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European Market Update: Markets Await Rate Decisions Today
¬∑ *** ECONOMIC DATA ***
¬∑ FR Nov Industrial Production: M/M -1.5% v -0.6%e || Y/Y 2.5% v 3.7%e || Prior Y/Y revised from 4.0% to 4.2%
¬∑ FR Nov Manufacturing Production: M/M -1. 3% v -0.4%e || Prior M/M revised from 1.9% to 2.0% |||| Y/Y 2.3% v 3.7%e || Prior Y/Y revised from 3.7% to 2.9%
¬∑ FR Nov Central Government Balance: -‚ā¨54.7B v -‚ā¨52.2B prior
¬∑ SW Nov Industrial Production: M/M 2.3% v 0.3%e || Y/Y 4.2% v 1.3%e
¬∑ SW Nov Industrial Orders: M/M 0. 1% v -4.4% prior || Y/Y 0.3% v 6.2% prior
¬∑ SW Nov Activity Index Level: 124.0 v 123.1 prior
¬∑ NO Dec CPI: M/M 0.8% v 0.2%e || Y/Y 2. 8% v 2.1%e
¬∑ NO Dec CPI Underlying: M/M 0.3% v 0.1%e || Y/Y 1.8% v 1. 6%e
¬∑ UK Nov Visible Trade Balance: -¬£7.37B v -¬£7.23Be || Prior revised from -¬£7.11B to -¬£7.35B
¬∑ UK Nov Total Trade Balance: -¬£4. 37B v -¬£4.3Be || Prior revised from -¬£4.14B to -¬£4.26B
¬∑ UK Nov Trade Balance Non EU: -¬£4.44B v -¬£4.39Be || Prior revised from -¬£4.42B to - ¬£4.48B
¬∑ *** SPEAKERS/COMMENTS ***
¬∑ ECB Mersch: Even best monetary policy can do nothing about oil prices; Luxembourg sure to see 2nd round effects as of March
¬∑ FR Trade Minister: Expects trade balance between -‚ā¨35B and -‚ā¨40B at the end of 2007
¬∑ A majority of The Times Monetary Policy Committee says that the BoE should today reject demands for a further cut in interest rates because decisive evidence of a serious economic slowdown is yet to emerge, while inflation dangers still persist
¬∑ EU Investor pressure had led some European banks to consider following new US requirements for the valuation of securities [Financial Times]
¬∑ *** FIXED INCOME/FX/COMMODITIES/ERRATUM ***
¬∑ On the commodities front UBS updated its 2008 metals price forecasts overnight. Most notably UBS cut its copper price forecast by 8%, and raised its gold price forecast by 9%. In trading the metals are in negative territory, but are off of their words levels of the session. Elsewhere crude oil has seen both sides of the neutral line overnight, trading slightly higher as Nigerian militant group MEND continues to hype up the ‚Äúimminent attack‚ÄĚ.
¬∑ European fixed income futures are currently trading lower in the session ahead of today's interest rate decisions. While the majority believe that the BOE will not cut rates today, as back-to-back BOE cuts are rare, there are still some that believe that a rate cut is possible. The ECB is widely expected to keep rates on hold again. Market participants await the post-rate announcement press conference to see whether the ECB will back off of its hawkish stance, or if the ECB will ‚Äúkeep talking the talk‚ÄĚ. Spain sold ‚ā¨3.63B in 4.10% April 2011 bonos with an average yield of 3.97% and a bid-to-cover of 1.28x overnight, and sold ‚ā¨1.5B in 3.90% October 2012 bonos with an average yield of 3.995% and a bid-to-cover of 2.09x.
¬∑ In currencies, the major European currencies are consolidating ahead of the BOE and ECB rate decisions later this morning. The GBP remains below its 1.9650 pivot level, but off of its 1.9540 session lows. The EUR/USD is steady at 1.4690. The JPY is broadly weaker following the US equity rally on Wednesday and comments from Goldman Sachs that elevated recession concerns in Japan. The EUR/JPY at 161.35, GBP/JPY at 215.70. Elsewhere, the NOK is firmer following its release of CPI data for December. The commodity currencies were mixed as oil and gold retraced from session highs.
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