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Pre market briefing, including Euro-area should decline below 2% during 2013, indicates ECB


UK Market Snapshot

UK markets finished higher yesterday, as upbeat US housing starts and initial jobless claims data raised hopes of a US economic growth revival.  International Consolidated Airlines climbed 4.3%, after British Airways unveiled new routes and terminal changes for summer 2013. Associated British Foods jumped 3.2%, after the company’s earnings climbed more than the estimates in its first-quarter. Home Retail Group surged 12.4%, after the company announced that its full-year earnings would beat forecasts. Banks, HSBC and Barclays advanced 1.1% and 0.9%, respectively, after a broker’s positive report for the banking sector.  On the flipside, Rio Tinto declined 0.5%, after the company’s CEO, Tom Albanese, stepped down from his position on news that the company would book a $14bn impairment charge for its aluminium unit and Mozambique coal assets. Xstrata and Glencore International retreated 0.4% and 0.1%, respectively. The FTSE 100 advanced 0.5%, to close at 6,132.4, while the FTSE 250 rose 0.7%, to settle at 12,847.6.

US Market Snapshot

US markets closed higher yesterday, as better-than-forecast US initial jobless claims and housing data offered respite from concerns over the US debt-ceiling. CBS Corp surged 7.9%, as the company indicated that it plans to convert its outdoor advertising unit into a real-estate investment trust. Homebuilders, PulteGroup, H & R Block and Lennar Corp climbed 5.3%, 4.9% and 3.5%, respectively, following upbeat December US housing starts data. BlackRock jumped 4.4%, as the company’s fourth quarter profit came in ahead of market expectation and after it boosted its dividend and buyback program. On the flip side, Bank of America plunged 4.2%, as it reported a decline in revenue and profits for the fourth-quarter. The S&P 500 Index gained 0.6%, to settle at 1,480.9, while the DJIA Index rose 0.6%, to close at 13,596.0. Meanwhile, the Nasdaq Index rose 0.6%, to finish at 3,136.0.

Europe Market Snapshot

Other European markets ended higher yesterday, on robust US housing starts and jobs data and after strong demand at a Spanish bond auction. Carrefour soared 6.1%, as the retailer posted a modest rise in its fourth-quarter sales and confirmed its fiscal 2012 operating profit view. French banks, BNP Paribas and Credit Agricole jumped 3.2% and 2.5%, respectively, on higher risk appetite among investors. HeidelbergCement and ThyssenKrupp climbed 3.2% and 2.2%, respectively, on improved demand outlook as robust economic data boosted global growth forecast. BASF added 1.2%, as the company got closer to pushing through its $900 mln takeover of Pronova BioPharma. Bucking the trend, SAP AG slipped 1.5%, following a broker downgrade to ‘Neutral’ from ‘Buy’. The FTSEurofirst 300 Index added 0.5%, to close at 1,165.5. Among other European markets, the German DAX Xetra 30 gained 0.6%, to finish at 7,735.5, while the French CAC-40 rose 1.0%, to settle at 3,744.1.

Asia Market Snapshot

Markets in Asia are trading higher this morning, as the Chinese economy grew by 7.9% in the fourth quarter and following a downward pressure on the yen. In Japan, exporters, Sony, Tokyo Electron and Honda are trading 8.5%, 7.2% and 2.9% higher, respectively, as the yen weakened against the dollar. Advantest Corp is trading 7.5% higher, after bellwether, Intel stated that it was raising capital spending. In Hong Kong, retailers, Belle International Holdings and Esprit Holdings are trading 2.9% and 1.3% higher, respectively. Resource stocks are trading higher, with Aluminum Corp. of China rising 2.6%, while Angang Steel edging up 2.1%. In South Korea, financial stocks are on the rise, with Samsung Life Insurance gaining 5.0% and Woori Finance Holdings rising 4.2%. The Nikkei 225 Index is trading 2.4% higher, at 10,863.5. Hang Seng Index is trading 0.8% higher, at 23,514.1, while the Kospi Index is trading 0.2% higher, at 1,978.9.

Key Economic News

Germany's Schaeuble worried by Japan monetary easing

German Finance Minister, Wolfgang Schaeuble stated that, he was very concerned about an expected further easing of monetary policy in Japan, which the new government is encouraging.

European economy should gradually recover later in 2013, indicates ECB

The European Central Bank (ECB) in its monthly bulletin indicated that the inflation in the Euro-area should decline below 2% during 2013 and that Euro-zone economy should start to gradually recover from recession later this year. However, it also added that risks to the economic outlook remain on the downside.

Euro-zone construction output fell in November

On a seasonally adjusted monthly basis, construction output in the Euro-zone retreated 0.4% in November, following an upwardly revised flat reading recorded in October. On an annual basis, the construction output fell 4.7% in November, from an upwardly revised 3.3% drop registered in the previous month.

Swiss producer and import price inflation rose in line with expectations in December

On a monthly basis, the Producer and Import Price Index rose 0.1% in December, in-line-with-market- expectations and compared to a flat rate recorded in the prior month. Annually, the Producer and Import Price Index rose 1.0% in December, compared to a 1.2% rise recorded in the previous month.

Foreign currency position, gold prices to underpin SNB's 2012 profit

The Swiss National Bank (SNB) stated that, it expects to report a profit of around CHF 6 billion in the 2012 financial year, underpinned by strong foreign currency investment and rising gold prices. The bank further detailed that, foreign currency positions contributed about CHF 4.7 billion to profit and gold holdings added CHF 1.4 billion.

US housing starts rose to a four-year high in December

On a seasonally adjusted monthly basis, housing starts in the US surged up 12.1% to annual rate of 954,000 in December, the highest annual rate since June2008 and from the a downwardly revised 4.3% drop or 851,000 starts in November. Market had expected housing starts to climb to an annual rate of 3.3% to 887,000, from the 861,000 originally reported for the previous month. Meanwhile, on a monthly basis, building permits rose a mere 0.3% in December, following an upwardly revised 3.7% increase recorded in November. Market had expected the building permits to rise 0.5% MoM in December.

Lockhart sees Fed’s bond buying continuing beyond mid-2013

Federal Reserve Bank of Atlanta President, Dennis Lockhart stated that, he expects the central bank to continue buying bonds beyond mid-year to achieve sustained improvement in the labour market.  In an interview, he noted that, “It is probably going to be a struggle to see by mid- year” enough progress in the jobs outlook to warrant stopping”.

US Philadelphia area manufacturing activity declined in January

The Federal Bank of Philadelphia reported that, its Diffusion Index of Current Activity fell to a reading of

-5.8 in January, from a reading of 4.6 recorded in December. Market had expected the index to drop to a reading of 6.0 in January, from a reading of 8.1 originally reported for the previous month.

US jobless claims fell to five-year low last week

For the week ended 12 January 2013, initial jobless claims in the US fell to 335,000, the lowest level since January 2008 and compared to the previous week's revised figure of 372,000. Market was expecting the claims to drop to 368,000, following 371,000 claims originally reported for the previous week. Additionally, for the week ended 5 January 2013, continuing claims in the US rose to 3.214 million, compared to the preceding week's revised level of 3.127 million.

Canadian international securities transactions dropped more-than-expected in November

International securities transactions in Canada fell to C$5.62 billion in November, compared to a downwardly revised C$12.67 billion recorded in the previous month. Market had expected the transactions to fall to C$ 10.0 billion in November. In contrast, Canadian purchases of foreign securities touched a five and half year high in November. Canadian investors bought C$7.81 billion in foreign securities in November, up from C$3.36 billion in October, and the highest since the C$12.55 billion recorded in April 2007.

Japanese investors bought foreign debt last week

The Ministry of Finance reported that, the Japanese investors sold ¥155.3 billion of foreign stocks in the week ended 11 January 2013 and purchased a net ¥ 391.3 billion of foreign bonds and notes during the week. Additionally, foreign investors purchased a net ¥ 139.0 billion in Japanese bonds and bought ¥233.8 billion in Japanese stocks.

Japan’s nationwide department store sales fell in December

The Department Stores Association reported that, on an annual basis, nationwide department store sales retreated 1.3% in December, compared to a 2.2% rise recorded in November. Meanwhile, on an annual basis, Tokyo department store sales fell 1.1% in December, compared to a 3.1% growth recorded in the previous month.

Chinese economy rose better -than-expected in 4Q FY2012

On a year to date basis, real gross Domestic Product in China 7.8% annually in 4Q FY2012, compared to a 7.7% rise recorded in the previous quarter. On an annual basis, real GDP rose 7.9% in 4Q FY2012, following a 7.4% growth recorded in 3Q FY2012.

Chinese industrial production rose in December

On an annual basis, industrial production in China grew 10.3%in December, accelerating from a 10.1% rise recorded in November. Market had expected the industrial production to increase 10.2% YoY in December. On a year to date basis, industrial production rose 10.0% YoY during the twelve months to December, following similar rate of increase recorded in November.

Chinese retail sales rose slightly more-than-expected in December

On a yearly basis, retail sales in China grew 15.2% in December, faster than 14.9% expansion recorded in the previous month. Market had expected the retail sales to record a growth rate of 15.1% in December. Meanwhile, on an annual basis, retail sales rose 14.3% during the twelve months to December, following a 14.2% year to date increase recorded in November.

Chinese fixed asset investment rose less-than-expected in December

On a year to date basis, urban fixed asset investment in China increased 20.6% in December annually, down from the 20.7% growth in the first 11 months. Market had expected the fixed asset investment in urban areas to rise 20.7% YoY in December.

Chinese business sentiment improved in January

The MNI flash business sentiment indicator in China rose to a reading of 54.94 in January, compared to a reading of 52.22 recorded in the previous month.


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