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DAILY US OPENING NEWS - 22/10/10

 

  • BOE’s Sentance said that the Bank of England should start to raise interest rates
  • US Treasury Secretary Geithner said that G20 nations should not weaken or prevent appreciation of undervalued currencies
  • Fed’s Hoenig said that any further so-called QE by the Fed would risk damaging the nascent US economic recovery

 

Overnight News

 

ASIA

 

JGBs dipped overnight as investors took profit on gains made the previous day after a well received 20-year debt auction. Nikkei rose 0.5% in a rebound after two days of losses, but investors were wary of pushing the market higher before seeing the outcome of a G20 meeting and with the JPY hovering near a 15-year high on the USD. But with the earnings season heading into full swing in Japan, investors snapped up shares of companies that had upbeat earnings prospects such as Hitachi, helping provide support to the overall market. (RTRS)

 

In other news, Japanese Economics Minister Kaieda said Tokyo is concerned about signs of bubbles forming in the Chinese economy. (RTRS)

 

Elsewhere, China’s raising interest rates on Tuesday does not signal a cycle of rate hikes, according to Wu Xiaoling, a former deputy governor of the central bank. (Securities Times)

 

US

 

Fed’s Hoenig said that any further so-called QE by the Fed would risk damaging the nascent US economic recovery. (WSJ)

 

In other news, foreign central banks overall holdings of US marketable securities at the Federal Reserve rose USD 16.02bln in the week ended Oct.20, to stand at USD 3.282trl. Also the US Federal Reserve’s balance sheet shrank to USD 2.288trl in the week ended Oct. 20 from USD 2.291trl the previous week. (RTRS)

 

Bonds

 

EUROPEAN GOVERNMENT BONDS

 

Bund futures lacked any clear direction during the European session, however did come under pressure following a better than expected German IFO data. European peripheral 10-year government bond yield spreads with respect to bunds showed muted reaction and remained marginally wider, and moving into the North American open, bund futures are trading in minor positive territory.

 

·   German IFO - Business Climate (Oct) M/M 107.6 vs. Exp. 106.5 (Prev. 106.8)

·   German IFO - Current Assessment (Oct) M/M 110.2 vs. Exp. 110.0 (Prev. 109.7)

·   German IFO - Expectations (Oct) M/M 105.1 vs. Exp. 102.9 (Prev. 103.9) (RTRS)

 

Maturity

2

5

10

30

Bund (Dec 10)

Level

0.989

1.666

2.466

2.977

129.68

Change (bps)

-0.373

-0.348

-1.660

-3.133

0.06

 

 

GILTS

 

NYSE LIFFE Gilt futures traded marginally higher throughout the European session, and moving into the North American open are trading sideways in positive territory.

 

In other news, BOE’s Sentance said that the Bank of England should start to raise interest rates from the record low of 0.5% to reflect better economic conditions in Britain and globally, adding that he favours gradual interest-rate increase. He further said that the global economy has turned round and the UK economy has grown by round about 2.5% over the last year. So those are all the conditions where we don’t need so much stimulus from monetary policy, and such a low level of interest rates. (RTRS)

 

Maturity

2.000

5.000

10.000

30.000

Gilt (Dec 10)

Level

0.591

1.446

2.926

4.056

124.7

Change (bps)

1.091

0.502

-0.842

-0.204

0.02

 

EQUITIES

 

European bourses traded in negative territory during the European session, with particular weakness seen in the basic materials sector due to relative strength in the USD index. Financials also underperformed, partly influenced by EU’s Rehn comments that banks may be pushed by the European Union to hoard extra capital buffers beyond minimum requirements proposed by global regulators last month, allied with an article in FT saying that big banks in Britain are in line to pay a larger-than-expected share of a new industry levy after some alterations to the scheme threatened to push up the overall charge on their balance sheets. Moving into the North American open, equities are trading in minor negative territory, with basic materials and healthcare as the worst 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

6608.57

3876.15

5741.78

2877.91

6498.89

Change (ticks)

-2.44

-2.12

-16.08

-4.38

-13.3

 

FX

 

After trading lower in early European trade, the USD Index regained strength as the session progressed, which in turn weighed upon EUR/USD and GBP/USD. In other news, GBP gained strength across the board, in early trade, following comments from BOE’s Sentance that the Bank of England should start to raise interest rates, whereas EUR gained briefly on the back of a better than expected German IFO data.

 

Also, USD/CAD spiked down around 20pips following an increase in Canadian CPI data.

·   Canadian CPI (Sep) M/M 0.2% vs. Exp. 0.1% (Prev. -0.1%)

·   Canadian CPI (Sep) Y/Y 1.9% vs. Exp. 1.9% (Prev. 1.7%) (RTRS)

 

Elsewhere, US Treasury Secretary Geithner said that G20 nations should not weaken or prevent appreciation of undervalued currencies. He added that emerging economies with undervalued FX and solid reserves must adjust FX with fundamentals. He also said that G20 advanced countries will work to cut excessive volatility and disorderly FX moves. (RTRS)

Currency

EURUSD

GBPUSD

USDJPY

Level

1.3917

1.5705

81.21

Change (pips)

-0.0003

0.0001

-0.1200

 

COMMMODITIES

 

Despite a brief move lower during the European open, WTI crude futures moved back into positive territory as the USD index moved to unchanged on the session.

 

Oil & Gas News:

  • JPMorgan says any setback in oil price should be bought, and says USD 100 oil may arrive sooner than we expect. Sees oil rally on weaker USD, demand from China. Also sees 6% drop in October demand if French strikes continue.
  • Iraq’s 2010 oil export at 1.876mln bpd, down 1.6% from 2009.
  • Workers at all 12 of France’s oil refineries remained on strike over pension reform on Friday. 71 ships, 4 barges delayed due to Fos-Lavera strike, all other Marseille port terminals but Fos-Lavera resumed work.

 

Geopolitical News:

  • North Korea nuclear arms a serious threat, according to military leaders worldwide. In addition, South Korea’s unification minister said that the possibility of the North conducting a third nuclear test couldn’t be ruled out.

 

Commodity

WTI Nymex

OTC Spot Gold

Level

81.14

1320.34

Change (NYSEARCA:USD)

0.58

-5.34


LOOKING AHEAD

 

Economic Releases

CDT  BST                                                        EXP.  PREV.

0730

1330

CA    Retail Sales M/M (Aug)

-0.1%

-0.1%

0730

1330

CA    Retail Sales Less Autos M/M (Aug)

0.5%

-0.4%

0930

1530

US    ECRI Weekly W/W (Oct 22)

 

122.40

0930

1530

US    ECRI Weekly Annualised Y/Y (Oct 22)

 

-6.9%

1000

1600

CA    Budget Balance (NYSEARCA:CAD) M/M (Aug)

 

-0.47B

1000

1600

CA    Budget (year-to-date) (CAD) Y/Y (Aug)

 

-7.70B

1200

1800

US    Baker Hughes Rig Count W/W (Oct 22)

 

1670

 

Speakers

 CDT  BST

0720

1320

EU    ECB's Bini Smaghi

N/A

N/A

EU    G20 Finance Ministers meeting

 

Auction

 CDT    BST

1000

1600

US    Fed's Outright Treasury Coupon Purchase Apr 2013 - Sep 2014

 

US Earnings: Exelon, Verizon

 

**Notes:

UST Nov. options expiry

Long Gilt Nov. options expiry

 

 

 Prices taken at  1212BST

 



Disclosure: No Position