From RanSquawk [16]
- Merkel, Monti and Papademos all state their optimism that a Greek bailout deal can be reached on Monday.
- Eurozone central banks are to exchange Greek bonds they hold for new issues, without CAC’s, via the ECB.
- UK January Retail Sales strongly outperform expectations.
Market Re-Cap
Market participants continued to react positively to yesterday’s reports that Euro-zone central banks, via the ECB, are to exchange the Greek bonds they hold for new bonds, without CAC’s, to help the Greek debt deal. As a result, stock futures traded higher throughout the session, led by the financials sector, while the health-care sector which is characterised by defensive-investment properties underperformed. Looking elsewhere, EUR/GBP traded briefly below the 0.8300 level, while GBP/USD continued to consolidate above the 1.5800 level following the release of better than expected retail sales. Hopes that a Greek deal is in the pipeline also lifted EUR/USD, which trades in close proximity to an intraday option expiry at 1.3110.
US Headlines
The US House of Representatives have passed an energy bill that would take control of a permit for the Keystone XL oil pipeline away from US President Obama, who has placed the project on hold. (RTRS)
Going forward, the latter half of the session sees the release of the US CPI report at 1330GMT.
Asian Headlines
China has launched a CNY 50bln fund in Shanghai to aid overseas acquisitions by Chinese Companies. (RTRS)
Moody’s have said they do not expect any Japanese ratings action on Feb 24th, adding that Japan’s credit outlook is stable. (Sources)
EU and UK Headlines
The second Greek bail-out will contain unprecedented controls on Athens’ ability to spend aid (FT-More) The agreement is likely to include an escrow account that must always contain enough cash to pay Greece’s debt for 9-12 months. If the account falls below that level, funding will be taken from aid earmarked to run the Greek government. If the deal is finalised by Monday, it will still include a list of 24 “prior actions” that Greece must complete by the end of the month, before aid is released.
Euro-zone central banks, via the ECB, are to exchange the Greek bonds they hold for new bonds, without CAC’s, to help the Greek debt deal. (RTRS) The ECB have secured protection against forced losses on its Greek bonds in a deal that is to be completed over weekend for an estimated EUR 50bln worth of Greek bonds and the profits will be disbursed to the national governments.
The UK has shown an unexpected growth in Retail Sales, with analysts expecting a contraction for January. The UK estimate of store inflation was 2.2% on the year, the lowest since December 2009.
-UK Retail Sales (Jan) M/M 0.9% vs. Exp -0.3% (Prev. 0.6%)
-UK Retail Sales (Jan) Y/Y 2.0% vs. Exp. 0.5% (Prev. 2.6%, Rev. 2.5%) (Sources)
Among recent speculation concerning the future of Portugal’s finances, the country’s PM has said the government will not seek more bailout funds, or extend its loan plan. (Sources)
EQUITIES
European equities are trading in positive territory ahead of the North American open, following risk appetite and hopes that a Greek bailout agreement may be signed through on Monday. This risk appetite has seen movements towards the more volatile stocks and away from the defensive positions, such as the health care stocks.
In individual equities news, Air Liquide are trading down 2.5% following corporate earnings that showed increasing levels of debt within the company. Despite increasing their 2011 dividend by 6.4%, this rise was EUR 0.10 below analysts’ expectations. Smaller Italian stock Finmeccanica are performing particularly strongly today, currently trading up 10%, following the signing of a USD 1bln Israeli contract to produce 30 fighter jets. (Sources)
Top performing sectors in the BE500: Financials (+1.73%), Technology (+1.49%), Basic Materials (+1.27%)
Worst performing sectors in the BE500: Health Care (-0.28%), Consumer Goods (+0.42%), Oil & Gas (+0.54%)
FX
After experiencing a directionless open, GBP/USD has appreciated following the release of higher than expected UK retail sales data, however this currency pair may experience further fluctuations following the release of US CPI data at 1330GMT as well as market talk of offers in the pair at 1.5870 and 1.5850, however this remains unconfirmed.
EUR/USD is trading positively following further progressions in the Greek bailout deal, with German Chancellor Merkel, Greek PM Papademos and Italian PM Monti expressing optimism that the deal will be signed off on Monday.
COMMODITIES
WTI is lacking direction ahead of the North American open, trading in minor positive territory, with a slightly weak USD index. Energy markets are looking ahead to US CPI data due at 1330GMT.
Oil & Gas News:
• The US House of Representatives have passed an energy bill that would take control of a permit for the Keystone XL oil pipeline away from US President Obama, who has placed the project on hold.
• The US Interior Department has submitted its proposed set of rules regulating hydraulic fracturing to the Office of Management and Budget for review, bringing a federal framework for the controversial drilling practice one step closer to reality.
• The US Energy Department will not make a decision on future LNG exports until it has weighed the potential consequences of sending US gas abroad, Energy Secretary Steven Chu has said.
Geopolitical News:
• The Iranian President has complained of outside interference in the region. The Iranian president is currently meeting with the leaders of Pakistan and Afghanistan aiming to promote regional stability.
• Japanese refiners have started weighing options for seeking flexibility in their Iran crude import contracts by asking for "force majeure" clauses to be included in the contracts so that they can be invoked when payments cannot be made via bank transactions, according to the Petroleum Association of Japan President Akihiko Tembo.
• The UN General Assembly has passed a resolution endorsing the Arab League’s plan for Syrian President Assad to step aside.