From RanSquawk [27]
- Eurozone Jobless rate highest since October 1997.
- ECB’s Weidmann warns of increasing risk stemming from certain ECB policies.
- ISDA says there is no payout on Greek USD 3.25bln default swaps
Market Re-Cap
European bourses are trading in positive territory ahead of the North American following a relatively quiet morning in Europe. Markets are led by the financials sector, currently trading up around 1.10%. This follows yesterday’s ECB LTRO. As such, the 3-month Euribor fix has fallen to 0.967%, a significant fall in inter-bank lending costs.
PMI Manufacturing data released earlier today came in roughly in line with preliminary estimates. The Eurozone unemployment rate for February has also been released, showing the highest jobless rate since October 1997.
There has been little in the way of currency moves so far in the session; however there may be fluctuations in USD pairs following the release of ISM Manufacturing data and weekly jobless claims later today.
US Headlines
Fed’s Plosser has said the US economy is improving at a steady pace and markets are functioning such that the Fed could raise rates before 2014. Plosser further commented that the need for further quantitative easing goes away with the further improvement in the US economy. (CNBC/Sources)
A Goldman Sachs research note released earlier today noted that they project house prices in the US will decline by around 3% from Q3 in 2011 until Q3 2012 and by an additional 1% thereafter. This pushes the bottom level of US house prices back to mid-2013, as reported on Zerohedge.com.
Asian Headlines
Chinese PMI Manufacturing (Feb) M/M 51.0 vs. Exp. 50.9 (Prev. 50.5)
Chinese HSBC PMI Manufacturing (Feb) M/M 49.6 (Prev. 48.8) (Sources)
EU and UK Headlines
The ISDA have said there is no payout on Greece USD 3.25bln default swaps, adding that no credit event for Greek CDS has occurred. The ISDA decision was unanimous. (Sources)
Jens Weidmann, head of the Bundesbank, has launched an attack on ECB’s Draghi warning of increasing risk stemming from certain ECB policies. This criticism has raised fears of potential costs for Germany from its role as the Eurozone’s biggest creditor. (FT-More) Weidmann has said the ECB risks endangering its reputation and called for a quick return to stricter rules on collateral that the ECB accepts from banks in return for funds. This commentary comes in the light of yesterday’s LTRO, which saw 800 bidders, many of them smaller banks able to access the funds via broader collateral rules.
Eurozone CPI estimate (Feb) Y/Y 2.7% vs. Exp. 2.6% (Prev. 2.7%)
Eurozone Unemployment Rate (Jan) M/M 10.7% vs. Exp. 10.4% (Prev. 10.4%, Rev. 10.6%)
-Eurozone January Jobless rate highest since October 1997.
PMI Manufacturing released earlier in the session showed little or no revisions to the preliminary estimates. (Sources)
-Eurozone Manufacturing PMI (Feb F) M/M 49.0 vs. Exp. 49.0 (Prev. 48.8)
-German Manufacturing PMI (Feb F) M/M 50.2 vs. Exp. 50.1 (Prev. 51.0)
-French Manufacturing PMI (Feb F) M/M 50.0 vs. Exp. 50.2 (Prev. 48.5)
-Italian Manufacturing PMI (Feb) M/M 47.8 vs. Exp. 47.1 (Prev. 46.8)
BoE's MPC member Martin Weale said there may not be a case for more QE in May and that if very real upside risks to inflation materialise, rates may rise before mid-2014. (RTRS) Weale added the BoE may raise rates before selling bonds when tightening and believes that monthly CPI data is no longer compatible with the BoE’s target.
UK Nationwide House Prices SA (Feb) M/M 0.6% vs. Exp. 0.2% (Prev. -0.2%, Rev. -0.3%)
UK Nationwide House Prices NSA (Feb) Y/Y 0.9% vs. Exp. 0.3% (Prev. 0.6%) (Sources)
-Monthly house price rise at the highest rate since April 2010. According to Nationwide’s Chief Economist, measures of activity in the housing market have picked up, with the number of housing transactions rising by 23% year-on-year in January and the number of UK mortgage approvals was up 36%. However, it remains to be seen whether this trend will be sustained.
EQUITIES
European markets are trading in positive territory across the board so far in the session, with some risk appetite evident as financials lead the way with the sector trading up 1.10%.
Former ECB Executive Smaghi has said the ECB’s latest LTRO raises serious concerns that cheap funding may create a disincentive for Euroarea banks to take steps to stand on their own feet. Smaghi has also said the ECB needs a bigger European banking oversight role. (FT-More)
More than half of the institutions that borrowed from the ECB were German, according to people familiar with the auction. (FT-More)
In individual equity news, Peugeot continues to attract attention, however today it is one of the worst performing stocks following a Moody’s downgrade to junk status. The ratings agency cited concern over the company’s deteriorating finances and a jump in its net debt. Following this news, company shares currently trade down 6.31%. (Sources)
Veolia Environment are one of the strongest performing equities in Europe today despite recording losses for 2011. The company made announcements today that it will stick to its plan to trim company debt and sell assets. The company have reported that they are in exclusive talks to sell its mass-transit unit Transdev. Company shares currently trade up 9.4%. (Sources)
Top performing sectors in the BE500: Financials (+1.05%), Utilities (+0.90%), Consumer Goods (+0.74%)
Worst performing sectors in the BE500: Technology (-0.09%), Consumer Services (-0.07%), Basic Materials (+0.17%)
FX
EUR/USD has experienced some fluctuations earlier in the session, following market talk of an Asian Central Bank buying the pair at the low near 1.3300, however this remains unconfirmed. Following this, the pair managed to recover back towards the touted 1.3350 intraday options expiry, however price movement going forward will likely be driven by the USD, with weekly jobs data and ISM manufacturing due for release later in the session.
USD/JPY is making losses on the session, with market talk of commercial bids at around the 80.80 mark, with stops set for around 80.75. Again, this pair may see further volatility following US data releases after the North American open.
COMMODITIES
WTI and Brent futures are on an upward trend ahead of the North American open, following yesterday’s upward revision to US GDP in Q4 of last year. Oil prices are still being pushed upwards by Middle Eastern tensions, as reports suggest that Iranian sanctions are already causing adjustment in oil supply patterns.
Oil & Gas News:
• Bank of America have said Middle East tension may add USD 40/BBL to oil prices, adding that Brent at USD 130/BBL for three months would hurt economic growth.
• Saudi Arabia are deploying the most oil rigs in four years as it prepares for possible shortages caused by tension with Iran.
• China has planned to increase its storage capacity for strategic petroleum reserves to more than 500mln BBLs by 2020.
• At the Capitol Hill press conference, US House Representative Frank said federal position limits were needed to curb excessive speculation in energy markets. Position limits were a mandate of the Dodd-Frank Act.
• A key US lawmaker has said he will introduce a bill today to implement an "inclusive" clean energy standard that will closely track a proposal advocated by President Obama.
• The US have said the world oil market is increasingly tight with supply interruptions, and that the strength of the world oil market amid the new Iran sanctions is now under revision.
• The G20 have appointed a commission calling for stricter regulation of price-reporting agencies to prevent the manipulation of oil markets.
• Japan bought record volumes of spot LNG supplies in January to replace shut nuclear power.
Geopolitical News:
• Iran’s parliamentary elections are due to take place tomorrow, with President Ahmadinejad and Supreme Leader Khamenei fight for a majority of 290 seats in parliament.
• According to an EIA report, the Iranian sanctions may already be causing adjustment in oil supply patterns, and the world oil supply cushion is quite modest by historical standards.