- Risk appetite in the European morning supported by German ZEW Survey results, first time positive since May
- Greece completes debt buyback with sources saying the country is set to meet its target of EUR 30bln ahead of the deadline
- Greece and Spain sell above the top end of indicative ranges in their respective T-bill auctions
In a sharp turn around from the open, Italian and Spanish 10yr government bond yield spreads over German bunds trade approx. 10bps tighter on the day, this follows several market events this morning that have lifted sentiment.
Firstly from a fixed income perspective, both Spain and Greece managed to sell more in their respective t-bill auctions than analysts were expecting and thus has eased concerns ahead of longer dated issuance from Spain this Thursday. In terms of other trigger points for today's risk on tone the December headline reading in the German ZEW survey was positive for the first time since May 2012 coming in at an impressive 6.9 M/M from previous -15.7 with the ZEW economists adding that Germany will not face a recession. Finally, reports overnight have suggested that Italian PM Monti could be wooed by Centrist groups which means that if he wanted too the technocrat PM could stand for elections next year albeit under a different ticket. As such yesterday's concerns over the Italian political scene have abated and the FTSE MIB and the IBEX 35 are out performing the core EU bourses.
In FX the notable mover as been the CHF, which has weakened significantly under speculation that the SNB may embark on negative deposit rates when they meet this Thursday. This comes after UBS sent a note to clients today that they would join Credit Suisse in charging bank clients for CHF deposits as of next week. Separately talk over the SNB floor has also resurfaced and further fuelled the move higher in EUR/CHF but nothing official has been seen or heard from the central bank.
Looking ahead highlights from the US include trade balance, wholesale inventories and a USD 32bln 3yr note auction, however, volumes and price action may remain light ahead of the key FOMC decision on Wednesday.
Asian press has said the Shanghai Comp. is likely to rebound early next year because of stabilising economic fundamentals and ample liquidity, this comes off the back of strong Chinese data over the weekend showing China's economy continues to rebound. Despite this. a report in Xinhua, citing a researcher at the China Association of International Trade said China's 2013 foreign trade may keep 'single-digit' growth.
- China New Yuan Loans (Nov) M/M 522.9bln vs. Exp. 550.0bln (Prev. 505.2bln)
- China M2 Money Supply (Nov) Y/Y 13.9% vs. Exp. 14.1% (Prev. 14.1%)
- China M1 Money Supply (Nov) Y/Y 5.5% vs. Exp. 6.2% (Prev. 6.1%)
- China M0 Money Supply (Nov) Y/Y 10.7% vs. Exp. 10.4% (Prev. 10.5%)
EU & UK Headlines
German ZEW Economic Sentiment survey came in positive for the first time since May with ZEW researchers saying Germany will not face a recession. ZEW researchers went on to say that ECB and Bundesbank growth forecasts are pessimistic and are at the bottom end of their economic outlook. ZEW also said that more than 75% of their analysts do not expect the ECB to change interest rates in the next 6 months.
Greece's debt buyback ended at 1200GMT with sources saying the country is set to meet its EUR 30bln target after missing the target on Friday which was the day the buyback initially ended.
Spanish and Greek T-bill auctions were well received with both countries selling more that the targeted amount which has added to risk-on sentiment in Europe. Peripheral bond yield spreads have tightened as the Bund moved lower due to improving risk-appetite.
US Congress is due to adjourn on Friday until January 15th with fiscal cliff negotiations still ongoing, according to Wall Street Journal sources, progress has been seen in fiscal cliff talks and they say that talks have become more substantive in recent days.
European equities are trading in positive territory as sentiment in Europe improved following German ZEW survey results being better-than-expected. All bourses are trading higher with the FTSE MIB seeing the highest gains as concerns over political unrest in Italy are dissipating.
The Utilities sector (+1.14%) is the best performing sector in Europe boosted by Suez Environment (+7.13%), whose shares have seen large gains as GDF have said they are not going to sell their stake in Co. Elsewhere, Tullow Oil shares are down over 5% after the Co. entered into an agreement to acquire Spring Energy Norway for USD 372.3mln. They also said they intend to begin a process to dispose of their assets in the UK and Netherlands.
EUR/USD has moved higher in the European session as sentiment has lifted in Europe following the German ZEW survey results printing positive for the first time since May. EUR/USD moved to fresh session highs on the back of the strong data, trades 1.2990, +49 pips at 1212GMT.
CHF weakened significantly in early trade after UBS sent a note to clients this morning saying they will charge bank clients for depositing in the bank from next week. This fuelled speculation that the SNB may announce negative deposit rates following this Thursday's meeting. EUR/CHF has strengthened based on the news and at 1216GMT trades at 1.2111, +32 pips.
USD/JPY moved higher in London, led by a US name buying 500mln during the session. At 1220GMT USD/JPY currently trades at 82.47, close to a touted option expiry of 82.50 for today's 1000am (1500GMT) NY cut.
WTI crude futures are trading higher today due to better sentiment following better-than-expected German ZEW data. Elsewhere, rising tensions in the Middle-East, in particular Egypt, could disrupt oil supplies. As a reminder, Brent crude January'13 options expire today at 1930GMT/1330CST. Also of note today is API inventories data which is due to be released at 2130GMT/1530CST although market participants are likely to be waiting any information from tomorrow's OPEC meeting.
OPEC are due to meet in Vienna tomorrow and the cartel is expected to keep the current output ceiling of 30mln bpd with the key decision being the appointment of a new secretary general. Saudi Arabia, Iran and Iraq have all nominated candidates for the job although a unanimous decision is needed from all members before the new secretary general can be appointed. Angola has said that only the Iraqi and Saudi Arabian candidates are in-line for the job.