From RanSquawk [22]
- Moody’s have downgraded Italy, Spain and Portugal and placed UK, France and Austria on outlook negative.
- ZEW Economists predict a slight uplift in the German economy in the second half of this year.
- Chinese Premier Wen has said he is willing to be further involved in the EFSF and ESM.
Market Re-Cap
The bearish sentiment following Moody’s overnight catch-up move to S&P failed to have a long-lasting effect on sentiment today. Instead, better than expected German ZEW, together with another well bid Italian debt auction saw equities stage an impressive rally which in turn lifted indices into positive territory. As a result, Bund futures are trading back below the 138.00 level, while peripheral bond yield spread are generally tighter on the session. The risk on sentiment also boosted the energy complex which saw WTI crude futures climb back above 101.00 level (note: Brent March future expiry). Looking elsewhere, EUR/USD advanced above 1.3200 level after triggering stops. Of note, intraday option expiries are seen at 1.3220 and then at 1.3300 (large). USD/JPY is up after the BoJ announced that it will undertake additional monetary easing action and expand its asset-purchase fund by JPY 10trl, while touted buying by Russian names also supported the pair this morning.
Going forward, the second half of the session sees the release of Import Price Index, Advanced Retail Sales from the US, as well as the latest QE-operation from the BoE and another round of Treasury Coupon Purchases by the Fed.
Asian Headlines
The Chinese Premier Wen has said he is confident that China will sustain growth and has said that China is willing to be further involved in the EFSF and ESM. (Sources)
BoJ has unanimously kept its base rate unchanged at a range of 0.0% to 0.1%. However, the BoJ will undertake additional monetary easing action and plans to expand its asset-purchase fund by JPY 10trl. BoJ has set a goal of 1% for CPI. (Sources)
EU and UK Headlines
Moody’s have placed France, Austria and the UK on negative outlook, raising the prospect that the countries could lose their AAA ratings. (FT-More) French Finance Minister Baroin commented on the move saying Moody’s has not downgraded France due to the size of its economy and government determination to press ahead with actions to boost growth and competitiveness.
Moody’s has downgraded Italy, Spain and Portugal. (FT-More)
-Italy has been downgraded to A3 from A2, negative outlook. Moody’s have commented that successful implementation of economic reform and a reduction in the vulnerability of government finances could stabilize Italy’s outlook.
-Portugal has been downgraded to Ba3 from Ba2, negative outlook
-Spain has been downgraded to A3 from A1, negative outlook. Moody’s have said they see Spain’s A3 rating exhibiting some degree of tolerance to potential downside scenarios, but is not immune to further substantial deterioration in the economy and financial market conditions. (Sources)
Moody’s have affirmed the EFSF’s Aaa rating. The ratings agency have said this decision is driven by the fact that no Aaa rating has lost its ‘top-notch’ rating, adding that the stable outlook for the EFSF rating largely reflects the outlooks for Germany, Netherlands, Finland and Luxembourg. (Sources)
The German ZEW Surveys posted earlier today have shown above expected figures in both readings, recording the first positive figure since May 2011, and the highest value since April 2011. ZEW economists have forecasted a slight uplift in the German economy in the second half of this year.
-German ZEW Survey (Economic Sentiment) (Feb) M/M 5.4 vs. Exp. -11.8 (Prev. -21.6)
-German ZEW Survey (Current Situation) (Feb) M/M 40.3 vs. Exp. 30.5 (Prev. 28.4) (Sources)
UK CPI has come in alongside expectations, however remains above the BoE target of 2.0%. The BoE’s King has said in his subsequent letter to the UK Chancellor that he expects UK CPI to fall to around the 2.0% level by the end of this year.
UK CPI (Jan) Y/Y 3.6% vs. Exp. 3.6% (Prev. 4.2%)
UK CPI (Jan) M/M -0.5% vs. Exp. -0.5% (Prev. 0.4%)
UK Core CPI (Jan) Y/Y 2.6% vs. Exp. 2.6% (Prev. 3.0%) (Sources)
An earlier Italian auction of three BTP lines came in well-received, with the 6.0% Nov’14 line showing a further fall in yields to 3.41%, approximately half the yield shown in November of last year. Italy sold EUR 6bln worth of BTPs in total. (Sources)
EQUITIES
Following a cautious open in Europe due to ratings action by Moody’s, markets have rallied amid renewed risk appetite and optimism of a German recovery forecast by ZEW economists. The Chinese Premier Wen has said he is willing to be further involved in the EFSF and ESM, possibly calming fears concerning the credibility of Europe’s bailout funds.
In individual equities news, L’Oreal are performing strongly ahead of the North American open (currently trading up around 3%) following confident corporate earnings released after-market yesterday and forecasting another year of sales and profit growth. (RTRS)
Top performing sectors in the BE500: Utilities (+1.01%), Technology (+1.01%), Consumer Goods (+0.61%)
Worst performing sectors in the BE500: Basic Materials (-0.37%), Health Care (-0.16%), Telecommunications (-0.09%)
FX
USD/JPY has been trading in positive territory throughout the European session following news that the BoJ is undertake additional monetary easing and will boost its Asset-Purchase fund by JPY 10trl. There has also been market talk that Russian names have been buying in the pair and thus supporting the upwards movements, however, this remains unconfirmed. (Sources)
After showing weaknesses earlier in the session following news of downgrades from Moody’s, the EUR index has appreciated ahead of the North American open after news that China is willing to become involved further in the EFSF and ESM, as well as above expected ZEW economic sentiment data for Germany, predicting a slight uplift in the German economy in the second half of the year. (Sources)
Chinese Premier Wen has said the EUR is a main investment for diversifying FX reserves. (Sources)
COMMODITIES
Despite a number of downgrades in Europe by ratings agency Moody’s, WTI and Brent Crude futures are trading in positive territory following comments from the Chinese Premier Wen, he has reiterated his confidence that China will sustain growth and has pledged to focus on boosting domestic consumption. As well as this, European ZEW surveys have shown encouraging data, with ZEW economists forecasting that Germany is to see a slight uplift in the second half of this year. These comments have renewed optimism in worldwide energy demand, and pushed price levels upwards.
Oil & Gas News:
• The Obama administration has requested USD 276mln to fund the US Department of Transportation's Pipelines and Hazardous Material Safety Administration in 2013, a figure that includes a USD 67mln boost for the administration's pipeline safety program.
• Backers of the Keystone XL oil pipeline in the US Senate prepared to attach legislation Monday giving Congress authority to approve TransCanada's controversial project to a must-pass transportation package. An adviser to Senator Richard Lugar (Republican-Indiana), said the group of mostly Republican pipeline supporters would introduce an amendment to the highway bill, which the Senate is expected to consider this week. The amendment has no guarantee of a vote in the Democratic-controlled chamber.
• Brent Crude in London may fall to as low as USD 85/BBL this year as crude supplies increase and global demand slows, according to Morgan Stanley
• Farouk al-Zanki, CEO of Kuwait Petroleum Corp and a member of OPEC, has said he sees current oil prices as suitable and helping to boost investments in oil exploration projects.
Geopolitical News:
• A senior Iranian military official said that Tehran's nuclear and other industrial facilities suffer periodic cyber attacks, but that the country has the technology to protect itself from the threat, according to an official news agency.