German ZEW survey continues to improve thanks to lower oil and weaker Euro

Notes/Observations

- IMF updated its World Economic Outlook (WEO) and again cut both 2015 and 2016 global growth forecasts

- China Q4 GDP Q/Q: 1.5% v 1.7%e; Y/Y: 7.3% v 7.2%e (first official miss since 1998 and also the lowest rate of growth in 24 years)

- China Dec Industrial Production hits a 3-month high (Y/Y: 7.9% vs. 7.4%e)

- German Jan ZEW Current Situation Survey registers its third straight month of improvement, highest since Feb 2014 (22.4 vs. 13.0e)

Economic data

- (JP) Japan Dec Convenience Store Sales Y/Y: -1.2% v -1.7% prior (9th straight monthly decline)

- (DE) Germany Dec PPI (miss); M/M: -0.7% v -0.4%e; Y/Y: -1.7% v -1.4%e

- (FI) Finland Dec Unemployment Rate: 8.8% v 8.2% prior

- (TW) Taiwan Dec Export Orders (beats) Y/Y: 4.5% v 1.8%e

- (ZA) South Africa Nov Total Mining Production data misses; M/M: -1.2% v +0.7%e; Y/Y: -0.4% v -0.3%e

- (DE) Germany Jan ZEW Survey (beats); Current Situation Survey: 22.4 v 13.0e v 10.0 prior; Expectations Survey: 48.4 v 40.0e

- (EU) Euro Area (EU18) Q2 Government Budget Deficit to GDP Ratio at -2.3% v -2.5% prior

Fixed Income:

- (ES) Spain Debt Agency (Tesoro) opened its book to sell EUR-denominated Apr 2025 bond via syndicate; guidance seen at 92bps to mid-swaps; order book over €17B

- (ES) Spain Debt Agency (Tesoro)auction steady; sold total €5.054B vs. €4.5-5.5B indicated in 6-Month and 12-Month Bills

- Sold €785M in 6-month Bills; Avg Yield: 0.105% v 0.276% prior; Bid-to-cover: 3.77x v 4.98x prior

- Sold €4.26B in 12-month Bills; Avg Yield: 0.213% v 0.363% prior; Bid-to-cover: 2.12x v 2.01x prior

- (CH) Switzerland sold CHF938.4B in 3-month Bills; Yield: -1.101%

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Equities

Indices [Stoxx50 +0.5%, FTSE 100 +0.3% at 6,603, DAX flat at 10,230, CAC-40 +0.6% at 4,420, IBEX-35 +1% at 10,261, FTSE MIB +0.7% at 19,611, SMI +0.3% at 8,180, Athens Stock Exchange -1%, S&P 500 Futures +0.2% at 2,017]

- Market Focal Points/Key Themes: Equity markets open slightly higher following Monday's gains with Thursday's ECB meeting in focus; DAX trades at another record high ahead of ZEW data; SAP cuts 2017 outlook; Novozymes Q4 results above ests; Unilever sales weighed down by European and emerging markets; Lower copper and oil prices weigh on resource-related firms; NY morning earnings (JNJ, Morgan Stanley, Baker Hughes, Halliburton, Delta)

By Sector

- Consumer Discretionary [Unilever ULVR.UK -2% (FY sales below ests), Luxottica LUX.IT -1% (profit taking after FY sales)]

- Healthcare [Novozymes NZYMB.DK +5% (Q4 results above ests)]

- Stoxx50 sectors [Industrials +1%, Financials +0.9%, Consumer Cyclical +0.7%, Telecom +0.3%, Consumer Non-Cyclical +0.2%, Energy flat; Technology -1.3%, Utilities -0.1%, Basic Materials -0.1%]

**Speakers**

- ECB Lending Survey: Credit Standards remained tight, but noted easing of credit standards in Q4

- Germany Fin Min Schaeuble: EU has stabilized the EMU region via tighter control and banking union and region would deliver its fair contribution to growth. He reiterated view of not seeing deflation in either Germany or Europe and that Europe must consolidate its budgets

- German ZEW Economists noted that its sentiment was helped by lower oil prices and weaker euro currency. Upcoming Greek election, SNB decision to abandon euro cap on Franc led to strong market fluctuations.

- Head of German Govt advisors (aka. 'wisemen') Christoph Schmidt: Greece exit was not insurmountable. Euro Area growth had become stronger in recent years due to reforms in Portugal and Ireland. Was not in favor of 50% haircut on Greek debt as it would take away pressure from further reforms

- Sweden Govt updated its economic forecasts; cuts both 2015 and 2016 GDP and CPI outlook. Cuts 2015 GDP growth forecast from 3.0% to 2.4%. uts 2016 GDP growth forecast from 3.2% to 2.7%. Cuts 2015 CPI forecast from 0.9% to 0.3% and 2016 inflation from 2.2% to 1.4%

- Sweden Fin Min Andersson stated that he saw slow recovery in coming years with downside risks to outlook. Europe had seen negative rather than upside surprises in recent years. Russia development could affect Sweden and divergent monetary stance in Europe can create large money flows and turbulence

- Slovakia Dep Fin Min Hudak: Domestic demand was picking up and seen boosting economic growth. Concerned by Euro Zone disinflation; ECB QE would help the region avoid deflation

- Hungary Econ Minister Orban: Economic fundamentals did not justify recent HUF currency (Forint) weakening vs euro; no reason to worry about weakening as pace was moderate

- South Africa Trade Min Davies: Manufacturers were comfortable with current level of ZAR currency (Rand) as it aided competitiveness

Currencies

- USD had a firm tone in Asia but saw some of its glow ebb during European trading. Dealers in Asia initially cited a WSJ's Hilsenrath piece that the Fed remained on track to begin raising interest rates this year despite the move lower in long term yields. The greenback gave away the bulk of its earlier gains as the session progressed

- Precious metals continued their recent uptrend. Spot gold edged towards the $1,300/oz area while spot silver retested the 18/oz

Political/In the Papers:

- (GR) Three polls over the last 24 hours showing Syriza Party (opposition) lead growing ahead of the Jan 25th Parliamentary elections

- (DE) German Bundesbank said to still striving to put limits on ECB QE - financial press; Trying to limit money-printing by ECB by softening blueprint or delay decisions on key parts beyond this week

- (DE) German economists: ECB should purchase €1.0T in govt and private bonds over the next two years to fight deflation risks and restore credibility; Economists include Fratzsscher of IFO Institute and Wolff from Bruegel Research

- (US) Fed watcher Hilsenrath (WSJ): FOMC likely to repeat that the Fed can be patient about rate increases in upcoming Jan 27-28 meeting

Looking Ahead

All times listed for economic events are denominated in Eastern Standard Time (Add 5 hours for GMT equivalent)

- (EU) EU General Affairs Ministers hold meeting in Brussels

- (PL) Poland Finance Ministry to meet Central Bank Gov Belka and heads of commercial banks following SNB move to abandon floor

- (AT) ECB's Nowotny (Austria) at Euromonry CEE conference in Vienna

- (IR) P5+1 convene with Iran for nuclear talks in Geneva

- (CH) China Premier Li at Davos

- (BR) Brazil Jan CNI Industrial Confidence: No est v 45.2 prior

- 05:30 (HU) Hungary Debt Agency (AKK) to sell 3-month Bills

- 05:30 (UK) DMO to sell £3.75B in 2% 2020 Gilts

- 06:00 (IL) Israel Nov Manufacturing Production: No est v -1.2% prior

- 06:30 (EU) ESM to sell €1.5B in 6-month Bills

- 06:45 (US) Daily Libor Fixing

- 07:00 (RU) Russia announces weekly OFZ bond auction (if not cancelled)

- 07:00 (TR) Turkey Central Bank (CBRT) Interest Rate Decision: Expected to leave rates unchanged; Expected to leave Benchmark Repurchase rate unchanged at 8.25%; Expected to leave Overnight Lending Rate unchanged at 11.25%; Expected to leave Overnight Borrowing Rate unchanged at 7.50%

- 07:00 (SE) Sweden govt no-confidence vote

- 08:00 (PL) Poland Central Bank (NBP) Minutes

- 08:00 (PL) Poland Dec Average Gross Wages M/M: 8.8%e v 0.6% prior; Y/Y: 3.1%e v 2.7% prior

- 08:00 (PL) Poland Dec Employment M/M: -0.1%e v +0.1% prior; Y/Y: 1.0%e v 0.9% prior

- 08:15 Baltic Dry Bulk Index

- 08:30 (CA) Canada Nov Manufacturing Sales M/M: -0.7%e v -0.6% prior

- 08:45 (UK) BOE's Cunliffe at event in London

- 09:00 (BE) Belgium Jan Consumer Confidence Index: No est v -12 prior

- 09:00 (EU) Weekly ECB Forex Reserves

- 10:00 (US) Fed's Powell on Libor in Washington

- 10:00 (MX) Weekly Mexico International Reserves Weekly

- 10:00 (US) Jan NAHB Housing Market Index: 58e v 57 prior

- 11:30 (US) Treasury to sell $24B in 3-Month and 6-Month Bills

- 16:45 (NZ) New Zealand Q4 CPI Q/Q: 0.0%e v 0.3% prior; Y/Y: 0.9%e v 1.0% prior

- 23:00 (MY) Malaysia Dec CPI Y/Y: 2.8%e v 3.0% prior

- 22:00 (TH) Thailand to sell THB16B in 2025 bonds

- (JP) Bank of Japan (BOJ) Monetary Policy Decision