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  • DAILY US OPENING NEWS - 24/07/12
    1. If the ECB does not resume its bond-buying programme in Spain, the government would consider seeking a full sovereign bailout, according to Spanish press reports. As such, any commentary from a meeting between Spanish economy minister De Guindos and the German finance minister Schaeuble will be closely watched.

     

    1. Chinese HSBC Flash Manufacturing PMI (Jul) M/M 49.5 (Prev. 48.2) - Slowest pace of contraction since February.

     

    1. Moody's revises Germany, Netherlands and Luxembourg's outlooks to negative, all remain at Aaa.

     

    1. RANsquawk European Morning Briefing Video: http://youtu.be/bhY0K6ggb88

    Market Re-Cap

    The major European bourses are down as US participants come to their desks, volumes still thin but higher than yesterday's, and underperformance once again observed in the peripheries, with the IBEX down 2.5% and the FTSE MIB down 1.2%. Last night's outlook changes on German sovereign debt caused a sell-off in the bund futures, with the effect being compounded as Germany comes to market with a 30-year offering tomorrow. The rating agency moves, as well as softer Euro-zone PMIs and reports that Spain is considering requesting a full international bailout have weighed on the riskier asset classes, taking EUR/USD back below the 1.2100 level. Furthermore, with Greece and a potential Greek exit now back in the news, investor caution is rife as the Troika begin their Greek report of the troubled country today.

    The Spanish and Italian 10-year yields have also responded to the Euro-woes, rising to session highs of 7.62% and 6.44% respectively; the spread over the benchmark bund also widening throughout most of the day. Spain's 3- and 6-month T-bill offering sold more than the indicative range at EUR 3.05bln, with stronger demand than but also higher yields, a similar theme to the last bill auction.

    WTI crude futures rallied in the overnight trade to USD 88.97 following the highest Chinese Manufacturing PMI in 5-months, pared these gains, now trading flat on the session.

    Looking ahead to the rest of the session, investors look forward to the July preliminary US Manufacturing PMI, as well as July's Richmond Fed Manufacturing Index and May's House Price Index, as well as corporate earnings from Apple after-market among others.

    Asian Headlines

    Chinese HSBC Flash Manufacturing PMI (Jul) M/M 49.5 (Prev. 48.2) (Newswires) The data shows the ninth straight month of contraction, however the pace of contraction may have been the slowest since February, according to HSBC.

    Japanese PM Noda held a rare meeting with Bank of Japan governor Shirakawa, leading to speculation that the two may have discussed ways to overcome Japanese deflation and the strong JPY. (Newswires) Shirakawa has reiterated that the Japanese economy is on a gradual recovery path, with the Eurozone debt crisis posing the greatest threat in the form of effects on Japanese business confidence and FX moves.

    US Headlines

    Fed's Raskin has said she expects to discuss the possibility of QE3 in relation to the Fed's dual mandate at the FOMC meeting scheduled for 31st July - 1st August. (Newswires)

    BarCap month end extensions Treasury: +0.02y

    EU & UK Headlines

    Moody's have lowered the outlook on Germany, Netherlands and Luxembourg's Aaa rating to negative from stable, and have affirmed Finland's Aaa rating; Outlook stable due to their unique credit profile. (FT-More) Moody's have said the change is due to the increased likelihood of a Greek Euro exit and the need for greater financial support for struggling Eurozone countries from the strongest members of the bloc. The moves from Moody's rating agency bring their ratings in line with S&P's on Netherlands and Luxembourg. Germany is currently rated AAA; Outlook stable at both S&P and Fitch. In response to Moody's action, the German finance ministry has said Germany is the Eurozone's anchor of stability, a role that it will continue to play. (Newswires)

    According to sources close to the Spanish government, if the ECB does not resume its bond buying programme on Spanish bonds, the government is considering asking for a full bailout that would allow it to meet its debt obligations for the rest of the year and avoid imminent financial collapse. (El Economista) Yesterday, the Spanish economy minister De Guindos ruled out the government requesting a full bailout.

    Elsewhere, The Spanish region of Andalusia is seeking an EUR 800mln loan from banks to avoid a central government rescue according to reports. (El Economista)

    French Manufacturing PMI (Jul P) M/M 43.6 vs. Exp. 45.5 (Prev. 45.2), lowest since May 2009

    French Services PMI (Jul P) M/M 50.2 vs. Exp. 47.5 (Prev. 47.9), highest in 6 months
    French Composite PMI (Jul P) 48.0 vs. Prev. 47.3

    German Manufacturing PMI (Jul A) M/M 43.3 vs. Exp. 45.3 (Prev. 45.0)

    German Services PMI (Jul A) M/M 49.7 vs. Exp. 50.0 (Prev. 49.9)
    German Composite PMI (Jul A) M/M 47.3 (Prev. 48.5)

    EUR/USD dropped 16 pips immediately following the release of the softer German data.

    DAX futures dropped 9 ticks.

    Spanish T-Bill Auction Results
    -Spain sells EUR 1.63bln 3-month T-bills, bid/cover 2.90, prev. 2.60 (yield 2.434%, prev. 2.362%)
    -Spain sells EUR 1.42bln 6-month T-bills, bid/cover 3.00, prev. 2.80 (yield 3.691%, prev. 3.237%)
    -Spain sells a total of EUR 3.05bln, which is above the top end of the indicative range.

    BarCap month end extensions Pan Euro Agg: +0.09y

    Equities

    Core European bourses are seen in flat to negative territory at the North American crossover, with the peripheral indices seen firmly lower, as the market seems to be correcting itself in Italian and Spanish stocks after overbuying yesterday. Utilities are leading the way lower, closely followed by financials, however the technology sector is seen in the green after software-maker SAP report a strong set of earnings premarket today. US stock futures currently indicate a flat-to-lower open on Wall Street today.

    In individual stock stories German-listed software company SAP are making strong gains at the midpoint of the European session. SAP reported their Q2 net income beating expectations of EUR 661mln, with revenues up 18% at EUR 3.89bln. SAP report that they are on track to deliver their targets for the full year, seeing 2012 non-IFRS operating profits of EUR 5.05-5.25bln. SAP shares are last seen higher by 2.3%.

    To the downside, Spanish oil firm Repsol are taking heavy losses after the Venezuelan President Chavez warned that the company would face ramifications if it proceeded with its action against Argentina over their recent dispute concerning YPF. Chavez warned that the company's significant investments in his country would come under threat after a meeting with the Argentine planning minister. Repsol shares are also seen lower moving in line with the underperforming IBEX today, their shares are last seen lower by around 4%.

    FX

    EUR/USD is seen trading just above session lows printed at 1.2084 at the North American crossover. The pair has been trending lower throughout the European morning, weighed upon by the swell of bad news from Europe. The pair took a further leg lower with the disappointing PMI figures from Germany, and failed to see any significant upside from relatively stronger French Services PMI. A spell of stops below the 1.2100 level could limit downside in the pair, however any progressions or commentary regarding the Spanish issues could push through those levels.

    Market talk of a European name selling in GBP/USD has weighed upon the pair this morning, however the loss have been somewhat recouped, trading in modest positive territory as the US comes to market. Any downside in the pair could be limited as dealers note bids at 1.5500 as well as 1.5485, possibly ranging trade as the session progresses. The pair now trades in close proximity to a touted option expiry at the 1.5525 option expiry for today's 10am (1500BST) NY cut.

    Commodities

    WTI and Brent crude futures are seen making gains from yesterday's close, the lowest in a week, as China's HSBC Manufacturing PMI data makes a modest improvement, however still indicates contraction. Participants now look head to the weekly API inventory numbers due after the NYMEX pit close.

    Oil & Gas News:

     

    1. Morgan Stanley have increased their average price forecast for US natural gas this year by 14% to USD 2.74 MMBTU.

    Geopolitical News:

     

    1. The Syrian government is still in full control of chemical weapons stockpiles according to a senior Israeli defense official.
    2. North Korea have moved fighter jets closer to the border with South Korea since May, according to South Korean officials.

    Last price taken at: 1235BST

    You can now follow real-time news headlines on the move with the new RANsquawk app available to download for free at ransquawk.com/mobile_app for Apple iPhone, Blackberry and Android users.

    Jul 24 7:45 AM | Link | Comment!
  • DAILY US OPENING NEWS - 23/07/12
    1. Spanish region of Murcia plans to apply for up to EUR 300mln of aid, with reports suggesting up to 6 more regions could request assistance; Spanish 10yr yield prints Euro-era record highs at 7.565%.

     

    1. La Stampa writes that ten Italian cities, most notably Naples and Palermo could be facing difficulties meeting their financing needs. Elsewhere, Italian market regulator CONSOB reintroduces short-selling ban on banking and insurance stocks.

     

    1. Senior executives at the IMF are considering ending their support for Greece, according to reports.

     

    1. RANsquawk European Morning Briefing Video: http://youtu.be/cHn3XVs_zss

    Market Re-Cap

    Risk-off trade is firmly dominating price action this morning in Europe, as weekend reports regarding Spanish regions garner focus, shaking investor sentiment towards the Mediterranean. The attitudes towards Spain are reflected in their 10yr government bond yield, printing Euro-era record highs of 7.565% earlier this morning and, interestingly, Spanish 2yr bill yields are approaching the levels seen in the bailed-out Portuguese equivalent. As such, the peripheral Spanish and Italian bourses are being heavily weighed upon, both lower by around 5% at the North American crossover.

    As for the core indices, all are trading firmly lower, led downwards by financials. Investor focus this morning remains on reports from Spanish press that more regions could be queuing up to request aid from PM Rajoy's central government. This effect has been compounded by similar reports from Italian press, raising the alarm that a number of Italian cities, notably Naples and Palermo, could be facing difficulties mounting their finances. The latest news from the periphery has seen a pick-up in volume in comparison to previous sessions, however with fewer than 250k contracts going through in the Bund, volumes do remain lighter on a year-average basis.

    Elsewhere, news that the IMF are to consider ending its support for Greece, withholding the allocation of further money to the country, has brought the prospect of default to the forefront of many investors minds. Since the open, no commentary from the IMF has hit the wires, however the German finance ministry highlighted that they have received no signal from the IMF that it will not take part in any further Greek aid. As such, the results of the Troika report, due to be conducted this week, will catch focus as the week progresses.

    In the energy complex, prices are seen markedly softer, with the weakness carrying across from the Asian session, wherein reports regarding limited scope for a Chinese rate cut due to the inflation profile gained attention.

    Looking ahead in the session, data remains light, with only Chicago Fed National Activity and Eurozone Consumer Confidence scheduled for release later today.

    Asian Headlines

    According to a central bank adviser, current interest rates in China are appropriate and any further cuts in the second half of this year would be difficult as CPI remains high. (Caixin.com)

    People's Bank of China monetary policy committee member Quoqing predicts China's economy may cool to 7.4% GDP this quarter. (Newswires) The current government target is for 7.5% GDP growth for this year, and the last GDP reading was 7.6%.

    US Headlines

    Fed's Williams has said the US are to make little progress tackling the high unemployment levels before 2014 unless the Federal Reserve eases their policy further. Williams declined to call directly for a Federal Reserve move, adding that he thinks the argument against further action is the question of uncertainty around the effects, costs and benefits of doing so. (FT-More)

    EU & UK Headlines

    The IMF is considering ending its support to Greece, with senior executives of the fund having already notified the EU that it no longer intends to allocate more money to the country, according to a report. (ekathimerini/Capital.gr) The report added that Greece could default as soon as September. The IMF is one third of the so called "Troika" of Greek creditors and this story follows the ECB saying Greek government bonds are ineligible for collateral purposes. The next Troika report on Greece is very much anticipated due to the reports that Greece may need a bridging loan. The visit by Troika inspectors is set to start on Tuesday.

    The PM of Murcia said the region plans to apply for financial aid from the state of approximately EUR 200-300mln, though the amount is yet to be finalized. (El Mundo) Elsewhere, the Balearic Islands, Catalonia, Castilla-La-Mancha, the Canary Islands and possibly Andalusia are also having difficulties with funding, according to Spanish press reports. (El Pais) On Friday the Spanish region of Valencia confirmed it was to tap the EUR 18bln Spanish regional aid fund which did cause the market to react in a risk-off fashion.

    Ten Italian cities face financing strains according to a report (La Stampa)
    The ten cities include Naples and Palermo and underlines growing concerns over the sustainability of local finances in the Eurozone's third largest economy. Last week, Italian PM Monti expressed concerns over the autonomous region of Sicily was on the brink of defaulting on its debt, though the Sicilian governor said the region is not at risk of default. Unlike Spain, however, Italy's local funding problems would not have an immediate impact on the country's EUR 2trln public debt pile, but it does underscore the growing pressure on all levels of public finances.

    Equities

    Core European bourses are seen softer at the North American crossover, with losses seen at around the 2% mark for all the main indices, however the peripheral IBEX-35 and FTSE-MIB are underperforming, seen lower by upto 5% this morning. Financials are seen weighing across the continent as fears regarding Spain, Italy and Greece's finances prompt investor caution around the riskier assets. No sector is spared as even the defensive health care stocks take 1% of losses as very few European stocks climb into the green. Following a morning of Italian and peripheral banks dipping in and out of trade limit-down, the Italian regulator CONSOB has reintroduced a short-selling ban on Italian banking and insurance stocks, providing some relief for the troubled institutions.

    In individual equities news, Siemens shares have seen some downside today as industry sources in German press suggest the company may miss its full year profit goals, with orders in the last quarter falling 'significantly'. (Handelsblatt) At the North American crossover, Siemens shares are seen lower by 1.6%.

    Swiss private banking group Julius Baer are one of the few stocks in the green in Europe today as they release their earnings report premarket. The company reported an expectation-beating adjusted net of CHF 221.4mln, with operating income and EPS both beating forecasts as well. Julius Baer also reported that they have no exposure to Greek, Irish, Portuguese or Spanish sovereign debt, with Italian exposure seen as marginal. After a morning's trade, Julius Baer shares are seen higher by 1.6% today.

    FX

    EUR/USD opened markedly lower at the European open, quickly breaking below the 1.2100 handle, a level that has not been broken since June 2010. The moves are reflected broadly across the asset classes, with risk-off remaining the dominant theme at the beginning of the week. The pair has staged a modest recovery, climbing back above the handle, but remaining fragile in negative territory. Market talk of stops in the pair at 1.2120 failed to halt the moves higher, but above this stops at 1.2160 could prove reactive as the session progresses. However, with little the way of data or events scheduled, a large option expiry at the 1.2100 handle could become magnetic as the US comes to market.

    GBP/USD is mirroring the losses in EUR/USD as the USD benefits from safe haven status. Buying in EUR/GBP has been pinned by some desks as the driver behind much of the moves, explaining the divergence between EUR/USD and GBP/USD at the North American crossover. Some participants may also be eyeing the key risk event for GBP this week, due on Wednesday, the advanced reading of Q2 GDP from the UK, with many expecting a soft figure, reinforcing the UK's perceived economic weakness. Elsewhere, as the session progresses beyond today's 10am (1500BST) NY cut an option expiry at 1.5525 could define trade for tomorrow's NY cut.

    Commodities

    Crude futures have suffered losses throughout overnight and European trade as investor sentiment has been weighed on by comments from a PBOC MPC member who noted the Chinese economy may cool to 7.4% GDP this quarter, and with growing concerns over Spain and Italy in the European periphery.

    Oil & Gas News

     

    1. Iraq has resumed crude-oil exports from Kirkuk oil fields at a lower rate according to Middle East shipping agents. This follows an explosion that blew up part of the northern pipeline that caries crude to Turkey's Ceyhan port.
    2. China bought more crude from Iran in June that it did on average last year before sanctions against Iran were imposed by the EU on July 1st.
    3. Nigeria plans to reduce exports of Bonny Light crude to five cargoes of 950,000 barrels each in September according to sources.

    Geopolitical News

     

    1. Iran would not close the Strait of Hormuz as long as it is able to use the vital shipping line itself according to a military commander.
    2. Iran has sent a new batch of enriched uranium to fuel a medical research reactor in its capital according to the country's nuclear chief.
    3. Israeli officials warned that an Iranian terror squad in Europe may be planning to attack its athletes at the Olympic Games.

    Last price taken at: 1234BST

    You can now follow real-time news headlines on the move with the new RANsquawk app available to download for free at ransquawk.com/mobile_app for Apple iPhone, Blackberry and Android users.

    Jul 23 7:57 AM | Link | Comment!
  • WEEK IN FOCUS - 23/07/12 - 27/07/12

    The summer effect was clear last week as intraday day traders saw very little price action to take advantage of amongst highly illiquid markets, however the effect may be less notable this week as European earnings season fully kicks in alongside the ongoing US releases, as well as some tier 1 data from Europe and the US that should draw participants back to their desks.

    With the top US names already releasing their performance figures over the past two weeks, it is interesting to note that although the firms are not routinely beating forecasts to the same extent as Q1, they are holding up fairly well on an expectations basis, despite the very clear headwinds across all sectors from the European and global economic slowdown. As such, participants will be keen to see if the steadfastness of the US corporates will be carried across the Atlantic. The week's earnings will pick up towards the end of the five-day period, with the likes of ExxonMobil, Amazon, Siemens and Barclays reporting on Thursday and Friday to name just a few. However, increased exposure to Europe's debt woes will likely keep a significant lid on Europe's big cap names. A highlight for the US specifically will come on Tuesday, as Apple are set to release their Q2 performance. Currently, analysts expect the tech giant to reach EPS and revenues of USD 10.38 per share and USD 37.3bln respectively.

    On the macro front, although the politicians and leaders may be eyeing their holidays, market forces will grant the economies no such break, as Italian and Spanish 10yr government bond yields closed last week in 'unsustainable' territory of 6% and 7% respectively, spreading jitters throughout the asset classes. The pain looks set to continue as Spain's regional finances continue to fall apart, with the region of Murcia announcing plans to request central government assistance over the weekend, furthering concerns surrounding Valencia's conflicting reports of needing support. Some participants may interpret this as merely the tip of the iceberg of troubles for the Spanish PM Rajoy.

    Elsewhere, Greece is hitting the headlines once more, as a leaked IMF report suggests the global fund could withhold further assistance for the indebted economy. Although many participants were already aware that the country could be seeking a bridge loan to see it through to September, the latest news could draw a line underneath the situation, as tensions heighten and further Greek default looks a more tangible prospect as each day passes.

    On the data front, China's HSBC manufacturing PMI will be keenly eyed on Tuesday, and markets will be looking to see if the latest GDP figures from the government can be verified. Any weakness in the number beyond expectations will likely underscore the need for additional economic measures from the People's Bank of China and Premier Wen's government as the year progresses. Elsewhere, the flash reading for UK GDP is expected on Wednesday, looking to set in another quarter of contraction, piling more pressure on the UK government and the Bank of England as the Olympics honeymoon period fails to divert investor's attention. Finally, US GDP is due at the end of the week. Analysts have been relatively downbeat about this figure of late, as Goldman Sachs' GDP tracker is continually revised lower as it takes into account the latest disappointing macro numbers from the country. As such, anything below (or even above) the expected 1.5% reading will likely prove reactive across the asset classes and any response from the Federal Reserve will be eagerly awaited.

    Jul 23 3:16 AM | Link | Comment!
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