dec Trade Balance (CHF): 2.1B v 2.5Be; Real Exports real M/M: +6.1% v -4.8% prior; Real Imports M/M: +7.6% v -8.2% prior
- (ES) Spain Jan Net Unemployment M/M: 177.5K v 127.0Ke
- (HK) Hong Kong Dec Retail Sales Value Y/Y: 23.4% v 20.5%e; Retail Sales Volume Y/Y: 17.1% v 15.1%e
- (ZA) South Africa Jan Naamsa Vehicle Sales Y/Y: 7.0% v 9.8%e
- (NO) Norway Jan Unemployment Rate: 2.8% v 2.8%e
- (UK) Jan PMI Construction: 51.4 v 52.5e
- (RU) Russia Gold & Forex Reserves w/e Jan 27th: $504.0B v $499.7B prior
- EU) Euro Zone Dec PPI M/M: -0.2% v -0.1%e; Y/Y: 4.3% v 4.3%e

Fixed Income: >- (ES) Spain Debt Agency (Tesoro) sold €4.55B vs. €3.5-4.5B indicated range in 2015, 2016, 2017 Bonds
- Sold €2.25B in 4.0% July 2015 Bono ; Avg Yield 2.861% v 3.384% prior; Bid-to-cover: 1.63x v 1.80x prior; Maximum Yield 2.989% v 3.576% prior
- Sells €984M in 4.25% Oct 2016 Bono; Avg Yield 3.455% v 4.029% prior; Bid-to-cover: 3.57x v 3.2x; Max Yield 3.557% v 4.050% prior
- Sold €1.05 in 3.80% Jan 2017 Bono; Avg Yield 3.565% v 5.544% prior; Bid-to-cover: 2.70x v 2.69x prior; Max Yield 3.704% v 5.560% prior
- (FR) France Debt Agency (AFT) sold approx €7.96B vs. €6.5-8.0B indicated range in 2018, 2020 and 2022 Bonds (OAT)
- Sold €1.01Bin 4.25% Oct 2018 Oat; Avg Yield 2.44% v 3.27% prior; Bid-to-cover: 4.34x v 2.92x prior
- Sold €1.25B in 2.5% 2020 Bonds; Avg Yield 2.91% v 3.64% prior; Bid-to-cover: 3.99x v 3.34x prior
- Sold €5.7B in new 3.0% April 2022 OAT; Avg Yield 3.13%; Bid-to-cover: 1.71x
- (HU) Hungary Debt Agency (AKK) sold HUF50B in 12-Month Bills; Avg Yield 7.85% v 8.19% prior; Bid-to-cover:1.97x v 1.58x prior
- (UK) DMO sold £1.25B in 0.125% I/L 2029 Gilts; Avg Yield -0.188%; Bid-to-cover:2.27 x

*** SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM ***
***Notes/Observations***
- Brazil posted its first trade deficit in 2 years in January
- Day 6 of the imminent Greek PSI deal
- Japanese officials continue verbal FX intervention
- Xstrata confirmed talks with Glencore; Rec'd approach regarding a merger of equals
- Spain Jan unemployment surges by 177K
- Spanish borrowing costs decline at 3-tranch bond auction
- China stresses that Europe must help itself first

Equities: >FTSE 100 -0.20% at 5781, DAX +0.20% at 6626, CAC-40 flat at 3366, IBEX 35 at 8717, FTSE MIB -0.20% at 16,228, SMI -0.40% at 6045

- European shares erased gains during the session after drop in oil -related names offset the rally following merger talks between Xstrata and Glencore. Xstrata [XTA.UK] rallied over 12% after confirming that Glencore made an approach for a merger of equals. Glencore already owns 34% of Xstrata shares. However, overall earnings for European companies were disappointing.
- Among notable names, Shell [RSDA.NL] declined after missing its net adjusted profit. Company noted that earnings had been affected by a downturn in industry refining margins and natural gas prices. The downside move affected its peer BP. Deutsche Bank [DBK.DE] also declined after reporting a decline in the Q4 profit as trading was adversely affected by the Eurozone debt crisis. Unilever [UNA.NL] also declined after noting that expect the external macro-economic environment to remain difficult in 2012 and input cost headwinds will persist

Speakers: >- China Premier Wen commented that China was considering involvement in EFSF and ESM facilities and reiterated its view that it was important to resolve the European debt crisis. Europe must rely on itself and reduce its debt load and introduce structural reforms
- German Chancellor Merkel commented from Beijing that China believed that Europe must do their 'homework' first regarding the crisis, then prepared to work for a stable euro
- Greece govt official commented that the bulk of discussions with EU/IMF/ECB Troika were basically completed but a few sticking points remain
- Germany BDB Banking Assoc President Schmitz stated that it must separate European monetary and fiscal policies to avoid a renewed crisis of confidence in the euro zone
- OECD chief Gurria commented that the ECB should purchase more bonds and contribute to cutting the Greek debt stock and cautioned that long term remedies would be doomed if the short-term issues are not addressed. He did note that Ireland's EU/IMF program was making good progress
- BoJ official Yamaguchi commented that the JPY currency has been appreciating recently although needed more time to assess market trend
- India Central Bank (RBI) Gov Subbarao commented that it needed to be unpredictable about forex interventions; Unreasonable for RBI to target inflation. He did concede that the RBI was biased toward containing inflation rather than managing growth.
- BoE's Posen commented in a radio interview that banks were not doing enough to support the economy
- Norway Fin Fin Johnsen commented that its economy was brighter compared to others but traditional exports did face challenge. He cautioned that banks must prepare for turmoil. Development in housing market were a concern as rising debt made sector 'extremely vulnerable' when interest rates go higher
- Italy minister said to have informed unions the gov't is to go ahead with labor refomrs regardless of agreement
- Moodys analyst Byrne commented that there was not much risk to Asian sovereign ratings in 2012
- S&P report noted that a Euro zone recession could end in late 2012 but the severity of recession was a 'close call'. The euro zone should gradually climb out of its mild recession in the second half of this year and into 2013. The core countries would likely lead the way back to growth, with other member countries delivering diverging performances. The S&P baseline forecast for 2012-2013 projected flat GDP growth for the euro zone as a whole in 2012 and 1% growth in 2013. S&P currently assigned a 60% probability to our baseline forecast, versus 40% for our alternative forecast of a true double dip. This would have a particularly adverse impact in countries like Spain, Portugal, and Italy.

Currencies:
- The FX markets maintained its recent ranges as the risk appetite tried to continue maintaining its recent momentum.
- The EUR/USD still had difficulty to break above the 1.32 handle and tested lower following the Spanish unemployment data. The pair probed below the 1.3130 area but did steady a bit after the Spanish and French bond auction results. Dealers did note that 2-way flows were prevalent with a plethora of option-related orders. Comments by China Premier Wen that it was considering involvement in EFSF and ESM facilities while German Chancellor Merkel visited the country on a three-day State visit. Wen did clarify that Europe must rely on itself and reduce its debt load and introduce structural reforms.
- The USD/JPY continued to hold above the 76.00 level with continued rhetoric from Japanese officials.
- The SNB still has yet to defend its 1.2000 floor in the EUR/CHF cross as speculators were performing the task for them. The cross was in the mid-1.20 area.

Political/ In the Papers:
- In an interview with the BBC, Bank of England's Posen said British banks are not doing enough to support the economy. He suggested that the banking sector needs more competition. In terms of policy, he supported the position that the UK would have been far worse without Quantitative Easing (QE).
- The Telegraph's Evans-Pritchard made note on the differences between the IMF and EU with regards to Greece. There are risks that policy makers in Greece could resist the new demands being made by the Troika officials. Both Germany and the Netherlands are opposed to giving Greece any more money, amid recent reports that Greece's second rescue package might have to be raised by €15B.
On the topic of the Bundesbank's liability related to the EU debt crisis, he added that the central bank has about €250B in liabilities related to the euro zone system. The Bundesbank has already provided €496B to countries including Greece, Ireland, Italy and Spain. A large portion of Bundesbank's liabilities are related to the ECB's 'TARGET2' automatic payments network, which deals with transactions between national central banks. According to Professor Frank Westermann of Osnabruck University, the liabilities of the Bundesbank are approaching the 'danger point'. A break-up of the EU would present large risks to the German central bank.
- In Ireland, NAMA reported only one in five loans were performing, with approximately €18.8B in arrears. Its recent quarterly report indicates 83% of the non-performing loans are four months in arrears; the agency must now either restructure these loans or move against developers through the courts. Prior to being transferred to NAMA, the value of performing loans were valued at €56.1B against the current value of €18.8B. NAMA chairman Frank Daly and chief executive Brendan McDonagh stated the number of non-performing loans was likely to continue rising.

***Looking Ahead***
- (EU) NATO Defense Min meet in Brussels
- (EU) EU Commission Rehn meets Netherland PM Rutte and Fin Min De Jager
- (CN) German Chancellor Merkel continues official China visit
- (US) US Senate banking committee vote on additional Iranian sanctions
- (US) Jan ICSC Chain Store Sales Y/Y: No est v 3.5% prior
- 6:00 (EU) EU Parliament votes on Iran nuclear ban
- 6:00 (EU) EU Parliament votes on Euro Bond resolution
- 6:00 (ZA) South Africa Dec Electricity Consumption Y/Y: No est v 0.2% prior; Electricity Production Y/Y: No est v 0.2% prior
- 7:00 (CZ) Czech Central Bank Interest Rate Decision: Expected to XXX the Repo Rate from the current 0.75% level
- 7:30 (US) Jan Challenger Job Cuts Y/Y: No est v 30.6% prior
- 8:00 (IT) Unicredit presents 2012 Economic Outlook
- 8:00 (US) Feb RBC Consumer Outlook Index: No est v 45.8 prior
- 8:00 (RO) Romania to sell Bonds
- 8:30 (US) Q4 Preliminary Nonfarm Productivity: 0.8e%e v 2.3% prior; Unit Labor Costs: +0.8%e v -2.5% prior >- 8:30 (US) Initial Jobless Claims: 371Ke v 377K prior; Continuing Claims: No est v 3.554M prior
- 8:45 (US) ISM NY: No est v 51.1 prior
- 9:00 (US) Fed's Evans speaks to reporters in Chicago
- 9:00 (UK) BOE member Posen
- 9:15 (EU) EU Commissioner Rehn
- 10:00 (US) Fed Chairman Bernanke testifies before House Budget Committee
- 10:00 (DK) Denmark Jan Foreign Currency Reserves (DKK): 3.535Me v 481.7B prior
- 10:30 (US) Weekly Natural Gas Inventories
- 19:15 (US) Fed's Fisher speaks in Austin, Texas
- 20:00 (CN) China Jan Non-manufacturing PMI: no est v 56.0 prior >- 21:30 (CN) China Jan HSBC Services PMI: No est v 52.5 prior

Legal disclaimer and risk disclosure

All information provided by Trade The News (a product of Trade The News, Inc. "referred to as TTN hereafter") is for informational purposes only. Information provided is not meant as investment advice nor is it a recommendation to Buy or Sell securities. Although information is taken from sources deemed reliable, no guarantees or assurances can be made to the accuracy of any information provided. 1. Information can be inaccurate and/or incomplete 2. Information can be mistakenly re-released or be delayed, 3. Information may be incorrect, misread, misinterpreted or misunderstood 4. Human error is a business risk you are willing to assume 5. Technology can crash or be interrupted without notice 6. Trading decisions are the responsibility of traders, not those providing additional information. Trade The News is not liable (financial and/or non-financial) for any losses that may arise from any information provided by TTN. Trading securities involves a high degree of risk, and financial losses can and do occur on a regular basis and are part of the risk of trading and investing.

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TradeTheNews.com European Market Update: Risk appetite benefits as Europe inches towards fiscal union

 TradeTheNews.com European Market Update: Risk appetite benefits as Europe inches towards fiscal union

***Economic Data***
- (EU) ECB: €2.2B borrowed in overnight loan facility v €2.4B prior; €479.4B parked in deposit facility vs. €488.9B prior
- (IN) India FY11 annual GDP Y/Y: 8.4% v 8.4% prior (Revision)
- (ZA) South Africa Dec Private Sector Credit Y/Y: 6.3%e v 5.9% prior; M3 Money Supply Y/Y: 8.2% v 7.6%e
- (DE) Germany Dec Retail Sales M/M: -1.4%% v 0.8%e; Y/Y: -0.9% v 0.9%e
- (DE) Germany Dec ILO Employment : 41.26M v 41.19M prior; Unemployment: 5.5% v 5.5% prior
- (FI) Finland Nov Final Trade Balance: -€358.0M v -€260M prelim
- (CH) Swiss Dec UBS Consumption Indicator: 0.92 v 0.78 prior
- (TW) Taiwan Dec Leading Index M/M: 0.5% v 0.5% prior; Coincident Index M/M: -0.6% v -0.6% prior
- (TH) Thailand Dec Business Sentiment Index: 48.5 v 39.0 prior
- (TH) Thailand Dec Current Account Balance: +1.9B v -$1.0Be; Total Trade Account Balance: -$238M v +$218M prior; Overall Trade Balance: -$1.0B v -$1.5B prior
- (FR) France Dec Producer Prices M/M: -0.1% v -0.1%e; Y/Y: 4.7% v 4.7%e
- (FR) France Dec Consumer Spending M/M: -0.7% v +0.2%e; Y/Y: -3.1% v -2.1%e
- (ES) Spain Nov Total Housing Permits M/M: -13.2 v -22.0% prior; Housing Permits Y/Y: -31.5% v -2.9% prior
- (CH) Swiss Central Bank publishes Dec Balance Sheet Data: Currency Holdings (CHF): 257.5B v 261.9B prior
- (HU) Hungary Dec Unemployment Rate: 10.7% v 10.%e
- (HU) Hungary Dec Producer Prices M/M: -0.5% v +2.5% prior; Y/Y: 7.5% v 7.4%e
- (ES) Spain January Preliminary Consumer Price Index Y/Y: 2.0% v 2.3%e; CPI EU Harmonized Y/Y: 2.0% v 2.2%e
- (TR) Turkey Dec Trade Balance: -$8.1B v -$8.6Be
- (TW) Taiwan Q4 Preliminary GDP Constant Prices Y/Y: 1.9% v 2.8%e
- (DE) Germany Jan Unemployment Change: -34K v -10Ke; Unemployment Rate: 6.7% v 6.8%e
- (HK) Hong Kong Dec M2 Money Supply Y/Y: 4.6% v 3.6% prior; M3 Money Supply Y/Y: 4.6% v 3.5% prior; M1 Money Supply Y/Y: 8/8% v 3.1% prior
- (HK) Hong Kong Dec Govt Mthly Budget Budget (HKD): +38.3BB v -1.4B prior
- (CZ) Czech Dec Money Supply Y/Y: 5.2% v 5.2% prior
- (IC) Iceland Dec Final Trade Balance (ISK): 6.9B v 14.5B prelim
- (IT) Italy Dec Preliminary Unemployment Rate: 8.9% v 8.7%e
- (NO) Norway Dec Credit Indicator Growth Y/Y: 6.7% v 6.5%e
- (NO) Norway Dec Retail sales Volume M/M: -0.3 v +0.2%e; Y/Y: 2.6% v 2.2%e
- (ES) Spain Nov Current Account: -€4.1B v +€0.5B prior
- (UK) Dec Net Consumer Credit: -£0.4B v +£0.4Be; Net Lending: £0.7B v £0.8Be
- (UK) Dec Mortgage Approvals: 52.9K v 54.0Ke
- (UK) Dec M4 Money Supply M/M: -1.4% v -0.5% prior (largest monthly decline on record); Y/Y: -2.5% v -2.5% prior; M4 Ex OFCs 3M Annualized: -0.8 v +3.2% prior
- (EU) Euro Zone Dec Unemployment Rate: 10.4% 10.4%e (highest level since April 1998)
- (BE) Belgium Dec Unemployment Rate: 7.2% v 7.2% prior
- (IT) Italy Dec PPI M/M: +0.1% v -0.1%e; Y/Y: 3.8% v 3.7%e
- (GR) Greece Nov Retail Sales Value Y/Y: -6.3% v -8.1% prior; Retail Sales Volume Y/Y: -8.9% v -10.8% prior
- (MA) Malaysia Central Bank left the Overnight Rate unchanged at 3.00%; as expected
- (EU) OECD Dec Inflation Y/Y: 2.9% v 3.1% prior
- (BR) Brazil Dec Industrial Production M/M: 0.9% v 1.0 %e; Y/Y: --1.2% v 0.8%e
- (PT) Portugal Dec Industrial Production M/M: -1.5 v -2.3 % prior; Y/Y: -8.7 v -3.0% prior
- (PT) Portugal Dec Retail Sales M/M: +2.3% v -2.5% prior; Y/Y: -10.3% v -9.2% prior

Fixed Income:
- (ZA) South Africa sold total ZAR2.1B vs. ZAR2.1B indicated in 2018, 2020 and 2031 Bonds
- (EU) ECB allotted €115.6B vs. €120Be in 7-Day Main Refinancing Tender
- (HU) Hungary Debt Agency (AKK) sold HUF50B in 3-Month Bills; avg yield 7.41% v 7.94% prior; Bid-to-cover: 2.73x v 3.15x prior
- (BE) Belgium Debt Agency sold total €2.58B vs. €3.0B indicated in 3-month and 6-month Bills
- Sold €1.64B vs. €1.8Be in 3-month Bills; Avg Yield 0.506% v 0.429% prior; Bid-to-cover: 2.70x v 2.23x prior
- Sold €940M vs. €1.2Be in 6-month Bills, Avg Yield 0.710% v 0.364% prior; Bid-to-cover: 4.02x v 2.01x prior

*** SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM ***
***Notes/Observations***
- EU Governments appear to be closer to fiscal union arrangement and agreement on €500B ESM Bailout Fund
-ECB Draghi: Fiscal Pact is first step toward fiscal union
- Continued optimism on progress in Greek PSI talks
- German Jan unemployment data beats expectations
- Italy Dec Unemployment data higher than expectations
- Euro Zone Dec Unemployment of 10.4% is the highest since 1998

Equities:
FTSE 100 +0.80% at 5715, DAX +0.90% at 6503, CAC-40 +1.1% at 3302, IBEX-35 +0.40% at 8553, FTSE MIB +1.5% at 15,983, SMI +0.30% at 5989

- European shares rose during the session as markets adopted a risk-on attitude following EU summit. European leaders agreed on stricter budget plan while Greece's PM Papademos noted that debt talks had advanced significantly. Continental banks rose on optimism while UK banks declined after Santander [SAN.ES] expected a tough 2012 for UK banks. Oil stocks were also up tracking gains in crude.
- ARM Holdings [ARM.UK] reported higher than expected earnings which pushed the stock higher.

Speakers:
- EU's Juncker commented that there was no need for a special commissioner to monitor Greece and forecasted an agreement between Greece and private creditors possible by end of week and Monday 'at the latest' and heinsisted to Greek PM Papademos that PSI be settled asap. He added that Mersch was the best candidate for ECB executive board.
- China Premier Wen reiterated the view that China would fine tune its economic policy and step up credit support for the economy at a State Council meeting. He commented that it would promote reasonable decline in housing prices
- German Chancellor Merkel was said to be seeking support of Chinese investors and lobby for joint euro stabilization in China ahead of her Official Visit to the Far East (set for Feb 1st thru 4th)
- BOE Tucker commented that bank rules must expose debt and equity investors to losses
- India PM Econ Advisor Rangarajan commented that the country needed to use all tools to combat inflation and lowerits budget deficit to deliver higher economic growth. He stressed that India should target a current account deficit below 2.5% of GDP

Currencies:
- Risk appetite was bolstered by the outcome of the EU Leader Summit on Monday which moved closer fiscal union for 25 States (Except UK and Czech Republic) and to finally sign off on the details of a €500B permanent bailout fund. The final shape of the deal to reduce Greece's debt is still unknown after
months of wrangling between the Greek government but optimism continued to prevail
- The USD maintained a softer tone against the major pairs. The EUR/USD was back testing the 1.32 handle but was unable to take out last Friday's intra-day high of 1.3220. The pair was off its best levels as the various European data continued to highlight the two-tier economies of Europe. German unemployment data was at record lows while the whole the Euro Zone unemployment was at its highest level since early 1998. German retail sales did show that its economy had pockets of weakness.
- The JPY strength remained apparent with USD/JPY probing the lower end of the 76 handle and some two big figures from last week's high in the pair. EUR/JPY was at 100.67

Political/ In the Papers:
- The FT commented that European banks may ask for further funds from the ECB. Banks in Europe may tap the ECBs funding scheme for up to two times more than the ECB supplied in €489 billion auction last month, indicating a possible further liquidity squeeze. Several large European banks said they may double, or even triple funding requests in February's auction (29th Feb). US banks Goldman Sachs informed their clients that banks could ask for twice as much as the auction in December; one senior banker stated that banks could easily do another €1 trillion.
- Various press articles out of Europe commented on the rising borrowing costs in Portugal, as it hit record highs following fears that it could follow in Greece's footstep towards a debt write-down. SocGen economist Nixon said Portugal may struggle in its plans to return to the capital markets by the end of next year. It may require additional finances, which may mean a second bailout, or possibly a similar Greek-like debt write-down. Evans-Pritchard also noted contagion concerns related to Greece have weighed on Portuguese bonds with Investors doubting EU officials' pledges that haircuts would not be applied to debt.
- Following its FY12 cut in economic forecasts (from 1% to just 0.9%), the IBEC (Irish Business and Employers' Confederation) reiterated a call for measures aimed at stimulating consumer spending. One suggestion was to allow people to draw down part of private pensions or other voluntary contributions to spend at this time.

***Looking Ahead***
- (RU) Russia 2011 Annual Real GDP Y/Y: No est v 4.0% prior
- 7:00 (EU) ECB announces allotment in 7-Day Term Deposits; To drain €219.0B
- 7:00 (CL) Chile Dec Unemployment Rate: 7.1%e v 7.1% prior
- 7:00 (ZA) South Africa Dec Trade Balance: -1.6Be v -8.0B prior
- 7:30 (BR) Brazil Dec Primary Budget Balance: 1.B v 8.2B prior; Nominal Budget Balance: no est v -10.2B prior; Net debt to GDP: 36.4%e v 36.6% prior
- 7:45 (US) Weekly ICSC Chain Store sales
- 8:00 (BR) Brazil ABRAS Dec Supermarket Sales
- 8:00 (PL) Poland Central Bank Jan Inflation Expectations: No est v 4.8% prior
- 8:30 (US) Q4 Employment Cost Index: 0.4%e v 0.3% prior
- 8:30 (CA) Canada Dec Industrial Product Price M/M: -0.1%e v +0.2% prior; Raw Materials Price Index M/M: 0.0%e v 3.8% prior
- 8:30 (CA) Canada Nov Gross Domestic Product M/M: 0.2%e v 0.0% prior; Y/Y: 2.3%e v 2.7% prior
- 8:55 (US) Redbook Weekly Retail Sales
- 9:00 (US) Nov S&P/CaseShiller 20 City M/M: -0.50%e v -0.62% prior; Y/Y: -3.3%e v -3.4% prior; Home Price Index: No est v 140.3 prior
- 9:45 (US) Jan Chicago Purchasing Manager: 63.0e v 62.2 prior
- 9:45 (UK) BOE to buy £1.7B in 2038-2060 Gilts in reverse auction
- 10:00 (US) Revisions to ISM's 2012 Seasonal Adjustments
- 10:00 (US) Jan Consumer Confidence: 68.0e v 64.5 prior
- 10:00 (US) Jan NAPM Milwaukee: 57.5e v 57.8 prior
- 10:00 (MX) Mexico International Reserves w/e Jan 27th
- 11:00 (US) CBO releases economic outlook
- 11:00 (CO) Colombia Dec Urban Unemployment Rate: 10.3%e v 10.3% prior
- 11:00 (US) Fed to purchase $2.25-2.75B in Notes
- 11:30 (US) Treasury to sell 4-Week Bills
- 12:00 (DE) German Econ Min Roesler
- 14:00 (AR) Argentina Dec Construction Activity M/M: No est v -1.3% prior; Y/Y: No est v 3.2% prior
- 16:30 (US) Weekly API Energy Inventories
- 21:30 (CN) China Jan HSBC Manufacturing PMI: No est v 48.7 prior
- (US) Republican Florida Primary

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