Start Your Day With The Usual Disappointing European Economic Data

Tyler Durden's picture

The quiet overnight session was started by comments from Buba's Weidmann, whose statement, among others, that the ECB will not cut interest rates just to weaken the EUR together with the assertion that the EUR is not seriously overvalued, sent the EURUSD briefly higher in pre-European open trading. Of secondary importance was his "hope" that the ECB will not have to buy bonds (it will once the market gets tired of Draghi open-ended verbal intervention), something he himself admitted when he said the ECB "may be forced to show its hand on OMT." The stronger EUR did not last long, and in a peculiar reversal from prior weeks when the European open led to a spike in the cross, saw the EURUSD dip to three week lows, touching on 1.3310, before modestly rebounding. This validity of the drop was confirmed two hours later when in the first key economic datapoint, it was revealed the Euroearea exports fell 1.8% in December, the most in five months. As SocGen said "the monthly trade data rounded off what has undoubtedly been a pretty dismal quarter for the euro area. Overall euro area exports fell by 1.8% m/m in December although this was offset by a even bigger 3% decline in imports - which itself reflects the weakness of domestic demand in some euro area countries. Maybe of more interest is the latest data on the destination of euro exports. These continue to show a pronounced weakness in global demand (albeit for November). This indicates that weakness in Q4 is not solely a domestic affair but also reflects a wider slowdown in the global economy."

SocGen is correct, and as the chart below shows, there is much more to the Chinese hard landing than the Politburo's liea, as European exports to China just dropped to a fresh multi-year low.

The other key economic news of the night was yet another economic miss in the UK, where retail sales ex autos/fuel dropped -0.5% on expectations of a +0.5% print, best summarized laughably by Goldman as "retail sales hit by the January snow... the weakness of today's data was largely caused by the unusually bad weather." These excuses are just getting plain silly.

Finally, despite expectations for a major repayment in today's LTRO put back announcement, only 9 banks repaid some €3.79 billion in LTRO funds, even smaller than last week's €4.99 billion repaied by 21 banks.

Various other key overnight news from Bloomberg:

  • Treasuries steady, 10Y headed for weekly decline; yen gains vs. dollar as G-20 finance chiefs and bankers meet in Moscow amid speculation of a currency war.
  • Japanese ruling party lawmaker Kozo Yamamoto said a race to devalue currencies would spark global growth, dismissing German criticism of Prime Minister Shinzo Abe’s plans for monetary easing which have weakened the yen
  • Bundesbank’s Jens Weidmann said an appreciating euro alone won’t trigger a cut in interest rates and the exchange rate’s gains are justified by the economic outlook; EUR/USD reached 14-month and 3-yr highs against USD and JPY earlier this month
  • U.K. retail sales unexpectedly fell in January for a second consecutive month
  • France’s Socialist president Hollande, facing EU pressure to reach budget targets, is risking the wrath of his core supporters to shrink the pension  system, which had a deficit of EU14b ($19b) in 2011
  • S&P owner McGraw-Hill Cos. was downgraded by Moody’s after the U.S. government filed a lawsuit that seeks as much as $5b in damages
  • BofAML Corporate Master Index OAS holds at 147bps as $4.625b priced yesterday; Markit IG at 86bps, near YTD low 85bps.  High Yield Master II OAS steady at  497bps; $875m priced yesterday. CDX High Yield little changed at 102.75
  • Nikkei falls 1.1%; China closed all week for New Year’s. European stocks, U.S. equity-index futures decline. Italian and Spanish bonds little changed.  Energy lower, precious metals rise

More on the overnight action from DB:

Despite the S&P500 (+0.07%), Dow Jones (+0.07%) NASDAQ (+0.06%) and CDX IG (+0bp) indices all closing virtually unchanged on the day, there was a lot to digest. The opening bell saw the S&P 500 trade 0.4% lower after euro area GDP disappointed (-0.6%qoq vs -0.4% expected) with Germany, Italy and France all coming in lower than expected. Our economists note that together with the earlier -0.7% qoq figure for Spain, these make Q4 the worst quarterly GDP print since H1 2009 for the EMU4 countries. US equities spent the rest of the day recovering from the lows as sentiment took on news  that Berkshire Hathaway was joining with an investment firm in acquiring Heinz in a transaction valued at $23bn.

The announcement certainly added to talk of a return of LBOs and investors seemed to spend much of the session yesterday scouring for similar names. It also comes just a few weeks after the news of Dell’s management buyout and probably explained some of the underperformance in CDX IG (of which Heinz is a member) versus European credit indices. Yesterday also saw the last day for the filing of quarterly Form 13Fs in the US, where investment managers are required to report their holdings to the SEC. This apparently resulted in a number of unusual market moves towards the end of the session. In terms of the economic data, initial jobless claims declined 27k to 341k (vs 360k expected) while continuing claims declined -130k to 3114k, the lowest reading since July 12, 2008. This number has been up and down a lot in recent weeks and months so its probably a bit too early for markets to get excited/worried about the improvements.

Turning to Asia, most of the attention overnight has been squarely focused on Japan ahead of today’s G20 meeting. The WSJ wrote that a draft communiqué being put together by the G20 will include a general pledge for members to refrain from currency manipulation but will not single out any particular country or currency. The communiqué will be released at the G20 meeting today and will include a recommendation that monetary policy should focus on price stability and that “persistent exchange rate misalignment" should be avoided. This comes despite pressure from Russia to use “stronger and more specific language” on the need to avoid currency manipulation, according to the WSJ who cite a senior G20 official.

In Japan itself, reports suggest that the Japanese PM Abe is close to selecting his nominee for the next BoJ governor and will likely finalise his decision over the next few days. Former deputy BoJ governor Toshiro Muto is the leading candidate for the post which may disappoint some who were hoping for a candidate with a more openly radical approach to monetary policy (Reuters). Japan’s economy minister Amari said today that the government has no target for the domestic stock market, seemingly back tracking on recent comments that he would like to see the Nikkei at 13,000 by the end of March.

For the moment though, the Nikkei is down 1.2% as we type, and is poised to extend its streak of +/- 0.5% days to eight trading days. USDJPY is down 0.36% overnight. Outside of Japan, Asian equities are mixed with the Hang Seng (-0.1%) trading marginally lower but the KOSPI (+0.08%) making back to positive territory. Newsflow remains fairly thin on the last day of the Lunar New Year holidays before the Chinese market reopens next week.

In other news, Fed’s Bullard reiterated that it made sense for the Fed to slow asset purchases as data improved, rather than to suddenly bring the purchases to a halt, and said this could even be done in a formulaic manner where for every one-tenth decrease in the unemployment rate, the pace of purchases could be brought down by $15bn per month. In a touch of irony, Moody’s downgraded McGraw-Hill, parent of Standard & Poor’s overnight from A3 to Baa2. The outlook remains negative. Moody’s cited the recent civil lawsuits filed against McGraw-Hill in relation to its ratings on mortgage securities as one of the reasons for the downgrade.

Glancing through today’s data calendar we have Spanish CPI and Eurozone trade balance in Europe. In the US, the Empire State Manufacturing, TIC Flows data, Industrial Production, and the preliminary print of the UofM Consumer Confidence survey are the highlights. Draghi will also speak at the G20 conference this morning at 9.15am London time.

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GetZeeGold's picture



Oh well......maybe tomorrow.


Then again......maybe socialism really doesn't work.

Smegley Wanxalot's picture

Wall Street will rise on all bad news, as usual.

But in case the US economy "unexpectedly" underperforms the reasons are clearly now some unexpected snow in winter called Nemo and the unexpected failure of big government in the old country.  No worries though - "we'll do big government right here."

Ghordius's picture

Can't start the day without some european disappointment - which leds me to ask myself when this idiotic US stocks market vs EURUSD "correlation" in the minds of borgs (human and HTF both) will continue

imho a good way to distract the US groupthink from getting the correct gauge un the USD levels from other comparisons, particularly "barbaric" ones

"Overall euro area exports fell by 1.8% m/m in December although this was offset by a even bigger 3% decline in imports" oh, sounds bad, eh? this further improving of the trade surplus, I mean... meanwhile I read little about the new Russian-Chinese pipeline projects...

GetZeeGold's picture



Proving once again the best offense is a good defense.


Don't look at me......look at those guys.

goldenbuddha454's picture

This is bullish.  What goes up must go up further.  Everyone needs to invert their way of thinking.  What appears to be bad is good and what is good is actually bad.  Take the employment numbers.  When we go from 7.8 to 7.9% that would appear to be bad, but in actuality we got a huge run up.  Ditto GDP slowing to 1%, ditto Greece and Spain youth unemployment above 50%, ditto Japan flooding the market with a trillion more yen and anything else bad you can think of in this Willy Wonka Economy is actually good!

youngman's picture

Krugman is on Bloomberg right now...enough to make me he has a job..he is a professor...a columinist..a medal winner...HOW?

He has made some statements that if you had 5 minutes to could tear him a new one...but maybe that is the new normal...60 seconds filled with sound bites and no facts......makes me want to go back to bed

GetZeeGold's picture



Cat has some pretty heavy support from academia.....those guys make the unions blush.


When dealing with fake can make the numbers do almost anything.

Monedas's picture

The world slows down about 7 seconds every year .... come on .... I just made that up .... as if it were government economic data !   LOL   PS:  Blade Runner will have to check his blades at the warden's office .... they'll give him a little wooden dolly with casters .... like WWI legless vets had to sell newspapers during the depression ! European economy slows .... read all about it .... brother, can you spare a dime ?

CDNX fan's picture

C'mon - get out there and SHORT CASH! Spend yer money on STOCKS (or energy or farmland or lead balloons). To SHORT CASH is to spend money, buy "stuff", anything "anti-fiat"...Since wage inflation is a long way off due to 3 billion Asians entering the work force and continuing to suck American jobs into the Himalayas and Mekong Delta, gold and silver will continue to decline and STOCKS will ROCK!

falak pema's picture

Krugman is now exporting meteoristes to Russia to make Keynesian logic triumph from outer space.

You guys don't give Krugman his true due. 

And, Europe is now telling China we will not buy your exports.

Awesome, meteorites and protectionist bites.

Poor blade runner, he has been charged with murder for killing sweet lover, who wouldn't take a shower with him like in Pyscho. She did get shot in the bathroom!

The news is scattering the birds this morning all the way from the Atlantic to the Urals!

Edward Fiatski's picture

That China chart is scary with a massive downtrend in lock. Pre-crisis levels - best levels, which mean we're going to take a rollercoaster to HELL again.

Don't BTFD yet, bitchez.