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

DAILY US OPENING NEWS - 21/10/10

 

  • BOE’s Miles said that UK’s monetary policy is extraordinarily expansionary and can still be used further if needed
  • Better than expected manufacturing and services PMIs from Germany and Eurozone boosted risk appetite
  • Nokia shares rose more than 8% after reporting a better than expected quarterly earning results
  • US Treasury Secretary Geithner suggested that he sees no reason for the USD to sink further against the EUR and the JPY

 

Overnight News

 

ASIA

 

JGBs dipped overnight as Tokyo stocks rebounded on a sharp slide in the JPY, however as the session progressed JGBs pared back most of the earlier losses. Nikkei inched down (-0.05%) to its lowest close in three weeks after the JPY regained strength against the USD and Shanghai shares fell.  (RTRS)

 

In other news, Japanese Economy Minister Banri Kaieda said the Japanese government’s most recent stimulus package may push up economic growth by 0.6 percentage point. (Sources)

 

·   Chinese Real GDP (Q3) Y/Y 9.6% vs. Exp. 9.5% (Prev. 10.3%)

·   Chinese Producer Price Index (Sep) Y/Y 4.3% vs. Exp. 4.1% (Prev. 4.3%)

·   Chinese Purchasing Price Index (Sep) Y/Y 7.1% vs. Prev. 7.5%

·   Chinese CPI (Sep) Y/Y 3.6% vs. Exp. 3.6% (Prev. 3.5%)

·   Chinese Retail Sales (Sep) Y/Y 18.8% vs. Exp. 18.5% (Prev. 18.4%)

·   Chinese Industrial Production (Sep) Y/Y 13.3% vs. Exp. 14.0% (Prev. 13.9%) (RTRS)

 

US

 

FDIC’s Bair said she expects large US banks will have to meet stricter capital requirements than specified in the new international rules known as Basel III. (RTRS)

 

Bonds

 

EUROPEAN GOVERNMENT BONDS

 

Bunds traded lower in early European trade ahead of large supply coming from Spain and France and came under further pressure after stronger manufacturing and services PMI figures from Germany and the Eurozone. The Spanish auction came out with a much lower bid/cover ratio, which in turn led to a widening of Spanish/German 10-year government bond yield spread, whereas the Irish/German spread widened on the back of news that talks between Ireland’s PM and the leaders of the main opposition parties ended without agreement on budget deficit, allied with comments from Ireland’s Economic and Social Research Institute (OTC:ESRI) that the Irish government risks pushing its economy into a prolonged recession as it tries to cut its budget deficit and lower borrowing costs. Moving into the North American open, bunds have maintained weakness and are trading in negative territory.

 

·   Eurozone Manufacturing PMI (Oct A) M/M 54.1 vs. Exp. 53.2 (Prev. 53.7)

·   Eurozone Services PMI (Oct A) M/M 53.2 vs. Exp. 53.7 (Prev. 53.6)

·   Eurozone Composite PMI (Oct A) M/M 53.4 vs. Exp. 53.6 (Prev. 54.1)

·   German Manufacturing PMI (Oct A) M/M 56.1 vs. Exp. 54.6 (Prev. 55.1 )

·   German Services PMI (Oct A) M/M 56.6 vs. Exp. 54.8  (Prev. 54.9)

·   French Manufacturing PMI (Oct P) M/M 55.2 vs. Exp. 55.3 (Prev. 56.0)

·   French Services PMI (Oct P) M/M 55.3 vs. Exp. 57.5 (Prev. 58.2) (RTRS)

 

·   Spanish bond auction for EUR 2.9bln, 4.65% 30-Jul-25, bid/cover 1.4 vs. Prev. 2.57 (yield 4.541% vs. Prev. 5.116%)

·   Spanish bond auction for EUR 0.941bln, 5.75% 30-Jul-32, bid/cover 1.4 vs. Prev. 1.94 (yield 4.777% vs. Prev. 4.797%) (RTRS)

 

Maturity

2

5

10

30

Bund (Dec 10)

Level

0.967

1.636

2.455

2.986

129.81

Change (bps)

1.207

2.316

1.716

-0.035

-0.14

 

GILTS

 

NYSE LIFFE Gilt futures traded higher during the European session over continued anticipation of further monetary easing from the BOE, a sharp decline in UK’s retail sales as well as comments from BOE’s Miles that UK’s monetary policy is extraordinarily expansionary and can still be used further if needed. Miles also said that he is guardedly optimistic that the recovery will continue.

 

In other news, BOE’s Dale said that it is important that the MPC remains alert, and is ready to change direction based on the circumstances. Dale added that the big challenge for the MPC is to balance an above target CPI and uncertainty about the recovery. (RTRS)

 

·   Retail Sales (Sep) M/M -0.2% vs. Exp. 0.3% (Prev. -0.5%, Rev. to -0.7%)

·   Retail Sales (Sep) Y/Y 0.5% vs. Exp. 0.9% (Prev. 0.4%, Rev. to 0.8%)

·   Major Banks Approvals (Sep) M/M 44K vs. Exp. 44K (Prev. 45K) (RTRS)

 

Maturity

2.000

5.000

10.000

30.000

Gilt (Dec 10)

Level

0.581

1.439

2.918

4.036

124.84

Change (bps)

-1.313

-6.005

-6.518

-6.767

0.65

 

EQUITIES

 

European equities traded in positive territory on the back of better than expected manufacturing and services PMI figures from Germany and Eurozone, allied with a strong quarterly earnings results from Nokia, which saw its shares climb more than 8% and helped the technology sector in particular. However, the Spanish IBEX 35 index underperformed its European peers following news that the Spanish government is considering a new sectoral tax on banks, energy companies and telecommunications firms to help plug the budget deficit. GlaxoSmithKline shares spiked higher after a better than expected quarterly earnings, however pared the gains after the co. said it is cutting its full year forecast, which in turn weighed on the health care sector. Moving into the North American open, equities are trading in minor positive territory with consumer goods and technology being the best performing sectors.

 

Kindly note that details regarding the US corporate earnings can be found at ransquawk.com website, or alternatively in the Ransquawk’s US Equity Opening News sheet, which will be sent out shortly.

 

Index

DAX

CAC

FTSE

EUROSTOXX

SMI

Level

6577.28

3861.5

5772.67

2873.29

6509.32

Change (ticks)

52.73

33.35

43.74

21.77

32.12

 

FX

 

The USD index gained overnight following comments from the US Treasury Secretary Geithner who suggested that he sees no reason for the USD to sink further against the EUR and the JPY, saying these major currencies are roughly in alignment. He also emphasized that the US was not pursuing a deliberate policy of devaluing he USD. However, as the session progressed and risk-appetite gathered pace, the USD index ventured back in negative territory, which in turn helped EUR/USD in particular.

 

In other news, GBP traded lower across the board following dovish comments from BOE’s Miles that UK’s monetary policy is extraordinarily expansionary and can still be used further if needed, allied with a sharp decline in UK’s retail sales figures.

 

Elsewhere, Japanese finance minister Noda said that the government is ready to take bold action on currencies, including intervention, when needed. Also, Japan hasn’t set a line to defend its currency at JPY 82 per USD, according to the Chief Cabinet Secretary Yoshito Sengoku.

 

Currency

EURUSD

GBPUSD

USDJPY

Level

1.4029

1.5770

81.03

Change (pips)

0.0065

-0.0079

-0.0600

 

 

COMMMODITIES

 

WTI crude futures have moved up from their Asian session lows, to keep above the USD 82 level, aided by a weaker USD Index (-0.25%), however remain in negative territory ahead of the NYMEX open.

 

Oil & Gas News:

  • Turkey’s Energy Minister says that Turkey will invest USD 3.2bln in Iraqi Gas fields which it won at a tender.
  • China’s commercial crude oil stocks at the end of September were 3.4% lower, than at the end of August, and oil product stocks were 3.9% lower.
  • France’s 12 oil refineries remain blocked today, with fuel supplies from them still cut off.

 

Geopolitical News:

  • Speculation of a third nuclear test is growing in North Korea, following movements of troops and vehicles near an atomic weapons site, according to the Chosun Ilbo newspaper.

 

Commodity

WTI Nymex

OTC Spot Gold

Level

82.33

1347.03

Change (NYSEARCA:USD)

-0.21

0.78


LOOKING AHEAD

 

Economic Releases

CDT BST                                                       EXP.     PREV.

0730

1330

US    Initial Jobless Claims W/W (Oct 16)

455K

462K

0730

1330

US    Continuing Claims W/W (Oct 9)

4430K

4399K

0730

1330

CA    Leading Indicators M/M (Sep)

0.2%

0.5%

0900

1500

US    Philadelphia Fed M/M (Oct)

2.0

-0.7

0900

1500

US    Leading Indicators M/M (Sep)

0.3%

0.3%

0900

1500

EU    Eurozone Cons. Confid. M/M (Oct A)

-11

-11

0930

1530

US    EIA Natgas Sto. Chng. W/W (Oct 15)

87

91

1500

2100

US     RPX Composite 28-Day (Aug) Y/Y

 

-1.04%

1500

2100

US     RPX Composite 28-Day Index (Aug) Y/Y

 

196.35

 

Speakers

CDT   BST

0900

1500

US     Fed's Bullard

1300

1900

US     Fed's Bullard

N/A

N/A

WLD  G-20 Finance Ministers' meeting

 

Auction

CDT   BST

1000

1600

US      5y TIPS, 2y-5y-7y Refunding Announcement

 

US Earnings: Amazon.com, American Express, Baidu, Citrix Systems, Exelon, Freeport-McMoRan Copper & Gold, McDonald’s, SanDisk,  Union Pacific, United Parcel Service

 

 Prices taken at  1219BST

 



Disclosure: No Position