US: Futures in positive territory bolstered by earnings and European growth signals. Yesterday's data was mixed with leading indicators and claims reporting better than expected results while Philly Fed came up short of expectations. Today is a blank on the US economic front with next week scheduled for the FOMC and home price data. The FOMC will be closely watched to see if the statement is used to correct the previously mentioned communication problem and if there is any reference to commodity price inflation versus wage/labor inflation. NYT report that municipal bankruptcy legislation is on the table, such actions would provide the states a negotiating table with pension obligations.
Europe: EURIBOR now at 102.5bp as the base rate OIS component has risen to 77bp (+18bp since the first of the year). Central bank funding support has been fazed out and rates have returned to more natural levels. The question remains for the globe whether central bankers will respond to commodity price inflation at the possible expense of labor price inflation that they so desire. Spain reportedly considering letting savings banks float on the open market to raise capital with the backstop of government intervention if there is a lack of interest. FT Deutschland reporting that AAA rated members want additional contributions from lower rated members for the EFSF (which is set for first issuance next week, px talk mid swaps +10bp). Given the construct of the fund to achieve AAA ratings via CDO ratings methodology, it would seem such contributions are unlikely without significant structural revisions.
Asia: China 7D repo rate up 127bp overnight. China securities journal reporting that rate hikes may occur around the Lunar New Year. Nikkei News reporting that Japan is now a net importer of consumer electronics. AUD flood impact statistics continue to roll in as the government is considering a flood tax to maintain fiscal austerity and cover the tab for flood impacts. RBNZ considering a cap of 10% of total assets on issuance of covered bonds by NZD banks.
From Brian Yelvington of Knight Capital