European Market Update 2/9 - UK Trade Deficit Widens in December

- The European indices are currently trading higher after crude oil pushed above the $60 handle for the first time in over one month.
- European government bonds are currently trading lower in the session after the ECB’s Trichet signaled yesterday that the ECB is likely to raise interest rates at the March policy meeting. In the UK gilts are trading lower after the UK trade deficit widened resulting from currency appreciation.
- French industrial production rose for the first time in four months in December due to an increase in the production of cars and manufacturing components. The French trade balance fell to a deficit of €2.9B in the month of December bringing the total deficit for 2006 to €29.2B, widening from the 2005 deficit of €22.9B.
- Italian industrial production reached 2.0% M/M, its highest level since April of 1997; On a work day adjusted basis industrial production reached 5.0% Y/Y, its highest since August of 2005. The rise in industrial production was led by an overall increase in demand, with the demand for cars representing one of the largest leaps.
- Norwegian CPI fell to its lowest level since July of 2001 at –1.3% M/M, while underlying CPI was unchanged at 1.0% Y/Y. Both numbers fell below analyst estimates easing pressure on the central bank to raise rates, and causing a sell off in the Krone.
- The UK trade balance widened the most in seven months on a decrease in exports resulting form the recent appreciation of the Pound. The visible trade balance was a deficit of £7.1B.
- The Bank of International Sentiment’s White said overnight that there is no sign of a big drop in USD shares of reserves worldwide. White said that the USD must drop heavily overtime, but noted that an adjustment must be orderly. White said that the ECB is correct over their inflation concerns noting that more tightening is warranted.
- Front moth crude oil futures are currently trading lower in the session, dipping into negative territory for the first time, slightly below the $60 handle on little news overnight.