Bunga Bunga Action in Italy Roils Markets

Economic Data

- (BR) Brazil Feb FGV Construction Costs M/M: 0.8% v 0.9%e
- (US) Jan Chicago Fed National Activity Index: -0.32 v 0.25 prior
- (BR) Brazil Jan Tax Collections (BRL): 116.0B v 103.5Be
- (MX) Mexico Q4 GDP: 3.9% v 7.3%e
- (MX) Mexico Q4 Current Account Balance: -$6.5B v -$4.2Be
- (IS) Israel Central Bank cuts base rate by 25bps to 1.50%, as expected
- (US) Feb Dallas Fed Manufacturing Activity: 2.2 v 3.0e

- Foreign exchange and European equity markets are on a roller-coaster ride this morning as the vote is counted in the Italian parliamentary and Senate elections. Leading European indices were up more than 2.5% on positive news that the center left coalition was in a comfortable position, with the Milan exchange up 3%, however those gains have vanished on further updates showing Berlusconi gaining in key provinces. The S&P500 gained nearly 0.6% at its best, but both the DJIA and S&P500 flatlined after the European declines.

- The initial exit polls out of Italy helped sooth markets as the numbers suggested the center-left Bersani coalition might not even need Mario Monti's support in forming new government. EUR/USD approached 1.3315 and yields on Italian government debt plunged to around. 4.15%. However, this early euphoria evaporated as more exit polls came out suggesting that Berlusconi's center-right coalition might have the numbers it needed to hold the senate, while Beppe Grillo's insurgent party was seen emerging as the largest single entity in the Senate. EUR/USD gave up all gains and tested below 1.3200, while yields 4.36%.

- Chesapeake Energy said it would sell a 50% stake in its Mississippi Lime shale assets to China energy giant Sinopec for $1.02 billion in cash. The two companies will share exploration and development costs and Chesapeake will remain operator of the project. CHK is down 4%.

- Shares of Barnes & Noble are up nearly 10% on news that Chairman Riggio told the board he would buy the retail assets of the company including Barnes & Noble Booksellers Inc and the website. Note that shares were up more than 25% before the open.

- In other deal news, there were reports that the CME had entered talks with Deutsche Boerse to acquire the German exchange, although they were later denied by executives from the Deutsche Boerse. 

Looking Ahead

- 11:30 (US) Treasury to sell $65B in 3-Month and 6-Month Bills
- 12:15 (CA) Bank of Canada Gov Carney speaks in London, Ontario
- 13:00 (US) Treasury to sell $35B in 2-Year Notes
- 13:30 (DE) ECB member Asmussen speaks in Berlin
- 14:00 (AR) Argentina Jan Industrial Production M/M: No est v -0.6% prior; Y/Y: No est v -3.4% prior
- 16:00 (US) House Speaker Boehner speaks on sequester
- 16:15 (AU) RBA's Debelle in Adelaide