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  • DAILY US OPENING NEWS - 12/06/12 0 comments
    Jun 12, 2012 8:13 AM
    1. Peripheral European bonds see slight bounce, prompting market talk of ECB's SMP in play, which has since been put down to short-covering by many analysts.

     

    1. Spain expects to sign a memorandum of understanding for its bank rescue after June 21st.

     

    1. The EFSF's EUR 1bln 2037 bond order book is in excess of EUR 1bln, according to leads.
    2. RANsquawk European Morning Briefing Video: http://youtu.be/hSDreqDsVt4

    Market Re-Cap

    European equities are seen making modest gains after a morning's trade, with the exception of the Italian FTSE-MIB, which is nursing slight losses. With little data to distract Eurozone participants, focus remains on the Eurozone laggard economies, with peripheral 10-yr bond yield spreads fluctuating throughout the morning. Both Italian and Spanish spreads are seen wider after having seen a period of swift tightening. Unconfirmed market talk of the ECB reactivating its' SMP and buying in the peripheral bond markets circulated, however some analysts have since put this down to a short squeeze in EUR/USD, as opposed to central bank intervention.

    Data from the UK has disappointed, with both industrial and manufacturing production coming in lower than expectations, prompting some GBP weakness in the wake of the release. GBP/USD has since recovered the losses with USD weakness observed across the board. Elsewhere from the UK, a large yield tail on its 5-yr Gilt in combination with a soft bid/cover at this morning's auction was followed by selling pressure in the Gilt futures, falling around 25ticks in the minutes after the release.

    Looking ahead in the session, participants will be paying keen attention to any updates from the EFSF on the demand for their 25-yr EUR 1bln bond. Datawise, the US is set to release their import price index for May, closely followed by IBD/TIPP Economic Optimism data.

    Asian Headlines

    The IMF's deputy head Lipton has urged the BoJ to conduct further monetary easing, and added that Japanese forex intervention would be something he could understand. (Newswires) The IMF further commented that the BoJ will not be able to reach their 1% inflation target until 2017, and the risks to the Japanese economy have shifted decidedly to the downside.

    US Headlines

    Fed's Evans has reiterated his call for more forward guidance from the Federal Reserve, adding that extending Operation Twist and expanding asset purchases is useful, repeating his stance that he is in favour of any accommodative policy. (Newswires) Fed's Evans still sees 2.5% US GDP growth for the next 24 months but sees downside risks from the Eurozone crisis.

    EU & UK Headlines

    All 27 EU countries should submit their big banks to a single cross-border supervisor as part of a banking union to be enacted as soon as next year, EU's Barroso has urged. (FT-More) The plan would also include an EU-wide deposit guarantee scheme and a rescue fund paid for by the levies on financial institutions, could be achieved by next year and without changes in the bloc's existing treaties.

    The Spanish government expects to sign a memorandum of understanding for its planned banking rescue package sometime between June 21st and the EU summit scheduled for June 28th, according to a finance ministry spokesperson. (Newswires)

    Eurozone peripheral government bond yields have been on a widening trend throughout the session so far with a brief interruption at around the mid-point of the morning, following some market talk of the ECB reactivating their SMP facility and buying in peripheral bond markets, however, since the moves, analysts have said a EUR/USD squeeze was responsible for the moves. After a morning's trade, yields are seen higher on the key Spanish 10-yr at around 6.8% and Italian yields remain firmly above 6%.

    UK Industrial Production (Apr) M/M 0.0% vs Exp. 0.1% (Prev. -0.3%)
    UK Industrial Production (Apr) Y/Y -1.0% vs Exp. -1.0% (Prev. -2.6%)

    UK Manufacturing Production (Apr) M/M -0.7% vs. Exp. -0.1% (Prev. 0.9%)
    UK Manufacturing Production (Apr) Y/Y -0.3% vs. Exp. 0.4% (Prev. -0.9%) (Newswires)

    Equities

    European equities are seen higher across the board in both the futures and the cash with the exception of the Italian FTSE-MIB, which has been underperforming throughout the European morning. The moves higher across the continent are led by the Telecommunications sector, closely followed by Utilities and Healthcare. Financials are trading in negative territory, being weighed upon by a continued lack of clarity from the European powers on the Spanish banking bailout. The US stock futures currently indicate a higher open on Wall Street, moving in line with their European counterparts.

    In individual equities news, German utilities firm E.ON are seen outperforming Europe following a positive broker move from UBS as well as buoyance from the outperforming European utilities sector today. E.ON shares currently trade higher by around 3.00%.

    To the downside, Italian banks remain long-suffering, with CDS' for the companies seen markedly higher on the day, as investors remain cautious of the contagion risks for Italian banks in the wake of the Spanish aid for their financial system. As such, Banca Monte dei Paschi and UniCredit all trade lower by over 2%, underperforming both the financials sector and the FTSE-MIB.

    FX

    USD weakness is observed across the FX board this morning, with both EUR and GBP stronger against the currency. EUR/USD was seen as supported in the early hours of the European session, with market talk of Middle-Eastern names buying assisting the moves above 1.2500, but the strength was somewhat capped at around the session highs of 1.2520. The pair has been trading in a relatively tight range and now hovers at around the 1.2500 handle, inbetween two touted option expiries at the 1.2450 and 1.2540 levels for the 10am NY cut.

    GBP is outperforming the EUR against the USD, and has seen some good strength in recent trade amid unconfirmed market talk of a UK exporter buying the pair, helping moves into the mid-1.5500 level. GBP did see some weakness following the disappointing manufacturing and industrial production figures, but the trend of the session remains prevalent as GBP/USD is seen higher by over 50 pips for the most of the session. Other option expiries of note include EUR/GBP at 80.50, which remains very close to market ahead of the 10am NY cut.

    Commodities

    WTI and Brent crude futures are seen modestly lower ahead of the NYMEX pit open as OPEC heads continue to deliberate over the output ceiling for OPEC's member countries going into their meeting in Vienna.

    Oil & Gas News:

    1. Saudi Arabia's oil minister Naimi has said he will not call for an increase in oil production at this week's OPEC meeting, adding that he is happy with the current output level.
    2. The Venezuelan OPEC representative has said OPEC should stick to its current 30MBPD output ceiling and opposes US sanctions on Iranian oil exports.
    3. White House said that no decision has been taken on using oil reserves.
    4. Occidental Petroleum and Magellan Midstream Partners are welcoming potential customers for a proposed 278,000BPD oil pipeline running from the Permian Basin in Texas to the Gulf Coast.

    Geopolitical News:

     

    1. China has announced it's opposition to US sanctions on oil imports from Iran, adding that imports from Iran are fair and transparent, according to the Chinese foreign minister.
    2. The US military based in South Korea have asked the Pentagon to provide more attack helicopters, aircraft and missile defence systems, amid further threats from North Korea.
    3. US announced it is exempting India, South Korea, Sri Lanka, Turkey, Taiwan, Malaysia and South Africa from Iranian oil sanctions according to congressional aide, however both China and Singapore were not exempted.
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