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  • DAILY US OPENING NEWS - 05/06/12 0 comments
    Jun 5, 2012 7:53 AM

    · G7 source says Germany is pushing Spain to accept a rescue from the European bailout fund and Madrid is resisting.

    · Spanish Budget Minister Montoro says at current borrowing costs, the market door is not open to Spain.

    · Volumes remain thin as the UK takes its second bank holiday.

    · RANsquawk European Morning Briefing Video: www.youtube.com/watch?v=womPN-CzlvI

    Market Re-Cap

    With volumes remaining light as UK participants take their second day off, the main themes of trade this morning have been modestly risk-averse with horizontal trade noted in the last few hours. The primary focus of the morning has remained on Spain, with commentary from the country's budget minister Montoro reigniting concerns over the Spanish economy by saying that a Spanish bailout would be 'technically unfeasible'. As such, fixed income markets are seen stronger with generally softer equities coupled with weakness in the EUR throughout the morning's trade.

    In terms of data, disappointing services PMIs as well as a lower than expected German factory orders reading has not helped sentiment, and looking ahead in the US session, USD strength is noted, in turn weighing on commodities which were seen higher in the early hours following positive Chinese data and an RBA rate cut overnight.

    Market participants now look forward to any imminent comments from the G7 conference call discussions, however it should be noted that officials have highlighted that these calls are part of regular exchanges, and are not a cause for concern. Elsewhere, ISM Non-manufacturing data from the US is due at 1500BST.

    Asian Headlines

    As a strong JPY and runaway deficits darken Japan's economic prospects, a growing number of lawmakers are pushing for greater control over the BoJ, just 14 years after the central bank first won independence. The moves come as politicians complain that the BoJ is not acting aggressively enough to combat the country's persistent deflation. (WSJ)

    Chinese HSBC Services PMI (May) M/M 54.7 (Prev. 54.1) (Newswires)

    Fitch has said broad credit growth in China continues to decelerate, adding to recent pressures on the domestic economy. A Fitch analyst has said that since the global crisis, the Chinese economy has become increasingly reliant on abundant, cheap financing to propel GDP growth. Therefore, it is not a surprise to see GDP growth slowing in tandem with broad credit growth. (Newswires)

    EU and UK Headlines

    Moves by senior EU leaders to develop a banking union across the continent face robust opposition from banks in Germany over fears that they would be put on a hook to support rivals in weaker countries. (FT-More) German banks are adamant that deposit-guarantee schemes should remain ring-fenced for use domestically and not be available to help bank customers elsewhere.

    The Spanish budget minister Montoro has said at current borrowing costs, the market door is not open to Spain, adding that neither France nor Germany has asked Spain to seek an international bailout. (Newswires)

    According to sources, Spanish PM Rajoy is pressing for a direct European rescue for the country's banking system with moral support from the European Commission, but Germany is reluctant. (Handelsblatt) However it was also noted that other media reports say Berlin is instead urging Madrid to request a full international bailout.

    European data has not helped buoy sentiment, with Eurozone retail sales disappointing, Services PMIs coming in distinctly mixed and a continued signal of contraction across many of the major countries. On top of this, Germany released their latest factory orders figures, coming below expectations for April, but March's figures were revised markedly upwards. (Newswires)

    -Eurozone Retail Sales (Apr) M/M -1.0% vs. Exp. -0.1% (Prev. 0.3%)

    -Eurozone Retail Sales (Apr) Y/Y -2.5% vs. Exp. -1.1% (Prev. -0.2%)

    -Eurozone Services PMI (May) M/M 46.7 vs. Exp. 46.5 (Prev. 46.9)

    -German Services PMI (May F) M/M 51.8 vs. Exp. 52.2 (Prev. 52.2)

    -French Services PMI (May) M/M 45.1 vs. Exp. 45.2 (Prev. 45.2)

    -Italian Services PMI (May) M/M 42.8 vs. Exp. 41.8 (Prev. 42.3)

    -German Factory Orders SA (Apr) M/M -1.9% vs. Exp. -1.1% (Prev. 2.2%, Rev. to 3.2%)

    -German Factory Orders NSA (Apr) Y/Y -3.8% vs. Exp. -3.8% (Prev. -1.3%, Rev. to -0.2%)

    EQUITIES

    European cash equities are seen mixed heading into the US open, with underperformance noted in the DAX and EuroStoxx, both of which are in negative territory. The peripheral bourses as well as the CAC-40 have managed to tip over into the green, but remain only marginally higher. The oil & gas sector is seen as the strongest performer of the day so far, with weakness observed in the utilities and telecommunications sectors. US stock futures are indicating a lower open in Wall Street, with S&P500 futures underperforming.

    In individual equities news, the ever-volatile Banca Monte dei Paschi are seen trading strongly after the European morning, following overnight reports that Deutsche Bank and a BNP Paribas unit are looking into the Italian bank's Northern Italy branches, according to Italian press (Il Sole 24 Ore). Banca Monte dei Paschi shares are currently seen higher by 4.6%.

    One of the top losers today is E.ON, who have revealed that they found trading irregularities caused by a single trader, estimating the loss to be in the "lower range of double digit millions". Following the news, E.ON shares spiked sharply lower, and despite paring a significant portion of the losses, are still seen lower by around 2% on the session.

     

     

    Index

    DAX

    CAC

    FTSE

    EUROSTOXX

    SMI

    Level

    5930.65

    2967.4

    N/A

    2076.26

    5717.19

    Change (ticks)

    -47.58

    12.91

    N/A

    -2.70

    3.85

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

    FX

    The USD index is seen markedly stronger, currently higher by over 0.6% following the European morning, with risk-aversion noted among the European exposed currencies, as both EUR/USD and GBP/USD hover just above session lows going into the US open. EUR/USD now trades just above a touted option expiry at the 1.2400 level for the 10am NY cut, with Monday's low of 1.2375 seen as the next level of support to the downside.

    Despite an RBA rate cut overnight, AUD/USD headed into the European open stronger, with some analysts forecasting the RBA to go further than the 25bps cut. The market-wide USD-strength has weighed on the pair progressing through the European morning, and has now slipped into negative territory on the day and now trades just above a touted option expiry at the 0.9700 level for the 10am NY cut.

    Currency

    EURUSD

    GBPUSD

    USDJPY

    Level

    1.2424

    1.5345

    78.26

    Change (pips)

    -0.0075

    -0.0039

    -0.0800

    COMMODITIES

    WTI and Brent crude futures are trading just below unchanged ahead of the NYMEX pit open, having pared gains seen following relative strength in overnight Chinese data as European equities slide lower and the USD index continues to strengthen throughout the European morning.

    Oil & Gas News:

    · Oil prices are unlikely to collapse as they did in 2008 because long-term fundamentals have not changed and supply will struggle to meet a projected increase in global demand, according to the CEO of Royal Dutch Shell.

    · Saudi Aramco have raised their differential used to determine July OSPs to Asia for its Arab Light Crude, according to the company.

    · A US senator called on President Obama to replace the chairman of the CFTC with an official who will crack down more quickly on speculation in oil and commodities markets.

    · The US is set to become a net liquefied natural gas exporter over the next five years as lower prices due to the shale gas revolution stoke demand, with China's gas consumption set to double, according to the IEA.

    · Enterprise Products have raised the time it would take for oil to reach Houston from Cushing, OK on the reversed Seaway pipeline to "approximately two weeks".

    · Iran has nominated its former oil minister Nozari as their candidate for OPEC chief.

    Commodity

    WTI Nymex

    OTC Spot Gold

     

    Level

    83.57

    1617.78

     

    Change (NYSEARCA:USD)

    -0.41

    -1.07

     

    **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

    CA

    Building Permits (Apr) M/M

    -1.5%

    4.7%

    0755

    1355

    US

    Redbook (Jun 1) W/W

     

    -0.9%

    0755

    1355

    US

    Redbook (Jun 1) Y/Y

     

    3.2%

    0800

    1400

    CA

    Bank of Canada Rate (Jun) M/M

    1.00%

    1.00%

    0800

    1500

    US

    ISM Non-Manufacturing Composite (May) M/M

    53.5

    53.5

    1530

    2130

    US

    API Crude Oil Inventories (Jun 1) W/W

     

    -353K

    1530

    2130

    US

    API Gasoline Inventories (Jun 1) W/W

     

    2058K

    1530

    2130

    US

    API Distillate Inventory (Jun 1) W/W

     

    -1321K

    1530

    2130

    US

    API Cushing OK Crude Inventory (Jun 1) W/W

     

    -557K

     

    Speakers

    0800

    1400

    GE

    German Chancellor Merkel & German Economy Minister Roesler hold talks with Unions

    0830

    1430

    EU

    EU's Rehn, ECB's Asmussen, IMF's Lagarde speak at conference

    1100

    1700

    US

    Congressional Budget Office releases 2012 Long-Term Budget Outlook

    1130

    1730

    US

    Portuguese Finance Minister Gaspar speaks in Geneva

    1200

    1800

    US

    US Treasury's Brainard

    1215

    1815

    US

    Fed's Evans

    1315

    1915

    US

    Fed's Bullard on Housing

    N/A

    N/A

    EU

    EU's Barnier

     

    Auctions

    1000

    1600

    US

    Fed's Outright Trea. Coup. Purch. Aug'20 - May'22 (USD 4.50-5.50bln)

    1030

    1630

    US

    USD 30bln 4-Week Bill Auctions

     

    Earnings

    UK

    N/A

    EU

    N/A

    SZ

    N/A

    US

    N/A

    Prices taken at 1233BST

    ** Note: Market Closed UK

    **'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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