EU Market Update: Tuesday’s UK services PMI data key for sterling as manufacturing and construction PMI data show contraction

– (CN) New tightening measures for the property markets in China send Shanghai Property Index lower by over 9%
– (IT) Italian bonds and equities underperform, as government formation process continues to weigh.
– (ES) IBEX-35 outperforms, as Spain’s Feb unemployment data beats market expectations
– (EU) EUR/USD continues to trade near 1.30, GBP/USD near 1.50 ahead of Thursday’s BoE and ECB meetings.
– (UK) UK Feb PMI construction data hits lowest level since Oct 2009, amid concerns about a “”triple-dip” recession
– (AU) AUD/USD hits 8-month low in Asia, amid underperformance in commodity currencies
– (EU) There are some expectations that today’s EU finance minsters’ meeting could cover topics including loan relief for Ireland and Portugal, Cyprus, Italy’s political situation and ESM aid for banks.
– (UK) HSBC fall over 2.5% after reporting FY12 results, records $5.2B of adverse fair value movements on own debt

– Indices: FTSE 100 -0.50% at 6,348, DAX -0.60% at 7,666, CAC-40 -0.20% at 3,693, IBEX-35 +0.10% at 8,195, FTSE MIB -1.4% at 15,455, SMI -0.30% at 7,581, S&P 500 Futures -0.30% at 1,512

– Equity markets are broadly lower, as the negative sentiment in China has weighed. Additionally, Italy’s FTSE MIB has underperformed amid ongoing concerns about the government formation process in the country. European banks are broadly lower, led by weakness in the Italian banking sector. HSBC has declined by over 3% following its FY earnings report. Resource-related firms are mostly lower, tracking the declines in oil prices. Looking ahead, markets are expected to focus on the later today euro zone finance ministers meeting. Also, on Thursday’s session the ECB and Bank of England are due to hold their monetary policy meetings. US monthly payrolls data is due on Friday

– UK movers [Centrica +1.5% (broker commentary); Anglo American -3% (broker commentary), HSBC -2% (FY ROE below target)]

– Germany movers [QSC +2% (raised dividend)]; K+S -1.5% (broker commentary)]

– France movers [France Telecom +3.5% (broker commentary) EADS +1% (to be added to the Euro Stoxx 50)]

– Spain movers [Repsol +2% (sale of Treasury stock), Telefonica +0.90% (broker commentary)]

– Switzerland movers [Transocean +2% (Q4 profits above ests, resumed dividend); Kuehn & Nagel -4.5% (Q4 profits declined y/y)]

– EUR/USD: The pair saw a tight range of 20 pips on either side of the psychological important 1.3000 level
– GBP/USD dropped from 1.5050 to 1.5000 after weaker than expect Construction PMI out of the UK. The pair rally back to the 1.5025 level
– USD/JPY: The Yen weakened into the Asian equities markets close as new property market regulations led the China stock market low. USD/JPY traded from 93.30 to 93.65 basing around 93.55/93.60 after Asia closed

***Fixed Income***

***Economic Data***
– (UK) FEB PMI CONSTRUCTION: 46.8 V 49.0E (lowest level since Oct 2009)
– (EU) EURO ZONE JAN PPI M/M: 0.6% V +0.5%E; Y/Y: 1.9% V 1.9%E

***Looking Ahead***
– 06:30 (BR) Brazil Central Bank Weekly Economists Survey
– 06:30 (US) Daily Libor Fixing
– 08:00 (US) Fed’s Yellen speaks in Washington
– 08:30 (SG) Singapore Feb Purchasing Managers Index: 50.2e v 50.2 prior; Electronics Sector Index: 49.4e v 49.9 prior
– 08:50 (FR) France Debt Agency (AFT) to sell combined €7.4B in 3-month, 6-month and 12-month Bills
– 09:00 (EU) Euro-Area Finance Ministers meet in Brussels
– 09:30 (EU) ECB calls for Bids in 7-Day Main Refinancing Tender
– 09:45 (US)Feb ISM New York: No est v 56.7 prior
– 10:00 (DK) Denmark Feb Foreign Currency Reserves (DKK): No est v 495.6B prior
– 11:00 (US) Fed to buy $1.25-1.75B in bonds
– 11:00 (IC)Iceland Q4 Current Account (ISK) No est v 29B prior
– 11:30 (US) Treasury to sell combined $65B in 3-Month and 6-Month Bills
– 11:45 (US) Former Fed Chairman Volcker speaks in Washington
– 13:00 (MX) Mexico Feb IMEF Manufacturing Index: No est v 52.1 prior; Non Manufacturing Index: No est v 51.7 prior
– 13:15 (US) Fed’s Powell on ‘to big to fail
– 16:00 (CO) Colombia Feb Producer Price Index M/M: No est v -0.1% prior; Y/Y: No est v -2.5% prior
– (MX) Banamex Survey of Economists
– 20:45 (CN) China Feb HSBC Services PMI: No est v 54.0 prior
– 22:30 (AU) RBA Interest Rate Decision: Expected to leave Cash Target unchanged at 3.00%


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