Markets are starting the week somewhat flat and mixed Monday, although the news that Egyptian President Mubarak has finally gone is allowing some renewed risk appetite to filter through.
Preliminary data released by Japan overnight, showed the economy contracting by less than expected in the last quarter of 2010; GDP shrinking 0.3% compared to the previous quarter, or 1.1% annualised, as exports and domestic demand fell. As is often the case, the ‘not as bad as it could have been’ news brings somewhat mixed sentiment to the market today, the mild gains in Asia failing as European bourses opened.
This lack of conviction looks set to carry through the US session, with stock futures pointing towards a near flat open for Wall St today. A distinctly empty economic calendar for North America will keep attention focused on corporate news, although Canadian New Motor Vehicle Sales data at 0830EST has offered a little direction for the auto sector.
Elsewhere, General Electric (GE) is seeing some headlines today amid news it will be paying $2.8 billion for the well-support division of the UK oil services company John Wood Group. The move comes as part of GE’s ongoing drive to expand in the energy industry by acquisition and reduce dependency on their financial arm. It is the fourth such deal in recent months, with total spending hitting $7.5 billion.
In financials, Credit Suisse has agreed a debt swap and launched a sale of the much publicised contingent capital notes, known as CoCos, in order to bolster its capital. The move will be watched across the board to gauge market appetite for the instruments, which are designed to convert to equity at a pre-agreed level of financial stress to provide an instant boost to the bank’s books. Credit Suisse is placing $6.2 billion with Qatar Holdings and Olayan Group, while at the same time launching a public sale to the market.
In the FX market, the dollar is making good gains across pairs today, despite a sense of risk-on sentiment in the broader markets; cable down around 20 pips at $1.6005, the euro-dollar off 40 tics at $1.3466. The yen has been under pressure during the session on the back of the GDP data overnight, while the Egyptian pound has managed to hold firm as confidence returns to the region after President Mubarak resigned his position.
US Treasuries are squeezing out some gains today, again despite a general sense of confidence in the markets; traders positioning themselves ahead of a week of Fed buying as part of the so called QE2 plan.