One Minute Macro Update: Compromise Or Conflict In Brussels?

U.S.: An earthquake in Japan earlier today sent markets
down this morning as today’s EU summit on a rescue mechanism lingers in the
background. Treasuries rallied again yesterday as European sovereign news and
slow Chinese export growth clogged headlines. The budget deficit expanded in
February, pushing out to its largest point ever at $220.5B due to increased
spending. The new record occurs in the background of a split Congress that has
not yet been able to meet a compromise on this year’s budget and a
CBO-projected $1.5T deficit in 2011. Today’s release of February’s retail sales
will likely be strong given the spike in gas and food prices, with advance
retail sales at 1.0%E v 0.3% prior. Excluding those inflationary boosts, retail
sales should still be moderate given the lighter weather experienced in months
prior.  We expect some upside to
expectations here, but note that any disappointment will certainly exacerbate
the negative headlines this AM.

Europe: All eyes are on today’s EU summit in Brussels
which is set to tackle the mounting sovereign debt situation in the region.
However, given the level of disagreement among leaders within Germany and those
across Europe, the meeting is likely to underperform. Leaders have already
noted that no final decisions on a rescue plan will be made today. Any real
action will not come until the next deadline at the end of the month.
Nevertheless, German Chancellor Angela Merkel yesterday indicated a willingness
to lower rescue plan interest rates if Greece sells state assets and Ireland
agrees to a common corporate tax base within the Euro zone. Merkel remained
reluctant to allow bond buying through via the EFSF, but did support an
increase in the EFSF’s current lending size (which is misleading, since the
increase would bring capacity up to the originally intended €440B). Despite a
Moody’s downgrade linked to an estimate that saw banking capital short by €50B,
Spain revised down its own interest expense estimate to €15B from the original
€20B. The change puts the Spanish government’s estimates in serious question.
The Finnish Financial Minister indicated yesterday that Portugal should make a
decision on financial assistance soon in order to avoid the fate of Ireland and
Greece. SOVXWE continues to widen, reaching 192bp this morning from 178bp last
week. France became the first country yesterday to officially recognize the
Libyan opposition government as the embattled state’s true government. The
final figure for German CPI for February was revised up to 2.1% YoY v the 2.0%
preliminary, putting Germany above the ECB’s inflation limit. Spain’s CPI
increased 3.6% YoY in line with market estimates. Portuguese CPI rose 3.5% YoY
v 3.7%E and final GDP for 4Q10 stayed at the preliminary figures of +1.2% YoY.
Italy’s final GDP for 4Q10 rose 1.5% YoY v 1.3%E. UK PPI output increased 5.3%
YoY v 5.2%E and core PPI increased 3.1% YoY v 3.4%E.

Asia: Japan’s 8.8 magnitude earthquake that hit the
country earlier today made a major blow on the Nikkei 225, while the rest of
the Pacific braces for potential tsunamis. Chinese inflation figures reported
yesterday put the country’s recent interest rate hikes in perspective. CPI rose
4.9% YoY v 4.8%E on top of the prior month’s 4.9% while PPI increased 7.2% YoY
v  7.0%E. Industrial production for China
came out strong in February, gaining 14.9% v 13.0%E. In a counter inflationary
move, Malaysia increased its reserve requirement up 100bp to 2% while holding
its overnight rate at 2.75%, in line with market expectations. New Zealand’s
food prices rose 0.1% MoM v 1.8% prior.

From Brian Yelvington of Knight Capital

Comments

[99er]

NQ

Looks set to reach the lower boundary of a Broadening Top.

http://www.zerohedge.com/forum/99er-charts-0

[99er]

Dollar

Up channel.

http://www.zerohedge.com/forum/99er-charts-0

[HedgeFundLIVE]

i swear one of our guys called the earthquake last night before it happened!!!: http://www.hedgefundlive.com/blog/earthquakes-and-flash-crashes-the-coming-mini-flash-crash