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DAILY US OPENING NEWS - 10/11/10

 

  • The PBOC hiked the reserve requirement ratio for Chinese banks by 50 basis points, effective from November 16th
  • Decline in Chinese imports and exports have weighed upon basic materials and oil & gas sectors
  • The BOE in its quarterly inflation report said that it sees UK’s CPI picking up in the near term
  • Bond auctions from Portugal were well bid, though observed an exceptionally high yield
  • Irish/German 10-year bond yield spread continues to widen due to ongoing fiscal concerns surrounding Ireland

 

Overnight News

 

ASIA

 

JGBs slipped in Asian trade, extending the previous day’s losses as the JPY fall against the USD helped push up Tokyo stocks to a four month high. The Nikkei rose 1.4% to its strongest close in more than four months, buoyed by Financial shares after a report that most major Asian banks will be exempt from planned new global rules. (RTRS)

 

In other news, the PBOC has ordered banks to lift their required reserve ratios by 0.5% in an apparent effort to curb rapid credit growth. The reserve rise is expected to be effective on November 16th. The targeted banks of the latest increase include Bank of China and Bank of Communications. Also, vice chairman of the CBRC, Cai Esheng, urged Chinese lenders to conform to the Basel 3 rules in a bid to improve international competitiveness. (RTRS)

 

·   Chinese Trade Balance (NYSEARCA:USD) (Oct) Y/Y 27.15bln vs. Exp. 25.00bln (Prev. 16.88bln)

·   Chinese Exports (Oct) Y/Y 22.9% vs. Exp. 23.0% (Prev. 25.1%)

·   Chinese Imports (Oct) Y/Y 25.3% vs. Exp. 28.3% (Prev. 24.1%)

·   Chinese Property Prices (Oct) Y/Y 8.6 vs. Exp. 8.9 (Prev. 9.1) (RTRS)

 

US

 

A panel of 51 economists left their forecast for US growth for this year and next unchanged for a third consecutive month, according to the Blue Chip Economic Indicators survey. The survey also said that not until the second half of the next year is the economy expected to be expanding fast enough to generate job growth of sufficient size to initiate the beginning of a sustained decline in the rate of unemployment. (RTRS)

 

·   MBA Mortgage Applications (Nov 5) W/W 5.8% vs. Prev. -5.0%

·   ABC Consumer Confidence (Nov 7) W/W -46  vs. Prev. -46 (RTRS)

 

Bonds

 

EUROPEAN GOVERNMENT BONDS

 

Following a higher open, bund futures gradually moved into negative territory primarily weighed upon by the weakness in Gilts following the release of the BOE’s quarterly inflation report. European peripheral 10-year bond yield spreads with respect to bunds demonstrated a mixed picture, with particular widening observed in the Irish/German spread due to ongoing fiscal concerns surrounding the Irish economy, allied with comments from Irish finance minister Lenihan saying that Ireland will run out of money in July 2011 if the budget is not passed. There was also market talk of a potential deal between the IMF and the Irish government, however its influence on the Irish/German spread was muted. The Portuguese/German spread widened after bond auctions from Portugal observed an exceptionally high yield, despite auctions being well bid. Moving into the North American open, bunds have maintained weakness and are trading in negative territory.

 

·   Portuguese bond auction for EUR 0.556bln, 4.20% 15-Oct-16, bid/cover 2.3 vs. Prev. 2.1 (yield 6.156% vs. Prev. 4.371%)

·   Portuguese bond auction for EUR 0.686bln, 4.80% 15-Jun-20, bid/cover 2.1 vs. Prev. 4.9 (yield 6.806% vs. Prev. 6.242%)

·   Italian 12-month T-Bill auction for EUR 5.5bln, bid/cover 2.092 vs. Prev. 2.16 (yield 1.778% vs. Prev. 1.441%)

·   German Schatz auction for EUR 4.9261bln, 14-Dec-12, bid/cover 1.4 (yield 0.98%), retention 17.9% (RTRS)

 

Maturity

2

5

10

30

Bund (Dec 10)

Level

1.012

1.607

2.480

2.985

129.66

Change (bps)

4.477

5.874

7.489

5.831

-0.7

 

GILTS

 

NYSE LIFFE Gilt futures traded in negative territory for the majority of the European session, and lost over 100 ticks since the release of the BOE’s quarterly inflation report, where the BOE said that they see CPI picking up in the near term, and staying above the 2% target through 2011, higher than BOE’s August forecast.

 

Maturity

2.000

5.000

10.000

30.000

Gilt (Dec 10)

Level

0.756

1.750

3.175

4.222

122.42

Change (bps)

6.224

14.528

14.630

6.664

-1.44

 

EQUITIES

 

European bourses traded lower during the session, dragged by basic materials and oil & gas sector, those underperformed partly due to a decline in Chinese imports and exports. Financials came under pressure after the PBOC increased the reserve requirement ratio by 50 basis points for Chinese banks, however did receive some comfort following reports in the FT this morning that most big Asian banks will be exempted from new global regulations, as regulators will focus on banks with global operations, and exempt domestically focused lenders. Moving into the North American open, equities have maintained weakness and are trading in negative territory.

 

Leaders of the G20 nations meeting this week will consider a bank regulatory plan that will group those with global operations separately from banks with primarily domestic operations, which would exclude most big Asian lenders. (NYSE:FT)

 

Index

DAX

CAC

FTSE

EUROSTOXX

SMI

Level

6758.76

3917.42

5837.61

2872.17

6577.08

Change (ticks)

-29.05

-28.29

-37.58

-18.47

-4.8

 

FX

 

GBP gained across the board following the release of the BOE’s quarterly inflation report, where the BOE said that they see CPI picking up in the near term, and staying above the 2% target through 2011, higher than BOE’s August forecast, which saw GBP/USD gain over 100 pips since the report’s release.

 

In other news, EUR traded under pressure owing to ongoing fiscal and sovereign fears surrounding peripheral Eurozone countries, however EUR/USD did pared back some losses following market talk of a potential deal between the IMF and the Irish government.

 

Elsewhere, the Reserve Bank of New Zealand played down the importance of a recent improvement in domestic economic data and said the high NZD could limit future rate rises. (RTRS)

 

·   Australian Westpac Consumer Confidence SA (Nov) M/M -5.3% vs. Prev. 3.3%

·   Australian Westpac Consumer Confidence Index (Nov) M/M 110.7 vs. Prev. 117.0 (RTRS)

 

Currency

EURUSD

GBPUSD

USDJPY

Level

1.3760

1.6081

82.39

Change (pips)

-0.0013

0.0096

0.7000

 

 

 

COMMMODITIES

 

WTI Crude futures have traded sideways throughout the Asian and European sessions, ahead of today’s DOE inventory release.

 

Oil & Gas News:

  • Goldman Sachs has said that oil prices will be substantially higher in 2012 due to shirking global stockpiles and increasing global oil demand.
  • The US DOE has reduced their Natural Gas price forecast by 2.7% to USD 4.35 from USD 4.47, as rising production boosts inventories.
  • The IEA has said that Australia is poised to overtake Norway to become the third largest gas producer among OECD nations by 2035, driven mainly by the booming liquefied natural gas sector.
  • China's October crude imports fell 15% from a year ago to their lowest in 19 months, as refiners drew on stocks after record purchases in September, but a domestic diesel shortage should bolster imports for the rest of the year.

 

Geopolitical News:

  • Iran’s Ahmadinejad has said Iran would not discuss its disputed nuclear programmer in proposed talks with major powers.

 

Commodity

WTI Nymex

OTC Spot Gold

Level

86.48

1397.9

Change (USD)

-0.24

5.00


 

LOOKING AHEAD

 

Economic Releases

 

CST

GMT

 

DATA

EXP

PREV

0730

1330

US

Initial Jobless Claims W/W (Nov 6)

450K

457K

0730

1330

US

Continuing Claims W/W (Oct 30)

4303K

4340K

0730

1330

US

Trade Balance (USD) M/M (Sep)

-45.0B

-46.3B

0730

1330

US

Import Price Index M/M (Oct)

1.2%

-0.3%

0730

1330

US

Import Price Index Y/Y (Oct)

3.8%

3.5%

0730

1330

CA

Int’l Merchandise Trade M/M (Sep)

-1.6B

-1.3B

0930

1530

US

DOE Crude Oil Invent. W/W (Nov 5)

1300K

1950K

0930

1530

US

DOE Gasoline Invent. W/W (Nov 5)

-1000K

-2689K

0930

1530

US

DOE Distillate Invent. W/W (Nov 5)

-2000K

-3568K

0930

1530

US

DOE Cushing Crude Invent. W/W (Nov 5)

 

-114K

0930

1530

US

DOE Refinery Utilisation W/W (Nov 5)

0.10%

-1.90%

1100

1700

US

EIA Natgas Sto. Chng. W/W (Nov 5)

24

67

1300

1900

US

Monthly Budget Statement (USD)

-140.0B

-176.4B

1300

1900

US

Tentative Outright Tre. Op. Sched. Releas.

 

 

1530

2130

NZ

Business PMI M/M (Oct)

 

49.2

1750

2350

JN

Machine Orders M/M (Sep)

-9.5%

10.1%

1750

2350

JN

Machine Orders Y/Y (Sep)

4.9%

24.1%

 

Speakers

 

CST

GMT

 

 

1200

1800

EU

ECB’s Trichet

N/A

N/A

WLD

APEC Ministerial meeting

 

Auction

 

CST

GMT

 

 

1200

1800

US

USD 16bln (Act) 30y Note Auction

 

US Earnings: Cisco Systems, Macy’s

 

 Prices taken at  1244 GMT

 

 

 



Disclosure: No Position