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Daily Agenda: Japan Posts Strong Export Numbers

Eurogroup to hold emergency meeting tomorrow to debate an extension for Greece; Argentina’s government faces mounting protests.

Two days after Japan reported fourth-quarter 2014 GDP that showed a weaker-than-anticipated rebound, January trade data revealed a huge increase in exports. Shipments abroad rose by 17 percent year-over-year for the month, the largest increase in four years, while the cost of imports fell sharply on lower fuel cost inputs. Yet while rebounding demand in Asia and the U.S. have been complemented by a weakened yen, household spending has yet to recover from last year’s consumption tax increase and deflationary pressure persists. For now, however, investors seem to be convinced that Japan’s glass is half-full, with the Nikkei 225 average achieving a 15-year high in trading this morning.

Greece hangs on the brink. A special Eurogroup meeting will be held on Friday in Brussels to discuss terms attached to an official Greek request submitted today for a temporary extension of existing credit lines. Comments from finance ministers of other European Union member states suggest that while negotiations are ongoing, there is still a significant divide between the terms proposed by Greek Finance minister Yanis Varoufakis and the demands of the troika: the EU, the European Central Bank and the International Monetary Fund. Separately, European central bank spokespersons reportedly denied European press reports that the bank had discussed the possibility of emergency capital controls with counterparties in Athens.

Protests break out in Argentina. Large, primarily peaceful, protests in Buenos Aires are putting more pressure on President Cristina Fernandez as public outcry erupts over the mysterious death of special prosecutor Alberto Nisman on the night before he was to unveil charges involving her administration. Nisman accused Fernandez of brokering a backroom deal to discredit evidence of Iranian responsibility for a 1994 bombing in exchange for a lucrative oil trade agreement.

U.S. economic data on deck. One day after the release of Federal Open Market Committee notes that featured a dovish discussion of a “longer time” before tightening, several key data points are on the schedule for release. Weekly initial jobless claims, due out this morning, have been volatile in recent weeks, with the 304,000-claimant spike last week part of a greater upward trend in the four-week moving average. Separately, Energy Information Administration oil and natural gas inventory data will both be released today, due to the shortened holiday week, with a special focus on weather-sensitive gas data given the frigid temperatures in the U.S. Northeast

Intuit to post earnings after the market close. Mountain View, California–headquartered tax preparation software firm Intuit will announce fourth-quarter 2014 results after equity markets close in New York today. The company was recently forced to halt temporarily state tax-filing services via its flagship TurboTax platform after the discovery of tens of thousands of fraudulent submissions.

Portfolio Perspective: Lift in Consumer Spending May Follow Debt Reduction and SavingsRandal J. Konik, Jefferies

Given the recent decline in gas prices, which could create up to $200 billion — or $930 per driver — in savings for consumers, the consumer sector equity research department at Jefferies conducted a survey to assess the potential impact to retailers. We found that low gas prices in an improving economy could lead to increased discretionary spending in 2015, but debt repayment and savings are likely to remain top consumer priorities. Retailers could start to see a meaningful benefit, however. Out of the participants in our survey, 55 percent expect to spend more in consumer discretionary categories over the next six months, assuming gas prices remain low. Interestingly, we also found that consumers plan on altering their spending patterns within consumer categories over the next six months. Restaurants and groceries, recently top consumer segments, are unlikely to pick up incremental spending share, while according to our survey, home goods and home improvement, apparel and accessories and electronics are bound to see a ramp up in spending share.

Randal J. Konik is an equity analyst with Jefferies in New York.

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