Market movers today
The leader of Italy's centre-left Democratic Party, Matteo Renzi, is expected to be formally handed the job of forming a new government. Renzi is expected to start negotiations on a common political programme with its current coalition partner New Centre Right, which supports it needs for a majority in the Senate. Renzi might present the new government's programme to the parliament later this week ahead of a confidence vote.
Euro-group finance ministers will meet this afternoon. The details of the banking union will continue to be on the agenda in addition to a discussion about an exit programme for Portugal. ECB's Nowotny will speak around noon.
Selected market news
In China new credit expanded faster than expected in January according to data released on Saturday. Aggregate financing, the broadest measure of new credit, in January expanded CNY2.6trn (consensus: CNY1.9trn) after increasing CNY1.7trn in December last year. A large increase in new credit is not unusual in January and money supply growth (a better leading indicator) continued to ease to 13.2% y/y in January from 13.6% y/y in December. Hence, the data are still consistent with a moderate slowdown, albeit at this stage they do not suggest that China faces a severe credit crunch.
In Japan data released overnight showed that GDP in Q4 13 only expanded 1.0% q/q ann. (consensus: 2.8% q/q ann.) after growing just 1.1% q/q in the previous quarter. This was markedly weaker than expected. Private consumption and business investment rebounded markedly in Q4 and domestic demand increased a healthy 3.2% q/q ann. However, as imports surged and exports only gained marginally, net exports were a substantial drag on growth despite the sharp depreciation of the yen since late 2012. It should be noted that the weak GDP growth in Q4 is inconsistent with strong business surveys and industrial production and it should be remembered that preliminary GDP data in Japan are often revised markedly. For that reason we do not expect the weak GDP number to force more easing from Bank of Japan in connection with tomorrow’s monetary easing. However, the likelihood of easing in the coming months has increased not least if JPY continues to appreciate.
Moody’s late Friday affirmed Italy’s Baa2 credit rating and the credit rating outlook was raised to stable from negative citing the financial strength and reduction of risks from contingent liabilities and Prime-2 debt ratings including the potential recapitalisation needs of Italian banks.
Overall the market sentiment remains slightly positive with Asian stock markets higher across the board. The markets continue to shrug off the recent weak US data. Nikkei has recovered after initially declining about 1% on the back of the weak GDP data. Emerging market currencies continue to recover moderately in Asian trade.
To Read the Entire Report Please Click on the pdf File Below