ECB QE, Coming To A Market Near You on March 9th

Economic Data

- (CL) Chile Jan Economic Activity Index (Monthly GDP) M/M: 0.4% v 0.6%e; Y/Y: 2.7% v 2.7%e
- (UK) Bank of England (BOE) left both Interest Rates and Asset Purchase Target (APT) at 0.50% and £375B respectively (as expected)
- (BR) Brazil Jan PPI Manufacturing M/M: -0.1% v +0.6% prior; Y/Y: 2.9% v 4.5% prior
- (CL) Chile Jan Nominal Wage M/M: 0.8% v 1.3% prior; Y/Y: 7.1% v 7.2% prior
- (US) Feb Challenger Job Cuts: +50.6K v +53.0K prior; Y/Y: 20.9% v 17.6% prior
- (EU) ECB decision left key rates unchanged
- (RU) Russia Feb CPI M/M: 2.2% v 2.2%e; Y/Y: 16.7% v 16.7%e; CPI YTD: 6.2% v 6.2%e
- (RU) Russia Feb CPI Core M/M: 2.4% v 2.5%e; Y/Y: 16.8% v 16.6%e
- (US) Q4 Final Nonfarm Productivity: -2.2% v -2.4%e; Unit Labor Costs: 4.1% v 3.3%e
- (US) Initial Jobless Claims: 320K v 295Ke; Continuing Claims: 2.421M v 2.40Me
- (BR) Brazil Feb Vehicle Production: 200.1K v 204.8K prior; Vehicle Sales: 185.9K v 253.8K prior; Vehicle Exports: 31.3K v 16.3K prior
- (US) Jan Factory Orders: -0.2% v 0.2%e
- (CA) Canada Feb Ivey Purchasing Managers Index (Seasonally Adj): 49.7 v 48.5e
- (US) Weekly EIA Natural Gas Inventories: -228 bcf vs. -223 to -227 bcf expected

The ECB outlined details of its shiny new QE program, helping European equities rack up very good gains today. US markets followed Europe higher, however they have given up gains as Europe closes. As of writing, the DJIA is up 0.19%, the S&P500 is flat and the Nasdaq is up 0.30%.

ECB President Draghi outlined the details of the ECB's bond buying program at the post rate decision press conference this morning. Draghi said bond purchases would begin on March 9th and continue until at least September 2016, although he clarified that the central objective will be to get inflation to just under bank's 2.0% threshold. ECB staff projections revised 2015 inflation forecasts to 0.0% from +0.7% prior (citing much lower oil), with 2016 revised up to 1.5% from 1.3% and initial 2017 projections set at 1.8%, right in line with Draghi's central objective for QE.

US and European government bond yields were floating higher all morning until Draghi said the ECB would buy government bonds with negative yields up to the Deposit Rate (which is presently -0.20%). Yields reversed course on the comment, with the German 10-year bund dropped as much as six basis points, dragging all yields lower with it, before moving a bit higher. EUR/USD tested above 1.1100 as Draghi began speaking and then dropped as low as 1.1010 as markets digested his remarks.

The initial jobless claims numbers rose to a nine-month high in the final week of February, while the less volatile four-week moving average moved up to 305K, which is slightly below the recent peak of 307K in mid-January. The January factory orders data declined for the sixth straight month, although the contraction was the smallest since last July.

After earnings, Canadian Solar missed expectations but also disclosed plans to form an asset management vehicle to maximize value for shareholders, sending shares of CSIQ up 8%. Kroger beat expectations and offered inline FY guidance, shares of KR are up 5%. Costco offered solid quarterly results and good comps. On the conf call, executive said the impact of West Coast port strike is mostly over and suggested it will take 4-8 weeks to clear backlogs at those ports. COST is up 2%.

On the M&A front, AbbVie reached a deal to buy Pharmacyclics for about $21 billion, buying the company access to what is expected to be one of the world's top-selling cancer drugs, Imbruvica. The firm was reportedly engaged in a fierce bidding war against Johnson & Johnson and analysts are broadly condemning AbbVie for overpaying. Moreover, J&J already owns half of the future cash flow from Imbruvica, via a partnership deal signed long ago. Shares of PCYC are up 16% over the last two sessions, while shares of ABBV dropped as much as 7% in the premarket, before recovering to -3%.

Looking Ahead

- 16:00 (CO) Colombia Jan Exports: $3.6Be v $3.8B prior
- 19:00 (CO) Colombia Feb CPI M/M: 0.7%e v 0.6% prior; Y/Y: 3.9%e v 3.8% prior
- 19:00 (CO) Colombia Feb CPI Core M/M: No est v 0.3% prior; Y/Y: No est v 3.2% prior
- 22:35 (JP) Japan to sell 6-Month Bill
- 23:00 (MY) Malaysia Jan Trade Balance (MYR): 7.0Be v 9.2B prior; Exports Y/Y: 2.5%e v 2.7% prior; Imports Y/Y: 1.5%e v 4.2% prior