Overview: Futures mostly positive this morning, with European stocks rising despite rising concerns over the EMU’s bailout fund.
U.S.: Yesterday saw existing home sales fell to 4.88MM v 5.12MME, weighed down by distressed properties and winter weather issues. More disappointing housing sector figures are expected today with the release of the house price index at -0.2%E MoM v -0.3% prior. The Richmond Fed manufacturing index will be released today at 24E v 25 prior.
Europe: The BOJ announced today that lender’s deposits with the bank will increase 146% to a high of ¥43.6T today v ¥17.7T the day before the earthquake as Japan continues to inject large amounts of cash into the financial system to help speed the recovery. Although Portugal plans on significant spending cuts, the growing political divide within the country may not allow the measures to pass. SOVXWE widened out to 171bp on the Portuguese news as well as the relative disappointment in the “new and improved” ESM/EFSF/EMU plans. There remain lots of questions as to how the EFSF will be expanded and it is not clear how the future ESM or the “new” EFSF would maintain ratings requirements without additional paid in capital or taxation power. Recall it took the current scheme about five months to receive a rating. Additionally, German opposition to fiscal unity has been bolstered by opposition from smaller countries who would also be part of the “payer’s club” (not as fun as the player’s club). Amidst this, Spain sold €1.2B in 3M bills at 0.899% v 1.101% prior with b/c at 4.33x v 3.35x prior and €842MM in 6M bills at 1.361% v 1.588% with b/c at 7.65x v 5.51x prior. Fiscal pressures worsened in the UK with a new report showing an increased budget deficit rose as revenue fell. Inflation pressures are worsening as well as UK CPI rose 0.7% MoM and 4.4% YoY v 0.6%E MoM and 4.2%E YoY. UK’s retail price index (RPI) rose 1.0% MoM and 5.5% YoY v 0.7%E MoM and 5.2%E YoY. Austria PPI rose 0.4% MoM and 5.0% YoY v prior figures of 0.5% MoM and 4.9% YoY. The continuing rise in prices may put more pressure on the ECB to take away the punchbowl. Finland’s unemployment reached 8.4% v 8.2% prior, a disappointing figure for the country that will be a major contributor to the EMU’s future rescue mechanism.
Asia: The BOJ announced today that lender’s deposits with the bank will increase 146% to a high of ¥43.6T today v ¥17.7T the day before the earthquake as Japan continues to inject large amounts of cash into the financial system to help speed the recovery. Japan all industry activity index rose 2.9% v 2.8%E in January. Taiwan unemployment rate fell to 4.59% v 4.71% prior. Hong Kong’s composite CPI rose 3.7% v 3.6%E. An Australian official forecasted higher rainfall amounts in 2Q11, reminding investors of the country’s recent flooding disaster.
From Brian Yelvington of Knight Capital