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  • DAILY US OPENING NEWS - 16/07/12
    1. WSJ writes that ECB's Draghi proposed imposing losses on senior Spanish savings bank bond-holders when pressed in liquidation. EU reiterates that senior bondholders will not forced to take losses.
    2. Saudi Arabia and the UAE have opened two new pipelines bypassing the Strait of Hormuz in a move that will reduce Tehran's power over global oil markets.


    1. Markets look ahead to Fed Chairman Bernanke's semi-annual testimony taking place tomorrow and Wednesday, as well as Spain selling 10yr debt this Thursday.


    1. RANsquawk European Morning Briefing Video:

    Market Re-Cap

    European equities are seen in flat to minor negative territory amid thin volumes and little newsflow, as the Summer-holiday effect begins to take effect. Data releases have been few and far between, as Eurozone CPI and Trade Balance figures show no surprises, as such, markets remained unreactive.

    Peripheral bond yield spreads against the German 10yr are seen marginally wider, as sentiment towards the Mediterranean economies remains sour. Participants are eyeing tomorrow's T-bill sale from Spain as the next test, but primary focus will remain on Thursday's 10yr bond auction, the first since Spanish PM Rajoy outlined EUR 65bln in budget cuts last week.

    WSJ reports from over the weekend have garnered attention, as sources suggest that ECB's Draghi was in favour of imposing losses on senior Spanish banking-bondholders, should the banks be pressed into liquidation, a report on which the ECB has declined to comment. Despite European finance ministers rejecting the proposals, the suggestion that the ECB would be in favour has weighed upon sentiment towards the periphery.

    EUR/USD has broken below the 1.2200 handle once again, as participants remain focused on the ratification of the ESM as the next signal of a step forward for the single currency. Weekend reports have highlighted that this process remains a tricky path, with Moody's warning that any delay in its implementation from Germany would be credit negative for all European sovereigns.

    Weekend press reports from China have been catching focus, as the Chinese Premier warns that the Chinese economy is yet to pick up momentum in its recovery, weighing upon WTI crude futures and the basic materials sector at the midpoint of the European session.

    Looking ahead in the session, US Advance Retail Sales data is expected at 1330BST/0730CDT, along with Empire Manufacturing, but price action looks to remain muted ahead of Bernanke's testimony set to begin tomorrow.

    Asian Headlines

    The Chinese State Council may hold a meeting as soon as July 18th in order to discuss the economy in H1 and fiscal and monetary policies in H2, according to unidentified analysts, after which, the analysts expect the government to launch a new round of stimulus. (China Securities Journal)

    Chinese premier Wen warned that the momentum for a recovery in economic growth is not yet in place and that difficulties may persist for a while. (Xinhua) However, Wen also said that economic growth is within the targeted range and government measures to support growth are bearing fruit.

    US Headlines

    Fed's Lockhart said the Fed may need to 'respond more aggressively' as if the economy continues on track indicated by recent data, and policy premises underlying Fed forecasts become untenable. (Newswires) The Fed official said he is comfortable with a late 2014 rate hike, adding that a new round of easing, if it were to occur, could include MBS purchases. Lockhart also said that his support for current policy stance rests on forecast that sees a step-up in growth and employment by the year-end and into 2013, adding that he had downgraded his forecasts recently.

    Fed's Lacker said expectations for what central banks can accomplish have become over inflated, reiterating he does not see the need for additional Fed stimulus, and adding that the Fed crowding out the Treasury market is not a major concern as the market can adapt. (Newswires) Lacker revised down his forecasts for growth in the US economy to 2%, and said he sees inflation trending around the Fed's target of 2% with a balanced outlook for consumer prices.

    A majority of Americans say the US needs to toughen its trade policies with China and is concerned that too many jobs are being 'shipped' overseas, according to a bipartisan poll. (FT-More)

    The impact of the Eurozone crisis is becoming more pronounced in the US and businesses are holding back ahead of scheduled tax hikes and domestic spending cuts, according to an NABE survey. (Newswires)

    EU & UK Headlines

    German chancellor Merkel is set to face a fresh revolt from the ranks of her own centre-right supporters when the German parliament is recalled for a special vote on the provision of up to EUR 100bln in aid for the Spanish banking industry. (FT-More) The Bundestag is expected to vote on Thursday in favour of the bailout with a clear majority, but the parliamentary leader of the Christian Democrat group forecast at the weekend that Ms Merkel would not gain an outright "chancellor's majority" for the deal.

    Moody's have said a delay in the German court ruling on the constitutionality of participating in the ESM is credit negative for all Euroarea sovereigns. (Newswires) Elsewhere, Moody's have said the Draft MoU on financial aid for the Spanish banking sector would impose losses on subordinated debt and hybrid capital instruments of lenders that need support from government or EU authorities.

    ECB's Weidmann urged Spain to take a bailout for the country and not just banks, adding that the bond markets would appreciate aid conditions going beyond the banks, according to a report. (Newswires) The German ECB representative also said Italy does not need a bailout because high borrowing costs do not justify aid, further adding that quick ESM ratification alone will not calm the markets.

    On July 9th, the ECB advocated imposing losses on holders of senior bonds issued by the most damaged Spanish savings banks if pressed into liquidation, though finance ministers have now rejected the approach, according to people familiar with the discussions. (WSJ) The ECB has declined to comment on the report. Elsewhere, senior bondholders will not be forced to take losses under European plans to finance the overhaul of Spain's banking industry according to the European Commission (Newswires)

    Eurozone Trade balance SA (EUR) (May) M/M 6.3bln vs. Exp. 5.0bln (Prev. 6.2bln, Rev. 4.5bln)
    Eurozone Trade Balance (EUR) (May) M/M 6.9bln vs. Exp. 4.0bln (Prev. 5.2bln, Rev. 3.7bln)
    Eurozone CPI (Jun) Y/Y 2.4% vs Exp. 2.4% (Prev. 2.4%)

    Eurozone CPI (Jun) M/M -0.1% vs Exp. 0.0% (Prev. -0.1%) (Newswires)

    Finland and Spain may conclude negotiations over collateral today to enable Finland's participation in the bank rescue, according to unsourced reports. (YLE)

    EU officials said it is too early to say how Greece will meet its financing needs and discussions can only begin once the Troika are back in the country. (Newswires) These comments followed reports that the ECB could consider allowing Greece to delay a bond payment in August or the possibility of bridge financing.

    The Italian economy minister said that GDP is expected to shrink "a little less" than 2% and that a balanced budget is "at hand". He also said that the planned sale of public assets could decrease public debt 20% in five years. (Corriere della Sera/Newswires)


    European equities are seen in flat to minor negative territory with little in the way of data or newsflow of note taking effect on trade. Modest risk aversion is observed amongst stocks, with the defensive healthcare sector seen outperforming. The primary laggard sectors today are basic materials and oil & gas, both of which are making losses following weekend reports of Chinese Premier Wen stating that the Chinese economy is yet to pick up momentum and stage a strong recovery, weighing on future commodities demand. US stock futures are seen in negative territory, indicating a lower open on Wall Street today.

    FTSE-listed IAG are seen outperforming today, as their Heathrow Airport headquarters forecast a surge in daily passenger numbers as flight paths benefit from the influx of Olympics-related fares, additionally estimating that the airport is to see all-time record numbers routinely throughout the sporting event. IAG shares trade higher by over 2% at the midpoint of the European session today.

    Ever-troubled Nokia are seen underperforming today, as investors remain unconvinced by the company's latest strategy of halving the price of its flagship Lumia 900 phone in the US, despite the CEO Elop maintaining that this is normal strategy, improving the accessibility of the device. Nokia shares are seen lower by 2.25% ahead of the US open today.


    FX markets are reflecting the thin trade, as participants eye the risk events of the week as Bernanke's semi-annual testimony, and Spain looking to sell 10yr debt this Thursday. EUR/USD is once again seen sub-1.2200, with EUR/GBP observed at levels not seen since March 2008, printing session lows at 0.7842. The downside in the pair may be somewhat limited, with a large option expiry at the 1.2200 handle possibly proving magnetic heading into the 10am (1500BST) NY cut.

    GBP/USD is seen mirroring the moves in EUR/USD, with the USD benefiting from safe haven flows. GBP/USD now trades in close proximity to a touted option expiry at the 1.5500 handle for the 10am (1500BST) NY cut.

    The falter in risk appetite following warnings from the Chinese Premier have weighed upon the commodity-linked currencies in the European session. As such, NZD/USD and AUD/USD are seen lower at the midpoint of the European session, moving in line with WTI crude futures.


    WTI crude futures are seen lower ahead of the NYMEX pit open as Chinese Premier Wen issues a further warning on a delayed pick-up in momentum for the Chinese recovery, weighing on future energy demand. However, losses may have been stemmed as the downbeat commentary from Wen increases speculation of stimulus from the world's second largest economy.

    Oil & Gas News:


    1. Saudi Arabia and the UAE have opened two new pipelines bypassing the Strait of Hormuz in a move that will reduce Tehran's power over global oil markets. The pipeline ships from Fujairah to a refinery in Pakistan and has begun the loading of around 500,000BBLs.
    2. The Presidents of Sudan and South Sudan have held their first talks since their countries came close to war in April, raising hopes for a negotiated settlement of oil and border disputes before the August 2nd UN deadline.
    3. Money managers, including hedge funds and commodity trading advisers, have raised their net long position in natural gas futures, options and swaps in the week to July 10th for the third week running, according to CFTC data.
    4. Concerns are growing about the reliability of oil prices, after a report for the G20 found the market is wide open to "manipulation or distortion". Traders from banks, oil companies or hedge funds have an "incentive" to distort the market and are likely to try to report false prices, it said.
    5. Russia may reduce duties on most oil shipments abroad by 8.9% from August 1st after Urals prices fell, while extending tax breaks for offshore fields and highly viscous crude.
    6. The French government may review its stance on shale gas as part of a planned mining code revision, according to unidentified officials. The reports say that progress on the issue is to be expected by the end of the month. The previous Sarkozy government passed a law last year banning hydraulic fracturing of shale with the exception of scientific research.
    7. Goldman Sachs have said their positive view on oil prices has been reinforced amid tightening sanctions on Iran and last week's Norwegian oil strike.
    8. Yemen may be able to resume oil exports as planned this week after tribesmen agreed to allow repairs to the country's main crude pipeline.
    9. Commerzbank see Brent trading at USD 110/BBL by the end of the year as demand picks up.
    10. UK energy regulator OFGEM have said around GBP 22bln will be needed to upgrade the aged gas and electricity networks across Britain. The National Grid have responded to the reports by saying that the proposed plans conflict with the company's business proposals in several important areas and do not appropriately incentivise the essential investments.

    Geopolitical News:


    1. Japan has called its ambassador to China back to Tokyo for discussions on a territorial dispute straining relations between the powers.
    2. Iran could prevent even a "single drop of oil" passing through the Strait of Hormuz if its security is threatened according to a top naval chief. He added that Iran's naval presence in international waters will increase.
    3. Japanese insurers are expanding their maritime coverage to allow more domestic tankers to transport Iranian crude, as Tokyo looks to keep oil flowing despite tough Western sanctions.

    Last price taken at: 1237BST

    Brent Crude August futures expiry (1930BST/1330CDT)

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

    Jul 16 7:56 AM | Link | Comment!
  • WEEK IN FOCUS - 16/07/12 - 20/07/12

    The macro-markets across Europe look set to remain choppy among thin volumes, as the summer holiday-effect is expected to become instilled within trade. Price action across the European asset classes looks set to remain driven by the political picture this week, as data is on the lighter-end and exasperated participants continue to look towards the full ratification of the ESM as the next sign of a step forward from Europe's leaders. Last week saw little reprieve for the left-leaning governments, as Spanish PM Rajoy outlined a fairly aggressive set of budget measures totaling EUR 65bln, providing further evidence that austerity is still king. Partisan themes among Europe's governing bodies took a slight blow last week as Italian PM Monti confirmed that he is not looking for another term in office, removing one of Rajoy and French President Hollande's key partners in the anti-austerity drive against German Chancellor Merkel. Commentary from Merkel this week could also play a strong role, as she continues to face resistance from her supporters on the perceived handouts to Europe's laggard economies, with the Bundestag recalling a special vote on Spanish aid this week.

    The Spanish government are set to receive a fresh sign from the markets on their confidence towards the troubled economy this Thursday, as they look to sell 10-year bonds, however, with a yet-undisclosed quantity of issuance, the Spanish treasury could take the step of restraining supply in order to pick-up bids for the individual securities. The auction comes following last week's budget announcements and so will provide some feedback on participants' perception of the fiscal measures.

    Data from the US this week comes in the form of advance retail sales numbers for June, which are expected to see a very modest lift from the summer pick-up in consumption, followed by inflation figures on Tuesday, not expected to be particularly influential, as the Fed's inflation outlook remains low down the list of their economic priorities. This data is likely to be overshadowed by Fed Chairman Bernanke's semi-annual testimony, set to take place over Tuesday and Wednesday this week on top of the release of the Fed's beige book. The publication is likely to offer some serious insight into the Fed's upcoming policy decisions, especially in the light of continually disappointing non-farm payroll reports.

    From Europe this week, data is light, however the German ZEW survey on Tuesday will likely be eyed, with analysts expecting the index to remain heavily weighed by the headwinds of Eurozone confidence, which is due to continue to undermine Germany's strong regional performance, as firm factory orders and industrial production figures have shown over the past few weeks.

    UK participants can look forward to a fairly busy week, as CPI numbers on Tuesday are expected to confirm that the country is facing no remote upwards pressure on prices, paving the way for the BoE to fill in the demand-gap with asset purchases. This is swiftly followed by the BoE's minutes on Wednesday, likely to paint a fairly clear picture that the board were firmly in favour of additional QE at their last rate-setting meeting. An important feature of the release will be whether there was any bias towards boosting Gilt purchases beyond GBP 50bln, as this will provide insight on whether the MPC are to continue their purchase programme in the upcoming months. Another feature of meeting that may garner interest is whether the members tossed up the possibility of any extra-unconventional policies, as members have highlighted their uncertainty towards the diminishing returns of further QE in an uphill struggle against the Eurozone drag.

    On the equity front, US earnings season is set to well and truly get underway this week, as the US banks are set to report, following JP Morgan's release. Elsewhere, Google and Microsoft are to update shareholders on their performance towards the tail end of the week.

    Jul 16 3:28 AM | Link | Comment!
  • DAILY US OPENING NEWS - 12/07/12
    1. ECB deposits fall dramatically following the cut to zero-deposit rates, however ECB current account sees significant uptick in evidence that shows European banks continue to sit on reserves as opposed to increase lending.


    1. Riskier assets weighed upon ahead of Chinese GDP data due out overnight.


    1. Italian yield reflects renewed caution as the Italian Business Lobby forecasts Italy's GDP contraction to be greater than official estimates.


    1. RANsquawk European Morning Briefing Video:

    Market Re-Cap

    European equities are seen softer at the North American crossover as continued concerns regarding global demand remain stubborn ahead of tonight's Chinese GDP release. Adding to the risk-aversion is continued caution surrounding the periphery, evident in the Spanish and Italian bourses underperforming today.

    A key catalyst for trade today has been the ECB's daily liquidity update, wherein deposits, unsurprisingly, fell dramatically to EUR 324.9bln following the central bank's cut to zero-deposit rates. The move by the ECB to boost credit flows and lending has slipped at the first hurdle, as the fall in deposits is matched almost exactly by an uptick in the ECB's current account. As such, it is evident that the banks are still sitting on their cash reserves, reluctant to lend, as the real economy is yet to see a boost from the zero-deposit rate. As expected, the European banks' share prices are showing the disappointment, with financials one of the worst performing sectors, and CDS' on bank bonds seen markedly higher.

    A brief stint of risk appetite was observed following the release of positive money supply figures from China, particularly the new CNY loans number, however the effect was shortlived, as participants continue to eye the upcoming growth release as the next sign of health, or lack thereof, from the world's second largest economy.

    Preference for safe haven assets continues to be observed among investors, as the UK DMO sells 10yr debt at another record low yield. As such, fixed income is seen higher today, with the Gilt futures outperforming. Peripheral 10yr government bond yield spreads against the German equivalent are seen wider on the day, as borrowing costs for Spain and Italy resume their incline as the Italian Business Lobby forecasts the country's growth contraction to be greater than official estimates.

    Looking ahead in the session, participants await the weekly jobs figures and a 30yr note auction from the US.

    Asian Headlines

    The BoJ have held their target rate unchanged at 0.10%, alongside expectations and maintained its view that the Japanese economy is gradually picking up, pointing towards solid domestic demand as a spur for growth countering the need for additional stimulus. (Newswires) The total size of the BoJ's asset buying and lending program is unchanged at JPY 70trl, however the bank has made a technical revision to the scheme, and are to increase the buying of short-term securities by JPY 5trl while reducing the amount it offers under fixed-rate market operations by the same amount.

    According to a Chinese government economist, Chinese GDP is set to grow by around 8%, expecting the economy to rebound slightly in the second half of this year. The economist adds that the rate of growth outweighs the need for massive stimulus. (Newswires) Elsewhere, the ADB sees the Chinese economy growing at a rate of 8.2% in 2012, and 8.5% in 2013.

    China New CNY Loans (Jun) M/M 919.8bln vs. Exp. 880.0bln (Prev. 793.2bln)
    Money Supply M0 10.8% vs. Exp. 10.6% (Prev. 10.0%)
    Money Supply M1 4.7% vs. Exp. 4.0% (Prev. 3.5%)
    Money Supply M2 13.6% vs. Exp. 13.5% (Prev. 13.2%) (Newswires)

    US Headlines

    San Bernardino City's attorney has said the country plans to declare a fiscal emergency but may bypass bankruptcy mediation, according to an interview. (Newswires)

    EU & UK Headlines

    Ireland is to unveil a multi-billion euro stimulus package later this month in an effort to kick-start its flagging economy and curb unemployment as it presses the Eurozone to take over a large chunk of bank-related debts to aid its recovery. (FT-More) Finance minister Noonan said the Troika had approved the package as long as spending limits are not breached.

    Greek coalition leaders have agreed to bring forward the bailout renegotiation. (ekathimerini) The leaders of the three parties that form Greece's coalition government have agreed to speed up the process by which Athens will ask its lenders for changes to the bailout.

    The ECB's overnight deposits have fallen dramatically to EUR 324.9bln, with EUR 722mln borrowed overnight. (Newswires) The fall in ECB deposits has been matched almost exactly by an uptick in ECB current account figures, showing that European banks are continuing to sit on reserves as opposed to lend them to the real economy.

    The Italian economy minister has said the Bank of Italy forecast of -2.0% GDP growth this year should be seen with maximum respect, However the Italian business lobby head has said GDP fall in 2012 will likely be more than 2.4%. (Newswires)

    Italy sells EUR 7.5bln 12-Month BOTs, bid/cover 1.55, Prev. 1.73 (yield 2.697%, Prev. 3.972%) - Lowest yield since May (Newswires)

    UK DMO sells GBP 3.5bln 1.75% Sep'22 Gilts, bid/cover 2.2, Prev. 1.63 (yield 1.719%, Prev. 1.920%, yield tail 0.3bps, Prev. 0.5bps) - Record low yield. (Newswires)

    The Spanish government are looking to tighten 2013 regions deficit target according to an official (Newswires) The official said regions 2013 target may be 0.7% of GDP vs. 1.1% now, but they are to keep 2012's target unchanged.

    The BoE are to announce the details of the "Funding for Lending" programme tomorrow at 1100BST/0500CDT. (Newswires)

    French CPI (Jun) Y/Y 1.9% vs. Exp. 1.9% (Prev. 2.0%) (Newswires)
    French CPI (Jun) M/M 0.0% vs. Exp. 0.0% (Prev. -0.1%)


    European equities are seen lower at the North American crossover with underperformance noted in the peripheral bourses, as the Italian Business Lobby head warns that Italy's GDP contraction is likely to be greater than official figures suggest. The primary laggards today are seen as the technology sector, closely followed by the telecommunications sector, with the riskier assets also taking notable losses as financials and basic materials are seen lower by over 1% apiece ahead of tonight's Chinese GDP data. US stock futures are seen lower, indicating a lower open on Wall Street today.

    DAX-listed SAP are seen firmly outperforming following the company reporting that their Q2 software revenue has reached the upper end of the Q2 outlook, reporting their revenues at EUR 1,059mln. SAP shares saw a sharp spike higher 5% in the immediate reaction, with Sage Group also benefiting strongly in the sector-related move.

    In individual equities news, HSBC are seen as the primary laggards amongst the UK banks, following overnight reports that they are to face a significant USD 1bln fine from the US for failing to have appropriate controls in place to ensure it did not facilitate the financing of terrorism and other criminal activities. On top of this, the Co. have reported that their Chairman Andrew Flockhart is to retire as Chairman of the Board. At the midpoint of the European session, HSBC shares are seen lower by as much 2%.


    EUR/USD continues its downward trend, breaking below the 1.2200 mark, as a slew of options at 1.2230 and the 1.2200 handle fails to contain price action. Unconfirmed market talk of Asian names selling in the pair added pressure early in the European morning, with the effect being compounded by French and Japanese names selling in EUR/JPY.

    The GBP/JPY cross has been somewhat of a focus this morning, as Japanese M&A deals of around GBP 3.2bln prompt expectations of support, however this has failed to materialise into the cross, but could become more influential as the session progresses.

    AUD weakness has been prevalent, carrying across into the European session as Australian employment change data disappoints, coming in at -27.0K against the expected 0.0K. As such, AUD/USD is seen moving closer to the 1.0100 level, currently down over 125 pips on the day.


    WTI and Brent crude futures are seen lower and on a downward trajectory ahead of the NYMEX pit open, as further concerns that global energy demand may falter carry across into the European session. The monthly report from the IEA failed to provide support for the energy complex, despite forecasting an uptick in demand growth next year. Energy participants now look ahead to the weekly EIA Natural Gas Storage Change (Jul 6) W/W Exp. 27, Low 22, High 34 (Prev. 39) due at 1530BST/0930CDT.

    Oil & Gas News:


    1. The IEA have forecast a pickup in world oil demand growth in 2013 as the global economy begins to recover. The agency forecasts world oil consumption to increase by 1MBPD to average 90.0MBPD next year. The IEA have said OPEC will need to provide an average of 30.5MBPD next year in order to meet market requirements.
    2. Abu Dhabi are to price the first oil exports from their Hormuz-bypassing pipeline to Fujairah at the same price it charges for crude loaded inside the Persian Gulf, according to three sources close to the matter.
    3. Credit Suisse have said the global LNG market will be tighter than expected this year due to Japan's demand for chilled fuel and production project delays. Credit Suisse estimate the LNG supply deficit to peak in 2014 or 2015, at 36mln tons per year in 2014.
    4. A hike in diesel prices in India is likely after the Presidential polls, according to an oil ministry source.
    5. Nigeria's cabinet has approved a final draft of an oil law, years in the making, that will be sent to President Goodluck Jonathan before going to parliament in a few days, the oil minister said on Wednesday.

    Geopolitical News:


    1. DEBKAfile's military sources report substantial US reinforcements, led by the USS Dwight D. Eisenhower aircraft carrier, are being rushed to the Persian Gulf opposite Iran, with dozens of unmanned underwater craft for destroying mines. The USS John C. Stennis arrives in August, raising the number of American aircraft carriers in waters off Iran to four including the USS Enterprise and the USS Abraham Lincoln, with the French Charles de Gaulle due soon to make up a fifth.
    2. You can now follow real-time news headlines on the move with the new RANsquawk app available to download for free at for Apple iPhone, Blackberry and Android users.

    Jul 12 8:18 AM | Link | Comment!
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