News Headline Summary

DAILY US OPENING NEWS: ECB says banks to repay EUR 137.2bln of 3y LTRO on Jan-30th - EURIBOR curve steepened aggressively following the announcement...

ECB says banks to repay EUR 137.2bln of 3y LTRO on Jan-30th - EURIBOR curve steepened aggressively following the announcement

German IFO Business Climate (Jan) M/M 104.2 vs. Exp 103.0 (Prev. 102.4)

UK GDP (Q4 A) Q/Q -0.3% vs. Exp. -0.1% (Prev. 0.9%) - ONS says mining and quarrying took off 0.18pp from Q4 GDP

RANsquawk European Morning Briefing Video: //youtu.be/W4fsL2_Yjls

Market Re-Cap

The release of an encouraging IFO report from Germany, as well as the 1st LTRO redemption announcement from the ECB, which saw EUR 137.2bln repaid by 278, buoyed investor sentiment in Europe this morning. As a result, heading into the North American open, stocks in Europe are trading in firm positive territory, with financials as the best performing sector. Although a higher LTRO redemption amount has pushed money market rates higher, it also supported risk assets, given the perceived health of interbank lending market. Since then, EONIA forwards have retraced half of the initial move higher, the curve remains steeper and the Euribor strip continues to trade heavy as markets price-in quicker removal of excess liquidity.

Looking elsewhere, USD/JPY trended higher throughout the session, with implieds back to highest levels since Monday as market participants reacted to the release of the Bank of Japan’s December minutes. One member, Ishida, proposed cutting rate for fixed rate market operations and other loan schemes to 0.03% from 0.1% and another member said that the Bank of Japan must mull costs and benefits of scrapping 0.1% floor on rates and it is too early to do so now. Going forward, market participants will get to digest the latest CPI data from Canada and housing data from the US.

Asian Headlines

Bank of Japan December minutes: members say economy is weakening and will continue with powerful easing. Bank of Japan board member Koji Ishida proposed cutting rate for fixed rate market operations and other loan schemes to 0.03% from 0.1%. Another member said that the Bank of Japan must mull costs and benefits of scrapping 0.1% floor on rates and it is too early to do so now.

Japanese National CPI (Dec) Y/Y -0.1% vs. Exp. -0.2% (Prev. -0.2%)
- National CPI Ex Food, Energy (Dec) Y/Y -0.6% vs. Exp. -0.5% (Prev. -0.5%)

EU & UK Headlines

ECB says banks to repay EUR 137.2bln of 3y LTRO on Jan-30th
Although a higher LTRO redemption amount has pushed money market rates higher, it also supported risk assets, given the perceived health of interbank lending market. Since then, EONIA forwards have retraced half of the initial move higher, the curve remains steeper and the Euribor strip continues to trade heavy as markets price-in quicker removal of excess liquidity.

JP Morgan upgrades its Q1 German GDP forecast to +1.5% from 1.0%. This follows better than expected German IFO today and manufacturing and service PMI's yesterday.
- German IFO Business Climate (Jan) M/M 104.2 vs. Exp 103.0 (Prev. 102.4)
- IFO Current Assessment (Jan) M/M 108.0 vs. Exp 107.2 (Prev. 107.1)
- IFO Expectations (Jan) M/M 100.5 vs. Exp 99.0 (Prev. 97.9, Rev. 98.0)

UK GDP (Q4 A) Q/Q -0.3% vs. Exp. -0.1% (Prev. 0.9%)
According to the ONS, the fall in output was largely due to a drop in mining and quarrying, after maintenance delays at the UK's largest North Sea oil field.

BarCap Pan Euro agg month-end extension seen at +0.13yrs

US Headlines

The return of confidence and healthy growth in the US risks setting off a "bond crash" comparable to 1994 and trigerring a string of upsets across the world according to Bank of America. (Telegraph)

US Treasury month-end extension seen at +0.03 years

Equities

Heading into the North American open, stocks in Europe are trading in firm positive territory, with financials as the best performing sector. Although a higher LTRO redemption amount has pushed money market rates higher, it also supported risk assets, given the perceived health of interbank lending market.

Microsoft reported Q4 EPS USD 0.76 vs. Exp. USD 0.74 but revenues missed to come in at USD 21.46bln vs. Exp USD 21.54bln. Co. reaffirms full year 2013 operating expense forecast.

Starbucks reported Q2 Adj. EPS USD 0.57 vs. Exp. USD 0.57. Q4 revenue USD 3.80bln vs. Exp. USD 3.84bln.

For a full rundown of EU equity news, please refer to European Equity Opening News report located in research section. Complete rundown of US equity news will be available on the website at 1400GMT (0800CST)

FX

USD/JPY trended higher throughout the session, with implieds back to highest levels since Monday as market participants reacted to the release of the Bank of Japan’s December minutes. Next major resistance level is seen at 94.13 which is the 38% retracement of the June 2007 to October 2011 bear trade.

EUR/USD tripped buy stops on the break of 1.3404 (Jan 14th high), which now opens the door towards 1.3490 which is the 50% retracement of the May 2011 to July 2012 bear trade. The bullish bias is also evident in the options market where 1-month risk/reversals is trading close to 3y high.

Commodities

WTI futures currently trade close to session highs and are heading for a seventh weekly advance, the longest run of gains since 2009, after paring up earlier mild losses sees in the Asian session.

Iraq is to resume crude exports via Turkey pipeline in 48 hours according to North oil.

North Korea have said they may test boosted fission weapon, threatening physical counter-measures against South Korea. (Asahi/KCNA) South Korea President-elect will not tolerate North Korea's nuclear weapons program and will respond firmly to any additional provocations from the communist country. (Yonhap)

Complete rundown of energy news is available in research section of the website.

25 Jan 2013 - 13:00 - Energy Data - Source: RANsquawk

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