One Minute Macro Update

US:  Markets sluggish this AM heading into the start of the data for the week which features Case/Shiller, Consumer Confidence, and Richmond Fed.  Expectations for all seem muted except for Consumer Confidence (54E, 52.5 prior).  FOMC the focus tomorrow here, while the myriad of global stories will likely take the stage today.

Europe:  UK 4Q10 GDP QoQ -0.5% v +0.5%E, YoY 1.7% v 2.6%E.  The big disappointment here brought cable down two big figures and is being blamed on weather and budget cuts from the UK’s £130B austerity plan.  The weather changes, but the growth/austerity conundrum will be part of the landscape for some time to come (in most DM countries).  EFSF issuance reportedly attracted nearly 10x interest for the €5B inaugural launch.  Recent guidance is MS+6-8bp.  Given ~10x interest, that might go tighter still.  What remains to be seen is the answer to the following question:  is this additional demand for a new product that is supra sov and not in the govvie indices?  Or is this demand merely a switch from govvies over to the supra sov structure?  No matter the buyer, the switch in demand will ultimately be a negative for existing issuers as the program expands in the latter case.  EUR seems bolstered by the sale thus far.  Spanish Finance Minister Elena Salgado gave the market some preliminary clarity yesterday, stating capital injections to cajas would not exceed €20B (sourced from private sector) and that the min tier 1 ratio would be 8% by 2013.  Market does not seem to like the plan as Spain is wider this AM.

Asia:  China 7D repo rate jumps 285bp, largest single jump since tracking after last week’s 203bp widening on Thursday.  BOJ leaves target range 0-10bp (unch’d, expected) while raising FY10/11 GDP targets to 3.3% v 2.1% prior.  Raises 2011 CPI forecast and issues warning on weak export markets.  Nikkei reporting that Japanese public pension costs are over 10% of GDP.  AUD 4Q10 CPI QoQ 0.4% v 0.7%E, lowest level since 1Q09.  YoY CPI 2.7% v 3.0%E.

from Brian Yelvington of Knight Capital


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