Danske Daily

Chinese trade surplus widens as import growth declines sharply

Stock markets higher in Asia. Bond yields and EUR/USD up a bit

UK RICS housing survey surprises to the upside

US consumer credit rose sharply in November

No tier-1 data today on global agenda.  Primary election in New Hampshire, US.
Swedish industrial production and Norwegian CPI out in Scandinavia.

Markets Overnight

Chinese trade data released overnight showed a surprising widening of the trade surplus to USD16.52bn in December (consensus USD8.8bn) from USD14.53bn in November. The move came on the back of  a sharp decline in import growth from 22.1% in November to 11.8% in December (consensus 18.0%), which may signal slower growth in the domestic economy. Export growth was in line with expectations at 13.4% down from 13.8%.

Equity markets rose slightly in the US yesterday on little news and the S&P future has continued higher in Asian trading. The Chinese stock market is up for the third day in a row after reaching very low levels at the start of the year.

US  10-year bond yields are up 5bp from the European close taking back  yesterday‟s decline.

In FX markets EUR/USD is up on  the  back of higher risk appetite. In Scandinavia EUR/SEK is lower this morning while EUR/NOK is broadly unchanged.

The UK RICS housing survey surprisingly rose to -16 in December, the highest reading since July 2010. The survey rose from -17 in November whereas consensus expected it to decline to -19.

Data for  US consumer credit released yesterday rose sharply by USD20.4bn in November (consensus USD7bn, previous USD6.0bn). The rise in revolving credit was the sharpest since spring 2008 and underpins the picture of rising consumer spending and easing of credit standards in the US – contrary to what we see in Europe.

Global Daily

Focus today: We have a relatively light calendar today. US Treasury Secretary Geithner will today start his two-day visit to China. Sanctions against Iran and the state of the global economy will top the agenda and  in addition  Geithner is unlikely to miss this opportunity to pressure China for further appreciation of CNY. The Hungarian chief negotiator will today continue his discussions with the IMF but no conclusion is expected until Thursday when a meeting with IMF president Lagarde  has been scheduled. In the US focus will be on the Republican primary election in New Hampshire where Mitt Romney is expected to pull another win. The data calendar today is very light. We expect industrial production in France to have contracted in November, in line with the German
industrial production data released yesterday. Finally  there will be speeches by FOMCmembers Williams, Pianalto and George.

Fixed income markets: With only a few scheduled events of interest, attention is likely to be on today‟s issuance of government bonds. Austria,  the Netherlands and Denmark are all printing today.  A tap of up to EUR3.5bn in the Netherlands is more than outweighed by the maturing 2.5% Jan-2012 bond (EUR14.3bn). In Austria EUR2bn will be tapped in 5Y and 10Y bonds respectively. In the light of the recent underperformance of RAGB, related to the developments in Hungary, it should prove interesting to see how solid demand is. Meanwhile, the two Danish taps are likely to see solid demand, as Denmark remains a safe haven. An accumulated EUR5bn is tapped in 2% „14 and 3% ‟21.

FX markets: The resignation of SNB President Hildebrand yesterday pushed EUR/CHF down close to 1.21, the lowest level since September 2011. However, the cross recovered somewhat as the board said that its 1.20 cap remains unchanged. The SNB council will hold an extraordinary meeting today and the head of the council, Raggenbass, said that a successor will be named as soon as possible. Jordan has taken over as interim President and is expected to be officially named very soon. In our view this means that the SNB policy will remain  the same. Deflation became more pronounced in December and we still look for a more ambitious target being introduced over the next three to six months. Otherwise, none of the key events today are expected to be able to move the FX markets very much. The markets continue to focus on Greece and Hungary. The forint has recovered slightly as the Hungarian chief negotiator started his talks with the IMF after the government was able to sell the planned amount of debt at yesterday's bond auction. However, we are still very cautious with HUF.   

Scandi Daily

In Norway the week‟s big release is December inflation. While inflation is far from the
most important factor in the Norwegian economy at present, we expect continued high cost growth and surprisingly robust demand for consumer goods to limit the scope for inflation to slow notably. The fall in November was probably due largely to reductions in prices for winter clothing and sports equipment on account of the unusually warm weather. We therefore expect core inflation to rise moderately to 1.1% y/y, which is somewhat lower than Norges Bank assumed in the October monetary policy.