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DAILY US OPENING NEWS - 04/11/10

 

  • Better than expected Halifax house prices from the UK, USD weakness, and BOE keeping its key interest rate and asset-purchase facility unchanged helped lift GBP/USD
  • Well received bond auctions from Spain and France strengthened risk appetite
  • European bourses traded higher led by basic materials and financials

 

Overnight News

 

ASIA

 

JGB futures rose in Asian trade as short positions were covered after yesterday’s closely watched Federal Reserve meeting ended without major surprises. Nikkei rose 2.2% on a wave of short covering as the Federal Reserve’s monetary easing passed without ructions in the currency market and investors took heart from solid US economic data. Analysts said foreign investors, including a big European name, were principal players behind the Nikkei’s climb away from seven week lows hit earlier this week.

 

In other news, BOJ’s Shirakawa warned that Japanese economy will experience some slowdown in exports and output ahead, suggesting the central bank will keep monetary conditions loose and consider further easing if risks to growth increases. It is worth noting that these comments come ahead of the BOJ’s two-day meeting starting later today. (RTRS)

 

US

 

Fed’s Bernanke said resuming large-scale asset purchases should boost economic growth through lower borrowing costs and higher stock prices and that concerns about the strategy are “overstated”. (Washington Post)

 

Bonds

 

EUROPEAN GOVERNMENT BONDS

 

Bund futures traded lower during the European session weighed upon by the strength in Asian and European equities, allied with well received bond auctions from Spain and France, with a combined size of over EUR 12bln. European peripheral 10-year bond yield spreads with respect to bunds demonstrated a mixed picture, with continued widening seen in the Irish/German spread due to ongoing fiscal concerns surrounding Ireland, as well as on the back of comments from Goldman Sachs’ chief economist, Erik Nielsen, who said that there is a real risk that the Irish government won’t be able to get the budget on December 7th passed. However, marginal narrowing was observed in Spanish/German spread. Moving into the North American open, bunds have maintained weakness and are trading in negative territory.

 

It is worth noting that the ECB is expected to keep its benchmark interest rate unchanged at 1.00% as expected in its rate announcement due at 1245 GMT.

 

·   Spanish New Bond Auction for EUR 3.387bln, bid/cover 1.6 (yield 3.575%)

·   French OAT auction for EUR 4.660bln, 2.5% 12-Oct-20, bid/cover 1.874 (yield 2.87%)

·   French OAT auction for EUR 1.705bln, 4.25% 25-Oct-23, bid/cover 2.223 vs. Prev. 1.53 (yield 3.04% vs. Prev. 3.75%)

·   French OAT auction for EUR 2.475bln, 4% 25-Apr-60, bid/cover 1.414 (yield 3.34%) (RTRS)

 

·   Eurozone Services PMI (Oct F) M/M 53.3 vs. Exp. 53.2 (Prev. 54.1), 8-month low

·   German Services PMI (Oct F) M/M 56.0 vs. Exp. 56.6 (Prev. 54.9)

·   French Services PMI (Oct F) M/M 54.8 vs. Exp. 55.3 (Prev. 58.2), 7-month low

·   Italian Services PMI (Oct) M/M 51.0 vs. Exp. 51.0 (Prev. 51.3), lowest in 3-months (RTRS)

Maturity

2

5

10

30

Bund (Dec 10)

Level

0.983

1.661

2.476

2.952

129.63

Change (bps)

2.351

4.022

5.979

10.801

-0.61

 

 

GILTS

 

NYSE LIFFE Gilt futures traded in tandem with bunds, with a sharp jump in Halifax House prices from the UK exerted further pressure on prices, and moving into the North American open, Gilts are trading in negative territory.

 

In other news, the Bank of England kept its benchmark interest rate unchanged at 0.50% and its asset-purchase programme unchanged at GBP 200bln as expected.

 

·   Halifax House Prices SA (Oct) M/M 1.8% vs. Exp. 0.6% (Prev. -3.6%)

·   Halifax House Prices (Oct) 3M/Y 1.2% vs. Exp. 0.8% (Prev. 2.6%) (RTRS)

 

Maturity

2.000

5.000

10.000

30.000

Gilt (Dec 10)

Level

0.697

1.624

3.053

4.168

123.82

Change (bps)

3.973

4.757

5.825

8.131

-0.29

 

EQUITIES

 

European indices, which trade up over 1.5% are led predominately by basic materials which has been underpinned by a weakening USD (11-month low in the USD index) and also after Canada blocked BHP Billiton's takeover bid for Potash. Financials have also outperformed after better than expected earnings out of French banking giants BNP Paribas and Societe Generale. Moving into the North American open, equities are trading in positive territory with basic materials and financials as 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

6720.41

3913.37

5841.92

2884.66

6598.45

Change (ticks)

102.61

70.43

92.95

54.23

85.46

 

FX

 

GBP/USD briefly topped 1.6200 underpinned by a weaker USD and after UK Halifax house prices came in much stronger than expected. Also, GBP/USD spiked up another 45pips to print fresh session high at 1.6228 after the BOE kept rates unchanged and refrained from expanding its QE program. In other news, EUR/USD has also been a benefactor of a fading USD and has risen above the 1.4200 mark. Elsewhere, NZD/USD gained following a drop in New Zealand’s unemployment rate.

 

·   New Zealand Unemployment Rate (Q3) Q/Q 6.4% vs. Exp. 6.7% (Prev. 6.8%, Rev. to 6.9%)

·   New Zealand Employment Change (Q3) Q/Q 1.0% vs. Exp. 0.5% (Prev. -0.3%, Rev. to -0.2%) (RTRS)

 

Currency

EURUSD

GBPUSD

USDJPY

Level

1.4219

1.6227

80.95

Change (pips)

0.0080

0.0146

-0.1200

 

COMMMODITIES

 

During the Asian and European trading session WTI Crude futures have continued to move higher, up over USD 1 to test the USD 86 level, supported by a sharply weaker USD Index (-0.6%) after yesterday’s announcement from the Federal Reserve they are going to undertake a further USD 600bln of quantitative easing.

 

Oil & Gas News:

  • France’s CGT Union have said that all unit’s at Total’s Feyzin refinery have restarted after a three week output halt due to strikes.
  • The IEA have said that Iraq will miss its oil production target of 12mln BPD by 2017.
  • Both JP Morgan and Bank of America Merrill Lynch have said that Crude oil will move above the USD 100 level in 2011, following the Fed’s announcement last night for a further USD 600bln on QE.

 

Commodity

WTI Nymex

OTC Spot Gold

Level

85.78

1363.55

Change (NYSEARCA:USD)

1.09

15.00

 

 

LOOKING AHEAD

 

Economic Releases

 

CDT

GMT

 

DATA

 

 

EXP

PREV

0730

1230

US

Initial Jobless Claims

W/W

Oct 30

442K

434K

0730

1230

US

Continuing Claims

W/W

Oct 23

4378K

4356K

0730

1230

US

Nonfarm Productivity

Q/Q

Q3 P

1.0%

-1.8%

0730

1230

US

Unit Labour Costs

Q/Q

Q3 P

0.7%

1.1%

0745

1245

EU

ECB’s Rate Announcement

M/M

Nov

1.00%

1.00%

0900

1400

CA

Ivey PMI

M/M

Oct

65.0

70.3

0930

1430

US

EIA Natural Gas Storage Change

W/W

Oct 29

63

71

0930

1430

US

ICSC Chain Store Sales

Y/Y

Oct

 

2.6%

 

 

Speakers

 

CDT

GMT

 

 

0830

1330

EU

ECB Press Conference

1200

1700

SZ

SNB’s Danthine

 

 

Auctions

 

CDT

GMT

 

 

1000

1500

US

Fed’s Outright Treasury Coup. Purch. Oct 2014 – Sep 2016

1200

1700

US

USD 10bln 10y TIPS Auction

 

 

US Earnings: Activision Blizzard, Apache, Kraft Foods, Microchip Technology, PG&E Corp, Starbucks, Tesoro Corp

 

 Prices taken at  1209 GMT

 

 

 



Disclosure: No Position