Friday, February 26, 2010



·         Europe: DJ Euro Stoxx +1.1%; FTSE +1.0%; Japan +0.2%; China dn 0.3%; Hong Kong +1%; India +1.1%; Australia +1%; SP futures dn 3.6pts

·         UK – there is speculation that a general election could be called as soon as this weekend – mentioned on CNBC. 

·         Euro update in the WSJ – pg. 1 article says that some “heavyweight” hedge funds have put on large bearish bets against the euro, w/some thinking it could fall to parity vs. the US$.  

·         Inflation – eurozone – headline jumps but core plunges -  Inflation accelerated to 1.0% on the year in January from 0.9% in December largely due to a jump in energy prices.  On a monthly basis, the consumer price index dropped 0.8% in January, the sharpest fall since January last year and slightly more than the 0.7% fall expected by economists.  core inflation slumped 1.5% in January, the sharpest monthly fall since records began in 1996  DJ

·         Greece – the EU says Greece’s published austerity package isn’t enough and that deeper cuts are needed.  "They [the EU] are telling us the current measures will only cut two percentage points. They are pushing very hard for another package of around EUR4 billion,"  Officials from the EU, the International Monetary Fund and the European Central Bank had been in Athens since the start of the week to evaluate Greece's progress   DJ 

·         Greece - German banks will avoid new investment in Greek bonds, Financial Times Deutschland reported.  After Eurohypo AG and Hypo Real Estate AG announced they would eschew Greek debt in their next financing rounds, Deutsche Postbank AG also said it won’t invest new funds in Greece – Bloomberg 

·         Greece and Germany – the latest cover of German magazine Focus showed Venus de Milo, the famous armless classical statue now at the Louvre, raising her middle finger under the headline "Cheats in the euro family" to suggest that Greece deliberately misled EU peers to cheat its way into the euro; Greece's Consumer Institute (INKA), the country’s oldest consumer group, called on Fri for a boycott of German products – Reuters

·         Spain’s biggest real estate companies are lobbying the government to extend a law deferring bankruptcy proceedings for companies that have seen property-price declines wipe out their capital, Expansion reported – Bloomberg

·         Europe Update – JPMorgan’s European credit strategy - Sovereigns and supply will test the European high yield market in March      Greece: things could get worse before they get better - Even though most European high yield companies have little direct exposure to Greece, we find it hard to see a solution to the broader sovereign crisis that is positive for the asset class. At the very least a sharp reduction in budget deficits across the most fiscally lax regimes will be needed; the associated drag on growth and potential for higher taxation are a clear negative for very indebted businesses.  Daniel Lamy  

·         Iceland walked out of the latest round of talks over U.K. and Dutch depositor claims after refusing to accept concessions put forward by the two countries – Bloomberg 

·         Germany debt chief hints at Greek rescue - The head of Germany's debt agency has warned that Greek withdrawal from the euro would have calamitous effects and destroy Europe's monetary union, a prospect that leaves Berlin with little choice other backing an EU rescue plan  

·         UK Q4 GDP Revised Higher; to 0.3% vs. St. +0.2%. [Bloomberg]

·         Eurozone CPI inline w/St. but core rate fell. Headlines +1% while core fell 0.9%

·         German Inflation - Inflation in Germany looks set to undershoot expectations for the second month in a row in February, after data from two of Germany's largest states showed prices rising more slowly than forecast. [DJ]

·         Italy's producer price index fell less than expected. Dn 0.3% vs. St. dn 0.6%. [DJ]

·         U.K. average home prices fell for the first time in 10 months in February. The average house price dropped 1.0% from January to GBP161,320. Economists were expecting the Nationwide measure of house prices to rise 0.3% in February. [DJ]

·         Spain’s Feb. inflation unexpectedly slowed in February. +0.9% vs. St. +1.1%. [Bloomberg]

·         China & Yuan – press report raising speculation action could be taken on the yuan - China is carrying out stress tests on labor-intensive industries to gauge the effect a stronger yuan would have on earnings, the 21st Century Business Herald reported today – Bloomberg 

·         China suffering labor shortage; hurting export recovery; In Dongguan, a manufacturing centre near Guangzhou, the local government estimates that there is now just one worker for every two jobs  FT 

·         China lending - China may have more than 700 billion yuan ($102.5 billion) of new loans in February; New bank lending for the month was already almost 600 billion yuan as of the last day before this year’s Lunar New Year holiday – Bloomberg (citing the Shanghai Securities News)

·         China & Gold - China has to keep buying gold over a long period and any price fall will present a good buying opportunity, Xia Bin, head of the financial institute of the Development Research Centre, a think-tank under the Cabinet, said on Friday; "The long-term strategy should be very clear, that is, China has to keep buying gold; but the detailed timing should be decided by the price curve." – Reuters 

·         China & Gold - The author of an article that said China had confirmed it would buy 191.3 tons of gold from the International Monetary Fund said on Friday she didn't have official sources for her story.  Reuters 

·         China copper stockpiles expand to 7yr high - Inventories, based on a survey of six warehouses monitored by the Shanghai Futures Exchange, jumped to 149,478 metric tons, 28 percent more than the week ended Feb. 12, the exchange said on its Web site. That’s the highest level since 2003 – Bloomberg

·         Taiwan’s January export orders rose 71.8%oya, compared to 52.6%oya growth in December. Seasonally-adjusted, export orders expanded at a steady 2.4% m/m in January, adding to the 3.7% m/m gain in December, with the sequential trend rising at 55.5% 3m/3m, saar. The further gain in January export orders was led by demand in the tech categories. Meanwhile, January IP rose at 69.7% oya, compared to 47.8%oya growth in December.  following the stronger-than-expected 4Q09 GDP report, we have fine-tuned the 2010 GDP growth forecast to 7.0%oya (previous forecast: 6.8%).  Grace Ng.  

·         Japan: strong IP and decent PMI mfg - Industrial production was stronger than expected, rising 2.5%m/m sa in January, on top of the ten consecutive gains started from March last year (JPM and consensus +1.0%). With an expectation of a slight 0.8% decline in February and a solid 1.6% gain in the projection survey, today's print suggests that IP would rise at 19.3%q/q, saar in this quarter, very close to a 19.7% increase in 4Q last year. While the downward revision in March looks likely as a projected 12.7% gain in electronic parts and devices is too high, the expected double digit gain in this quarter confirmed our view that manufacturing activity remains solid. February PMI manufacturing overall index was also decent, unchanged at 52.5 from January as we had expected   Masamichi Adachi  

·         Japan Retail Sales come in better - +2.6% vs. St. dn 0.2%

·         Japan: Deflation of core CPI and core core CPI remained stable in January - The oya deflation in the nationwide core CPI (all items ex fresh food) was unchanged between January this year and December last year at -1.3%, after having slowed 1.1% point from the fastest decline marked in August last year mainly reflecting a favorable base effect in the energy component. The pace of the decline in CPI ex. food and energy, a core of the core CPI, -1.2%, was also the same rate as in December, when the core core CPI marked the worst reading since the data can go back to 1971. Miwako Nakamura 

·         Japanese banks – call from JPMorgan equity research - Katsuhito Sasajima - Raising sector stance to slightly Bullish from slightly Bearish: Bank stocks have tended to rally in spring, and we think they could do so again this year.  While structural reform looks unlikely, we think the potential for a sudden share-price rise warrants consideration of what could be one of the few opportunities to make a profit on the sector.  

·         India shares end higher following the country’s budget - Finance Minister Pranab Mukherjee presented the budget for the fiscal year starting April 1.  Mukherjee, unveiling an INR11.08 trillion ($240 billion) budget, said the government will curb spending growth and put more state assets on the block as it seeks to cut the deficit to 5.5% of gross domestic product from this year's 6.9%. He also proposed a series of personal tax-breaks, which will fuel domestic consumption.  DJ

·         India - Fitch Ratings is “less encouraged” to cut India’s credit rating after the South Asian nation’s government today pledged to shrink its budget deficit – Bloomberg

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