Italy Election Fallout Continues; US Markets Benefit from Housing Data

Economic Data

- (BR) Brazil Jan Unemployment Rate: 5.4% v 5.2%e
- (US) Weekly ICSC Chain Store Sales w/e Feb 24th w/w: +0.1%; y/y: +2.9%
- (HU) Hungary Central Bank (NBH) cut the Base Rate by 25bps to 5.25%, as expedcted
- (BR) Brazil Jan Total Outstanding Loans (BRL): 2.367T v 2.359T prior
- (US) Weekly Redbook Retail Sales w/e Feb 24th: 2.7% y/y prior
- (MX) Mexico Jan Preliminary Trade Balance: -$2.9B v +$961.7M prior
- (US) Dec S&P/Case-Shiller 20 City MoM: 0.88% v 0.65%e; Y/Y: 6.84% v 6.60%e; Home Price Index: 145.95 v 145.82e
- (US) Q4 S&P/Case-Shiller Q/Q: 7.33% v 7.00%e; HPI: 132.22 v 135.67 prior
- (US) Dec House Price Purchase Index M/M: 0.6% v 0.6%e; Q/Q: 1.4% v 1.1% prior
- (US) Feb Richmond Fed Manufacturing Index: 6 v -4e
- (US) Feb Consumer Confidence: 62.0e v 58.6 prior
- (US) Jan New Home Sales: 437K v 380Ke

- The Italian election is the central fact moving global markets over the last 24 hours, as investors consider the real risk that the euro zone crisis could be back with a vengeance. Yesterday US indices had their worst performance since last November. Asia equity markets closed at their lows and the Nikkei lost 2%. European indices continue to give up ground and the Milan Bourse is looking to close down nearly 5%. In the US, better economic data helped lift indices in the first hour of trading before reality set in. The DJIA is +0.4% and the S&P500 is flat.

- US February consumer confidence picked up sharply from the one-year lows seen in the January reading, topping expectations. The December house price index confirmed that US housing is recovering well. The final monthly reading for the year showed 2012 had the biggest annual gain in home prices in six years. Meanwhile, the January new home sales numbers hit highs last seen in July 2008.

- The Italy election results delivered no clear majority in either the lower or upper house, although Berlusconi conceded defeat in the lower house. Five-Star Movement leader Beppe Grillo continues to refuse to collaborate with either the center-right coalition (Berlusconi) or the center-left alliance (Bersani), although he held out hope that he might support a government after it was formed. EUR/USD has apparently found some support around 1.3050. USD/JPY has been right around 92 through the overnight session.

- In Washington, Fed Chairman Bernanke began his semi-annual testimony before Congress in the Senate. Bernanke reiterated many of his prior views, offering little new. He defended QE, saying the benefits of asset purchases clearly outweigh the costs. He urged the Congress to replace the sequester cuts with more nuanced and gradual spending reductions.

- The Senate Finance Committee backed President Obama's nominee to head the Treasury, Jack Lew, overlooking the perks he got from previous employers and clearing the way for a full-Senate confirmation vote.

- Home Depot comfortably beat expectations in its Q4 report and hiked its dividend. Comps were solid, up 7% y/y. Note that today's housing news is also helping the name. HD is up more than 6%.

- Shares of tire manufacturer Titan are down nearly 20% this morning after the firm reported a Q4 loss thanks to tax issues and one-time costs.

- Apollo Group and the for-profit education companies are in the red this morning after University of Phoenix's accreditor recommended the university be put on probation due to the unit's insufficient autonomy from its parent company. APOL is down 4.2% while other for-profit names are down 2-3%.

Looking Ahead