European Market Update - Swiss Retail Sales Blow Out Estimates in December

- The European indices are currently trading lower in the session for the second consecutive day. Weighed down by the mining sector.
- European government bonds are currently trading higher in the session, following through after some large gains during yesterday’s session. In the UK gilts are trading relatively flat after significant gains were made up poor retail sales figures and poor data in the US.
- Final January CPI figures in Germany were unchanged from their preliminary readings showing that inflation accelerated in January after the VAT hike was instated.
- Swiss adjusted retail sales for the month of December came in at 9.2% y/y, well above estimates of 2.5%, reaching a new six-month high. December retail sales were boosted by Christmas sales, which benefited from the recent rise in consumer confidence in the Swiss economy.
- According to a preliminary reading the rate of job creation in France did not accelerate during the fourth-quarter when compared to the third-quarter, a sign that the economy recovery in Europe may be fairly limited. The preliminary reading on wages show that wage growth slowed when compared to the third-quarter.
- The People’s Bank of China announced during the European session that they are raising their reserve requirement by 50bps bringing the reserve requirement up to 10.00%. Note that the change becomes effective as of February 25. Upon raising the reserve requirement the PBOC said that the Chinese trade surplus remains a problem.
- The EU raised its 2007 GDP growth forecasts, and cut inflation forecasts for Italy, Germany, Spain, and the Euro-Zone. The EU cut France’s inflation forecast, but cut France’s GDP growth forecast as well. Additionally the EU boosted the UK’s growth forecast, but left the inflation forecast unchanged. The EU boosted 2007 Euro-Zone growth forecast to 2.4% from 2.1%, and cut the Euro-Zone inflation forecast to 1.8% from 2.1%. The EU said that it expects significant labor market improvements in 2007, and reiterated that higher than expected wage settlements pose inflation risks.
- Front month crude oil futures are currently trading lower in the session on little news. Similarly the metals are also trading lower, with gold falling by as much as $4.00 in the session.