In the absence of any notable developments overnight, the market remains focused on the rapidly moving situation in Greece, which as detailed over the weekend, responded to Europe's Friday ultimatum very vocally and belligerently, crushing any speculation that Syriza would back down or compromise, and with just days left until the emergency Eurogroup meeting in three days, whispers that a Grexit is imminent grow louder. The only outstanding item is what happens to the EUR and to risk assets: do they rise when the Eurozone kicks out its weakest member, or will they tumble as UBS suggested this morning when it said that "the escalation of tensions between the Greek government and its creditors is so far being shrugged off by investors, an attitude which is overly simplistic and ignores the risk of market dislocations" while Morgan Stanley adds that a Grexit would likely lead to the EURUSD sliding near its all time lows of about 0.90.
That, the ongoing Ukraine "peace talks" which are rapidly going nowhere and in fact have already managed to splinter Europe and the US (as well as sow internal European discord) and the collapse of Chinese imports, and weaker than expected exports, reported over the weekend leading to a record high trade surplus, is what is on traders' minds this morning.
As a result European equities (Eurostoxx50 -1.21%) trade in the negative territory across the board with concerns and uncertainty surrounding Greece weighing on sentiment after Greek PM Tsipras rejected terms on the bailout extension. This also supported a bid in core fixed income as Bunds trade with gains of over 50 ticks breaking above Friday’s high, with the prospect of lower bond issuance this week also supporting upside. The GR/GE 10Y spread is wider by around 68bps and ASE down over 5% indicating the dampened optimism in Greece after being downgraded at S&P to B- from B whilst Moody’s put the country’s Caa1 rating on review for downgrade on Friday. Weakness in equities was further exacerbated after reports that Hannover, Hamburg & Stuttgart airports face delays due to strikes sent DAX heavyweight Deutsche Lufthansa (-2.4%) lower and caused selling in the DAX (-1.52%) after a technical break below 10,700. Furthermore, the DAX was further compounded by JPMorgan downgrading the index.
Despite the data printing a record surplus, exports and imports declined more than expectations, with the import reading falling the most since May’09. Hang Seng (-0.6%) and Shanghai Comp (+0.6%) initially fell, although the latter has now pared back its losses, with sentiment lifted by today’s trading trial of options on the China 50 ETF by the Shanghai Stock Exchange. Nikkei 225 (+0.4%) managed to eke out gains after benefiting from a weak JPY.
Despite the data printing a record surplus, exports and imports declined more than expectations, with the import reading falling the most since May’09. Hang Seng (-0.6%) and Shanghai Comp (+0.6%) initially fell, although the latter has now pared back its losses, with sentiment lifted by today’s trading trial of options on the China 50 ETF by the Shanghai Stock Exchange. Nikkei 225 (+0.4%) managed to eke out gains after benefiting from a weak JPY.
In FX, CHF saw some weakness in early trade with weekend comments from SNB’s Jordan stating that that the central bank are not yet at their limit in regards to negative interest rates prompting further speculation of additional action by the SNB. Overnight, AUD underperformed in the wake of Chinese trade data with imports from Australia to China falling by 35.3%, however has been bid in the wake of Australian PM Abbot winning the confidence vote by 61-39 votes. The USD-index (-0.11%) was initially weaker overnight but has trimmed some its earlier weakness on little fundamental news with major pairs coming off best levels.
WTI crude futures have remained around the USD 52.00 level during the European morning and trade in modest positive territory with the USD-index trading lower by 0.11%. Elsewhere Libya’s largest export port, Hariga, has been closed due to a strike by security personnel resulting in production falling to 300,000/bpd for the country. In precious metal markets, much of the movements have been technical with gold (+0.6%) higher after touching its 50DMA, while silver (+1.8%) outperforms the metals complex after failing to make a sustained break below its 50DMA and 100DMA. Following the rejection of the contract terms by the United Steelworkers union from Shell, discussions are set to resume on February 10th. (BBG)
In Summary: European shares stay lower, though above intraday lows, with the autos, banks underperforming and basic resources, oil & gas outperforming. Greece’s Tsipras reaffirms bailout program rejection in address to parliament yesterday. Ruble rallies, Russian inflation set to slow, central bank governor says. Merkel due to meet Obama today in Washington. The German and Italian markets are the worst-performing larger bourses, Switzerland’s is the best. The euro is little changed against the dollar. German 10-year bond yields fall, Greek yields increase. Commodities gain, with nickel, zinc underperforming and natural gas outperforming. U.S. mortgage delinquencies, foreclosures due later.
Bulletin Headline Summary from Bloomberg and RanSquawk:
- European equities (Eurostoxx50 -1.21%) trade in the red amid Greek PM’s Tsipras refusal to accept the EU’s anti-austerity proposals ahead of the Feb 16th bailout extension deadline.
- Looking forward, sees no tier 1 data scheduled with market focus solely on any ongoing developments regarding the discussion between the EU and Greece
- Treasuries gain led by long end as global stocks decline amid Greece concern after the country’s prime minister reaffirmed his rejection of nation’s bailout before Wednesday’s emergency meeting of euro area finance ministers.
- Greek prime minister Tsipras vowed to increase the minimum wage,restore the income tax-free threshold, halt infrastructure privatizations, and ask for World War II reparations from Germany
- Germany posted a record current-account surplus in 2014, setting the stage for renewed international calls to address its economic imbalances
- Ukraine’s almost yearlong conflict enters a pivotal week, with the outcome of more talks on a peace agreement potentially determining whether a wider war can be avoided as violence escalates
- Intimidation of the Baltic states, pressure on the former Soviet republic of Kazakhstan, warmer ties with Greece as a way of dividing the European Union -- all are potential options for the former KGB agent bent on recasting the world order
- Bank of England Governor Mark Carney said the U.K. is just beginning to see a pickup in wages, a key metric for policy makers as they debate the timing of the first interest-rate increase since 2007
- Finance ministers and central bank chiefs from the G-20 agree that monetary policy needs to stay accommodative until the outlook for economic growth improves, according to a draft communique obtained by Bloomberg
- Greece topped the list of worries for finance ministers and central bankers from the G-20, with concern rising that the Mediterranean nation’s membership of the euro has never been more tenuous
- Sovereign yields mixed, with Greece 10Y surging nearly 70bps to 10.79%. Asian, European stocks, U.S. equity-index futures fall. Brent, WTI, gold, copper rise
Credit to Zero Hedge
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