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  • DAILY US OPENING NEWS - 17/05/12 0 comments
    May 17, 2012 8:07 AM

    · Spain sells to the top of the indicative range in medium-term maturity bonds, yields sharply higher on all three lines.

    · Moody's are to cut Spanish bank's debt ratings today, according to Spanish press.

    · Contagion fears press peripheral 10-yr government bond yields against the German Bund wider throughout the European morning.

    · RANsquawk European Morning Briefing Video: http://youtu.be/asGZwKWxLsg

    Market Re-Cap

    European cash equities are in the red across the board at the midway point, as the bourses fail to reverse the trend of the past few sessions. With data points very light today, participants continue to focus on the macroeconomic themes as speculation regarding a Greek exit maintains focus.

    A medium-term maturity Spanish bond auction slightly eased fears, selling to the top of the indicative range, however the appearance of solid demand was countered somewhat by limited supply and sharply higher yields across all three lines. Following the auction results, EUR/USD saw some modest support and the Bund exhibited slight weakness, but this was short-lived as the macroeconomic concerns took over once more.

    Unexpectedly, the 3-month Euribor rate fixing came in with its first increase since December last year, prompting some selling pressure on the Euribor strip. This move was retraced as it was rumoured that one bank had not submitted a rate due to the Ascension Day market holiday across certain European markets, prompting the incline.

    The bad news for Spanish banks, particularly Bankia, continues, as overnight reports state that the troubled lender has seen EUR 1bln in deposits leave over the past week. As such, Bankia shares have been seen lower by 25% at some points and peripheral banks have dipped in and out of trade. Despite these reports being denied by the Spanish economy secretary, shares are still seen markedly lower.

    Looking ahead in the session, US weekly jobs data and the Philadelphia Fed may come into focus as the US comes to market.

    Asian Headlines

    Japanese GDP (Q1 P) Q/Q 1.0% vs. Exp. 0.9% (Prev. -0.2%, Rev. 0.0%)

    Japanese GDP Annualized (Q1 P) Y/Y 4.1% vs. Exp. 3.5% (Prev. -0.7%, Rev. 0.1%)

    Japanese Nominal GDP (Q1 P) Q/Q 1.0% vs. Exp. 1.0% (Prev. -0.5%, Rev. -0.3%)

    Japanese GDP Deflator (Q1 P) Y/Y -1.2% vs. Exp. -1.5% (Prev. -1.8%, Rev. -1.9%) (Sources)

    Following the figures, the Japanese government may revise upwards its assessment of the economy for the first time in 9-months, according to unsourced reports. (Asahi)

    US Headlines

    Foreclosure activity on US homes fell to lowest level in nearly five years in April, according to RealtyTrac. (Sources) Foreclosures were reported to have fallen to 188,780, down 5% from March and 14% from a year previously, the lowest level since July 2007.

    EU and UK Headlines

    Spain have released their final prints for Q1 GDP, confirming that the country slipped back into recession during the first three months of this year, alongside market expectations.

    Spanish GDP (Constant SA) (Q1 F) Q/Q -0.3% vs. Exp. -0.3% (Prev. -0.3%)

    Spanish GDP (Constant SA) (Q1 F) Y/Y -0.4% vs. Exp. -0.4% (Prev. -0.4%) (Sources)

    Elsewhere from Spain, the Spanish treasury EUR 2.49bln in medium-term bonds with mixed bid/cover ratios, with notably higher yields across all lines.

    -Spain sells EUR 372mln 4.4% Jan'15 Bonds, bid/cover 4.47, Prev. 2.41 (yield 4.375%, Prev. 2.890%)

    -Spain sells EUR 1.1bln 3.25% Apr'16 Bonds, bid/cover 2.38 , Prev. 4.13 (yield 5.106%, Prev. 3.374%)

    -Spain sells EUR 1.02bln 4.0% Jul'15 Bonds, bid/cover 3.01, Prev. 2.88 (yield 4.876% Prev. 4.037%) (Sources)

    According to reports in Spanish press, Moody's are to cut Spanish bank's debt ratings today. (Expansion) This is somewhat alongside expectations, as the conclusion Moody's Spanish banking review is due. The banking downgrade is rumoured to take place at 2000BST/1400CDT.

    The government of Spain are to announce that they will appoint Oliver Wyman and BlackRock to independently value real-estate loans in the nation. The first stage is set to be completed within a month, with the second stage to be completed within three months. (Sources)

    For the first time since December 19th 2011, the 3-month Euribor rate fixing came in higher than the previous reading by 0.001%. There was some speculation however that the sudden incline was due to some banks not submitting a fix due to the Ascension Day market holiday across the Nordic states and Switzerland (Sources)

    Italy's financial revival has been strong and government forecasts can be met if reforms are fully implemented, but more needs to be done to stimulate growth, according to the IMF. (FT-More) The IMF's European department director said that following the assessment Italy should have the highest primary surplus in the Eurozone next year.

    EQUITIES

    Financials continue to weigh upon Europe as solvency issues arise from across Greece and Spain, with contagion fears dragging down firms from across the continent. Healthcare stocks benefit from their defensive status and tip over into positive territory on the day.

    In individual stocks news, Bankia significantly underperform all others as overnight reports state that the bank has seen EUR 1bln leave its deposits over the past week or so, among solvency issues and flight from risk. As such, Bankia shares have come under notable selling pressure throughout the morning session, indicated lower by as much 25% at some points of the morning. The Spanish economy secretary has since denied the claims, but the share price has remained unresponsive, staying lower.

    Among the few stocks trading in the green in Europe is FTSE-100 stock ICAP, who have taken to opportunity to move into discussions with the recently-troubled PLUS Markets Group. PLUS Markets have confirmed that the two companies are in talks concerning the sale of their Plus Stock Exchange unit to ICAP, but there has been no offer has yet been made. As such, ICAP shares now trade modestly higher above the UK index, currently up around 1.5% on the day.

    US giant Wal-Mart have reported a beat on EPS and revenue expectations in their pre-market release:

    Wal-Mart (NYSE:WMT) Q1 EPS USD 1.09 vs. Exp. USD 1.04

    - Q1 revenue USD 112.30bln vs. Exp. USD 110.44bln. (Sources)

     

     

    Index

    DAX

    CAC

    FTSE

    EUROSTOXX

    SMI

    Level

    6309.63

    3006.06

    5316.1

    2137.22

    N/A

    Change (ticks)

    -74.63

    -42.61

    -89.15

    -38.12

    N/A

    **Note: For US equity news in detail, refer to the RANsquawk Daily US Equity Opening News report.

    FX

    EUR/USD has been observed floating lower throughout the European morning with the continued risk-aversion preventing the pair from any significant upside. Unconfirmed market talk of offers in the mid-1.27s have capped the pair from seeing significant gains and it now trades just below yesterday's low of 1.2681.

    USD strength continues to be noted, going alongside the trend of the past weeks, with the USD-index reaching a four-month high in today's European session. As such, GBP/USD is seen lower throughout the session, hitting one-month lows of 1.5837 earlier today.

    Currency

    EURUSD

    GBPUSD

    USDJPY

    Level

    1.2673

    1.5831

    80.23

    Change (pips)

    -0.0043

    -0.0079

    -0.1000

    COMMODITIES

    WTI crude futures were seen trading higher heading towards the NYMEX pit open rebounding from a six-month low, following the stronger than expected Japanese data overnight.

    Oil & Gas News:

    · Enbridge are to spend around USD 3bln to boost capacity of its mainline system and give Western producers access to refiners in the Midwest and Quebec. Elsewhere, Enbridge are to conduct the reversal of their Seaway pipeline today, alongside expectations. The pipeline now flows oil from the Cushing hub to the Gulf coast.

    · The IEA Chief Economist said oil prices pose a serious risk to the global economic recovery, and the IEA is ready to release strategic stocks if the conditions warrant it.

    · The White House declined to comment on a news report that the US will seek G8 support for a strategic oil release although the Obama Administration affirmed that all options remain on the table for an SPR release.

    · Royal Dutch Shell's CEO has said he expects US natural gas prices to double by 2015, but remain under pressure in the short term.

    · Turkey has said it is close to bring gas from the Caspian Sea to Europe, in a deal that could mark the end of a plan to combine gas from Azerbaijan with central Asian gas to reduce Europe's dependence on Russian imports.

    · Further European refineries may face closure as US rivals become more profitable and leases begin to expire across the continent. Analysts speculate that the refineries will be converted into storage facilities.

    Geopolitical News:

    · Iran continues to develop its ballistic missile programme, launches missiles in violation of sanctions according to a UN expert panel. The panel noted that sanctions have slowed Iran's procurement of critical nuclear technology and a sanctioned subsidiary of an Iranian shipping line continues to operate vessels.

    · The US Senate is to ask the chamber to approve a new package of oil and economic sanctions today aimed at further pressuring Iran to abandon its nuclear plans.

    · U.S. plans for a possible military strike on Iran are ready and the option is "fully available," the U.S. ambassador to Israel said, days before Tehran resumes talks with world powers which suspect it of seeking to develop nuclear arms.

    Commodity

    WTI Nymex

    OTC Spot Gold

     

    Level

    92.7

    1547.69

     

    Change (NYSEARCA:USD)

    -0.11

    8.12

     

    **Note: For commodities news in detail, refer to the RANsquawk Daily Energy Commentary report.

    LOOKING AHEAD

    Economic Releases

    CDT

    BST

     

    DATA

    EXP

    PREV

    0730

    1330

    US

    Initial Jobless Claims W/W (May 12)

    365K

    367K

    0730

    1330

    US

    Continuing Claims W/W (May 5)

    3230K

    3229K

    0730

    1330

    CA

    Int'l Securities Transactions M/M (Mar)

    8.00B

    12.49B

    0730

    1330

    CA

    Wholesale Sales M/M (Mar)

    0.3%

    1.6%

    0900

    1500

    US

    Philadelphia Fed M/M (May)

    10.0

    8.5

    0900

    1500

    US

    Leading Indicators M/M (Apr)

    0.1%

    0.3%

    0930

    1530

    US

    EIA Natural Gas Storage W/W (May 11)

    53

    30

     

    Speakers

    0800

    1400

    WLD

    IMF's Zhu Min & World Bank President Zoellick speak at World Bank event

    0930

    1530

    WLD

    IMF holds regularly scheduled briefing in Washington

    0930

    1530

    CA

    Bank of Canada's quarterly review of eco. & central banking

    1100

    1700

    WLD

    IMF's Blanchard speaks at National Economist Club

    1135

    1735

    US

    Fed's Bullard speaks on US economy in Louisville

    N/A

    N/A

    UK

    BoE's King meets EU's Rehn at St. Antony's College, Oxford

     

    Auctions

    1000

    1600

    US

    2-, 5- and 7-year note refunding announcement

    1000

    1600

    US

    Fed's Trea. Coup. Purch. Feb'36-May'42 (USD 1.50-2.00bln)

    1200

    1800

    US

    USD 13bln 10-yr TIPS Auction

     

    Earnings

    UK

    N/A

    EU

    N/A

    SZ

    N/A

    US

    Autodesk, Applied Materials, Computer Sciences, GameStop, Gap, Intuit, Marvell Technology, Precision Castparts, Ross Stores, Salesforce.com

    Prices taken at 1240BST

    **Note:

    Market closed Austria, Finland & Sweden

    WTI Crude June options expiry (1930BST/1330CDT)

    **'Market talk' - Signifies information that has not been formally tested through traditional journalistic channels and therefore is to be treated as unsubstantiated. Any interpretation of the talk is taken at the readers own risk and is a representation of the rumours within the market place and never generated by ourselves.

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