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European Market Update: German Wholesale Prices Surprise to the Upside
Â· *** ECONOMIC DATA ***
Â· GE Jan Wholesale Price Index: M/M 1.4% v 0.2%e || Y/Y 6.6% v 5. 3%e
Â· FR Dec Central Government Balance: -â‚¬38.4B v -â‚¬54.7B prior
Â· SW Riksbank raises rates by 25bps to 4.25% || Was expected to hold at 4.00%
Â· UK Jan RICS House Price Balance: -54.7% v -52.0%e (lowest since November 1992)
Â· UK Jan Claimant Count Rate: 2.5% v 2. 5%
Â· UK Jan Jobless Claims Change: -10.8K v -5.0Ke || Prior revised form -6.4K to -8.7K
Â· UK Dec Average Earnings inc-bonus: 3.8% v 3. 7%e
Â· UK Dec Average Earnings ex-bonus: 3.7% v 3.7%e
Â· UK Dec ILO Unemployment Rate: 5.2% v 5.3%e
Â· EU Dec Industrial Production: M/M -0.2% v 0.6%e || Prior revised from -0.5% to -0.4% || Y/Y 1.3% v 2.3%e || Prior revised from 2.7% to 3.1%
Â· *** SPEAKERS/COMMENTS ***
Â· Riksbank: Notes considerable uncertainty due to financial market unrest
Â· Riksbank: Sees key rate at 4.3% in Q308
Â· Riksbank: Sees FY08 GDP growth of 2.4% v 2.4% forecast
Â· Riksbank: Sees FY09 GDP growth of 2.0% v 2.1% forecast
Â· Riksbank: Inflation expectations have risen
Â· *** FIXED INCOME/FX/COMMODITIES/ERRATUM ***
Â· The European indices opened sharply lower in the session and continued to decline before rebounding and making a break for positive territory on little news during early trading. A number of big European names reported ahead of the European equity open today including Total, British Energy, Peugeot, EDF, and Thyssenkrupp. Total beat out operating profit and net income estimates, while Peugeot''s 2H results were mixed and Tkyssenkrupp''s results shy of estimates for Q1. Elsewhere ahead of the European market open the Japanese FSA announced at a press conference that Japanese banks have Â¥600B (around $5.6B) in sub-prime-related losses since December. Looking ahead to the US pre-market, Deere & Company, along with Dow component Coca Cola Co.
Â· Fixed income futures opened firmer in the session but followed a downward path after the European equity opened lower and eventually rebounded from session lows. Overall the session was quiet with the 2/10- year spread in Germany breaking 86bps before narrowing. While the there wasn''t any major data in the session, the higher-than-expected German wholesale sales, as well as the lower-than-expected unemployment rate added to the downside momentum in fixed income. In new supply overnight Germany sold â‚¬5.11B in 4.00% 2018 bunds with an average yield of 3.94% and a bid-to- cover of 1.705x. The cover compares to 1.2x at the previous auction. Elsewhere, according to wire reports overnight, Agence France TrÃ©sor is set to price â‚¬3.0B in 15-year i/l bonds at +29bps vs. the 2017 OATi.
Â· On the commodity front the IEA: cut its world oil demand growth forecast by 200K bpd to 87.6M bpd overnight. The IEA said that oil demand forecast cut on the back of slowing US growth adding that Underlying oil demand trend is weaker. Focus later today will rest on the inventory data in the US, which is expected to show that oil and gasoline inventories rose for a fifth consecutive week. Spot gold broke back below the $900-level overnight after equities staged a recover and platinum prices receded from their recently made all time highs.
Â· In currencies the Swedish Krona was firmer overnight after Riskbank shocked the market with a 25bps interest rate hike at today''s meeting; the overwhelming market consensus was for Riksbank to keep rates on hold at 4.00%. Market participants seem to have picked up a more positive attitude towards the US Dollar overnight ahead of today''s retail sales data. There appears to be a sense of comfort in the market following Warren Buffet''s offer yesterday. The GBP was slightly higher following the jobs and average earnings data for January and December respectively, however the Bank of England''s quarterly inflation report is still due, and remains the key event in the UK today.
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