European Market Update: New Greece measures expected on Wednesday; Euro tested fresh nine-month lows as Greek unions continue to protest austerity measures


ECONOMIC DATA

- (IN) India Trade Balance: -$10.3B v -$10.2B prior; Exports Y/Y: 11.5% v 9.3% prior; Imports Y/Y: 35.5% v 27.2% prior

- (SZ) Swiss Q4 GDP Q/Q: 0.7% v 0.4%e; Y/Y: +0.6% v -0.5%e

- (BR) Brazil Feb FIPE CPI: 0.7% v 0.7%e

- (SP) Spain Feb Unemployment: 82.1KK v 62.2Ke

- (SA) South Africa Feb Naamsa Vehicle Sales Y/Y: 16.2% v 12.0% prior

- (PD) Poland Q4 GDP Y/Y: 3.1% v 3.0%e

- (UK) Feb PMI Construction: 48.5 v 48.9e

- (EU) Euro-Zone Feb CPI Estimate: 0.9% v 0.9%e

- (EU) Euro-Zone Jan PPI M/M: 0.7% v 0.6%e; Y/Y: -1.0% v -1.1%e

- (IT) Italy Feb Preliminary CPI (incl Tobacco) M/M: 0.1% v 0.2%e; Y/Y: 1.2% v 1.3%e

- (IT) Italy Feb Preliminary CPI EU Harmonized M/M: 0.0% v 0.2%e; Y/Y: 1.1% v 1.3%e


SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

- Equities: European equity markets have put in a mixed morning session with initial strength surrendered, only to be recovered all within 60min of trading. Positive sentiment from US and Asian trading set the theme for today's open as earnings season in Europe has begun to tail off. Commodity names have remained in focus following further supply fears from Chile (which was struck by a further 6.6 magnitude aftershock). Analyst at Morgan Stanley boosted iron ore and coaking coal contract price expectations while Moody's revised its outlook on European steel, all of which combined to boost the sector. Shares of HSBC [HSBA.UK] bounced off yesterday's losses and lower rotation in Hong Kong trading. With the kick off of the Geneva auto-show, auto's have been in focus ahead of expected US Feb sale figures. Commentary from European auto makers has been supportive with BMW [BMW.GE], VW [VOW.GE], Peugeot [UG.FR] and Renault [RNO.FR] all trading higher. Data has been supportive throughout the session with strong GDP reads from Switzerland and Poland that have at least temporarily shaken off fears seen yesterday when Sweden slipped back into recession. Trading volumes are off last week's highs as equities attempt to print three consecutive sessions of gains.

- Individual equities: Fresnillo [FRES.UK]: Reports prelim FY09 Rev $849.9M v $862Me. || John Wood Group [WG.UK]: Reports FY09 Net $164.2M v $205Me, Rev $4.93B v $4.8Be. || CRH [CRH]: Reports FY09 Net €592M v €611Me, Rev €17.37B v €18Be. || Allied Irish Bank [ALBK.IR]: Reports FY09 loss €2.33B v loss €2.8Be, Rev €4.86B v €4.3Be. ||

- Speakers: Poland Central Bank Hausner stated that expected 'tough' environment in 2010 due to fading impact of stimulus measures coupled with rising job losses. The official noted that a spending cap was not enough to curb the Polish deficit ans the government might consider raising taxes *** China Foreign Affairs official Zhao Qizheng commented that the US bears responsibility for regression of relations with China *** Japan Lower House of Diet approvedFY10/11 budget of ¥92.3T. The bill still needs to be presented to Upper House but approval is typically automatic. *** PIMCO's El-Erian: Everyone needs to recognize sovereign balance sheets are a concern this year *** IATA reported Jan International Air Passenger Traffic was up 6.4% y/y *** Greece Debt Agency Chief Christodoulou commented that was not under pressure to issue bonds in the near term and would sell when conditions are better *** EU Financial Services Commissioner Barnier stated that it would investigate trades in sovereign credit default swaps (CDS)

- Currencies: European peripheral concerns continue to be the critical issue for the direction of currencies. The EUR/USD posted fresh 9-month lows below 1.3450 following comment s that the Greek civil servants union ADEDY would stage a 24-hour strike in the middle of the month to protest against the new measures. This continues the highlight the social implications that the fiscal tightening would face as dealers took notice of earlier comments from EU Monetary Affairs Commissioner Rehn. The EU noted that Greece must reveal new measures in the coming days to allay officials concerns that the current austerity plan falls short. There is speculation that Greece will unveil fresh measures on Wednesday ahead of the pivotal Greek/German meeting on March 5th. The EUR/USD recovering back above the .135 level ahead of the NY morning. ***The GBP was off its worst level as fiscal and political concerns continued to weigh on its trend. The latest opinion poll out in the UK shows conservatives lead back out to 6% lead compared to the 2% margin registered in a weekend poll. The concern over a potential Parliament saw the GBP test below 1.48 on Monday. The most recent poll had alleviated some of that concern for the time being.

- Fixed Income: The UK yield curve has noticeably flattened during the session, with selling in the short end and bargain hunting in the long end and belly. In a vote of confidence for the economy, the DMO sold 2B in 4.25% 2039 Gilts with an above average bid-to-cover of 1.9 times. Yields in Germany are slightly higher across the curve with the benchmark 10y Bund yield holding above 3.11%. The peripherals complex is somewhat mixed with Greek 10s back below Bunds +300bps for the first time since mid Feb as expectations for a bailout grow stronger. Meanwhile Spanish 10s are 3bps wider at +73bps with supply expected later in the week.

- Geopolitical: European/South American diplomatic disputes kicked into another gear as a surprise announcement from a Spanish judge placed the country squarely in conflict with Hugo Chavez's Venezuela. In a multipronged plot, it is alleged that the Venezuelan government provided support and collaboration with Colombian rebels (FARC) and Spanish separatists (ETA) to assassinate the Colombian President during a visit to Spain. Venezuelan-Colombian relations remain extremely hostile with Venezuela accusing the US of using Colombia as a staging ground for an invasion. *** US Deputy Sec of State James Steinberg has begun a trip to China in a move that has been broadly seen as a return to normalized relations between the US and China. The trip follows loud disputed regarding a US arms sale to Taiwan (ROC) and a meeting between the President and the Dalai Lama.


Notes

- Australia's Central Bank (RBA ) raises interest rates by another 25bps to 4.00%. States rates are below avg

- Fed's Plosser: Fed's Plosser: Fed should drop the "extended period" language as the US economic recovery has begun to solidify

- China exporters: CNY appreciation of maximum of 2.3% is 'bearable'

- Greek civil servants union to stage 24-hour strike during the middle of March in response to Government austerity plan

- Aftershocks over 6.0 continue to hit Chile


Looking Ahead

- 7:45 (US) ICSC Chain store sales

- 8:30 (SI) Singapore Feb Purchasing Manager Index: No est v 51.4 prior; Electric Sector Index: No est v 53.8 prior

- 8:55 (US) Redbook

- 9:00 (CA) Bank of Canada Interest Rate Decision: Expected to maintain interest rates at 0.25%

- 9:00 (IR) Irish Central Bank Gov Honohan

- 14:00 Fed's Kocherlakota

- 15:30 (MX) Mexico Jan Budget Balance YTD: No est v -274. 5 prior