Relatively quiet overnight session in the markets, where Europe has seen several bond auctions, most notably in France and Spain, whose good results has in turn sent the German 30 Year Bund yield to the highest since December 12, all courtesy of the recently printed (and collateralized with second and third-hand Trojans) $1.3 trillion. Per BBG [23], Spain sold 976 million euros of 3.25 percent notes due April 2016 at an average yield of 3.37 percent. The bid-to-cover ratio was 4.13, compared with 2.21 when the notes were sold in January, the Bank of Spain said in Madrid today. It also auctioned 2015 and 2018 securities. France sold 3.26 billion euros of benchmark five-year debt at an average yield of 1.78 percent. The borrowing cost for the 1.75 percent note due in February 2017 was less than the yield of 1.93 percent at the previous sale of the securities on Feb. 16. Elsewhere, we got confirmation of the collapse in Greece, where Q4 unemployment rose to 20.7% [24], up from 17.7% in the prior quarter. China weighed on Asian market action again following ongoing concerns about domestic property curbs, and a slide in the Chinese Foreign Direct Investment of -0.9% on Exp of +14.6%. ECB deposit facility usage, primarily by German banks, was flattish at €686.4 billion, while in Keynesian news, Italian debt rose to a new record in January of €1.936 trillion. Watch this space, once inflection point occurs and vigilantes realize that not only has nothing been fixed in Italy, but the current account situation in Italy, and Spain, is getting progressively worse as shown yesterday, all at the expense of Germany.
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Full overnight summary from BofA.
Market action
Overnight, Asian equity markets finished mixed. The Japanese Nikkei advanced 0.7%. The Japanese rally was led by Japanese exporters, which rallied after the dollar rose against the yen. A weaker yen would be supportive of the Japanese economy, because it is highly dependent on exports. The other Asian market to finish higher was the Hang Seng, up 0.2%. On the flip side, the Chinese composite fell 0.7%, as investors worry about potential new measures to limit property speculation, which has driven real estate values in China very high. The Indian Sensex fell the most, down 1.3%, while the Korean Kospi lost 0.1%.
In Europe, equities are rallying 0.1% in the aggregate. Blue Chips are enjoying a better lift, up 0.4%. Shares in London are flat, while, in Germany, shares are trading 0.3% higher, and in France, equity markets are up 0.2%. In other words, investors are searching for high-quality companies in the Euro area that have the strength to carry through the Euro area's recession.
Meanwhile, at home, futures are pointing to a modest rebound after selling off marginally yesterday. The S&P 500 is set to recover all of its losses today when it opens. Futures are pointing to a 0.2% higher opening.
Treasuries have continued to sell off in the bond markets. Currently the 10-year yield is 3bp higher from yesterday's close and is trading at 2.30%. Overnight, the yield on the 10-year Treasury almost hit 2.35%. In Europe, the German bund and the UK gilt are also selling off as well. The gilt is up 5bp, to 2.39%, and the bund is 2bp higher, at 1.98%.
The dollar is weakening against a basket of other major currencies. The DXY index is down 0.2%. Commodities are higher, with WTI crude oil up 17 cents, to $105.58 a barrel. Gold is trading 58 cents higher, at $1,645.53 an ounce.
Overseas data wrap-up
As was widely expected, the Swiss National Bank left its benchmark interest rate unchanged at 0.00% and left its cap on the Swiss Franc at 1.20 versus the Euro. Interest rates of zero and the currency ceiling are an effort to prevent deflation from taking hold in the country's economy. Deflation risks had risen as investors flocked to the currency, pushing up the value of the Swiss Franc. That made imported goods very cheap for Swiss consumers and was causing the economy to slow.
Industrial production in the Netherlands fell more than expected in January, tumbling 3.9% mom. The market was looking for a much smaller contraction of just 0.7%. Last month's figure was revised higher to show a 2.7% mom increase, compared to an originally reported 1.7% gain. From a year ago, industrial production is down 1.7%. Looking ahead, the weakness in the Dutch manufacturing sector is expected to continue. Our European team's forecast assumes that industrial production drops 4.3% yoy in 2012.
While the manufacturing sector is struggling with weak demand, Dutch consumers continue to spend on retail goods due to the relatively low unemployment rate. Retail sales grew by 0.8% yoy in January, building on the prior month's 1.3% yoy gain (originally reported as a 1.0% increase). One reason for the relative strength of the Dutch consumer is the low unemployment rate in that country. Currently, the registered unemployment rate stands at 6.0%. That is one of the lowest rates in the Euro area. The key takeaway is that the relatively strong labor market in the Netherlands is boosting consumers' income levels, which, in turn, supports consumer spending.