Overnight Market Summary
Heading into the North American open, stocks in Europe are seen broadly lower, with consumer services seen as the worst performing sector, where the UK based retailers have underperformed amid fears that a combination of heavy discounting, along with bad weather, impacted heavily on overall performance. Of note, the SMI index in Switzerland underperformed throughout the session, with Swatch shares under pressure after officials were unable to say what caused the fire at the weekend at the co.'s ETA unit factory in Grenchen, which destroyed one workshop and damaged another. As expected, traded volume is far below the daily avg and this trend is expected to continue this week. The euro is stronger against the dollar. Japanese 10yr bond yields rise; Italian yields decline. Commodities little changed, with silver, gold underperforming and natural gas outperforming. U.S. pending home sales, Dallas Fed manufacturing data due later.
- S&P 500 futures up 0.1% to 1837.5
- Stoxx 600 down 0.2% to 327.1
- US 10Yr yield little changed at 3%
- German 10Yr yield down 1bps to 1.95%
- MSCI Asia Pacific up 0.4% to 141
- Gold spot down 0.7% to $1205.2/oz
Overnight bulletin summary from Bloomberg
- Treasuries steady, 10Y yield holding near 3%; asset class has declined 2.3% this year, according to BofAML indexes, first yearly loss since 2009 as Fed scales back bond buys.
- Trading this week expected to be quiet; no Fed speakers scheduled until Bernanke and Plosser on Jan. 3, no Treasury note or bond auctions until 3Y/10Y/30Y cycle week of Jan. 6; little if any corporate issuance expected
- China’s local-government debt swelled to 17.9t yuan ($2.95t), a 48% increase over the previous two years, according to a report by the National Audit Office
- China ruled out talking to Japan’s Abe, saying he “closed the door” to any meetings with Chinese leaders after visiting a site that memorializes fallen Japanese soldiers including war criminals
- China’s benchmark money-market rate fell for a fifth day after the first weekly cash injection by the central bank this month, and the yuan touched a 20-year high following a record fixing
- Turkey’s Prime Minister Erdogan enters the last week of 2013 reeling from a corruption probe that has splintered his party and highlighted economic vulnerabilities
- Suicide bombers at a train station and on a trolleybus killed at least 30 people within 24 hours in the southern city of Volgograd, raising the security threat less than six weeks before Russia hosts the Winter Olympics
- Sovereign yields mixed. Nikkei +0.7%, Shanghai -0.2%. U.S. equity-index futures steady. WTI crude little changed, copper high, gold declines
The Nikkei 225 was supported by JPY weakness (USD/JPY touched on its highest level in 5 years) and closed higher by 0.69% at 16291.31 to record a 56.72% gain for the year and its best year since 1972.
EU & UK Headlines
ECB President Draghi sees no urgent need to cut the Eurozone's main interest rate further and sees no signs of deflation.
ECB's Weidmann ruled out another haircut to Greece’s state debt, urging Athens instead to press on with reforms to their completion.
In related news Greece will return to international bond markets in the second half of 2014 and issue 5y securities according to Finance Minister Stournaras.
Barclays pan-Euro agg month-end extensions: +0.03y
Barclays Sterling month-end extensions:+0.06y
Of note, the US 10y yield closed at 3.0% on Friday, and at its highest level since July 2011, after printing at high of 3.19% at the CBOT pit open.
Barclays US Tsys month-end extensions:+0.07y
Heading into the North American open, stocks in Europe are seen broadly lower, with consumer services seen as the worst performing sector, where the UK based retailers have underperformed amid fears that a combination of heavy discounting, along with bad weather, impacted heavily on overall performance.
Of note, health care sector has under performed its peers, where Sanofi shares are seen lower by around 1% following reports that the company does not anticipate Lemtrada to be approved by end March.
After failing to open on time and then subsequently opening lower by over 5%, Monte Paschi shares have edged into positive territory after it was reported that although co.'s shareholders have authorised a EUR 3bln capital increase, it will only take place after mid-May. Il Sole 24 Ore reported that the postponement of the capital increase may promote alternative hypothesis for the bank.
Overnight in Asia, analysts at JPMorgan said that Japan will almost certainly fail to meet its 2% inflation target, which will prompt further BoJ easing in April. In line with this view, JPMorgan put its 2014 USD/JPY forecasts at 104 in Q1, 100 in Q2, 102 in Q3 and 106 in Q4. Nevertheless, USD/JPY knocked out barrier options on its ascent through 105.25 to record a fresh 5 year high, but met resistance ahead of the 105.50 level where a key Fibonacci level and larger option barriers have capped further gains in the pair.
China's National Development and Reform Commission says it needs to closely monitor effects on China and South Korean exports from a weaker JPY.
Libya's eastern Hariga port will resume oil exports within days after the authorities reached an agreement with protesters to end 4 months of blockage, according to an oil official.
Rockets fired from Lebanon hit open areas in northern Israel over the weekend, prompting retaliatory artillery fire according to the Israeli army.
A top Iranian nuclear negotiator has expressed hope that a deal with world powers could be implemented in a month but technical talks on the matter are proceeding slowly.
At least 15 people have been killed and 23 others hurt in a suspected suicide bombing on a trolleybus in the Russian city of Volgograd, officials say.
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