Key news
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Chinese HSBC manufacturing PMI improved slightly for the third month in a row
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Talks between Iran and IEAE have failed to ease tensions as Iran has denied IEAE access to a suspected nuclear-related military base
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USD/JPY traded above 80 in the early morning hours for the first time since August.
Markets Overnight
The flash estimate for the Chinese HSBC manufacturing PMI in February improved to 49.7 to 50.2 from 48.8 in January, but details were slightly weak. New orders in February were unchanged at 49.1, but the drop in export orders from 50.4 to 47.5 is a concern. The data suggest that China’s GDP growth is improving, but will remain below trend in Q1. With an improvement for the third month in a row it appears that the risk of a hard landing scenario for the Chinese economy is diminishing. Hence, monetary easing in China will continue to be cautious.
The International Atomic Energy Agency, IEAE, said this morning that Iran did not accept its request to visit a suspected nuclear-related military base. The talks with Iran, which have been going on for two days, have thus failed to ease tensions. Oil prices increased to a nine-month high on Iran supply worries earlier in the session, but then declined half a percent on concerns that high commodity prices will curb global demand.
In Greece the Collective Action Clause bill has been passed on to Parliament and will be voted upon tomorrow. The introduction of CACs means that Greece will almost certainly be downgraded to selective default by rating agencies. The Greek Finance Minister Evangeliz Venizelos said that PSI will reduce debt by 110bn, i.e. slightly more than previously anticipated.
Bank of England’s deputy governor Charles Bean said that the UK is in for a moderate recovery later this year as falling inflation eases the squeeze on household incomes.
The equity markets saw Dow briefly above 13000 for the first time since May 2008 before retrenching later in the US session, pulled down by concerns about higher oil prices. Dow and S&P500 ended the session up just 0.1%. The Nikkei index edged notably higher after meeting resistance at 9500.
US bond yields have been lifted slightly and the curve has steepened a bit following the approval of the second rescue package for Greece and a subsequent shift in focus towards the improving growth outlook. A two-year note issued yesterday sold USD35bn at 0.31%. The yield was the highest since the July 2011 auction.
In the FX markets USD/JPY traded above 80 in early morning hours for the first time since August and is currently trading just below that level reflecting better US data and the Japanese central bank’s planned asset purchases. The euro weakened slightly overnight and EUR/USD temporarily traded below 1.322. Scandinavian currencies and GBP have strengthened slightly overnight.
Danske Bank A/S
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