One Minute Macro Update
US: Markets mostly bullish this AM following the holiday weekend in the US. Friday’s CPI print seemed reflective of inflation, showing increases in core and non-core metrics, while retail sales was mixed relative to expectations. We fear the real demand rally might well be short lived. Today’s Empire Manufacturing and November TIC flows will be watched closely for forward indications in the US, while the story out of Europe continues to be the market’s focus.
Europe: Headlines abound with respect to the European sovereign story as the SOVXWE trades tighter inside of 195bp in the early morning (now back out to 200bp). Comments out of German Finance Minister Schaeuble indicate that forward support for stabilization funds should happen within a comprehensive package (read: fiscal discipline). Issuance out of Spain, Greece, and Belgium today seems to have been bolstered by an uptick in ECB support. The ECB reported purchases of €2.3B last week and reportedly owns 20% of the outstanding issuance of Greece, Ireland and Portugal. Distortions in bond auctions place more of an emphasis on the marginal buyers at the moment, which are not the Asian buyers rumored in weeks past, but rather the EMU itself. If the EMU/ECB/EFSF continues to ratchet up in size, the impacts of the shared responsibilities for that increase in size will be felt most immediately and forcefully within the strongest countries. The stealth taxation of these countries will not escape voters in the upcoming March elections (a time period that coincides with a lot of debt maturities within the EMU) and we do not expect a comprehensive plan (read: fiscal discipline with cross taxation) to emerge ahead of those elections. Doing the right thing will not be popular and the Eurogroup has reportedly rejected the EFSF at the current meeting.
Asia: PBOC suspending bill auctions this week as President Hu arrives in the US. Premier Wen Jiabao pledged to fight against “abnormal” credit growth.
From Brian Yelvington of Knight Capital
And key bulletized highlights:
- Asian stock markets post gains as investors eye US.
- Bundesbank sees German rebound slowing.
- China's central bank has cut its 2011 lending target for banks by 10% (to abt $1.1 trillion)
- China's property prices continued to rise in Dec at 0.3% - at a slower pace.
- Coal prices reach two-year high as flooding in Australia curbs production.
- FDI in China in 2010 rises to record $105.7B.
- Food prices causing riots in Africa stoke record US farm economy growth.
- Oil falls after Trans Alaskan pipeline restarts system following repairs.
- OPEC raises oil demand f'cast for 2011 by 200,000 bpd on improved economic outlook.
- Poland may raise rates for first time in 2 1/2 years to control inflation.
- Apple's Jobs takes leave as weight loss said to continue; Cook takes over.
- BP is swapping 5% of its stock for a 9.5% stake in Russia’s Rosneft.
- BP, Rosneft form global, arctic strategic alliance; to develop 3 license blocks in Arctic.
- Delta's Dec. quarter net income rises from a $25M loss last year to a $19M gain this year.
- JetBlue to restate income.
- Glaxo to record $3.49B charges in Q4 to cover costs relating to a U.S. investigation of its marketing practices.
- Goldman Sachs halts Facebook share sale to US investors on rule concerns.
- J.Crew draws no bids to rival $3B TPG, Green offer.
- Lenovo forms unit for tablets, smartphones.
- Li Ka-Shing's Hutchison to sell stake in port operations in Singapore IPO.
- Rio Tinto's Oct-Dec hard coking coal prodn up 8%; copper down 9% & iron ore up 6%.
- Royal Bank of Scotland selling UK rehab and care specialist Priory Group for $1.5B.
- Samsung Electronics: No plan to hike DRAM prices.
- Severstal's Nord gold unit starts $1B initial share sale in London.
- Shareholders in South Massmart Hldgs to sell a controlling stake to Wal-Mart Stores.
- US regulator near approving Comcast's NBC deal.
Economic Calendar: Data on Empire Manufacturing, NAHB Housing Market Index to be released.
Earnings Calendar: AAPL, AMTD, C, CBAN, CHMP, CREE, DAL, FULT, IBM, LBIX, MMR, SCHW.
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Data provided by Egan-Jones
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