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DAILY US OPENING NEWS - 02/11/10


  • The RBA hiked its key cash rate by 25 BPS to 4.75% unexpectedly
  • The USD index traded lower during the European session ahead of the FOMC meeting tomorrow
  • The PBOC said that it will further improve reform of CNY formation mechanism, and will keep CNY basically stable at reasonable level
  • Eurozone manufacturing PMI came in higher than expected, with the job index highest since March 2008
  • UK Construction PMI registered an eight month low, which weighed on GBP

 

Overnight News

 

ASIA

 

JGBs traded heavy early but bounced on a good 10-year auction. Nikkei closed up 0.06% as the market looks ahead to the US mid-term election today and the FOMC rate decision due later this week. (RTRS)

 

In other news, some bank of Japan board members said exempting the bank’s new asset buying fund from a ceiling on outright Japanese government bond purchases would help to avoid the impression of debt monetisation, according to BOJ’s minutes of its October 4th-5th meeting. Some members also said the bank needed to retain its 0.1% interest rate on extra reserves that banks park at the BOJ because the negative effects of an excessive decline in interest rates would exceed any easing effects. (RTRS)

 

Elsewhere, the PBOC said it will gradually normalise monetary policy from counter-crisis mode, however will continue the implementation of moderately loose monetary policy. It also said that it will further improve reform of CNY formation mechanism, and will keep CNY basically stable at reasonable level. (RTRS)

 

US

 

According to an article in the WSJ, Republicans are positioned for large gains in Tuesday’s mid-term election, likely retaking the House and picking up seats in the Senate, amid strong voter frustration. (WSJ)

 

A preview of today’s mid-term election is available on the RANsquawk website.

 

Bonds

 

EUROPEAN GOVERNMENT BONDS

 

Bunds traded higher during the European session as the market looks ahead to the US mid-term election today as well as the FOMC meeting tomorrow in the anticipation of further quantitative easing. European peripheral 10-year bond yield spreads with respect to bunds generally widened, with widening seen in Portuguese/German spread partly on the back of news in Jornal de Negocios saying that Portugal requires EUR 510mln additional spending cuts to meet its deficit target. The Greek/German spread also widened, influenced by news in Kathimerini that Greece needs to implement additional spending cuts this year after lower than targeted revenue for 2010, whereas narrowing of the Irish coalition majority to 3 after the resignation of a senior government party MP contributed towards the widening of Irish/German spread. Moving into the North American open, bunds have maintained strength and are trading sideways in positive territory.

 

·   Eurozone Manufacturing PMI (Oct F) M/M 54.6 vs. Exp. 54.1 (Prev. 53.7)

·   German Manufacturing PMI (Oct F) M/M 56.6 vs. Exp. 56.1 (Prev. 55.1)

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

·   Italian Manufacturing PMI (Oct) M/M 53.0 vs. Exp. 52.6 (Prev. 52.6), highest since July (RTRS)

 

·   Belgian sells EUR 1.115bln in 3-month T-Bill auction, bid/cover 2.57 vs. Prev. 3.38 (yield 0.777% vs. Prev. 0.593%)

·   Belgian sells EUR 1.795bln in 6-month T-Bill auction, bid/cover 2.67 vs. Prev. 2.50 (yield 0.901% vs. Prev. 0.621%) (RTRS)

 

Maturity

2

5

10

30

Bund (Dec 10)

Level

0.981

1.678

2.463

2.909

129.81

Change (bps)

0.598

-0.252

-1.632

-3.151

0.13

 

GILTS

 

 

NYSE LIFFE Gilt futures traded in tandem with bunds, gaining further strength after a drop in the construction PMI data from the UK, and moving into the North American open, prices are trading sideways in positive territory.

 

In other news, British opposition Labour Party has nosed ahead of the Conservatives since the coalition government announced public spending cuts last month, according to the latest ComRes poll for the Independent newspaper. The poll puts support for Labour on 37% (+3%), Conservatives on 35% (-5%) and Liberal Democrats at 16% (+2%). (RTRS)

 

·   Construction PMI (Oct) M/M 51.6 vs. Exp. 53.0 (Prev. 53.8), eight-month low

 

·   Conventional Gilt Auction, new 2.00% Jan'16, for GBP 4bln, bid/cover 2, yield tail 0.4 BPS

 

Maturity

2.000

5.000

10.000

30.000

Gilt (Dec 10)

Level

0.664

1.594

3.020

4.108

123.87

Change (bps)

-0.490

-1.567

-2.269

-1.209

0.2

 

EQUITIES

 

In European equities, Spanish Bank BBVA (-3%) has announced a EUR 5bln rights issue to pay for a stake in Turkey's Garanti bank for USD 5.8bln, this has led to a underperformance from Spain's IBEX35 index today. However, on the positive side the FTSE100 index has outperformed the rest of Europe, following well received earnings from BP (+1.5%) and strength in the Basic Materials and Oil & Gas sectors which have a high weighting in the Index, and moving into the North American open, equities are trading in minor positive territory.

 

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

6655.77

3869.37

5757.47

2857.09

6545.32

Change (ticks)

50.91

28.26

62.85

20.36

40.6

 

FX

 

AUD gained strength across the board following an unexpected hike in Australian key cash rate to 4.75% from 4.50%, which marks a two year high. In other news, the USD index traded under pressure ahead of the FOMC meeting tomorrow, where markets are expecting an announcement of further QE. This allied with strength in commodities helped commodity linked currencies, with the NZD/USD printing a fresh 27-month high above 0.7694.

 

Elsewhere, EUR gained strength on the back of strong manufacturing PMI data from Eurozone countries, which helped EUR/USD to test the 1.4000 level. However, an eight month low in UK construction PMI weighed upon GBP across the board and saw GBP/USD retracing more than 100 pips.

 

Also worth noting, the Indian Central Bank raised its repo rate and reverse repo rate each by 25 BPS to 6.25% and 5.25% respectively as expected.

Currency

EURUSD

GBPUSD

USDJPY

Level

1.3971

1.5979

80.89

Change (pips)

0.0078

-0.0057

0.3800

 

COMMMODITIES

 

WTI Crude futures traded sideways with little real direction throughout the European session, ahead of the US mid term elections and the FOMC meeting.

 

Oil & Gas News:

  • IEA’s Tanaka has said that an oil price range of USD 70-90 is needed for stimulate investment in unconventional oil sources, however he was not sure if this price would promote healthy economic growth.
  • Saudi Oil Minister Ali Naimi has said an oil price between USD 70-90 per barrel is a comfortable range for consumers which is higher than his earlier statements that USD 70-80 was ideal. Similar comments were also made from Qatar’s Oil Minister Al-Attiyah.
  • Bank of America have said that Oil prices could move above USD 90 before the end of the year, if the Fed announce further QE, as oil prices are only starting to reflect a weak USD against the G10 currencies, which leaves room for oil prices to rise as the emerging market currencies strengthen against the USD.
  • ExxonMobil’s Nigerian unit has said it made a rich gas condensate discovery off the south-east coast of the country today.
  • Russia’s Energy ministry has said that Russian oil output hit a new record of 10.26mln BPD in October, beating the September record of 10.16mln BPD.

 

Commodity

WTI Nymex

OTC Spot Gold

Level

83.52

1353.8

Change (NYSEARCA:USD)

0.57

-0.05

 

 


 

LOOKING AHEAD

 

Economic Releases

 

CDT

GMT

 

DATA

 

 

EXP

PREV

0755

1255

US

Redbook

M/M

Nov 2

 

0.3%

0755

1255

US

Redbook

Y/Y

Nov 2

 

2.8%

1030

1530

UK

DMO Gilt Size Announcement

 

 

 

 

1200

1700

IT

New Car Registrations

Y/Y

Oct

 

-18.9%

1400

1900

IT

Budget Balance

M/M

Oct

 

-12.7B

1400

1900

IT

Budget Balance (Year to Date)

Y/Y

Oct

 

-64.5B

1530

2030

US

API Crude Oil Inventories

W/W

Oct 29

 

6432K

1530

2030

US

API Gasoline Inventories

W/W

Oct 29

 

-1805K

1530

2030

US

API Distillate Inventory

W/W

Oct 29

 

818K

1530

2030

US

API Cushing Crude Inventory

W/W

Oct 29

 

-351K

1600

2100

US

ABC Consumer Confidence

W/W

Oct 31

-47

-47

N/A

N/A

US

US Mid-term Elections

 

 

 

 

 

 

Auction

 

CDT

GMT

 

 

0900

1400

FR

EUR 8bln combined 13-, 20-, 24-, and 50-week T-Bills

 

 

US Earnings: Electronic Arts, Hartford Financial Services, Kellogg Co., MasterCard, Marathon Oil, Sysco Corp, Wynn Resorts

 

 Prices taken at  1155GMT

 

 

 



Disclosure: No Position