German IFO Survey continues to improve

EU Mid-Market Update: Greece turns a new page on austerity after Syriza party steps into power; German IFO Survey continues to improve

Notes/Observations

- Greece Syriza party (opposition) set to become the first anti-austerity majority party in the euro zone

- Germany Jan IFO Business Climate registers its 4th straight MoM improvement

Economic data

- (SG) Singapore Dec Industrial Production M/M: 1.8% v +1.5%e; Y/Y: -1.9% v -3.4%e

- (FI) Finland Dec PPI M/M: -1.4% v -0.5% prior; Y/Y: -1.8% v -0.5% prior

- (CZ) Czech Jan Business Confidence: 13.3 v 13.8 prior; Consumer Confidence Index: 4.3 v 2.8 prior; Composite: 11.5 v 11.6 prior

- (ES) Spain Dec PPI M/M (miss): -1.1% v -0.9%e; Y/Y: -3.7% v -3.5%e

- (NL) Netherlands Jan Producer Confidence (miss): 2.8 v 3.6e

- (DE) Germany Jan IFO Business Climate (beat): 106.7 v 106.5e (4th straight monthly improvement); Current Assessment (beat): 111.7 v 110.7e; Expectation Survey: 102.0 v 102.5e

- (BR) Brazil Jan FGV Consumer Confidence: 89.8 v 96.2 prior

Fixed income:

- None seen

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

**Equities**

Indices [Stoxx50 +0.3%, FTSE 100 -0.2% at 6,819, DAX +0.6% at 10,720, CAC-40 +0.2% at 4,653, IBEX-35 +0.1% at 10,600, FTSE MIB flat at 20,516, SMI +1.4% at 8,272, Athens Stock Exchange flat, S&P 500 Futures -0.2% at 2,039]

- Market Focal Points/Key Themes: Equity markets open lower amid focus on Greek elections; Athens Stock Exchange trades lower by over 5%, then pares losses; Banks mixed after Greek election results; Lower commodity prices weigh on mining sector; German IFO data mixed; Markets pare losses amid IFO data release, DAX briefly trades at fresh record high; Event risks for the week include Fed decision (Jan 28th), US Q4 advance GDP (Jan 30th), Germany Prelim Jan CPI (Jan 29th), UK Q4 advance GDP (Jan 27th)

By Sector

- Industrials [BASF BAS.DE -1% (broker commentary)]

- Consumer Staples [Delhaize DELB.BE +4% (Q4 sales +6.3%)]

- Consumer Discretionary [Aer Lingus AERL.UK +3% (revised bid from IAG)]

- Basic Materials/Resources [Glencore GLEN.UK -2.5% (lower copper prices)]

- Health Care [Shire SHP.UK +3% (positive FDA decision)]

- Stoxx50 sectors [Consumer Cyclical +1.3%, Technology +0.8%, Telecom +0.8%, Utilities +0.6%, Industrials +0.6%, Consumer Non-Cyclical +0.5%, Basic Materials +0.3%, Financials +0.2%; Energy -0.7%]

Speakers

- Greece Independent Party leader confirmed he would give vote of confidence to Syriza leader Tsiprsa and to participate in next govt

- ECB's Draghi commented in Jan 15th letter to Greece's Parliament: Greece's tax burden was well below EU avg

- ECB's Coeure (France) stated that a falling Euro currency is good but it would eventually stabilize

- Spain Fin Min de Guindos reiterated his view that there was no risk of Spain suffering fallout from Greek elections

- German DIW institute chief Fratzscher: Greek election result seen as "bad news for Europe and Greece". A conflict with European partners on economic policy is inevitable

- Germany CSU Freidrich: Germany map scrap aid to Greece; has right to no longer finance Greece's debt

- German IFO Economists noted that Germany economy was making good start to 2015. Manufacturers expected stronger impulses from exports and benefit from weaker Euro currency

- Syriza Party official Varoufakis: Euro exit was not in the cards and must be very careful not to toy with fast or loose talk of Grexit

- Poland Central Bank Raczko: Deflation to last longer than previously forecasted; still room for a rate cut

- Poland Central Bank's Bratkowski reiterated need to lower interest rates in coming months; had significant room to lower rates and could not afford the current "wait-and-see" policy and should cut by 25bps per month. Must be ready for radical shift if GDP pace quickened

- Russia said to be preparing a new humanitarian aid convoy to Ukraine on Tuesday, Jan 27th

- Russia Foreign Min Lavrov: Not seeking repayment of Ukraine debt

Currencies

- Analysts were watching the next phase of the Greek election results particularly if Syriza indicated any potential confrontation with its EMU partners. ECB QE was program appearing to keep a lid on contagion at this time.

- The USD corrected during the EU morning after posting fresh trend highs against most currencies

- The EUR/USD tested 11-year lows in thin Asian trading just below the 1.11 level but rebounded to test above 1.1250 just ahead of the NY morning. European peripheral bond yields reverse slight rise as trading began in Europe with the Greek 10-year holding steady and higher by 40bps to 8.56% after the Parliamentary elections results.

Political/In the Papers:

- (GR) Syriza leader Tsipras: Bailout agreements have ended for Greece; Mandate of elections cancels bailouts of austerity; New govt will be ready to cooperate and negotiate with partners to achieve a mutual solution; Will avoid a destructive collision

- (UR) UN Security Council said to hold emergency meeting on Monday on Ukraine crisis . EU Foreign Affairs chief Mogherini: Convening emergency European foreign ministers meeting on Thursday (*Note: Press reports have noted that separatist rebels in Eastern Ukraine have resumed a full offensive for the 1st time in 5 months)

Looking Ahead

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

- 05:30 (DE) Germany to sell €1.5B in 12-month Bubills

- 05:30 (BR) Brazil Central Bank Weekly Economists Survey

- 06:00 (RO) Romania to sell 5.85% 2023 Bonds

- 06:45 (US) Daily Libor Fixing

- 07:30 (TR) Turkey Jan Real Sector Confidence (Seasonally Adj): No est v 108.8 prior; Real Sector Confidence NSA: No est v 101.2 prior

- 07:30 (TR) Turkey Jan Capacity Utilization: No est v 74.6% prior

- 08:00 (ES) Spain Debt Agency (Tesoro) announces size of upcoming auctions

- 08:15 (US) Baltic Dry Bulk Index

- 08:50 (FR) France Debt Agency (AFT) to sell combined €6.2-7.4B in 3-month, 6-month and 12-month Bills

- 09:00 (EU) Euro-Area Finance Ministers (Eurogroup) meet in Brussels

- 09:00 (IL) Israel Central Bank Interest Rate Decision: Expected to leave Base Rate unchanged at 0.25%

- 09:00 (MX) Mexico Nov Retail Sales M/M: No est v -0.1% prior; Y/Y: 3.7%e v 5.6% prior

- 09:30 (GR) Greece Syriza party leader Tsipras meets the President on forming a govt

- 09:35 (EU) ECB calls for bids in 7-day main Refi

- 09:45 (EU) ECB announces weekly purchases under its covered bond program 3 (CBPP3)

- 10:30 (US) Jan Dallas Fed Manufacturing Activity: 3.2e v 4.1 prior

- 11:30 (US) Treasury to sell combined $50B in 3-Month and 6-Month Bills

- 16:00 (KR) South Korea Jan Consumer Confidence: No est v 102 prior

- 20:30 (CN) China Dec Industrial Profits Y/Y: No est v -4.2% prior

- 22:30 (HK) Hong Kong to sell 3-month, 6-month and 12-month Bills