- Announcements of a Greek political deal are likely later today according to a Greek government official.
- French President Sarkozy has said France and Germany are not imagining the possibility of no Greek agreement.
- UBS have revised their outlook for US Q1 2012 real GDP growth to 2.3% from 1.5%.
Weekend talks between Greek government officials failed to reach a definitive conclusion and as such market sentiment has been risk averse across the asset classes. The equity market has been chiefly weighed upon by the banking sector and as such underpinned the rise in fixed income futures. However, recent trade has seen a slight pullback led by tightening of the French spreads on reports of good domestic buying noted in the belly of the French curve.
Today marks the deadline for Greece to provide feedback as to the proposed bailout terms put forth by the Troika, but with continued disagreement on the fine print in the additional austerity proposals, market participants remain disappointed in the lack of progress. Of note a PASOK spokesman has said that Greece should not hold a general election after clinching an agreement on a second bailout package, suggesting instead an extension of Lucas Papademos' tenure. However, the two main unions of Greece have called for a 24hr strike on Tuesday.
Looking ahead there is little in the way of major US economic data today so Greece will likely remain the dominant theme for the rest of the session.
Federal and State officials aim to wrap up this week a multibillion-dollar deal with five major banks to settle probes of alleged foreclosure abuses. However there are a number of sticking points that must be dealt with before the deal is finalised, including whether California (the state stands to benefit more than any other) will sign on to the program. (WSJ)
UBS have increased their outlook for 2012 Q1 US real GDP growth to 2.3% from the previous estimate of 1.5%. (Business Insider)
The IMF have cut their Chinese economic growth forecast to 8.25% over the 2012-2013 period, adding that inflation is coming down to a more comfortable level in the economy. The IMF further commented that if the Euro area suffers a sharp recession, Chinese growth would drop abruptly. (Sources)
EU and UK Headlines
International market focus remains on Greece for the most of the session, with little progress in terms of announcements or releases and further warnings of social unrest, with major Greek unions warning that a 24 hour general strike could take place tomorrow.
Currently Greek Ministers are debating the country’s austerity measures, with two senior government officials commenting that Greek Leaders are close to agreeing an average 20% cut in minimum wages and cuts in supplementary pensions. These austerity measures are a precondition made by the Troika for the green-light on a EUR 130bln loan to prevent the country from defaulting. (Sources)
French President Sarkozy and German Chancellor Merkel have briefed the press and highlighted their optimism concerning Greece but reiterated that there will be no release of funds unless decisions are made. (Sources)
Talks between Greek party leaders and further talks with the IIF were continuing last night as the Greek Finance Minister admitted that Greece was “on a knife edge”. (RTRS) The Troika and other lenders bluntly told Greece it must achieve political consensus across all parties in the unity government over budgetary reforms and achieve a binding PSI deal with creditors before any further bailout funds are released.
According to draft legislation obtained by French Business channel BFM Business TV, the French financial transaction tax will only cover companies with capitalisation of more than EUR 1bln. (RTRS)
German factory orders outperformed expectations today; however these positive measures have taken a backseat against the ongoing Greek crisis and have failed to push the DAX into positive territory.
German Factory Orders SA (Dec) M/M 1.7% vs. Exp. 1.0% (Prev. -4.8%, Rev. -4.9%)
German Factory Orders NSA (Dec) Y/Y 0.0% vs. Exp. -0.4% (Prev. -4.3%) (Sources)
Bank of England to pump an extra GBP 50bln into UK economy. (Sunday Times)
Analysts said recent evidence of stronger growth, in purchasing managers’ indexes (PMIs) for the manufacturing and service sectors, was unlikely to deter the Bank of England from adding to the GBP 75bln of asset purchases it announced last October.
UK Halifax House Prices SA (Jan) M/M 0.6% vs. Exp. 0.1% (Prev. -0.9%)
UK Halifax House Prices (Jan) 3M/Y -1.8% vs. Exp. -2.1% (Prev. -1.3%)
UK Lloyds Employment Confidence (Jan) M/M -73 (Prev. -75). (Sources)
European equity markets are trading in negative territory ahead of the North American open driven by moves away from the riskier asset classes such as Financials over further deliberations over a Greek PSI deal.
Earlier reports that the EBA would challenge recapitalisation regulations put forward by some of Europe’s biggest banks have been denied by a Regulatory Press Release, stating that the overwhelming majority of the measures outlined in the plans appear to be in line with the spirit of the EBA’s recommendations.
The Basic Materials sector is the worst performing sector for the European morning, led by Glencore underperforming its peers with the news that it may have to offer 2.8 shares for every Xstrata share in the planned merger, with further details set to be announced tomorrow. (Sunday Times)
Top performing sectors in the BE500: Healthcare (+0.15%), Telecommunications (+0.06%), Consumer Goods (-0.12%)
Worst performing sectors in the BE500: Basic Materials (-0.93%), Financials (-0.71%), Consumer Services (-0.70%)
EUR/USD and GBP/USD are trading negatively ahead of the North American open following an appreciation of the USD index due to uncertainty over Greek PSI progression.
The IMF have commented on the CNY, stating that upwards pressure on the currency has diminished recently. (Sources)
WTI Crude futures have fallen from a three-day high over concerns that Greece still have not reached a debt-swap deal, threatening the European economy and fuel demand. The Algerian Oil Minister has commented that OPEC are happy with the current price levels of oil, adding that OPEC have never planned to offset Iranian supply cuts with a boost in production.
Oil & Gas News:
• OPEC have agreed that crude prices should remain at current levels and have said that the organisation has never discussed pumping more oil to offset a possible drop in Iranian exports, according to Algeria’s Oil Minister.
• China will cut crude oil imports from Iran for a third month because of differences over payment and price terms, according to unidentified sources.
• China may see the growth in net crude oil imports slow to 5.9% this year, reflecting the lowest level in 2006, according to the China National Petroleum Corp.
• The Italian Industry Minister has said the country’s gas situation is “certainly critical”. As a result, Italy is importing more gas from Algeria to offset lower Russian supplies, according to the CEO of energy giant Eni.
• A final framework is at hand on sweeping legislation to impose an impact fee and update safety regulations on Pennsylvania’s booming natural gas industry, according to top Republican state lawmakers.
• National Iranian Oil Company will supply light cargoes to the Asian region at the lowest premium in six months after a reduction by Saudi Arabia yesterday.
• Iran's oil minister said the state would not retreat from its nuclear programme even if its crude oil exports grind to a halt.
• An explosion hit a gas pipeline running from Egypt to Israel on Sunday, the latest in a series of attacks on the installation that crosses the increasingly volatile Sinai region, witnesses and state media reported.
• A Nigerian militant group based in the oil-producing Niger Delta has claimed responsibility for an attack on an oil pipeline owned by Italian company Eni, a strike the military said was the work of criminal gangs.
• An explosion has ripped through a major oil pipeline feeding refinery in the Syrian city of Homs, according to residents.