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DAILY US OPENING NEWS - 03/11/10


  • Markets continue to focus on the FOMC meeting later in the session, with the anticipation of further QE
  • Stronger services PMI and shop price index figures from the UK helped GBP
  • Irish/German 10-year bond yield spread trading just below 500BPS (+15BPS), Euro-lifetime high
  • There was early market talk of China widening the CNY trading band this weekend

 

Overnight News

 

ASIA

 

Japanese market holiday

 

Shanghai stock index slipped 0.5% in volatile trade, with heavy selling in small caps offsetting gains from heavyweight financials such as Everbright Bank. (RTRS)

 

In other news, the World Bank raised its forecast for economic growth in China this year and next, adding that the strong domestic fundamentals will help offset an expected slowdown in the global economy. In a quarterly update on Chinese economy, the World Bank said China would likely grow by 10% this year, up from an earlier forecast of 9.5%. Next year’s estimate was lifted to 8.7% from 8.5%. It also said that while consumer price rises will probably stay above the 3% year-average target set by the Chinese government, there will not be much further run-up. It added that China should raise interest rates and allow a stronger CNY to damp inflation. (RTRS)

 

·   Chinese Non-Manufacturing PMI (Oct) M/M 60.5 vs. Prev. 61.7

·   Chinese HSBC Services PMI (Oct) M/M 56.4 vs. Prev. 55.2 (RTRS)

 

US

 

In the US mid-term election, the Republican Party regained control of the House of Representatives but the Democrats kept their control of the Senate. However the market reaction has been muted as this was the result which most political commentators and newswires had been expecting. The focus now moves on to today's FOMC meeting where it is widely expected that a further USD 500bln of QE will be announced.

 

In other news, according to an article in FT, Martin Feldstein wrote that the QE2 is risky and should be limited. He further said that the truth is there is little more that the Fed can do to raise economic activity. What is required is action by the president and Congress: to help homeowners with negative equity and businesses that cannot get credit, to remove the threat of higher tax rates, and reduce the out-year fiscal deficits. Any QE should be limited and temporary. (NYSE:FT)

 

·   Challenger Job Cuts (Oct 29) Y/Y 37.986K vs. Prev. 37.151K

·   MBA Mortgage Applications (Oct 29) W/W -5.0% vs. Prev. 3.2%

·   ABC Consumer Confidence (Oct 31) W/W -46 vs. Exp. -47 (Prev. -47) (RTRS)

 

Bonds

 

EUROPEAN GOVERNMENT BONDS

 

Bund futures traded higher during the European session ahead of the FOMC meeting later in the US session, where market anticipation is for further QE from the Fed. European peripheral 10-year bond yield spreads with respect to bunds demonstrated a mixed picture, however the Irish/German spread widened to its Euro-lifetime high due to persistent fears surrounding Ireland’s ability to address its budget deficit, and the Portuguese/German spread widened ahead of the Portuguese parliament vote on the 2011 budget outline later in the session. Moving into the North American open, bunds have maintained strength and are trading sideways in positive territory.

 

·   Portuguese 3-month T-Bill auction for EUR 0.5bln, bid/cover 2.2 vs. Prev. 3.0 (yield 1.818% vs. Prev. 1.595%)

·   Portuguese 12-month T-Bill auction for EUR 0.531bln, bid/cover 2.2 vs. Prev. 2.4 (yield 3.260% vs. Prev. 2.886%)

·   German Bobl auction for EUR 4.10425bln, 1.75% 09-Oct-15, bid/cover 1.6 vs. Prev. 1.6 (yield 1.65% vs. Prev. 1.52%), retention 17.9% vs. Prev. 21.4% (RTRS)

 

Maturity

2

5

10

30

Bund (Dec 10)

Level

0.971

1.644

2.429

2.846

130.11

Change (bps)

-1.665

-3.566

-3.887

-5.666

0.33

 

GILTS

 

NYSE LIFFE Gilt futures traded in tandem with bunds, though prices did come under some pressure following a stronger than expected Services PMI from the UK, and moving into the North American open, Gilts are trading in positive territory.

 

·   Services PMI (Oct) M/M 53.2 vs. Exp. 52.5 (Prev. 52.8), highest since June

·   BRC Shop Price Index (Oct) Y/Y 2.1% vs. Prev. 1.9%, highest annual rate since January. (RTRS)

 

Maturity

2.000

5.000

10.000

30.000

Gilt (Dec 10)

Level

0.663

1.586

3.011

4.107

123.99

Change (bps)

-0.877

-1.910

-2.026

-1.602

0.19

 

EQUITIES

 

European bourses traded in minor positive territory led by financials on the back of better than expected corporate earnings from SocGen. However, Spain’s IBEX 35 index underperformed its European peers weighed upon by weakness in Santander and BBVA shares. Basic materials sector has performed reasonably well due to weakness in the USD index, and moving into the North American open, markets look ahead to the FOMC rate decision due later in the US session.

 

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

6673.7

3886.82

5766.85

2867.65

6565.09

Change (ticks)

19.39

21.10

9.42

6.64

23.59

 

FX

 

GBP gained strength across the board following a stronger than expected shop price index from the UK, and received a further boost after better than expected Services PMI data from the UK, which also saw GBP/USD reaching a 10-month high. It is also worth noting that the RBS has pushed back its forecasts for the BOE to re-start its QE programme to February from November, which in turn has also contributed towards GBP strength.

 

In other news, the USD index continued to trade under pressure ahead of the FOMC rate decision later in the US session, which in turn helped EUR/USD and GBP/USD.

 

Currency

EURUSD

GBPUSD

USDJPY

Level

1.4051

1.6138

80.85

Change (pips)

0.0017

0.0097

0.2200

 

COMMMODITIES

 

WTI Crude futures have moved higher during European trade, buoyed by a weakening USD Index ahead of today’s Federal Reserve meeting.

 

Oil & Gas News:

  • UAE’s Oil minister al-Hamli says said that oil prices at USD 70 per barrel are comfortable for both producers and consumers.
  • Indonesia's crude production missed its 2010 budget target after a leak at the TGI pipeline last month hit production.
  • KNOC have said that the damage from the explosion at an oil pipeline in Yemen is minimal.

 

Commodity

WTI Nymex

OTC Spot Gold

Level

84.87

1358.95

Change (NYSEARCA:USD)

0.97

1.50

 

 


 

LOOKING AHEAD

 

Economic Releases

 

CDT

GMT

 

DATA

 

 

EXP

PREV

0715

1215

US

ADP Employment Change

M/M

Oct

20K

-39K

0900

1400

US

Durable Goods Revision

M/M

Sep

 

3.3%

0900

1400

US

Nondef  cap ex. Air Revision

M/M

Sep

 

-0.6%

0900

1400

US

ISM Non-Manufacturing Composite

M/M

Oct

53.5

53.2

0900

1400

US

Factory Orders

M/M

Sep

1.6%

-0.5%

0930

1430

US

DOE Crude Oil Inventories

W/W

Oct 29

1500K

5007K

0930

1430

US

DOE Gasoline Inventories

W/W

Oct 29

0K

-4387K

0930

1430

US

DOE Distillate Inventory

W/W

Oct 29

-1000K

-1613K

0930

1430

US

DOE Cushing Crude Inventory

W/W

Oct 29

 

-351K

0930

1430

US

DOE Refinery Utilisation

W/W

Oct 29

0.30%

1.20%

1315

1815

US

FOMC Rate Decision

M/M

Nov

0.25%

0.25%

1600

2100

US

Domestic Vehicle Sales

Y/Y

Oct

8.90M

8.82M

1600

2100

US

Total Vehicle Sales

Y/Y

Oct

11.80M

11.73M

1645

2145

NZ

Employment Change

Q/Q

Q3

0.5%

-0.3%

1645

2145

NZ

Employment Change

Y/Y

Q3

1.2%

-0.1%

1645

2145

NZ

Unemployment Rate

Q/Q

Q3

6.7%

6.8%

N/A

N/A

PO

Parliament vote on 2011 budget outline

 

 

 

 

 

 

Speaker

 

CDT

GMT

 

 

1115

1615

SZ

SNB’s Jordan

 

 

Auction

 

CDT

GMT

 

 

0800

1300

US

3y-10y-30y  Quarterly Note Refunding Announcement

 

 

US Earnings: Chesapeake Energy, Devon Energy, EOG Resources, Murphy Oil, News Corp, Prudential Financial, Qualcomm

 

 Prices taken at  1146GMT

 

 

 



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