European Market Update 2/14 - UK Jobless Claims Lowest Since May 2004

- The European indices are currently trading in positive territory in the session led higher by the commodity stocks on higher commodity prices, as well as positive earnings reports from Total and Electricitie de France ahead of the European open.
- European government bonds are trading rather flat ahead of Bernanke’s speech. The FED’s Bernanke is set to speak on monetary policy in front of the senate at 10:00 ET today. Germany sold €4.98B .375% 2017 bunds in a top-up auction overnight with an average yield of 4.11% and a bid-to-cover of 1.8; the bid-to-cover on the previous auction was 1.8. Italy sold €2.5B in both a 5-year and 15-year 3.75% bond auction. The average yield on the 5-year auction was 4.05% while the bid-to-cover was 1.57. The average yield on the 15-year was 4.42%, while the bid-to-cover was 1.61. Gilts drifted lower in the session, but spiked sharply higher upon the release of the BOE inflation report, only to be knocked back down again after some comments from the BOE’s King. Gilts are currently trading lower in the session.
- In the UK the claimant count rate came in at 2.9% below estimates of 3.0%, while the jobless claims change was –13.5K, falling to its lowest level since May of 2004. The number of resident claiming jobless benefits fell to 925.8K as economic growth pushed companies to hire more employees. Average earnings including bonus fell to 4.0%, below estimates of 4.1%, and in line with its six-year average.
- In its quarterly inflation reports the Bank of England said that inflation is seen falling below target by Q4 of 2007, noting that inflation is seen at about 1.8% by the end of 2007. The report also points out that near term inflation risks are seen on the downside while medium term risks are seen on the upside. After the report the BOE’s King said that greater labor market slack could slow CPI growth. King also noted that it may take longer than expected for inflation to reach its target level. King pointed out that the BOE MPC will focus on medium term inflation.
- In an interview published overnight the ECB’s Liebscher said that there is concern over upside risks for inflation in the Euro-Area. Liebscher cited wage demands, oil prices, strong credit growth and indirect tax hikes. Liebscher also noted that the ECB does not have a target exchange rate for the EUR/USD and other big currencies.
- The Bank of France’s business sentiment survey for the month of January showed that sentiment rose to 107 from 104. The BOF forecasted Q107 GDO at 0.7% Q/Q and 2007 GDP at 1.5%. The BOF said that the industry outlook remains positive.
- The German DIHK raises its 2007 GDP growth forecast to 2.3% from 1.5% noting that the risks to the German economy are the weak JPY and the US slowdown. The DIHK said that they see a 25bps interest rate hike in March, noting that another rate hike cannot be ruled out.
- The OECD released a report on the Swedish economy overnight. According to the report Sweden should tighten its fiscal framework and consider a uniform VAT hike. The report also notes that Riksbank’s policy is highly credible, but that long-term inflation expectations need to be monitored closely.
- Front moth crude futures are currently trading lower in what has been a quiet session on the energy front thus far. The metals are currently trading higher in the session.