One Minute Macro Update
US: Markets positive this morning. Treasuries experienced a bullish move yesterday as economic numbers managed to disappoint lofty expectations. Advance retail sales released yesterday showed a weaker than expected increase at 0.3% v 0.5%E. Today will see the release of housing starts, PPI, and industrial production. An increase in the latter would represent a third straight month of growth.
Europe: European sovereigns eking back out after a bit of euphoria. We believe that expansion is yet another band-aid solution. European stocks rose again yesterday on the news of strong corporate earnings above profit estimates. The strong performance led the Stoxx Europe 600 to a high unreached since September 2008. Reports out of Germany indicate that Jens Weidmann, Merkel’s top advisor, will head the Bundesbank. Critics see Merkel’s nomination as an attempt to gain political influence in the bank, although these views are not widely supported. The BOE revised its inflation expectations originally released in November. Inflation expectations increased to a 1.7% YoY increase in headline CPI in the next two years and up to a 4-5% increase in CPI for the short term. Eurozone GDP forecasts were also lowered. German bond auctions resulted in the sale of €3.37bn 10Y at 3.28% v 2.87% prior with bid-to-cover at 1.9x v 1.6x prior. Portuguese bond auctions resulted in the sale of €1.0bn 12-M bills at 3.987 v 3.71% prior with bid-to-cover at 1.9x v 2.6x prior.
Asia: The Chinese press reported that the CBRC, China’s banking regulators, recommended that banks slow lending to local governments. Chinese money supply (M2) increased 17.2% v 19.0%E. Japanese tertiary industry index, which measures the service sector of the economy, declined 0.8% MoM v -0.6%E. Singapore retail sales rose 1.8% YoY v 0.9%E. Singapore will release 4Q 2010 GDP later today; estimates peg GDP at +12.1% YoY.
From Brian Yelvington of Knight Capital
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