Daily Agenda: Europe Numbers Raise Expectation for ECB Intervention

German factory orders faltering; U.S. jobless numbers to be released; Standard Chartered closes equity division.



The release of minutes from the Federal Open Market Committee yesterday revealed nothing new, yet Treasury markets rallied anyway. The focus of market risk narratives has turned once again to Europe. The shock of the terrorist attack in Paris against satirical magazine Charlie Hebdo has polarized a nation already divided by partisan politics, and raised debate on security measures in the broader European Union. The attacks are not the only bad news for the region. November producer price index (PPI) figures released today by Eurostat indicated a marginal decline in the costs of goods at the factory gate. The broad gauge of the cost of goods in wholesale markets has registered a year-over-year contraction for 16 consecutive months. In light of yesterday’s surprise negative consumer price inflation reading, this latest data point adds more fuel to the fire for analysts anticipating a quantitative easing announcement from the next European Central Bank meeting later this month. The near-term question that this raises for investors is whether a bad-news-is-good cycle can see equities and sovereign debt markets rise on expectations of bank purchases and how low the euro can sink against the U.S. dollar.

German factory orders stumble. New factory orders in November contracted sharply according to Federal Ministry for Economic Affairs and Energy data released today. At a decline of 2.4 percent for the month in aggregate, domestic orders slumped by 4.7 percent, indicating that recent gains in activity measures may be in jeopardy for the EU’s largest economy.

U.S. jobless and credit data on deck. Initial jobless claims will be watched carefully in the U.S. after a surprise jump in last week’s figures. Last week’s pace of 209,000 newly laid-off workers is expected to moderate in this week’s reading, although analysts note that holiday seasons can present temporary distortions to the indicator. Separately, consumer credit levels for November will be announced with consensus forecasts for an increase of $15 billion after October’s $13 billion expansion largely driven by nonrevolving debt categories. The automotive and student loan segments continue to be the primary drivers of household credit expansion.

Standard Chartered shutters equity division. After mounting pressures from investors in recent quarters, London–headquartered Standard Chartered CEO Peter Sands announced a move to close equity trading operations in addition to up to a reduction of 4,200 in the bank’s retail branch network. Unprofitable institutional equity sales, trading and research segments will be eliminated as the bank struggles to rebound after a series of disappointing quarters impacted by slowing growth in the developing markets on which the financial institution focuses.

Bank of England holds steady. Today’s announcement from the Bank of England’s Monetary Policy Committee brought no surprises, with benchmark rates were left unchanged. With weak oil prices continuing to weigh on inflation and sluggish growth in Continental Europe, Bank of England governor Mark Carney and his colleagues are under little pressure to tighten despite recent rises in wages.

Constellation Brands beats estimates. Liquor giant Constellation Brands today reported fiscal third-quarter results with net income up 5 percent year-over-year and adjusted earnings per share of $1.23 versus analyst consensus forecasts of $1.14. Recently, the company’s stock has strongly outpaced the broad market with double-digit gains in the past three months that saw the S&P 500 rise less than 5 percent. After five consecutive quarters of double digit or better growth, some analysts have expected a moderation in the momentum of sales growth despite a strong international group of brands.