From RanSquawk [24]
- The ECB’s overnight deposit facility received a fresh record EUR 820bln from European Banks.
- China revises its GDP target for 2012 downwards to 7.5% from 8.0%.
- The Troika believes Greece will require a further EUR 50bln in bailout funds before 2020, however these reports have since been denied by German spokesman Seibert.
- The ECB does not believe voluntary participation in the Greek debt swap deal will be sufficient and CACs will be enforced, according to an ECB source.
Market Re-Cap
European equity indices are exhibiting signs of risk averse behaviour, with financials and basic materials performing particularly poorly. This follows weekend reports from ECB sources that the central bank does not believe voluntary participation in the Greek debt swap deal will be sufficient, and the CACs will have to be invoked. Markets are also reacting to the weekend press from Germany, claiming the Troika believe Greece will require a third bailout of around EUR 50bln by 2020, however these reports were denied by a German spokesman earlier in the session.
European Services PMI data released earlier in the session fell below expectations, compounding the already cautious market behaviour.
European Banks have parked a fresh record EUR 820bln with the ECB overnight, showing further evidence that the LTRO has loosened liquidity constrictions in the continent.
Commodities are making losses ahead of the North American open following overnight news that China have made a downward revision to their GDP target for 2012. Spot gold is trading down around 0.9% and WTI and Brent crude futures have been making a loss for most of the session so far, however oil has made positive movements in recent trade. These negative movements in commodities are also weighing down upon the commodity-linked currencies, with AUD particularly making losses on the session.
US Headlines
Fed’s Bullard said that the US employment situation is likely to continue improving and sees unemployment at around 7.8% by end of the year. Bullard also sees 3% real GDP growth for the year. In other comments he noted, the March meeting is time to wait on QE. (Sources)
There is little in the way of data releases after the US open, but we can expect US ISM non-manufacturing data as well as commentary from Fed members Fisher and Evans.
Asian Headlines
Chinese Premier Wen has said China should aim for 2012 GDP growth of around 7.5%. The 2011 GDP growth target was 8%, with actual growth at 9.2%. Wen expects a CPI rise of 4% across the same period. (Sources)
EU and UK Headlines
An ECB source has said that the ECB expects that the participation rate of Greece’s private creditors in the planned voluntary debt restructuring deal will be too low and collection-action clauses will have to be invoked. (Der Spiegel)
The Troika believes that a third Greek bailout worth up to EUR 50bln might be needed to help the country raise funds between 2015 and 2020. (Der Spiegel)
-Earlier in the session, German spokesman Seibert denied these reports. (Sources)
Final readings for February PMI services data today disappointed with the exception of Germany, which slightly outperformed expectations.
Eurozone Services PMI (Feb F) M/M 48.8 vs. Exp. 49.4 (Prev. 50.4)
German Services PMI (Feb F) M/M 52.8 vs. Exp. 52.6 (Prev. 53.7)
French Services PMI (Feb F) M/M 50.0 vs. Exp. 50.3 (Prev. 52.3)
Italian Services PMI (Feb) M/M 44.1 vs. Exp. 45.2 (Prev. 44.8) (RTRS)
Europe continues to show signs of a loosening in liquidity constraints with the 3-month Euribor fix falling once more to 0.934% and the ECB recording another record overnight deposit of EUR 820bln from European banks. (RTRS)
EQUITIES
Risk averse behaviour is ruling the European equity markets today, with financials and the basic materials sector performing particularly poorly.
The basic materials sector is making heavy losses following the overnight announcements from China, revising down their GDP targets for 2012 to 7.5% from 8.0%. This has dampened the future outlook for commodity demand, pushing the sector downwards. The financial sector losses follow market suspicions that the Greek saga is still not complete, with Troika reports that Greece may require a further EUR 50bln in bailout funds by 2020.
In individual equity news, BP are outperforming the rest of the Oil & Gas sector following weekend news that the company have reached a settlement with the plaintiffs in the Macondo trial over the 2010 Deepwater Horizon spill. Following the news, a company spokesman has said he expects dividends to rise as company fortunes improve, however did warn that they are unlikely to reach pre-2010 levels. Company shares are currently up 1.5%. (Sources)
Top performing sectors in the BE500: Health Care (+0.40%), Consumer Goods (+0.13%), Technology (-0.13%)
Worst performing sectors in the BE500: Basic Materials (-1.68%), Financials (-0.99%), Industrials (-0.89%)
FX
EUR/USD is roughly flat on the session; however the pair was making losses earlier after the release of below expected services PMI data coming from Europe.
Commodity-linked currencies, particularly AUD, are making losses on the session, echoing the losses made in gold and oil today. This follows overnight news that China has made a downward revision to their GDP 2012 target from 8.0% to 7.5%, dampening the outlook for future commodity demand from the Far East.
COMMODITIES
WTI and Brent futures have been trading negatively on the session despite upwards pressures from the continuing political tensions in the Middle East. This follows overnight announcements from the Chinese Premier that the Chinese GDP target for 2012 has been revised downwards to 7.5% from 8.0% previously.
Oil & Gas News:
• Iran will probably stop sales of crude to Belgium, the Czech Republic and the Netherlands according to Iranian press reports.
• Iraq’s deputy energy minister has said the country’s production of crude oil exceeds 3MBPD.
• Saudi Aramco have said Arab light crude sold to Asia will be priced at a premium of USD 2.80/BBL to the regional benchmark for April loading, compared with USD 1.55/BBL in March.
• China asked Russia to deliver at least double the crude oil quantities via the ESPO pipeline branch; however Russia refused the request, according to state industry sources.
• China’s power production is to rise 7.5% this year, the slowest rate of growth since 2009 with falling demand from thousands of power stations likely to curb gains in coal output, according to a government work report.
• Spot demand for supertankers carrying Middle Eastern crude climbed to a record of 142 fixtures in February, equivalent to 9.79MBPD.
Geopolitical News:
• President Obama stressed that a “military component” was part of the potential strategy for dealing with Iran and criticised the idea of using a containment strategy should Iran secure a nuclear weapon. However, Obama also said the US believed the best solution was a permanent agreement to end Iran’s nuclear weapon ambitions that did not require “constant military intervention”.
• Talks between the United States, United Kingdom, France, Germany, Russia, and the People's Republic of China on Iran are at an advanced stage, with an announcement expected soon, according to EU diplomats.
• Japanese foreign minister Gemba has said Japan and the US are nearing a deal on Iranian oil import cuts, possibly the end of the month.
• Iran’s ambassador to the IAEA suggested his government may try to defuse the latest international tensions over its nuclear program by allowing the U.N. agency to visit suspected nuclear site that inspectors have previously been barred from.