- ECB’s Liikanen says inflation is not a particular concern in Europe, adding that the ECB has never said there is a floor to interest rates.
- ECB’s Nowotny says he does not see the need for further 3-year tender following next week’s LTRO.
- German Finance Minister says the Bundestag may have to consider future financial help for Greece.
The better tone in risk markets is largely being driven by encouraging economic data from the US and Europe, which as a result saw Bunds trade in negative territory. Of note, ECB’s Liikanen has said that inflation is not a particular concern in Europe, adding that the ECB has never said that there is an interest rate floor. On the other hand, Gilts are being supported by comments from BoE’s Fisher, as well as less than impressive GDP report. Nevertheless, EUR/USD took out touted barrier at the 1.3400 level earlier in the session, while USD/JPY is trading in close proximity to an intraday option expiry at 80.60.
Going forward, the latter half of the session sees the release of the Final U. Michigan, as well as the latest New Home Sales report.
Moody’s have said Japan’s credit rating would be reviewed if plans to double its sales tax rate are delayed further, warning that weak policy formation threatens efforts to curb the country’s massive debt burden. (RTRS)
In a report the PBOC said that China should accelerate the loosening of capital controls, thereby outlining the path to a freely tradable currency and more open capital markets (FT- More) The report laid out three stages for reform. The first, over the next 3 years, would clear the path for more Chinese investment, the second phase, 3-5 years, would accelerate overseas lending of the CNY and longer term, over 5-10 years, foreigners would be given more freedom to invest in Chinese stocks, bonds and property.
However, in a comment piece, it has been shown that China is unlikely to impose rapid ‘big bang’ reforms. The central bank proposal was cautious; it was not written by the bank’s governor, nor was it published on the PBOC website. The central bank is also not testing the timeline for these reforms as at least five years will pass before Beijing opens up its bond and stock markets more widely. The report also suggested that making the CNY fully convertible was the final step, with no deadline submitted. (FT China-More)
EU and UK Headlines
European creditor countries are demanding 38 specific changes in Greek tax, spending and wage policies by the end of this month and have laid out extra reforms that amount to micromanaging the country’s government for two years, according to documents obtained by the Financial Times. (FT - More) The reforms, spelt out in three separate memoranda of a combined 90 pages are the price that Greece has agreed to pay to obtain a EUR 130bln second bail-out and avoid a sovereign default.
Resistance to the Greek bailout is growing among German lawmakers in Chancellor Merkel’s coalition, increasing the chances she may need to rely on humiliating opposition support to win a vote on it next week. (Rheinische Post)
ECB’s Draghi said the take up at first 3-yr LTRO was not that high, and the rules on collateral should be tightened, not eased. Furthermore, the ECB has instruments to absorb liquidity if needed. With regards to Greece, he reaffirmed that the ECB will not take losses on its Greek bond holdings. Draghi has also rejected the easing of Euroarea fiscal targets, saying it would elicit an immediate reaction by the market. (RTRS/WSJ)
ECB’s Nowotny has made comments concerning future three-year tender saying that he does not see the need for future LTROs after next week. (Sources)
The German Finance Minister has said he has sent German MPS a letter asking them to support the Greek bailout vote. However he added that this holds no guarantees that this path will lead to success, adding that Germany may have to consider future financial help for Greece. (Sources)
BoE’s Fisher has said that the outlook for the British economy is still incredibly uncertain and that he is keeping an open mind as to whether further quantitative easing will be required, adding that he feels more comfortable about the inflation outlook than the outlook for growth. (Sources)
Both the UK and Germany posted their second readings for Q4 GDP today, with both economies publishing unrevised figures for their quarterly readings.
German GDP SA (Q4 F) Q/Q -0.2% vs. Exp. -0.2% (Prev. -0.2%)
German GDP NSA (Q4 F) Y/Y 1.5% vs. Exp. 1.5% (Prev. 1.5%)
UK GDP (Q4 P) Q/Q -0.2% vs. Exp. -0.2% (Prev. -0.2%)
UK GDP (Q4 P) Y/Y 0.7% vs. Exp. 0.8% (Prev. 0.8%) (RTRS)
European bourses are mostly in positive territory ahead of the North American open following some modest risk appetite.
This risk appetite is reflected in the performance of financials today. Bank of America have noted that many investors are incorrectly positioned on European Banks, raising the sector to overweight from neutral. Deutsche Bank has been performing particularly well following this, with company shares seen trading up 3.8%.
Restraining the financials sector from outperforming is Lloyds, posting a disappointing set of corporate earnings earlier today, recording a full year net loss of GBP 2.8bln, this was weighed down upon by a PPI provision of GBP 3.2bln. However, the CEO has said that he is confident that the company will achieve its medium term goals. Company shares currently trade down 1%.
Top performing sectors in the BE500: Technology (+1.49%), Oil & Gas (+0.81%), Financials (+0.78%)
Worst performing sectors in the BE500: Health Care (-0.30%), Consumer Goods (-0.26%), Basic Materials (+0.22%)
EUR/USD has been trading strongly after a slow start following some risk appetite in EUR-led currency pairs, erasing barriers at the 1.3400 level.
USD/JPY has also seen price action close to 80.60 ahead of the North American open, erasing touted barriers at 80.50.
Despite distinctly average GDP readings, GBP/USD is trading strongly on the session at around the 1.5800 level.
WTI is experiencing a directionless session ahead of the North American open, currently trading in positive territory. Energy market focus continues to look toward Iran, with news that the US and Israel are planning to ensure “all other options” are available beyond sanctions.
Oil & Gas News:
• March Western fuel oil volumes to East Asia are at a second straight all-time high of above 5mln tonnes, according to trade sources.
• Chinese refineries processed 36.2mln tonnes of crude oil in January, or 8.52MBPD, up 1.9% from a year earlier; however oil production declined 2.3% in the same period to 17.08mln tonnes, according to the National Development and Reform Commission.
• Ship traffic was halted in Houston due to dense fog yesterday, delaying 46 inbound and 32 outbound vessels, according to the US coastguard.
• A crude oil pipeline inside the Paulsboro refinery in New Jersey broke yesterday, leaking around 157,000 BBLs. A report from the New Jersey Department of Environmental Protection said the spill is not expected to impact the Delaware River or local water supplies.
• The US and Israel are coordinated on steps being taken to combat Iran’s perceived nuclear threat and have been planning to ensure “all other options” are available, according to the US ambassador to Israel. The ambassador further commented that the sanctions were having a significant effect but had not yet reached their goal.
• The US government has offered to help India obtain alternative supplies for Iranian crude as it looks to squeeze Iranian oil revenues, according to three people familiar with the matter. The unidentified sources commented that the US may help broker deals with suppliers such as Iraq and Saudi Arabia.
• A tanker carrying 600,000 BBLs of disputed Sudanese oil arrived in a Japanese port following a delay of more than a week because of uncertainty concerning the ownership of the cargo, according to port and industry sources. The vessel is one of at least three tankers that the South Sudanese President has accused Sudan of “looting”.
• US envoys have said talks with North Korea have made some progress. A US representative commented that they discussed nuclear non-proliferation, food-aid demands and other issues at the heart of regional tension.