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DAILY US OPENING NEWS - 17/11/10

 

 

  • Shanghai Composite closed down 1.9%, marking a new one-month closing low, following comments in the Shanghai Securities Journal which speculated that the PBOC could hike rates as soon as this Friday
  • Austrian finance minister said that the next instalment of the EU/IMF emergency loan to Greece has been delayed from December to January, however, Greek officials were quick to stress that the delay was purely due to technical reasons
  • GBP/USD spiked up more than 20 pips following a sharp drop in the jobless claims data from the UK
  • The BOE voted 1-7-1 to keep the benchmark interest rate unchanged at 0.5%, and the asset purchase target unchanged at GBP 200bln

 

Overnight News

 

ASIA

 

JGBs fell overnight as participants sold to make room for an upcoming 20-year sale, with the JPY’s continuing retreat against the USD also leaving market players cautious. Nikkei erased earlier losses and clawed up 0.2% as a softer JPY against the USD prompted investors to hunt for bargains in carmaker and other exporters. Foreign investors such as European fund operators were detected buying blue chip shares, providing support to the market, according to traders. (RTRS)

 

Also, Shanghai Stock Index fell 1.9% to a new one-month closing low, with retail investors dumping resource issues such as Sinopec on worries Beijing is preparing more aggressive steps to tame inflation. It is worth noting that according to the Shanghai Securities Journal, citing an unidentified analyst, China could raise interest rates for a second time this year as soon as November 19th. (RTRS/ Shanghai Securities Journal)

 

Separately, the Chinese State Council said that it will take forceful measures to stabilise consumer prices, however it refrained from making any direct commentary on monetary policy. (RTRS)

 

US

 

Fed’s Rosengren said he sees completing the USD 600bln of purchases and would need to consider more action if the economy weakens, inflation falls more, or if the jobless rate rises. Also, Fed’s Evans said he wants to apply accommodative policy until he is confident that the economic situation is changing. He also said that USD 600bln is a good start. (WSJ)

 

Separately, Fed’s Lockhart said that the Fed would most likely complete the full USD 600bln of bond buying it announced earlier this month. He also added he would not completely rule out a mid-course re-evaluation if economic growth proved much stronger than expected. (RTRS)

 

·   MBA Mortgage Applications (Nov 12) W/W -14.4% vs. Prev. 5.8% (RTRS)

 

Bonds

 

EUROPEAN GOVERNMENT BONDS

 

Bunds traded higher for the majority of the session, on the back of on-going concerns surrounding European peripheral states, allied with a sharp decline in the Eurozone construction output figures. European peripheral 10-year government bond yield spreads demonstrated a mixed picture, with widening observed in Greek/German spread following comments from the Austrian finance minister that the next instalment of the EU/IMF emergency loan to Greece has been delayed from December to January, however, Greek officials were quick to stress that the delay was purely due to technical reasons.

 

 

 

 

With regards to the situation in Ireland, not much has changed from yesterday, with market participants beginning to lean in favour of Ireland opting for EU/IMF/ECB bailout, despite the Irish government refraining to provide any clear indication on how they intend to proceed. The question now seems to be a matter of timing with the Irish finance minister saying that official talks will begin tomorrow with no set deadline. The Irish/German 10yr bond yield spread has observed some minor widening with investors also noting that LHC.Clearnet have increased its margin requirement on members' trading in Irish government bonds to 30%.

 

Moving into the North American open, bunds have maintained strength and are trading in positive territory, as the market looks ahead to a slew of key economic figures from the US later in the session.

 

·   Eurozone Construction Output SA (Sep) M/M -2.1% vs. Prev. -0.4% (RTRS)

 

Maturity

2

5

10

30

Bund (Dec 10)

Level

1.042

1.712

2.595

3.110

128.47

Change (bps)

-1.316

-0.486

-2.502

-3.180

0.33

 

GILTS

 

NYSE LIFFE Gilt futures traded in positive territory during the European session, despite prices coming under some pressure following a sharp fall in jobless claims change data from the UK, and moving into the North American open, prices are trading sideways in positive territory.

 

In other news, according to BOE’s November minutes, the BOE voted 1-7-1 to keep the benchmark interest rate unchanged at 0.5%, and the asset purchase target unchanged at GBP 200bln, with BOE's Sentance voting for a 25 basis point hike in the benchmark interest rate and Posen once again voting for additional QE. (RTRS)

 

Elsewhere, European finance ministers working on an international aid package for Ireland want the UK to make bilateral loans to Dublin as part of a larger aid package which could total as much as EUR 100bln and include credit from the Eurozone and IMF, according to people familiar with the matter. (WSJ)

 

·   Jobless Claims Change (Oct) M/M -3.7K vs. Exp. 6.0K (Prev. 5.3K, Rev. to 1.3K)

·   Claimant Count Rate (Oct) M/M 4.5% vs. Exp. 4.5% (Prev. 4.5%)

·   ILO Unemployment Rate (Sep) 3M/Y 7.7% vs. Exp. 7.7% (Prev. 7.7%) (RTRS)

 

Maturity

2.000

5.000

10.000

30.000

Gilt (Dec 10)

Level

1.061

2.017

3.267

4.276

121.62

Change (bps)

-1.837

-2.487

-2.207

-5.808

0.24

 

EQUITIES

 

European equities traded higher for most of the session, led by the Healthcare sector, partly due to the strength in Actelion shares (+8.6%) following news that Amgen is considering a takeover offer and after the FDA approved GlaxoSmithKline's Benlysta drug. Financials remained a mid-performer throughout the session as market looks for further clarity on the Irish situation. Moving into the North American open, equities have come off their best levels, with healthcare and technology being the best performing sectors.

 

Index

DAX

CAC

FTSE

EUROSTOXX

SMI

Level

6689.05

3778.8

5675.62

2791.05

6492.75

Change (ticks)

25.81

16.33

-6.28

9.28

16.22

 

FX

 

GBP/USD spiked up more than 20 pips following a sharp drop in the jobless claims data from the UK, allied with a 7-1-1 split in the BOE's MPC, with BOE's Sentance voting for a 25 basis point hike in the benchmark interest rate and Posen once again voting for additional QE.

 

 

Currency

EURUSD

GBPUSD

USDJPY

Level

1.3483

1.5878

83.44

Change (pips)

-0.0006

-0.0007

0.1500

 

COMMMODITIES

 

WTI Crude futures trade in negative territory, as the market continues to speculate of further policy tightening in China.

 

Oil & Gas News:

 

  • China have said they will take forceful measures to stabilise consumer prices according to a statement from the State Council. This includes intervening to control prices when necessary. Oil, grain, sugar and cotton are all markets which China seeks to stabilise.

 

Commodity

WTI Nymex

OTC Spot Gold

Level

82.01

1340.79

Change (NYSEARCA:USD)

-0.33

1.09


 

 

LOOKING AHEAD

 

Economic Releases

 

CST

GMT

 

DATA

EXP

PREV

0730

1330

US

CPI M/M (Oct)

0.3%

0.1%

0730

1330

US

CPI Y/Y (Oct)

1.3%

1.1%

0730

1330

US

CPI ex. Food & Energy M/M (Oct)

0.1%

0.0%

0730

1330

US

CPI ex. Food & Energy Y/Y (Oct)

0.7%

0.8%

0730

1330

US

CPI Core Index SA M/M (Oct)

 

221.781

0730

1330

US

Consumer Price Index NSA Y/Y (Oct)

218.854

218.439

0730

1330

US

Housing Starts M/M (Oct)

598K

610K

0730

1330

US

Housing Starts (%) M/M (Oct)

-2.0%

0.3%

0730

1330

US

Building Permits M/M (Oct)

570K

539K

0730

1330

US

Building Permits (%) M/M (Oct)

4.2%

-5.6%

0930

1530

US

DOE Crude Oil Invent W/W (Nov 12)

-700K

-3274K

0930

1530

US

DOE Gasoline Invent W/W (Nov 12)

-1000K

-1917K

0930

1530

US

DOE Distillate Invent W/W (Nov 12)

-2000K

-4972K

0930

1530

US

DOE Cushing Crude Invent W/W (Nov 12)

 

-1746K

0930

1530

US

DOE Refinery Utilisation W/W (Nov)

0.50%

0.60%

1030

1630

US

Cleveland Fed Median CPI M/M (Oct)

 

0.0%

 

Speakers

 

CST

GMT

 

 

0700

1300

US

Fed’s Rosengren

0815

1415

US

Fed’s Bullard

0820

1420

EU

ECB’s Constancio

0930

1530

EU

Treasury’s Wolin

N/A

N/A

EU

ECOFIN meeting

 

Auction

 

CST

GMT

 

 

1000

1600

US

Fed’s Outright Treasury Coup. Purch. Feb 2018 – Nov 2020 Exp. USD 7-9bln

 

US Earnings: Applied Materials, NetApp

 

**Notes:

Short Sterling Nov. futures and options expiry

 

 

 Prices taken at 1249 GMT

 

 

 



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