Overview: Markets positive again this morning as investors eagerly await news out of the EU summit.
U.S.: Today will see the release of durable goods orders for February at +1.2%E MoM v +2.7% prior and +2.0%E v -3.6% prior, excluding transportation. Initial jobless claims are expected to move somewhat lower than last week at 383KE v 385K prior. Continuing claims are estimated to move similarly at 3,700KE v 3,706K prior. The U.S. tax code may see changes as several Republican Congressman are taking up the matter as announced yesterday. Much attention is focused on the tax deferral of repatriated profits, a $1T sum.
Europe: Portugal’s failure to reach an agreement on austerity measures yesterday and the subsequent resignation of PM Socrates has taken the country one step closer to accepting an international bailout. However, any such aid is severely limited by the hobbled constraints of the EFSF and the lack of (good)will between payer and payee countries. SOVX bounced off of 182bp overnight and has since retraced to 172bp, making the Portuguese election another "buy the rumor, sell the fact" trade for the Euro sovereign crisis. These latest events put more pressure on the widely anticipated EU summit today and tomorrow. With talk regarding Collective Action Clauses (CACs) coming from Merkel, the EMU could be starting to get its discussions on the right path. NPV reductions will be necessary for at least some periphery countries, and the sooner they begin, the less onerous they will be. Moody’s announced a downgrade on thirty of Spain’s smaller banks due to sovereign financial pressures and weak banks. Recall that Moody’s lowered Spain’s sovereign debt rating one notch to Aa2 on March 10th. The ISM’s Purchasing Managers Index showed mixed results in manufacturing and services. Euro zone PMI came in at 57.7 v 58.3E for manufacturing and 56.9 v 56.3E for services. The French PMI preliminary report showed an increase to 56.6 v 56.0E in manufacturing and 60.7 v 59.5E in services. The German report also showed 60.9 v 62.0E in manufacturing and 60.1 v 58.4E in services. Italian consumer confidence for March decreased slightly to 105.2 v 106.4 prior. UK retail sales grew 1.2% YoY v 2.5%E and fell 1.0% MoM v -0.6%E. Dutch GDP grew 0.6% QoQ v 0.6%E. Irish GDP contracted 1.6% QoQ v a revised +0.6% prior and decreased 0.7% YoY v a revised -0.3% prior
Asia: The BOJ said today that the efforts involved in the earthquake rebuilding may overcome the GDP contraction associated with the original damage. In a review of its recent monetary policy, the PBoC reported that it intends to use quantitative tools less and focus on interest rates and other pricing tools instead. Hong Kong’s trade deficit widened 56.9% to 25.1B v 16.0B prior as imports grew 25.2% v 19.0% prior and exports shrank 24.9% v 27.6% prior. The central bank of the Philippines increased the overnight borrowing rate to 4.25% from 4.0%, an all-time low, joining other Asian central banks in their recent actions to ward off inflation. Japanese inflation numbers due out today with headline CPI estimated to remain flat YoY. Excluding fresh food, estimates are pegged at -0.3% YoY v -0.2% prior.
From Brian Yelvington of Knight Capital