Morgan Stanley and General Electric both beat street expectations in today's pre-market earning reports.
Chinese GDP Y/Y prints higher than expectations at 7.9% vs. Exp. 7.8%, boosting Asian equities.
Japanese economic advisor Hamada said the Bank of Japan shouldn't set a timeline on easing as long as deflation continues.
RANsquawk European Morning Briefing Video: http://youtu.be/gQUBYtAfJTY
Heading into the North American open, equities in Europe are trading in minor positive territory, underpinned by the release of encouraging macro data from China. China's Q4 growth data came out slightly better than expected, while Japanese stocks surged, after Japanese economic advisor Hamada said JPY weakness to 95 or 100 vs. USD is nothing to worry about. Even though the spot JPY rate is a touch lower and trades in close proximity to an intraday 89.75 option level, the 1-month implieds are bid again as market participants remain bullish on near term direction ahead of the BoJ meeting next week. GBP/USD underperformed its peers, after the ONS said that retail sales growth for the month of December (annual rate) slowed to lowest since December 1998 - except for December 2010, when sales were hit by heavy snow. The ONS said that clothing and food sales did notably badly, but online retailers did well. Looking at other asset classes, the EONIA curve steepened again this morning, with the Euribor strip down between 3-7ticks, underpinned by expectations of redemption flows related to LTRO repayments by EU banks as evidenced by higher Euribor rate fixings. Also, aggressive exodus of long Euribor positions is said to have been a contributing factor behind the bid tone in Bunds this morning, trading little changed at last check. Going forward, markets will get to digest the release of the preliminary U. Michigan survey for the month of January, as well as the latest Treasury purchase op by the NY Fed.
Chinese Real GDP Y/Y beat expectations at 7.9% vs. Exp. 7.8% overnight. The National Bureau of Statistics said Chinese growth of 7-8% is a good balance and China can not return to a period of super-rapid growth. Elsewhere, Chinese Retail Sales and industrial Production both also beat expectations overnight.
The Japanese economic advisor Hamada said USD/JPY to 95 or 100 is nothing to worry about also adding that the Bank of Japan shouldn't set a timeline on easing as long as deflation continues, adding that the BoJ law should be revised. This led to further weakening in JPY following these comments, breaking above 90.00, however now trades back below but did initially add support to the NIkkei 225 with the index closing the session up over 2.8%.
EU & UK Headlines
UK retail sales fell 0.3% M/M vs. expected increase of 0.1% in December. The 3-month fall was the lowest since December 2010 with the ONS saying declining food and clothing sales saw Q4 retail sales volumes fall at their fastest pace for 2 years.
The 3-month Euribor Interest rate fixed at 0.209% vs. yesterday's fix of 0.204%. The Euribor strip continues to trade lower with the strip down 3-7 ticks after yesterday's fall due to talk of ECB collateral rule tightening and ahead of LTRO redemptions.
BoE's McCafferty said the BoE must keep open mind on new stimulus tools. He also said inflation risks complicate policy decisions, sees CPI falling to target only slowly.
Earlier today the Portuguese PM Coelho reaffirmed he does not want a second rescue plan and said they see the country's Debt to GDP ratio falling in 2014.
US House Budget Committee Chairman Paul Ryan said his party is considering pressing only for a short term extension of US borrowing authority. Ryan, speaking to reporters at a Republican retreat for House members, said he believes the Obama administration has and should use authority to prioritize its payments to avoid a debt default in the event of any delays in raising the debt limit.
European equities are mixed today, after opening markedly higher, echoing Asian counterparts with the Nikkei 225, Hang Seng and Shanghai Composite all closing the session with modest gains.
The DAX once again underperforms against its European peers with ThyssenKrupp one of the worst performing stocks after today's trading update with investors calling for Chairman Gerhard Cromme to resign.
Morgan Stanley reported pre-market beating street expectations on EPS (USD 0.45 vs. Exp. USD 0.27) and revenues (USD 7.48bln vs. Exp. USD 7.09bln). In initial pre-market trade MS shares are up approximately 3%. General Electric also reported, printing a beat on revenues and EPS with the CEO saying the Co. has great momentum going into 2013. In pre-market trade following the report, GE shares were also seen trading higher by around 3%. The last few days have shown positive earnings reports ahead of Apple and Google earnings reports next week.
Even though the spot JPY rate is a touch lower and trades in close proximity to an intraday 89.75 option level, the 1-month implieds are bid again as market participants remain bullish on near term direction ahead of the BoJ meeting next week. Of note, Japanese economic advisor Hamada said JPY weakness to 95 or 100 vs. USD is nothing to worry about.
GBP/USD underperformed its peers, after the ONS said that retail sales growth for the month of December (annual rate) slowed to lowest since December 1998 - except for December 2010, when sales were hit by heavy snow. The ONS said that clothing and food sales did notably badly, but online retailers did well.
EUR/CHF broke above 1.2500 level overnight, however touted profit taking and offers ahead of 1.2575 barriers weighed on the cross this morning. In terms of technical levels, having closed at 1.2474 yesterday (which is the October 2011 high), there is now scope for a test on the next key level at 1.2662 (the 38% retracement of the October 2008 to August 2011 move). Earlier today there was also some
market talk that Swiss government wants the SNB to raise EUR/CHF floor to 1.2500.
WTI crude futures are trading broadly unchanged after ticking higher overnight. Initial reaction to the better than expected Chinese GDP headline figure saw WTI move higher although gains have been pared since the European open as USD strength has been observed. Markets could also be reacting to comments from the Chinese Bureau for National Statistics saying China can not return to a period of super-rapid growth.
The EIA today released their monthly outlook and raised their demand estimate for OPEC crude by 100,000 BPD to 30mln BPD and said they expect global oil demand to rise by 1% to 90.8mln BPD in 2013.
Additionally, the Brent pipeline system is now pumping oil again as most oil fields resume output according to Taqa. This is after it had been shut following an offshore incident on Monday.
- Reg & E-Mini DOW/E-Mini NASDAQ, S&P/RUSSELL January 13 Options Expiry (1430GMT/0830CST)
- CAC 40 January 13 Futures and Options Expiry (1500GMT/0900CST)
- Reg NASDAQ/S&P500 January 13 Option Expiry (2115GMT/1515CST)
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Print 12:58, 18 Jan 2013 - Market Analysis - Source: RANsquawk
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