US: Markets mostly positive this morning, breaking its recent pattern. Today will show several retail industry-related releases, including advance retail sales and import price index. Surveys reflect expectations of bullish data. We also note a recent creep in LIBOR-OIS to 16bp (+4bp YTD).
Europe: EURIBOR-OIS has moved out to 28bp from late January lows of 21bp. European stocks reached their highest level yesterday since September 2008 off of the release Japan’s growth figures which were slightly better than expected. European bank CDS rose, increasing 6bps on the Markit iTraxx Financial Index to 166, following news from Ireland’s opposition party that they support senior bank bondholders’ participation in the country’s bank bailouts. Reports yesterday suggest that Merkel is likely to fill in Axel Weber’s recently vacated central bank post with an individual with background at Bundesbank. Favorites include Jens Weidmann, Merkel's top economic adviser, and Juergen Stark, a current member of the ECB executive board. Expect an official announcement by this Wednesday. Germany’s ZEW for February missed expectations with 15.7 v 20.0E for economic sentiment and 85.2 v 83.0E for the current situation, driven by inflation fears. Germany’s preliminary GDP came in at +0.4% QoQ v 0.5%E, and France’s preliminary GDP came in at 0.3% QoQ v 0.6%E. WSJ reported that Ireland’s EU/IMF bailout is short approximately €50bn, compared to the €67.5bn already agreed upon. Ukraine reported yesterday that its $15.6bn bailout negotiations with the IMF are "going well." Contrasting comments from German and Belgian FMs illustrate the issues facing a potentially fiscally unified Eurozone.
Asia: Emerging market stocks rallied yesterday after the release of China’s positive export figures and the announcement of Egypt’s intent to form a democracy. Inflation continues to rise in China, as its CPI increased 4.9% YoY missing expectations of 5.4% and PPI increased 6.6% YoY v 6.2%E. The CPI increase included a change in the basket of goods that reduced the weight of food which has recently risen in price dramatically. The BOJ left its target rate unchanged at 0.1%, in line with consensus estimates. Japan also saw a 3.3% MoM gain in industrial production over last month’s +3.3%.
From Brian Yelvington of Knight Capital