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European Market Update: Markets Quiet Ahead of Merrill's Earning
Â· *** ECONOMIC DATA ***
Â· EU Dec Trade Balance: Â¬2.6B v Â¬5.5Be || Prior revised from Â¬6.1B to Â¬5. 4B
Â· EU Dec Trade Balance sa: Â¬2.7B v Â¬3.7Be || Prior revised from Â¬4.0B to Â¬3.0Be
Â· EU Nov Construction Output: M/M -0.8% (no ests.) || Y/Y -0.8% (no ests.) || Prior y/y revised from 2.4% to 2.8%
Â· SZ Jan ZEW Expectations: -32.7 v -29.7 prior
Â· *** SPEAKERS/COMMENTS ***
Â· The UK government has outlined a plan to provide relief for troubled borrowers || The plan would allow consumers who fall into financial difficulties through a change of circumstance to stop making repayments on personal loans, credit cards and other debts for up to 1 year by applying for an "enforcement restriction order [Times]
Â· ECB Liebscher: Sees 2008 growth at 2.0%
Â· ECB Liebscher: Uncertainty has increased significantly
Â· ECB Liebscher: The ECB remains ready to provide sufficient liquidity
Â· ECB Liebscher: Will do what is necessary to fight off second round inflation effects
Â· FR French Official: At ease with ECB line, would not be troubled by a rate cut
Â· FR French Official: Sees no reason to amend French growth outlook at this point
Â· ECB Monthly Report: Risks to the economic outlook are on the downside || The ECB will do what is necessary to anchor inflation || Euro-Zone economic fundamentals are "sound" || Scenario remains of GDP growth around potential || Reiterates that money, credit growth are vigorous
Â· UK BCC Q4 Survey: 40% of firms aim to boost prices vs. 28% in Q3 || 41% of manufacturing firms plan to boost prices vs. 32% in Q3 || Manufacturing and service price balances are both at all time highs
Â· *** FIXED INCOME/FX/COMMODITIES/ERRATUM ***
Â· On the equity front the European indices are trading in positive territory. Pharmaceutical company Novartis fell short of estimates and announced a CHF10.0B buyback. In France shares of Alstom opened higher after reporting third quarter sales +20% y/y, while shares of Remy Cointreu declined following a less favorable earnings report. Share of HMV traded higher in the UK after providing an update showing strong sales growth during the Christmas season. S&P futures are in positive territory, and have been throughout the European session, but are currently off of their best levels.
Â· Following an extremely active day in terms of volume bund futures are trading lower on profit taking after dovish ECB comments pushed the March contract to a new high of 116.37 yesterday. Schatz and bobl futures also rest in negative territory at the moment. In France the AFT sold Â¬5. 31B in 3.75% 2013 BTANs with an average yield of 3.79% and a bid-to-cover of 2.53x. Over in the UK the DMO sold Â£725M in 2047 I/L gilts with an average yield of 0.744% and a bid-to-cover of 2.06x. The cover compared to 2.42x at the previous auction.
Â· Front month crude oil futures are currently trading in positive territory in the session. Futures had pushed into negative territory earlier on after an OPEC delegate noted that OPEC is watching US economic data for any indication of a demand slowdown. The OPEC delegate added that OPEC is eyeing a production rollover in February and a possible cut in March. Copper prices have recovered following a 2-day decline on the back of a rebound in equity markets, as well as speculation that the current economic situation in the US may prompt aggressive interest rate cuts. Spot gold has been relatively stable overnight and is focused on the dollar ahead of Merrill Lynch's earnings due out later this morning.
Â· In currencies the USD was mixed during the European session. Carry related pairs retraced from their recent sell-off as equity markets stabilized. The EUR/USD was retesting Wednesday's lows following the ECB's monthly report. The EUR/USD testing its 30-day moving average around the 1.4710-area. The commodity related currencies have retraced from their recent losses as both gold and oil have stabilized. USD/CAD is at 1. 0190 after testing 1.0250 in early Europe. The AUD/USD is holding above the 0.88-level
Â· Both data and central bank speak were very light overnight, and did not prompt any additional activity in the market. Looking ahead, in addition to December housing starts, and building permits, as well as jobless claims, there are a series of speakers scheduled during the US session today. Speakers include the Fed's Pinalto at 8:15 ET, the ECB's Trichet at 9:00 ET, the Fed's Bernanke at 10:00 ET, and the Fed's Lockhart at 13:00 ET. Also in focus today will be Merrill Lynch's fourth- quarter earnings report, which is expected at 7:30 ET.
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