Market wrap
Sentiment was mixed, a London-session rally reversed in NY. Apart from the positive residual effects of the earlier dovish FOMC result, there was a story from Greek newspaper Ethnos that private sector bondholders had revised their debt-swap offer from a coupon above 4.0% to a more palatable 3.75%. Also helping was a good Italian bond auction and strong German consumer confidence. Sentiment turned lower in NY after some weak data for new home sales and leading indicators. The S&P500 shed 0.8% after making a six-month high at the NY open to be currently down 0.2%. The CRB commodities index is 0.5% higher, oil +1.3% and copper +1.9%. Global funding pressures continued to wane, US 3mth Libor extending a glacial drift lower since 5 January and down 0.3bp to 0.553%. US 10yr treasury yields slipped from 1.98% in London to 1.93% in NY. The Italian 10yr yield fell 18bp but Portugal's remained under pressure (+20bp) and made a fresh high.The US dollar index slipped in London and then consolidated. EUR rose in London from 1.3100 to 1.3184 but slipped to 1.3140 in NY. USD/JPY fell from 77.70 to 77.29. AUD rose from 1.0600 to 1.0688 - a fresh three-month high - and then fell to 1.0630. NZD rose from 0.8167 to 0.8236 - also a three-month high - and then fell to 0.8200. AUD/NZD traced a sideways range of 1.2950-1.2990.
Economic wrap
US Chicago Fed national activity index rose to 0.17 in Dec compared to a fall of 0.46 in Nov (downwardly revised from -0.37). The rise in the index was mainly driven by production (+0.24) and employment-related (+0.22) indicators. Consumption and housing indicators were down by 0.29. The sale, orders and inventory category was up 0.01 in Dec.Orders for US durable goods were positive for the third month in a row up 3% in Dec compared to an upwardly revised increase of 4.3% in Nov. The rise in Dec was, as in Nov, led by nondefense aircraft orders which were up 18.9%. Excluding transport, orders rose 2.1% in Dec compared to an increase of only 0.5% in Nov.
US initial jobless claims rose to 377K the week ending 21st Jan from an upwardly revised 356K. Claims have been volatile in recent weeks due to holidays but smoothing via the four-week moving average shows a continued modest improvement from 380k to 377.5K.
US leading index rose 0.3% in Dec, following a 0.2% rise in Nov (revised from 0.5%). The increase of the index was mostly led by the spread between short- and long-term interest rates, improvement in claims and gains in the factory workweek.
US new home sales were down by 2.2% in Dec after a rise of 2.3% in Nov (upwardly revised from 1.6%). The absolute sales fell for the first time in four months. The fall combined with the 3.5% decline in pending home sales may suggest early signs that the recent stability in the housing market may be faltering.
German consumer confidence rose to 5.9 in Feb from an upwardly revised 5.7 in Jan according to the GfK survey. This fifth consecutive increase and 10-month high was driven by a two-decade low unemployment rate and an improvement in consumer spending despite the ongoing travails of the wider Eurozone. The increase confirms the improvements in other German leading indicators such as the IFO yesterday and the PMI's/ZEW previously.
French consumer confidence rose slightly in Jan to 81 from a low of 80 and still hovering close to a three-year low. Business confidence fell to -12 in Jan, the third consecutive fall since the 10-year high of 28 in Apr 2011.
UK CBI retail sales were down to -22 in Jan from +9. Expected sales were -10, implying a further decline in consumer spending next month. After the negative GDP figure yesterday and another tick higher in the ILO unemployment, the case for further QE at next month's MPC meeting continues to build.
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