Hello
EUROPE: Thursday sees a full calendar, with the policy meetings from the Bank of
England and the ECB dominating. Ahead of the central banks, there data releases
in both the UK and on the Continent. At 0745GMT, French December foreign trade
data and central government deficit numbers will be released. At 0800GMT,
Spanish December industrial output data will be released. Germany's December
industrial output data is scheduled for release at 1100GMT.
The ECB policy decision is expected at 1245GMT, with President Mario Draghi's
presser expected at 1330GMT. 
There is unlikely to be any change in policy, but the presser is looking a
little more difficult than a week ago, as political jitters in both Spain and
Italy have resurfaced in the market's conscience over the past seven days.
However, Draghi is likely to express to markets that there is little chance of
an early end to ECB stimulus in the medium term, even as sentiment indicators
tick higher.
At 1530GMT, ECB Board member Benoit Coeure appears at a
conference in Frankfurt, while Bundesbank Vice President Sabine Lautenschlaeger
speaks, also in Frankfurt.
From 1600GMT, EU leaders gather in Brussels for a summit, with the EU budget for
the next seven years seen as the main topic of discussion.
UK: UK data is expected from 0930GFMT, with the release of the December trade
balance and the December industrial production numbers. At 0945GMT, BOE Governor
nominee Mark Carney appears before Parliament's Treasury Select Committee.
Carney will be grilled by MPs on his plans to modernise the central bank and
also to expand on his ideas of targeting nominal GDP for monetary policy ideas.
At 1200GMT, Bank of England's February Policy Decision is due. Despite the UK
gain recording a quarter of negative growth in Q4, few see the Bank moving to
increase the stock of QE at the Feb meeting, leaving it unchanged at stg 375 bn.
BOE: RBS expects the Bank of England's MPC to announce the reinvestment of the
proceeds of the 4.5% 2013 Gilt for Stg6bln following today's meeting. The 4.50%
2013 Gilt matures on Mar 7 and has Stg34.519bln outstanding, of which the BoE
owns Stg6.1bln of the bond. RBS notes that there are "3 options for the Bank".
1. Do nothing and leave it as cash in the Asset Purchase Facility; 2. Transfer
cash to HM Treasury as per the coupon flows; or 3. purchase more Gilts with the
proceeds. "We think the third option is most likely and neutral for policy and
is already the working assumption of the OBR in their December forecasts. "For
redemptions prior to winding down, the BoE reinvests sums equal to the original
purchase price". The key for Gilts will be the time over which such operations
take place. We expect a period of several months and a muted impact", said RBS.
UK PRESS: The FT notes that more than 80% of those registering as self-employed
since 2008 have been in the "over-50" category. According to the paper,
reporting on an ONS study, says the ost common occupations were taxi drivers,
construction workers, carpenters and farmers.
UK PRESS: The IFS says UK households face deeper cuts or tax increases
equivalent to 3p in the pound as UK borrowing levels run above forecasts, the
Times reports.
US: The US calendar gets underway at 1330GMT, with the release of the jobless claims
data for the Feb 2 week and 4Q Non-farm Productivity Unit Labor Costs numbers.
The level of initial claims is expected to fall 8,000 to 360,000 in the February
2 week after rising by 38,000 in the previous week. Seasonal adjustment
difficulties are common in January due to sharp fluctuations in the unadjusted
data and the New Years and MLK holiday, resulting in seasonally adjusted
movements that can be unexpected. Still, it appears that there has been some
modest improvement in claims over the last year, when the hurricane-related blip
in early November is discarded.
Nonfarm productivity is forecast to fall 1.2% in the fourth quarter after a 2.9%
rise in the third quarter. Output growth is expected to be slower than in the
third quarter due to the weakness in GDP growth. As a result, unit labor costs
are expected to be up 3.3% in the fourth quarter after a 1.9% decline in the
previous quarter
Also at 1330GMT, Canada'S December Building permits and New housing price index
numbers will be released.
At 1340GMT, Chicago Federal Reserve Bank President Charles Evans is slated to
appear in a CNBC interview.
Further Fedspeak is due at 1430GMT, when Fed Gov. Jeremy Stein gives an address
to the St. Louis Fed's research symposium.
At 1530GMT, EIA Natural Gas Storage data for the Feb 2 week are due for release.
At 2000GMT, US December Consumer Credit data will be released. Consumer credit
usage is expected to rise $15.0 billion in December after the sharp gains seen
in recent months. Retail sales rose 0.5% in the month, while nonauto sales were
up 0.3%. Nonrevolving credit use should continue to drive gains in the headline
numbers.
Further late data sees the release of the January Treasury Allotments data at
2000GMT nad the Money Supply numbers for the Jan 28 week at 2130GMT.
EURO-DOLLAR: Closed in NY Wednesday at $1.3523, the rate having extended its
corrective pullback off Wednesday's Asian highs of $1.3597 to $1.3496,
recovering to $1.3544 before easing again into the close. A fairly subdued start
in Asia with rate holding around $1.3520 before it got pressed down to $1.3505
($1.3506 76.4% $1.3494-1.3544). Rate met demand placed into the figure which
cushioned the move prompting spec shorts, that had positioned for stops below
$1.3494 to cover back ahead of the European open which edged rate up to $1.3532
($1.3535 76.4% $1.3544-05). Rate was trading around $1.3528 into Europe. ECB
rate decision with the accompanying press conference, the latter seen providing
the main interest as rates expected to remain on hold. Traders will look for any
change in Draghi's perceived hawkish tones at the last meeting, expecting him to
turn more cautious on economic growth and more relaxed on the inflation outlook.
Ahead of this Spain and France bond sales at 0930GMT/0950GMT and Germany
industrial production data is due for release at 1100GMT.
US weekly claims at
1330GMT will provide a sideshow to ECB Draghi though not to be ignored.
EURO-DOLLAR: Bids seen placed between $1.3505-1.3495 with stops seen through
$1.3495/85. A break here to expose next band of demand from $1.3485 through to
$1.3460. More stops $1.3450/40. Resistance seen into $1.3550, with further
offers dotted toward $1.3560. Traders say that topside seen scattered with sell
interest up to $1.3600, with the downside holding mainly stops.
CABLE: Closed in NY at $1.5666, the rate having spent Wednesday consolidating
above key trend line support at $1.5630, touching a recovery high of recently
posted lows between $1.5630/32 at $1.5678. Positioning ahead of today's
appearance of BOE governor in wait Mark Carney in front of the TSC (0945GMT) in
focus, yesterday's slight recovery in sterling seen on suggestions that he may
not be as dovish as recent interviews would suggest, though market still holds
an underlying bearish outlook for sterling.
BOE MPC rate announcement at 1200GMT
not expected to provide any change in rates nor QE, though some suggest comment
could be made about the maturing stg6.1bln gilt that matures early March which
could affect the size of the current stg375bln QE. Cable demand is seen in place
into $1.5630, further interest dotted down to $1.5600 with stops below.
Resistance seen into $1.5680, with further interest seen placed through to
$1.5700 (Reuters show a spike high of $1.5689 but can't see on other charts to
confirm). Euro-sterling was contained by stg0.8624/41 in Asia.
YEN: Dollar-yen found a base at Y93.27 Wednesday, after pulling back from an
earlier posted high of Y94.07. The move above Y94.00 was seen completing several
traders' target around this level, with the corrective pullback seen relatively
shallow compared to the rate's recent recovery. Tech traders still see room for
further upside potential, Ichimoku analysts (favoured in Japan) see Y95.70 as
the next upside target, noting that trade Wednesday closed above the first key
support at Y93.18 (5-dma), with the Tenkan and Kijun lines still rising. Trade
in Asia was contained within Y93.30/71, opening Europe around Y93.60. Offers
seen into Y93.80, more between Y94.00/10. Barrier interest reported at Y94.25
with stops above. Traders have suggested that the Abe govt may not want
dollar-yen to push above Y95.00 this side of G20. Demand seen from Y93.30
through to Y93.00. Release of machinery orders overnight did provide some yen
strength, but this was soon countered. Euro-yen closed in NY at Y126.57, off
intraday lows of Y125.93, the rate dipping back to Y126.04 into early Asia
before recovering, edging up to Y126.86 into Europe.
BOJ: In his testimony at the Lower House Budget Committee, Bank of Japan
Governor Masaaki Shirakawa denied that he had told the other BOJ board members
at the bank's Jan. 21-22 that the BOJ would have to accept a 2% inflation target
in order to prevent the Abe government from seeking to rewrite the BOJ Act with
the aim of reducing central bank independence.
BOJ: BOJ's Shirakawa also told lawmakers that as a central banker, he shares the
concern that if monetary policy alone had to play a role in boosting the
economy's growth potential and overcoming deflation, the economy would face
various risks and distortions.
BOJ: BOJ Governor Masaaki Shirakawa told the lower house budget committee that
boosting the economy's growth potential by various economic agents holds the key
to overcoming years of deflation. Prime Minister Shizo Abe told the same
committee that he does not agree with the conviction held by economists and BOJ
policymakers that the falling working population in Japan is the root cause of
continued price drops. "Deflation is an issue about the amount of currency, so
monetary policy should play a primary role," said Abe.
NEWS: JAPAN'S NIKKEI 225 INDEX ENDS DOWN 0.93% AT 11,357.07
GOLD: Spot gold prices are trading around unchanged levels Thursday
after posting some marginal gains during the previous day. Spot gold
ended Wednesday's session up $4.75 at $1677.70/oz after recovering from
lows seen just above $1668/oz posted during the morning of the European
session. Demand for the precious metal continues to remain sluggish due
to subdued trading activity in China ahead of the Lunar New Year holiday
next week. Market participants will now be looking ahead to the European
central bank meeting later in the day as well as key China data due out
Friday. Spot gold prices are trading just above unchanged levels after
edging their way higher from initial intra-day lows of $1676.75/oz to
highs of $1681.45/oz and now trade at $1678.30/oz, up $0.60 on the
session. Offers are seen above the market at $1692/oz with medium bids
continuing to show below at $1664/oz.
GOLD: The Reserve Bank of India would consider restrictions on the value and
quantity of gold imported by banks, which account for 60% of India's total gold
imports, under extreme conditions, as the world's biggest gold consumer battles
a record high current account deficit, according to various media reports. The
RBI also said it would consider introducing gold-linked financial instruments to
divert savings of inflation-wary Indians from gold bars and coins into bonds.
OIL: March NYMEX WTI prices are trading marginally higher Thursday after
ending the previous day flat. March WTI futures ended Wednesday's
session 2 cents lower at $96.62 a barrel after trading in a $95.04 to
$96.99 range. Some brighter weekly oil supply data helped compensate a
stronger US dollar after WTI prices recovered sharply during the
afternoon from earlier setbacks. A report, published by the US Energy
Information Administration (EIA), showed that US crude inventories rose
by 2.6mln barrels last week, below market expectations for a 2.9mln
increase. In addition, stockpiles in Cushing, Okla, fell by 300,000
barrels. Crude prices are little changed this morning, with traders
eyeing the European central bank meeting later in the day as well as key
China data due out Friday. March WTI prices have been tied to a narrow
range, paring their gains slightly from initial highs of $96.89 to lows
of $96.68 and now trade near their lows at $96.70 a barrel, up 8 cents
on the session.
NATURAL GAS: NYMEX March natural gas prices are trading higher Thursday,
extending their gains from the previous day. March natural gas futures
ended Wednesday's session up 1.9 cents at $3.418 per million British
thermal units (mln Btu) after trading in a $3.398 to $3.459 range. The
front month has now recovered around 3.5% in the last three sessions,
following a 4.2% slide last week. Prices continue to advance this week
underpinned by expectations for more heating demand after another front
of cold weather moves into the Midwest by late next week before
spreading its way east. March natural gas futures have edged their way
higher this morning, picking up from an initial intra-day low of $3.426
per mln Btu to trade a high of $3.449 and now trade at $3.444 per mln
Btu, up from last night's close of $3.418 per mln Btu.
OPTIONS: FX: Option expiries for today's 1000ET cut,
* Euro-dollar; $1.3350, $1.3400, $1.3500, $1.3615, $1.3650, $1.3750
* Dollar-yen; Y92.50, Y93.00, Y93.50, Y94.00, Y94.10
* Cable; $1.5630, $1.5700, $1.5715
* Dollar-Swiss; Chf0.9000
* Aussie-yen; Y95.25
SPAIN AUCTION PREVIEW: Spain's Tesoro Publico taps its 2-year benchmark 2.75%
Mar 2015 Bono, 5-year benchmark 4.50% Jan 2018 Bono and also off-the-run 6.00%
Jan 2029 Obligaciones bond issues Thursday for between E3.5bln-E4.5bln. This is
the first auction from Spain following the successful launch of its syndicated
new 10-year benchmark issue on Jan 22 for E7.0bln -- the first syndicated deal
since February 2012 and where the final demand size was the highest for a
syndicated bond in the history of the Tesoro. Sources familiar with the deal
noted that the final size was approaching E23.0bln when its order books closed.
However, since then, Spanish yields have risen amid increased political
uncertainty in Spain and Italy, with the 10-year yield now approaching 5.50%.
Most strategists expect further concession into the auction and risk of strong
domestic take-up. The 2.75% Mar 2015 Bono was last sold on Jan 10 for E3.4bln at
an average yield of 2.48% and then covered 2.07 times. The 4.50% Jan 2018 Bono
was last sold on Nov 8, 2012 and the 'repo special' 2029 Obligaciones was last
sold in Jan 2010 -- and therefore not comparable.
Auction results are due around
0940GMT.
EUROZONE: Timeline of key events in the eurozone for next few weeks:
- Feb 07 ECB Governing Council meeting, Draghi press conference
- Feb 07/08 European Leaders summit in Brussel
- Feb 07 Spain sells Bono bonds
- Feb 08 Greek T-bill redemption for E1.975bln
- Feb 08 ECB announces 3-year LTRO payback total amount
- Feb 11 Eurogroup meeting
- Feb 12 ECOFIN meeting
- Feb 12 ECB Draghi at a closed Spanish Parliament meeting from 1300GMT to
1430GMT, but also a presser should follow directly
- Feb 12 Italy T-bill auction
- Feb 12 Spain sells 6-/12-month T-bills
- Feb 12 Greece sells new 13-week T-bills for up to E1.0bln
- Feb 13 European Commission publishes forecasts
- Feb 13 Italy BTP auctions
- Feb 14 Eurozone Q4 advanced GDP
US: Timeline of key events in the US for the next few weeks:
- TBD Senate confirmation of Lew as US Treasury Secretary
- Feb 07 Fed Outright Tsy Coupon Purch 02/15/2036-11/15/2042 $1.25-$1.75bn
- Feb 07 UST announces 3/6m bills at 1100ET
- Feb 07 Fed Evans (voter) on CNBC at 0840ET
- Feb 07 Fed Bullard (voter) remarks at research symposium at 0930ET
- Feb 07 Fed Gov. Stein at St. Louis Fed's research symposium at 0930ET
- Feb 07 Treasury Auction Allotments at 1500ET
- Feb 07 Money Supply (M2) at 1630ET
- Feb 08 Fed Outright TIPS Purch 04/15/2017-02/15/2042 $1-$1.5bn
- Feb 08 Fed Kocherlakota (non-voter) at NYU Stern School of Business 1545ET
- Feb 10 Chinese Lunar New Year holiday
- Feb 11 Fed Outright Tsy Coupon Purch 2/15/2036-11/15/2042 $1.25-$1.75bn
- Feb 12 Fed Outright Tsy Coupon Purch 02/15/2020-11/15/2022 $2.75-$3.50bn
- Feb 12 UST auctions 4 week at 11:30 ET
- Feb 12 UST auctions 3-yr 13:00 ET
