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***Notes/Observations
from around the world***
-Greece
to continue debt discussions with creditors Friday
-
Concerns that Greece's funding needs might be bigger than originally thought
-
Fitch end of month review deadline looms for 6 European sovereigns
-
China to return from week-long Lunar New Year holiday
-
European equity indices opened the session lower, but have since pared losses
on renewed hopes that a Greek debt agreement might be reached in the next few
days. European banks are currently trading mixed, with French banks
underperforming. Greek banks have risen by over 10%, amid the ongoing talks
between Greece's government and its private sector creditors. Additionally, a
Greek press report said that the Troika officials were said to have lowered
their capital demands for Greek banks.
Speakers:
- Iran parliament to
discuss Emergency Bill Sunday which will halt oil exports to Europe from next
week
-
Renewed reports circulated that Greece's creditors were nearing a deal on PSI
related to a lower coupon. Greece PM and IIF head Dallara to meet again today
at 16:30 GMT in relation to PSI talks
- EU Commissioner Rehn stated that he expected
a Greek PSI either today or at some pojnt over the weekend
-
ECB's Gonzalez-Paramo reiterated the view that ECB had not said that interest
rates were at a minimum level as rates would be as high or low in order to
ensure price stability
-
Spain Econ Min de Guindos commented that the Euro zone could withstand Greek
default in comments from a press interview in Davos, Switzerland. He noted that
unemployment was the main source of vulnerability for Spain and the country
must increase banking consolidation. He reiterates that Spain would not use
taxpayer funds for banks. Banks could absorb €50B provision on their own and
that Spanish banks had already began increasing provisions.
-
German Finance Ministry reports its 2011 tax revenues which saw total revenues
rising 7.9% y/y and Federal taxes rising by 9.8% y/y. The Ministry noted that
Germany must continue on path of budget consolidation and reiterated the view
that economic growth to regain momentum during 2012 year
-
German Econ Min Roesler commented that there was no need to discuss greater
Euro Zone contribution for Greece or size of ESM at this time and stressed that
must put in place the EU's December agreement. He clarified that could talk
about more Greek measures if current plan wais not enough and that Greece must
take steps to boost its competitiveness
-
Euro Zone panel (World Economic Forum) comprised of German Fin Min Schaeuble,
France Fin Min Baroin, Spain's Econ Min De Guindos and EU Commissioner Rehn
reiterated numerous themes addressed in recent weeks on the Eurpean debt
crisis, Greece debt swap discussions, Fiscal pact and growth.
-
ECB's Gonzalez-Paramo commented that Spanish labor reform was necessary for
employment growth
-
Sweden Fin Min Borg commented at Davos that Greece was destroying its
credibility with investors because it was not carrying out fiscal reform
quickly enough. He noted that the ECB should not be forced to accept losses on
its holdings of Greek debt, but should instead be given more breathing room to
take action to help resolve the euro zone's debt crisis
-
Poland Central Bank Gov Belka commented that he anticipated core inflation to
ease in 2012 with 2012 GDP growth possible above 3.0%. The weaker PLN currency
would shield exporters from EU slowdown. Polish banking sector was well
capitalized
-
Poland Central Bank's Winiecki commented that the central bank was more likely
to raise interest rates rather than cut them and needed o watch economy closely
in coming months
Currencies:
-
The European session focus remained on Greece's debt deal negotiations with
optimism continuing to have an upper hand in sentiment. The EUR/USD probed towards 1.3150 on renewed
reports Greece's creditors were nearing a deal on PSI related to a lower
coupon. EU Commissioner Rehn fanned the
optimism when he stated the he expected a Greek PSI either today or at some point
over the weekend.
Political/
In the Papers:
-
The financial press reported that the Troika was said to have lowered capital
demands for Greek banks, and asked the country to re-capitalize its banks using
instruments without voting rights. The banks may be required to have a core
tier 1 capital ratio of 10% from 2013, instead of this year, as was demanded as
a condition for the May 2010 loan accord.
-
Former ECB Board member Bini Smaghi has concerns about the IMF's special
creditor status, adding that the special creditor status could lead to negative
consequences that would offset benefits, such as delaying the return of program
countries to market financing.
-
The FT summarized yesterday's comments from EU official Rehn regarding the size
of Greece's second rescue package. The article quoted Rehn as saying that there
was likely to be a need for some increase in official sector funding on the
basis of revised debt sustainability. Rehn declined to say how big the funding
shortfall would be, although he said that increased taxpayer support for Greece
would be "not anything dramatic."
-
The Telegraph's Evans-Pritchard looked at concerns related to the
sustainability of Portugal's debt levels. According to the Kiel Institute,
Portugal needs to have a primary budget surplus of more than 11% of GDP per
year in order to control its debt levels. It suggested that Portugal is in the
same position that Greece was one year ago. The Kiel Institute also believes
that Portugal's needs a debt haircut of 46-56% in order to return its debt to
sustainable levels.
-
The British government is expected to launch a public and private investment
fund for green energy on Friday. The fund will provide seed finance for a
minimum of £3 billion for green energy projects in emerging, and developing
countries.
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Today's Economic News:
Our
day trading
strategies today will depend on the news, and this morning we
are reminded that Friday’s always make things a little different. Friday’s are all about getting in early,
being selective and then looking to make our money on the small windows of
opportunity that come our way from 800-1100am EST. We know price action gets sloppy after 11am
EST so we need to keep an eye on the clock.
This
morning our day begins with a highly-anticipated GDP news at 830am. I'm a trader who doesn’t really get much from
the GDP number each quarter b/c there are SO many analysts that price-in the
potential news data so when the actual news is released the market usually just
chops sideways with very little volatility.
I hope I'm wrong on this today, but we typically see a pretty
disappointing move from GDP because SO many traders have been working to
prepare for it all week.
You
can see our quarterly GDP took a nose-dive in late 2011 but has been
rebounding, much like the manufacturing indexes and durable goods orders. Will this up trend continue today?
The
big news today will most likely be the consumer sentiment at 955am EST, which
is more likely to have a dramatic impact on the price action we trade
today. Consumer sentiment is SUPPOSED to
be the most important thing in the markets and
it usually gets us some great opportunities if the numbers come out
higher or lower than estimated. You can
see the consumer sentiment numbers, along with everything else we’ve been
watching, have been improving over the last 90 days and we will hope to see
more of the same.
And
lastly, we remind ourselves today is Friday so we will be wrapping up our
trading around 1100am EST this morning and open the floor for questions from
guests and members until around 1230pm EST.
Lets
have a great day, its been a profitable week, so lets finish it strong!
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