- Risk appetite in financials carried across from last night’s Fed stress test results.
- Chinese Premier Wen highlights the imbalances in the Chinese property market, dampening future oil demand.
- UK Chancellor Osborne is looking to launch a new 100-year gilt.
Going into the US open, European equity markets have carried across some risk appetite from last night’s Wall Street news that 15 out of 19 major US banks had passed the Fed’s stress test scenarios. This risk appetite is evident in Europe today with financials outperforming all other sectors, currently up over 2%.
Data released so far today has been relatively uneventful, with Eurozone CPI coming in alongside expectations and Industrial Production just below the expected reading for January.
Taking a look at the energy complex, WTI and Brent crude futures are seen on a slight downwards trajectory so far in session following some overnight comments from China, highlighting the imbalance in the Chinese property market, dampening future demand for oil. Looking ahead in the session, the DOE crude oil inventories will shed further light on the current standing of US energy inventories.
US MBA Mortgage Applications (Mar 9) W/W -2.4% (Prev. -1.2%) (Sources)
In the BoJ’s monthly economic report the central bank have commented that the economy remains flat, although shows signs of picking up with production and private investment showing improvements. (Sources)
Chinese Premier Wen has said that China needs to run its affairs well in the face of a Eurozone crisis, adding that 2012 may be the most difficult year for the country but also the most hopeful one. The Premier has commented on the national housing market, saying that property prices are far from reasonable and the country will not slacken its implementation on property controls. Wen commented on the recent Chinese GDP forecast revisions saying that 7.5% GDP growth should not be considered low. (Sources)
Standard & Poor’s have commented that China’s growth is likely to top 8% in 2012, despite adverse global market conditions. S&P have warned that adverse developments in the EU and the Middle East could threaten Chinese growth. S&P see significant room for cuts in the Chinese RRR. (Sources)
The Nikkei Share average closed above the 10,000 level for the first time in seven months, closing up 1.53%, following strong gains on Wall Street, a weak JPY and the Federal Reserve upgrading its US economic outlook. (RTRS)
EU and UK Headlines
Fitch upgraded Greece to B- from Restricted Default; Outlook stable, and stated that future rating actions would be driven by Greece's performance against the parameters of the new EU-IMF programme and the sovereign's capability and willingness to honour its restructured debt obligations. (RTRS)
The European Commission have dismissed a request from Dublin to defer a EUR 3.1bln payment related to its banking debt. (FT-More) EU’s Rehn dismissed the request, adding that Ireland must live up to its obligations.
Standard & Poor’s Managing Director of Sovereign Ratings has said it is likely to restore Greece to triple-C category following default. (Sources)
Eurozone Industrial Production SA (Jan) M/M 0.2% vs. Exp. 0.5% (Prev. -1.1%)
Eurozone Industrial Production WDA (Jan) Y/Y -1.2% vs. Exp. -0.8% (Prev. -2.0%)
Euro-Zone CPI (Feb) Y/Y 2.7% vs Exp. 2.7% (Prev. 2.7%)
Euro-Zone CPI (Feb) M/M 0.5% vs Exp. 0.5% (Prev. -0.8%) (Sources)
UK Chancellor Osborne is looking to issue a 100-year bond, or even a perpetual gilt that never matures in order to take advantage of the UK’s historically low interest rates. (FT-More) This type of issue has been implemented before following the First World War and the South Sea bubble in the 18th Century. This would ‘lock-in’ the benefits of Britain’s low borrowing costs and the UK Chancellor will hope this reflects market confidence in his fiscal plans.
UK Chancellor Osborne is also facing pressure to extend the stamp duty holiday in the upcoming budget. (Telegraph) The stamp duty holiday is currently due to end on March 24th and has seen an increase of 23% of first-time buyer loans in January.
Italy sold to the upper end in their earlier BTP auction, with a new Mar’15 line showing a yield below the 3.00% level.
-Italy sells EUR 5bln 2.50% Mar'15 BTPs, bid/cover 1.565 (yield 2.76%)
-Italy sells EUR 1bln 4.25% Sep'19 BTPs, bid/cover 1.996 Prev. 1.62 (yield 4.30%, Prev. 5.810%) (Sources)
Financials are outperforming all others, currently up 2.25%, ahead of the US open with some risk appetite carried across from last night’s Fed stress test results confirming that 15 out of 19 major US banks has passed the stress scenarios.
European Telecoms may face a European Commission probe to determine whether meetings between Co. top executives led to possible collusion. Company’s involved, known as the ‘E5’ are Deutsche Telekom, France Telecom, Telecom Italia, Telefonica and Vodafone. (FT-More)
In individual stocks news, E.ON are performing particularly strongly following the publication of their corporate earnings, outperforming expectations in both net income and Ebit for 2011. Company shares currently trade up over 6.5%. (Sources)
Barclays have revised up their USD/JPY forecast, predicting that USD/JPY is to hit 84.00 in one month, 88.00 in three months and 90.00 in six months. (Sources)
USD/JPY is extending its gains so far in the session with buyers touted below the 83.00 and wider US/Japan yield spreads providing underlying support following the FOMC’s rate decision. Exporter offers are touted to remain above the 83.50 level so further upwards progress could slow slightly, however the market talk remains unconfirmed. (Sources)
GBP/USD currently trading in close proximity to the 1.5700 option expiry due for the 10am NY cut (1400GMT) with market talk of offers in the pair at 1.5740, however this remains unconfirmed. (Sources)
WTI and Brent Crude futures are trading lower ahead of the US open. Overnight, the Chinese Premier Wen commented that China’s economy remains imbalanced, particularly in the housing market, as such, future oil demand has been dampened. Market now awaits the weekly DOE numbers, shedding some further light on US oil inventories.
Oil & Gas News:
• The IEA have said that global oil supply has fallen despite Saudi Arabian output being at a 30 year high. The IEA have forecast 2012 oil demand growth to remain unchanged at 0.8MBPD. IEA reports February OPEC oil output +315,000BPD to 31.42MBPD.
• The Kuwaiti oil minister has said customs workers strikes in the country are not affecting their oil exports.
• Saudi Arabian oil minister Al-Naimi has said the country is ready to fill any perceived or real oil supply gap in a speech at the International Energy Forum. Al-Naimi has further commented that the country can supply oil to Japan in the case of an energy crisis.
• The US have asked Russia to warn Iran that it has a last chance in negotiations expected in April to avoid military strikes against its nuclear program.
• The IEA estimate that Iranian sanctions could remove 0.8-1MBPD from the oil market.
• Israel have emerged from fighting with Palestinians in Gaza more confident that its advanced missile shield can perform well in a war with Iran, with an Israeli official referring to the latest clashes as a ‘mini-drill’ for an Iranian conflict.