News Headline Summary

DAILY US OPENING NEWS: ECB says banks to repay EUR 61.1bln of 2nd 3y LTRO vs. Exp. EUR 122.5bln on Feb 27th...

ECB says banks to repay EUR 61.1bln of 2nd 3y LTRO vs. Exp. EUR 122.5bln on Feb 27th

German IFO Business Climate (Feb) M/M 107.4 vs. Exp 104.9 (Prev. 104.2, Rev. 104.3)

EU cuts Euro area 2013 GDP forecast to -0.3% from +0.1% and sees Euro area deficit 2.8% of GDP in 2013, 2.7% in 2014.

RANsquawk European Morning Briefing Video: http://youtu.be/OiJLLcT-Hh4

Market Re-Cap
Heading into the North American open, equities in Europe are trading higher, supported by yet another solid macro economic data release from Germany (German IFO survey). The risk on sentiment was also supported by the ECB announcing that only EUR 61.1bln of 2nd 3y LTRO vs. Exp. EUR 122.5bln on Feb 27th will be repaid by banks and EUR 1.744bln of 1st 3y LTRO vs. Exp. EUR 3.0bln on Feb 27th. The release prompted the EONIA curve to bull flatten and the EUR to come under broad based selling pressure as market participants re-priced probability of lower rates for longer. This view was initially supported by lower than expected 3-month Euribor rate fix, which this morning fixed at 0.218% vs. Prev. 0.220% (Exp. 0.220%).

In other news, the European Commission cut its Euro area 2013 GDP forecast to -0.3% from +0.1%. France’s GDP is expected to grow by just 0.1% and Germany’s by 0.5% in 2013. Shortly after, EU's Rehn said that fiscal deadlines may be extended if economic growth falls short.

Going forward, market participants will get to digest the latest CPI and retail sales data from Canada. Also of note, the NY Fed will also conduct its latest Outright Treasury Coupon Purchase operation, targeting 2036-2043.

Asian Headlines
Chinese House Prices (Jan) M/M +1.0% (Prev. +0.47%) (Newswires); China Shanghai New Home Prices (Jan) Y/Y +1.3% (Prev. 0.0%); China Beijing New Home Prices (Jan) Y/Y +3.3% (Prev. +1.6%)

EU & UK Headlines
ECB says banks to repay EUR 61.1bln of 2nd 3y LTRO vs. Exp. EUR 122.5bln on Feb 27th
ECB says banks to repay EUR 1.744bln of 1st 3y LTRO vs. Exp. EUR 3.0bln on Feb 27th

German IFO Business Climate (Feb) M/M 107.4 vs. Exp 104.9 (Prev. 104.2, Rev. 104.3)
- IFO Current Assessment (Feb) M/M 110.2 vs. Exp 108.5 (Prev. 1080, Rev. 108.1)
- IFO Expectations (Feb) M/M 104.6 vs. Exp 101.4 (Prev. 100.5, Rev. 100.6)

EU cuts Euro area 2013 GDP forecast to -0.3% from +0.1% and sees Euro area deficit 2.8% of GDP in 2013, 2.7% in 2014.
- Sees German GDP up 0.5% in 2013, up 2.0% in 2014.
- Sees France GDP up 0.1% in 2013, up 1.2% in 2014.
- Sees Italy GDP down 1.0% in 2013, up 0.8% in 2014.
- Sees Spain GDP down 1.4% in 2013, up 0.8% in 2014.

BoE's Miles said more QE warranted unless small output gap or 'pessimistic' assumption made on supply growth, hopes the BoE can begin unwind 'not too far down the road' . Miles said 1.5% of GDP would justify extra GBP 60bln of Gilt purchases and 3% of GDP gap points to GBP 175bln, and not clear that there are more effective tools for BoE other than Gilt purchases.

Pan EUR agg BarCap month end +0.04y
Sterling agg BarCap month end +0.07y

US Headlines
According to sources, Fed's Bernanke minimized concerns that the central bank’s easy monetary policy has spawned economically-risky asset bubbles in comments at a meeting with dealers and investors this month.
Of note, many participants at the Jan. 29-30 FOMC meeting “expressed some concerns about potential costs and risks arising from further asset purchases,” with some noting that added buying “could foster market behavior that could undermine financial stability,” according to the minutes.

US Treasury agg BarCap month end +0.10y. Although the extension is much larger than the +0.03y in January, the impact on the curve is expected to be somewhat muted as there is seasonality bias during the refunding months (Feb, May, August and November).

Equities
Heading into the North American open, equities in Europe are trading higher, supported by yet another solid macro economic data release from Germany (German IFO survey). The risk on sentiment was also supported by the ECB announcing that only EUR 61.1bln of 2nd 3y LTRO vs. Exp. EUR 122.5bln on Feb 27th will be repaid by banks and EUR 1.744bln of 1st 3y LTRO vs. Exp. EUR 3.0bln on Feb 27th.

Hewlett Packard reported after the closing bell yesterday, Q1 Adj. EPS USD 0.82 vs. Exp. USD 0.71, Q1 revenue USD 28.36bln vs. Exp. USD 27.80bln, sees Q2 Adj. EPS USD 0.80 - 0.82 vs. Exp 0.77. Shares seen up 4.9% in pre-market trade.

Banks and broker-dealers ensnared in the Libor-rigging scandal are facing fresh pressure to settle with Europe’s top competition authority as it expands the scope of its probes. (FT-More) European antitrust probe widens to include CHF swaps.

China Securities Investor Protection Fund is considering buying more shares of listed companies to better support shareholders interests according to those familiar with the matter.

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
Better than expected German IFO data failed to prop up EUR/USD, which fell back into negative territory after the ECB said that only EUR 61.1bln of 2nd 3y LTRO vs. Exp. EUR 122.5bln on Feb 27th will be repaid by banks. The release prompted the EONIA curve to bull flatten and the EUR to come under broad based selling pressure as market participants re-priced probability of lower rates for longer. Short-dated implied vols were better bid and the 1-month traded at its highest level since early September last year. Of note, intraday option strikes are seen at 1.3150 and 1.3200 levels.

AUD appreciated after RBA Governor Stevens commented that the slowdown in China’s economy has come to an end and that the appropriate rate is the current low one Australia has, which suggested a positive outlook for the Australian economy and implied rates will be kept on hold for the time being. Around 2 hours after the initial comments, Stevens then said it is fair to say easing is more likely.

Commodities
WTI and Brent crude futures trade in positive territory, the US benchmark coming off its lowest levels since December despite US crude stockpiles increasing for a fifth week in the longest stretch of gains since May. Some analysts are estimating that WTI may drop to USD 90.00 BBL after breaching support at its 50DMA during its recent pullback, the first time since December 18th. Looking ahead in the session Baker Hughes US Rig Count is due at 1800GMT/1200CST.

US oil demand fell 1.7% year on year in January despite a rise in gasoline consumption according to the API.
European refinery output dropped 1.3% in January, while gasoline output grew 3.1% according to Eurooilstock.

South Korea will sternly punish North Korea for any provocation according to South Korea president elect Park's spokesman.

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

22 Feb 2013 - 13:02 - Fixed Income Data - Source: RANsquawk

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