Consolidative Tone at Start of Week

There has not been any meaningful follow through to the pre-weekend foreign currency rally and the euro, sterling and Swiss franc are consolidating in unremarkable activity at the upper end of Friday's ranges.  The yen is a bit stronger amid talk of exporter dollar selling after the greenback's upside momentum faded just above JPY84.00 last Thursday.   The Australian dollar initially extended its gains despite cautious comments from the central bank's Stevens.  However, some unwinding of Aussie-yen positions saw the Australian dollar slipped back into the pre-weekend congestion area $1.0570-80 area. 

Equity market are mixed.  The MSCI Asia-Pacific Index eked out a marginal gain, but markets open late, like India, Thailand and Malaysia are lower.  European bourses are mostly lower with the notable exception of Spain, which is posting broad based gains,  led by health care, consumer goods and technology sectors.  Only basic materials are lower. 

Bond markets are generally firmer, with Greece new 10-year bond the exception.  Despite poor press for the Iberian peninsula (PIMCO on Portugal and Wolfgang Munchau on Spain) both bond markets are firmer.  Portugal's 10-year yield is off 13 bp, the most in Europe, while Spain's 10-year benchmark yield is 1 bp lower. 

The news stream is light today.  The focus in the market is on the Greek CDS auction, 20-year bond supply by the EFSF and poor Italian industrial orders data.  January industrial orders plunged 7.4%, more than twice the market consensus.  The year-over-year decline accelerated to 5.6% from 4.3% in December.  Domestic orders fell 7.6% after falling 5.5% in December.  Industrial sales fell 4.9%. 

Meanwhile, the latest polls indicate a tighter race in France.  However, starting tomorrow, stricter media rules go into effect and this is seen more helpful for challengers to Sarkozy.  The French election is among the largest risk factors in Q2. 

The UK's budget on Wednesday and Italian labor reform (Monti and labor leaders met tomorrow) are the key political developments on the near-term agenda.  Separately, the polls confirm that the PP is running ahead in the March 25 Andalusia election.  Two polls show an outright majority.  A third poll makes it appear closer. 

Lastly, Apple holds a conference call today amid widespread speculation it i announce a dividend.  Talk is of a 2-3% annual dividend which, based on the closing price, could be worth $11.71-$17.57 a share.  a quarterly dividend of $2-$3 a share would boost personal income figures.  Apple last paid a dividend in 1995.