From RanSquawk [13]
- Market talk of a French sovereign downgrade continues to do the rounds – Unconfirmed
- German Unemployment Change (000's) (Dec) M/M -22K vs. Exp. -10K (Prev. -20K, Rev. to -23K)
- EU says the commission and member states have submitted amendments for new EU treaty
Market Re-Cap
Equities in Europe traded mixed today, with particular underperformance noted by the French banking stocks on the back of ongoing speculation that France will end up losing its cherished AAA sovereign debt rating. As a result, French/German 10y bond yield spread traded wider throughout the session. In addition to that, looming supply was also noted as another reason for the underperformance in 10Y and 30y part of the curve. Separately to this, according to press reports, Germany is studying a proposal to take 75% haircuts on Greek bonds as part of the planned debt swap. While the CEBR noted that there is a 99% chance the euro will not be around in the next ten years and will start to unravel this year, with a 60% probability that one nation will leave. Offsetting the raft of negative news flow was better than expected German and Chinese macro economic data. Of note, WTI Crude and Brent Crude futures are trading sharply higher after Iran’s army warned the US against sending an aircraft carrier back to the Persian Gulf after it passed through the Strait of Hormuz a week ago. Heading into the North American open, attention will turn to the latest ISM Manufacturing report, as well as the FOMC minutes.
Asian Headlines:
**Note: Market holiday in Japan and China.
Chinese Manufacturing PMI (Dec) M/M 50.3 vs. Exp. 49.1 (Prev. 49.0)
Chinese Non-manufacturing PMI (Dec) 56.0 vs. (Prev. 49.7)
EU and UK Headlines
Germany is studying a proposal to take 75% haircuts on Greek bonds as part of the planned debt swap. (Euro2day.gr/Kathimerini/Financieele Dagblad) Meanwhile, a 50% write-down on Greek debt may not be enough to bring it down to sustainable levels according to an IMF official. IMF staff are now working on a starker economic assessment than outlined last month in its loan-program review. ECB's Wellink also questioned whether 50% write-downs were sufficient to allay the Greek debt fears while stating the new 3-year LTRO's from the ECB are a measure which goes too far.
The German chancellor, Merkel, has warned that the year ahead will "undoubtedly" be harder than 2011. (Observer) Urging greater European co-operation to salvage the Euro, Merkel said the German economy was performing well "even if the next year will undoubtedly be more difficult than this one". The Greek PM Papademos, spelled out a continuation of harsh austerity measures, while the Italian president, Giorgio Napolitano, warned that sacrifices would have to be made if the country was to avoid "financial collapse".
UK Manufacturing PMI (Dec) M/M 49.6 vs. Exp. 47.4 (Prev. 47.6, Rev. to 47.7)
German Unemployment Change (000's) (Dec) M/M -22K vs. Exp. -10K (Prev. -20K, Rev. to -23K)
German Unemployment Rate SA (Dec) M/M 6.8% vs. Exp. 6.9% (Prev. 6.9%)
FX
According to Jim Rogers, the euro could rebound in the near-term despite the problems affecting continental Europe, as investors are overly bearish on the currency (at the time of writing the pair was trading up around 100pips). Separately, GBP/USD benefited from the release of better than expected PMI data, while USD/JPY came under pressure on the back of touted selling by an Asian central bank.
COMMMODITIES
WTI and Brent crude futures traded higher during the European session amid reports that Iran test fired missiles in Gulf and better than expected Chinese PMI data.
Geopolitical News:
• Iran’s army chief said the Islamic Republic would take action if the U.S. aircraft carrier that recently left the area returned to the gulf.
• Iran has claimed to have successfully tested a new medium-range ground to air missile during naval exercises in the Gulf, amid rising tensions over the country's nuclear programme.