MINDENAO GOLD MINING (fka MDGM)

[Alex Chory]

from Saxobank, fwiw................

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Published: Feb. 02 2006, 10:41 GMT

Data watch today
ECB Rate Decision (and press conference), US Nonfarm Productivity, US Unit Labor Costs


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12:45 GMT ECB Rate Decision
The ECB is unanimously expected to leave rates unchanged at 2.25%, so that is what they will do. They want to be transparent and every change to be broadly expected. The market does, however, expect the ECB to hike rates by another 25 bps. at the upcoming March meeting.

13:30 GMT ECB Rate Conference
This will be the interesting part today. The ECB has mentioned the increased energy prices at several previous occasions. Since they insist on including energy costs in their inflation targetting and since energy costs are again higher with Brent Crude trading above 65 USD/bbl, this could cause a hawkish tone at the press conference today.

Unless we see some really hawkish comments at the press conference, the rate outlook should still favour USD over EUR, and the recent sell-off in EUR/USD should continue.

13:30 GMT US Unit Labor Costs and Nonfarm Productivity
US Unit Labor Costs (4Q P) are expected at 3.5%, which is quite a lot. We have seen indications of a rather tight labor market lately, so this might keep the long rates high or even improve the US rate outlook. Another contributing factor could be the Nonfarm Productivity. The latest reading was impressively high as the figures have generally been in the last couple of years. The generally high labor produtivity has been one of the Fed's primary arguments for why they could have a period of extremely low interest rates without adding to inflationary pressure. Today's reading is expected at only 0.1% and this - using the Fed's own argument - would support the US rate outlook.

Fixed Income stands to be hurt by these figures and the general downtrend should continue. Looking at US 10-year Treasuries, there is still much downside, at least to 107-16.

Stocks are not likely to be affected by the figures in a big way, it will only slightly cap the gains from yesterday's trading.