Equities in Europe slip as fiscal cliff euphoria fades
Market participants await the release of the most recent FOMC policy meeting minutes and the release of the monthly jobs report from the BLS
RANsquawk European Morning Briefing Video: http://ransquawk.com/videos/934/play.flv
European equity indices traded lower today, as market participants booked profits posted yesterday as investors reacted positively to a deal which averted the so-called fiscal cliff. The inability to sustain positive momentum was also evident in currency markets, where EUR/USD and GBP/USD both seen lower by almost 1point, which in turn lifted the USD index above the 100DMA line. In terms of EU related commentary, eKathimerini reported that nonperforming loans in Greece soared in 2012, with bank officials estimating the rise at some 50% on an annual basis. This means that the sum of NPLs exceeds the total of the funds set aside for the recapitalization of the local credit system and unless the growth of new NPLs is contained, banks may need yet another recapitalization process at the end of 2013 according to sources. However this failed to gain enough traction and price action in FI markets remained depressed, with Mar-Bund trading in a tight range for much of the session. The latest round of issuance from France (EUR 7-8bln) was well absorbed, as was the first Gilt auction by the DMO which benefited from cheapness relative to 2/5/10s fly. Going forward, market participants will get to digest the release of the latest Challenger Job Cuts, ADP Employment and Weekly Jobs reports ahead of the monthly jobs report from the BLS on Friday. In addition to that, the most recent FOMC policy meeting minutes will be released at 1900GMT.
Chinese Official Non-manufacturing PMI (Dec) M/M 56.1 (Prev. 55.6)
EU & UK Headlines
German Unemployment Change (000's) (Dec) M/M 3K vs. Exp. 10K (Prev. 5K)
- Unemployment Rate SA (Dec) M/M 6.9% vs. Exp. 6.9% (Prev. 6.9%)
Spain's jobless total has seen its biggest December decline since records began.
Spanish Unemployment Net ('000s) (Dec) M/M -59.1 vs. Exp. 62.5 (Prev. 74.3)
UK Construction PMI (Dec) M/M 48.7 vs. Exp. 49.5 (Prev. 49.3), weakest since June 2012.
Today's DMO issuance, which was the first one this year, benefited from relative cheapness on the cash curve, where 2/5/10s fly traded at its cheapest level since Feb-12. UK DMO sold GBP 3.75bln 1.0% 2017 b/c 2.11 vs. Prev. 1.59, yield tail 0.4 bps vs. prev. 0.6 bps. The issuance by the French Trésor was also well received (the agency sold EUR 8bln worth of OATs as expected)
Nonperforming loans in Greece soared in 2012, with bank officials estimating the rise at some 50% on an annual basis. (eKathimerini)
UK banks intend to boost mortgage lending over the next three months, according to Bank survey. Home buyers should find it easier to get a mortgage this year, as banks increase the availability of loans, according to a report from the Bank of England. This suggests that the BoE will refrain from boosting the APF, citing growing evidence that the FLS is beginning to have an impact on credit flow.
US Challenger Job Cuts (Dec) M/M 32.556K vs. Prev. 57.1K, total layoffs in 2012 lowest since 1997.
US MBA Mortgage Applications (Dec 28) W/W -10.4% vs. Prev. -12.3%
European equity indices traded lower today, as market participants booked profits posted yesterday as investors reacted positively to a deal which averted the so-called fiscal cliff. Defensive sectors, and in particular health care stocks, benefited from the flight to quality. On the other hand, given the correlation with underlying commodity product, basic materials and utilities stocks underperformed for much of the session as technically driven weakness in EUR supported the USD index which tested the 100DMA level to the upside.
The inability to sustain positive momentum was also evident in currency markets, where EUR/USD and GBP/USD both seen lower by almost 1point, which in turn lifted the USD index above the 100DMA line. JPY reversed recent weakening bias and trended lower for much of the session. Bids at 87.00 failed to contain the selling pressure, with bids in USD/JPY now seen at 86.50, also touted intraday option expiry level.
WTI futures pared as much as 0.7% after rallying 2.6 % in the past two sessions in the wake of the fiscal-cliff deal. Looking ahead market participants will be awaiting API data today followed by the DOE inventories tomorrow. Credit Suisse says WTI crude to re-align with global markets in 2013. Co. lowers 2013 average WTI price forecast to USD 102.75/bbl from USD 106.00/bbl.
Print 13:08, 03 Jan 2013 - Economic commentary - Source: RANsquawk
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