- Euribor trading lower as the pace declines in the daily fixes continue to narrow
- EU’s Rehn has said a deal on Greece is very close; IIF’s Dallara and Greek PM Papademos are to meet again at 1630GMT
- Market awaits advanced reading of Q4 US GDP at 1330GMT
EU stock futures have come off the initial lows at the open today following news that EU’s Rehn expects a PSI conclusion to be reached over the weekend, however this news comes amid the IIF’s offer to private bondholders of a 70% haircut. Further Greek PSI talks are expected later in the session following a meeting between IIF’s Dallara and Greek PM Papademos in Athens at 1630GMT.
Euribor 3-month rate fixing continues to decline, however the pace at which the rates are falling is slowing, showing a fall of 0.005% compared with a 0.013% fall at this time last week. The slowing speed of decline has prompted hesitancy in financial markets, pushing the Euribor strip downwards. Further evidence of this impact comes from Portuguese bond yields, which today hit record Euro area highs.
Spanish and Italian spreads have tightened this morning following market talk that the ECB were buying Spanish debt through the SMP in the belly of the curve. The Italian BOT auction this morning came in well-received following strong domestic demand, with 6-month yields falling from previous auctions.
The Bund traded in thin volumes this morning as the market awaits the key indicator of US GDP, released at 1330GMT.
The market awaits US advanced GDP figures, where majority of analysts expect inventory component to account for a large portion of the reading.
US Treasury Secretary Geithner has spoken at the World Economic Forum this morning, commenting that the US economy is growing at a 2-3% rate, adding that the US economy still faces big challenges from the financial crisis and this will take a while to repair. (Sources)
BarCap US Treasury month end extension seen at +0.01yrs.
Some BoJ members have said the country needs to make the utmost efforts to maintain financial stability and that the latest expansion of asset buying has been effective. Some members have also commented on the country’s exposure to the global crisis, saying that domestic demand and exports will fall, should overseas economies weaken further, according to the BoJ minutes. (Sources)
EU and UK Headlines
European news is mixed today, with major comments from EU’s Rehn that a Greek PSI debt-swap deal could occur over the weekend, however the IIF has said haircuts could reach the level of 70%. IMF’s Lagarde has also commented on the ongoing talks saying that she is not optimistic or positive about the progress of the talks. Market focus will shift towards further talks between the Greek PM Papademos and the IIF’s Dallara in Athens today, scheduled for 1630GMT.
Euro-zone banks could accept losses on debt not bought through the SMP and governments are discussing losses on Greek debt held by central banks according to sources. The source also said Euro-zone Greek debt holdings are unlikely to be part of any financial restructuring.
- German Finance Minister Schaeuble has said the Greek government must fulfil its promises attached to earlier aid packages before expecting more money.
- EU’s Juncker has said a Greek default should be avoided at all costs as it would have contagion effects for the rest of the Euro area. (Sources/Stuttgarter Zeitung/Le Figaro)
EU ramps up pressure over Volcker rule (WSJ)
EU’s Barnier is to raise his objections to the Volcker rule with US Treasury Secretary Geithner stating that the proposed US regulations would discourage US banks from trading European sovereign bonds, increasing funding costs for European governments through a reduction of liquidity.
BarCap Pan Euro Agg month end extension seen at +0.12yrs.
European stocks have gained on the back of comments from EU’s Rehn that a Greek PSI deal could be reached this weekend however, the indices are retreating at this point following uncertainty over how the final details.
One of the top leaders in the Utilities sector this morning is RWE, who have attained 7 new Norwegian contracts, increasing their share price at this point.
Other highlighted companies in Europe today include Total announcing plans for a USD 1.8bln upgrade of the Daesan complex in South Korea. (Sources)
USD index is trading down today as the EUR/USD pair trades in positive territory following comments from EU’s Rehn that he expects a Greek PSI deal over the weekend.
Japanese Finance Minister Azumi has instructed MoF staff to analyze the causes of the trade deficit, adding that he cannot comment on whether the trade deficit could be a trend. (Sources)
Japanese National CPI Y/Y (Dec) -0.2% vs. Exp. -0.2% (Prev. -0.5%)
Japanese National CPI Ex Food, Energy Y/Y (Dec) -1.1% vs. Exp. -1.1% (Prev. -1.1%)
Japanese Retail Trade SA M/M (Dec) 0.3% vs. Exp. 0.4% (Prev. -2.1%)
Japanese Retail Trade Y/Y (Dec) 2.5% vs. Exp. 2.1% (Prev. -2.3%) (Sources)
Heading into the North American open, WTI crude futures are trading above the psychologically important USD 100 level, on the back of a weaker USD and reports that a law to be debated in Iran’s parliament on Sunday could halt exports of oil to the EU as early as next week.
Oil & Gas News:
• Royal Dutch Shell CEO says although he sees volatility in oil prices, doesn’t expect a repeat of 2008 oil spike.
• Asian physical gasoline cracks in Singapore hit three-month highs Thursday, led by concerns over spot availability within Asia due to refinery closures in Europe and the US Atlantic Coast.
• The presidents of Sudan and South Sudan are to hold talks in Ethiopia in an effort to diffuse a fractious conflict over oil revenue sharing which last week saw the latter shut-in production, a report claims.