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Pre Market Briefing, including 'Weak housing market hampering US recovery'

UK Market Snapshot

UK markets finished lower on Friday, amid downbeat Chinese trade data and on news that Greece had not secured a second bailout as the Euro zone Finance Ministers demanded more steps and a parliamentary seal of approval from Greece. Miners, Kazakhmys, Anglo American and ENRC dropped between 3.5% and 4.5%, following a sharp fall in China’s imports in January 2012. Royal Bank of Scotland, Lloyds Banking Group and Standard Chartered declined 3.1%, 3.1% and 1.4%, respectively. National Grid retreated 1.2%, after an analyst downgraded its rating on the stock to ‘Neutral’ from ‘Overweight’. Cable & Wireless Communications tumbled 16.6%, after the company cut its full-year earnings forecast for its Panama unit. The FTSE 100 shed 0.7% to close at 5,852.4, while the FTSE 250 fell 0.6% to settle at 11,167.6.

US Market Snapshot

US markets closed lower on Friday, amid weaker-than-expected consumer confidence data and after Euro-zone Finance Ministers refused to approve a €130 billion rescue package until Greece backs austerity measures. Banks, Morgan Stanley, Citigroup and Bank of America dropped 3.3%, 2.2% and 1.3%, respectively. Energy stocks, Halliburton, Exxon Mobil and Chevron fell between 1.0% and 1.9%. Alcoa and Freeport-McMoRan Copper & Gold dropped 3.3% and 3.2%, respectively, after Chinese imports fell in January. First Solar tumbled 10.4%, as a broker downgraded its rating on the stock to ‘Neutral’ from ‘Buy’ and after permitting issues delayed a US loan guarantee for a power plant in California. The DJIA fell 0.7% to settle at 12,801.2, while the NASDAQ slid 0.8% to close at 2,903.9. The S&P 500 slipped 0.7% to settle at 1,342.6. 

Europe Market Snapshot

Other European markets finished lower on Friday, as fears over Greece debt default intensified after Euro-zone Finance Ministers held back further financial aid for Greece. Saab tumbled 8.6%, after reporting larger-than-expected fourth-quarter loss. Banks, Societe Generale, Commerzbank, BNP Paribas and Deutsche Bank dropped between 4.0% and 7.5%, after Euro-region Finance Ministers delayed the Greek loan package. ThyssenKrupp declined 3.9%, after a broker cut its rating on the European steel sector to ‘Neutral’. GDF Suez retreated 3.7%, following a 13.0% fall in its 2011 results. Alcatel-Lucent surged 12.1%, after the company stated that it expects to increase its adjusted operating margins in 2012. The FTSEurofirst 300 index declined 0.9% to close at 1,064.1. Among other European markets, the German DAX Xetra 30 fell 1.4% to close at 6,693.0, while the French CAC-40 shed 1.5% to settle at 3,373.1. 

Asia Market Snapshot

Markets in Asia are trading higher this morning, after Greek Prime Minister, Lucas Papademos won parliamentary approval for austerity measures to secure a second international bailout to avoid a default, outweighing a report that Japan’s economy contracted more-than-expected in the fourth-quarter of 2011. In Japan, Softbank is trading 3.5% higher, amid news that the company was likely to win a new spectrum. Fanuc is trading 2.4% higher, amid reports that the company plans to double its production of tools used to make smartphone components. In Hong Kong, telecom sector stocks, China Mobile and China Unicom Hong Kong are trading 1.1% higher, each. In South Korea, automobile sector stocks, Kia Motors and Hyundai Motor are trading 3.5% and 1.8% higher, respectively. The Nikkei 225 index is trading 0.8% higher at 9,015.0. Hang Seng index is trading 0.7% up at 20,928.6, while the Kospi index is trading 0.6% higher at 2,005.1.

Commodity, Currency and Fixed Income Snapshots

Crude Oil


At 0433GMT today, Brent Crude Oil one month futures contract rose 0.86% or $1.01, to trade at $118.32 per barrel, after Greece’s parliament approved austerity measures to secure its second international bailout. Also, Overseas Shipholding Group, Frontline Ltd. and owners controlling more than 100 supertankers announced that they would stop loading cargoes from Iran. On Friday, the contract fell 1.08% or $1.28, to settle at $117.31 per barrel, after Euro-area Finance Ministers delayed approval of a second rescue package for Greece, raising concern that the European debt crisis would reduce the demand for crude oil.

Gold

At 0433GMT today, gold futures contract gained 0.27% or $4.70, to trade at $1,730.00 per ounce, as the trade deficit in the US widened to $48.8 billion in December, compared to a revised deficit of $47.1 billion in November. On Friday, the contract lost 0.91% or $15.90, to close at $1,725.30 per ounce, as the dollar strengthened against other major currencies, decreasing the appeal of the precious metal.

Currency

At 0433GMT today, the EUR strengthened against the USD, gaining 0.58%, to trade at $1.3248, after Reuters and the University of Michigan reported that the Consumer Sentiment Index in the US dropped to 72.5 in February from 75.0 in January. On Friday, the EUR lost 0.79% versus the USD, to close at $1.3171.

At 0433GMT today, the GBP strengthened against the USD, gaining 0.39%, to trade at $1.5792. On Friday, the GBP lost against the USD, falling 0.51%, to close at $1.5731, as the producer price inflation in the UK eased to 4.1% in January, compared to a rate of 4.8% recorded in the previous month. Market had expected the inflation to ease to 3.7% in January.

Fixed Income

In the US, long term treasury prices rose on Friday, pushing the yields on 30-year bond lower, amid news that Euro-area Finance Ministers demanded for more cuts and assurances from Greece before they could approve of a second bailout, spurring demand for safe haven assets. On Friday, yields on 30-year bond decreased 9 basis points to 3.11%, while yields on 10-year notes fell 8 basis points to 1.96%. However, yields on 2-year notes remained flat at 0.27%.
 
Key Economic News

UK producer price inflation slowed to a 14-month low in January


On a year-on-year basis, the producer price inflation in the UK eased to 4.1% in January, marking the lowest annual rate since November 2010 and compared to a rate of 4.8% recorded in the previous month. Market had expected the inflation to ease to 3.7% YoY in January. Meanwhile, the Core Output Price Index rose 2.4% in January, the lowest annual rate since February 2010. Market had expected the index to rise 2.2% in January.

German inflation revised higher in January

On an annual basis, the Consumer Price Index in Germany stood at 2.1% in January, compared to an initial estimate of 2.0%.

French industrial output declined more-than-expected in December

On a monthly basis, the industrial production in France fell 1.4% in December, compared to a 1.1% increase recorded in the previous month. Market had expected industrial production to fall 0.7% MoM in December. Meanwhile, on a sequential basis, the manufacturing production slipped 1.4% in December, following a 1.4% increase recorded in the previous month. Market had expected the manufacturing output to fall 1.0% MoM in December.

Swiss consumer prices declined in January

On a year-on-year basis, the Consumer Price Index in Switzerland declined 0.8% in January, following a 0.7% fall recorded in December. Additionally, on a monthly basis, the index declined 0.4% in January. Market had expected the index to fall 0.3% MoM in January.

Weak housing market hampering US recovery

The US Federal Reserve Chairman, Ben Bernanke, stated that sluggish housing market is preventing a more robust economic recovery in the US.

US trade deficit widened to a six month high in December

The trade deficit in the US widened to $48.8 billion in December, marking the largest deficit since June 2011 and compared to a revised deficit of $47.1 billion in November. Market had expected the trade deficit to remain unchanged at a deficit of $47.8 billion originally reported for the previous month.

US Consumer Sentiment Index declined more-than-expected in February


Reuters and the University of Michigan reported that the Consumer Sentiment Index in the US dropped to a reading of 72.5 in February from a reading of 75.0 in January. Market had expected the index to edge down to a reading of 74.8 in February.

Canadian trade surplus widened in December

The trade surplus in Canada widened to C$2.7 billion in December, compared to a surplus of C$1.2 billion recorded in November. Market had expected the surplus to widen to C$1.5 billion in December.



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