Please Note: Blog posts are not selected, edited or screened by Seeking Alpha editors.

DAILY US OPENING NEWS - 14/10/10

 

  • Monetary Authority of Singapore widened SGD’s trading band, in a move to tighten policy
  • USD index has traded at its lowest since December 2009
  • USD/JPY briefly dropped below 81.00, a fresh 15-year low
  • Fed’s Lacker said he would not support further monetary easing
  • BOE’s Sentance said that the BOE need to start rising interest rates gradually

 

Overnight News

 

ASIA

 

JGBs slipped overnight on caution ahead of a 30-year debt auction being eyed as a source of short term direction for the market. However, as the session progressed, JGBs pared earlier losses. Nikkei rose 1.9%, its best daily performance in a month, buoyed by a jump in resource stocks as USD weakness fuelled a climb in commodity prices. (RTRS)

 

In other news, Japan’s Prime Minister Kan and Finance Minister Noda said that downward risk to the country’s economy is increasing. However Japanese Economy Minister Kaieda said there are clear signs that the nation’s economy is recovering. (Sources)

Elsewhere, about 26% of all loans to Chinese local government financing vehicles are at serious risk of default, regulators concluded after a probe into what some analysts see as a liability for the economy. The estimate that CNY 2trl of local debt could turn sour is slightly higher than an earlier assessment by the Chinese banking regulator that 23%, or CNY 1.76trl, was in trouble. (RTRS)

 

US

 

Fed’s Lacker said he would not support further monetary easing, saying he is not very worried about subdued US inflation readings. He added that he is very confident quantitative easing can affect inflation, but less clear it can help growth at this juncture. He also said that the value of the USD is no more a factor than usual in setting policy, and he does not see a material risk of deflation. (RTRS)

 

In other news, the number of US homes taken over by banks topped 100,000 for the first time in September, though foreclosures are expected to slow in coming months as lenders work through questionable paperwork, real estate data company RealtyTrac said. Banks foreclosed on 102,134 properties in September, the first single month above the century mark, RealtyTrac said. There were a total of 347,420 total foreclosures filings in September, 3% higher than August and 1% higher than a year earlier. (RTRS)

 

Elsewhere, the Chief Operating Officer at PIMCO said that the market is anticipating another round of QE by the Fed. (Sources)

 

Bonds

 

EUROPEAN GOVERNMENT BONDS

 

Bunds traded lower during the European session on the back of general risk-appetite and strength in equities, with European peripheral 10-year bond yield spreads with respect to bunds generally tightened across the board. However, a well received BTP auction from Italy had muted reaction on the market, and moving into the North American open, bunds are trading in negative territory.

 

Maturity

2

5

10

30

Bund (Dec 10)

Level

0.789

1.434

2.296

2.909

131.39

Change (bps)

0.911

1.646

1.503

1.791

-0.18

 

GILTS

 

NYSE LIFFE Gilt futures traded in tandem with bunds during the European session and moving into the North American open have come off its best levels, however still trading in minor negative territory.

 

In other news, BOE’s Sentance said the Bank of England risks losing credibility over inflation worries. He added that interest rates need to start rising gradually to counter the risk of above target inflation becoming entrenched in the economy. (Telegraph/RTRS)

 

Maturity

2.000

5.000

10.000

30.000

Gilt (Dec 10)

Level

0.619

1.536

2.880

3.977

125.2

Change (bps)

-0.310

0.026

0.379

-0.785

-0.01

 

EQUITIES

 

European equities traded higher for the majority of the European session, with particular strength witnessed in telecommunications and basic materials sectors. A broker upgrade for Vodafone, allied with news that Telecom Italia completed an agreement to raise its stake in Sofora, the holding that controls Telecom Argentina, helped the telecommunications sector, whereas continued weakness in the USD index buoyed the basic materials sector. In equity specific news, SAP shares rose following market talk that Hewlett-Packard may bid for the company. However, FTSE 100 index underperformed its European peers weighed upon by financials as well as weakness in Royal Dutch Shell shares following market talk that the company is guiding the street down 2% for Q3 (unconfirmed). Financials came under further pressure following comments from Moody’s saying that the outlook for German banking system remains negative.

 

Index

DAX

CAC

FTSE

EUROSTOXX

SMI

Level

6473.38

3836.73

5740.63

2853.91

6458.54

Change (ticks)

38.86

8.39

-6.72

13.36

3.41

 

FX

 

The USD index remained under pressure, weighed upon by news that Singapore unexpectedly tightened policy to let its currency rise by widening the trading band for the Singapore dollar (SGD), which in turn helped both EUR/USD and GBP/USD. At one point the USD index touched its lowest level since December 2009, however moving into the North American open it has pared back some of the earlier losses on the back of market talk that a deal between US and China has been reached, whereby China will allow the CNY to appreciate at a faster pace, whereas the US will take less aggressive quantitative easing measures. Also, according to sources, news that the US Treasury Department is expected to issue its annual report on the currency practices of China tomorrow helped the USD index.

 

In other news, the USD/JPY touched fresh 15-year low at 80.89, however as the session progressed it came off the worst levels after the USD index pared earlier losses, and following comments from Japanese PM that Japan will take decisive forex steps if necessary.

 

Also, the GBP gained partly on the back of comments from BOE’s Sentance that interest rates need to start rising gradually to counter the risk of above target inflation becoming entrenched in the economy.

 

Currency

EURUSD

GBPUSD

USDJPY

Level

1.4088

1.6040

81.19

Change (pips)

0.0127

0.0143

-0.6200

 

COMMMODITIES

 

Despite initially trading above the USD 84 level, WTI Crude futures have given back some of their gains during the European session,  as the USD Index came off its initial lows and European equity markets came off the highs.

 

Oil & Gas News:

·  According to reports, OPEC ministers meeting in Vienna today were "100%" in agreement to keep output unchanged. This follows the Kuwait oil minister saying that the only likely outcome would be to leave output policy unchanged, and the Saudi oil minister saying that he is happy with the current oil market and prices. OPEC President Wilson told reporters earlier in the day that oil at USD 75-85 provides no threat to the world economy.

·  There will be an extraordinary meeting of OPEC ministers on December 14th in Quito, Ecuador.

·   A French port strike at the Fos-Lavera oil hub is continuing for a 18th day today, with 63 vessels including 27 crude oil tankers and 18 refined product vessels now being blocked. Also in France French unions have called for public transport workers to strike for a 3rd day. Total has started to halt production at all their French refineries, with the IEA reporting that France have tapped its emergency oil reserves.

·  Nigerian Oil Minister Madueke said today a planned oil licensing round and the passage of wide-ranging legislation to overhaul the energy sector would take place this year.

 

Commodity

WTI Nymex

OTC Spot Gold

Level

83.62

1381.55

Change (NYSEARCA:USD)

0.61

9.40


LOOKING AHEAD

 

Economic Releases

CDT BST                                                         EXP.    PREV.

0730

1330

US    Initial Jobless Claims W/W (Oct 9)

445K

445K

0730

1330

US    Continuing Claims W/W (Oct 2)

4450K

4462K

0730

1330

US    Trade Balance (USD) M/M (Aug)

-44.0B

-42.8B

0730

1330

US    PPI M/M (Sep)

0.2%

0.4%

0730

1330

US    PPI Y/Y (Sep)

3.7%

3.1%

0730

1330

US    PPI ex. Food & Energy M/M (Sep)

0.1%

0.1%

0730

1330

US    PPI ex. Food & Energy Y/Y (Sep)

1.5%

1.3%

0730

1330

CA    Int'l Merch. Trade (NYSEARCA:CAD) M/M (Aug)

-2.3B

-2.7B

0930

1530

US    EIA Natgas Sto. Chng. W/W (Oct 8)

91

85

1000

1600

US    DOE Crude Oil Invent. W/W (Oct 8)

1400K

3088K

1000

1600

US    DOE Gasoline Invent. W/W (Oct 8)

-1500K

-2646K

1000

1600

US    DOE Distillate Invent. W/W (Oct 8)

-1175K

-1124K

1000

1600

US    DOE Cushing Crude Invent. W/W (Oct 8)

 

749K

1000

1600

US    DOE Refinery Utilisation W/W (Oct 8)

0.35%

-2.70%

 

Speakers

 CDT   BST

0740

1340

EU    ECB's Wellink

0900

1500

SW   Riksbank Deputy Governor Ekholm

1050

1650

SW   Riksbank Deputy Governor Nyberg

1600

2200

US    Fed's Kocherlakota

 

Auction

  CDT    BST

1200

1800

US   USD 13bln (Act) 30y Note Auction

 

US Earnings: Advanced Micro Devices, Google, Progressive Corp., Safeway

 

 Prices taken at  1244BST

 



Disclosure: No Position