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DAILY US OPENING NEWS - 18/11/10

 

 

  • European bourses traded higher amid general risk-appetite and strength in Asian equities
  • Weakness in the USD index has helped commodities, which in turn has buoyed basic materials sector and commodity-linked currencies
  • ECB's Honohan said he expects Ireland to tap large EU/IMF loan, which may run into the tens of billions of EUR
  • Irish finance minister said that the EU/IMF talks could lead to bank aid, adding that the Irish bank guarantee scheme has been extended until the end of 2011
  • The Spanish bond auction was well received, though yield saw yet another increase

 

Overnight News

 

ASIA

 

JGBs fell overnight as Tokyo stocks advanced to a five month high, with the fall exacerbated by a lacklustre 20-year debt sale. Nikkei jumped more than 2% to close above 10,000 for the first time since late June overnight as a fall in the JPY against the USD attracted strong fund inflows from overseas to bolster financial shares. (RTRS)

 

Also, Shanghai Stock Index rose 0.9% in a mild technical rebound overnight, led by gains in heavyweight commodity issues such as oil giant Sinopec Corp that were boosted by a dip in the USD. Speculative retail investors, who make up two-thirds of turnover, started tentatively buying back into the Shanghai market which has lost some 11% in the slide from last Friday to Wednesday. (RTRS)

 

US

 

Moody’s cut its rating on San Francisco’s general obligation debt to ‘Aa2’ from ‘Aa1’, citing minimal prospect for improvement in the city’s finances. (RTRS)

 

Bonds

 

EUROPEAN GOVERNMENT BONDS

 

Bunds traded lower throughout the European session amid enhanced risk-appetite, and well received bond auctions from Spain and France, with European peripheral 10-year government bond yield spreads with respect to bunds seen moderate tighter across the board. The Irish/German spread tightened following no further negative news flow in terms of Irish fiscal situation, comments from ECB's Honohan who expects Ireland to tap large EU/IMF loan, which may run into the tens of billions of EUR, as well as the Irish finance minister saying that the EU/IMF talks could lead to bank aid. The Irish finance minister also said that he wants to reassure all depositors that their deposits are safe, adding that the Irish bank guarantee scheme has been extended until the end of 2011. Moving into the North American open, bunds are trading in negative territory as the market looks ahead to key jobs data from the US later in the session.

 

In other news, the OECD raised its 2010 GDP forecast for the OECD area to 2.8% from 2.7%, and raised its 2010 GDP forecast for the Euro-area to 1.7% from 1.2%. (RTRS)

 

·   Spanish Bond auction for EUR 2.586bln, 4.85% 31-Oct-20, bid/cover 1.84 vs. Prev. 2.32 (yield 4.615% vs. Prev. 4.144%)

·   Spanish Bond auction for EUR 1.068bln, 4.70% 30-Jul-41, bid/cover 2.05 vs. Prev. 2.10 (yield 5.488% vs. Prev. 5.077%) (RTRS)

 

Maturity

2

5

10

30

Bund (Dec 10)

Level

1.076

1.789

2.672

3.177

127.76

Change (bps)

3.275

6.613

7.264

6.705

-0.69

 

 

GILTS

 

NYSE LIFFE Gilt futures traded in tandem with bunds amid renewed risk-appetite, and moving into the North American open, prices have maintained weakness and are trading in negative territory.

 

·   Retail Sales (Oct) M/M 0.5% vs. Exp. 0.4% (Prev. -0.2%, Rev. to -0.5%)

·   Retail Sales (Oct) Y/Y -0.1% vs. Exp. 0.0% (Prev. 0.5%, Rev. to 0.0%)

·   Public Finances (PSNCR) (Oct) M/M 2.4bln vs. Exp. 6.0bln (Prev. 20.7bln)

·   Public Sector Net Borrowing (Oct) M/M 9.8bln vs. Exp. 8.9bln (Prev. 15.6bln, Rev. to 14.4bln)

·   CBI Trends Orders (Nov) M/M -15 vs. Exp. -24 (Prev. -28) (RTRS)

 

·   Conventional Gilt auction for GBP 3.25bln, 3.75% Sep'20, bid/cover 1.77 vs. Prev. 2.01 (RTRS)

 

Maturity

2.000

5.000

10.000

30.000

Gilt (Dec 10)

Level

1.087

2.075

3.348

4.321

120.87

Change (bps)

3.127

5.893

7.895

4.287

-0.82

 

EQUITIES

 

After opening on a positive note on the back of strength in Asian equities and general risk appetite, European bourses have continued to trade higher led by basic materials and a weakening USD (-0.60%), with financials also performing well on the back of no further deterioration in the Irish fiscal situation, allied with increasing signs that Ireland will opt for the EU/ECB/IMF bailout fund. Moving into the North American open, equities have maintained strength and are trading in positive territory with basic materials and consumer goods as the best performing sectors.

 

Index

DAX

CAC

FTSE

EUROSTOXX

SMI

Level

6794.3

3852.97

5770.91

2845.68

6583.4

Change (ticks)

94.23

60.62

78.35

42.98

88.41

 

FX

 

The USD index continued to weaken and traded in negative territory throughout the European session, which in turn buoyed EUR/USD and GBP/USD. The commodity linked currencies also traded higher on the back of strength in commodities, with further strength coming into AUD and NZD following bullish economic comments from the RBA's deputy governor, Battellino, and New Zealand finance minister, English, respectively.

 

Currency

EURUSD

GBPUSD

USDJPY

Level

1.3661

1.6015

83.29

Change (pips)

0.0132

0.0108

0.1100

 

COMMMODITIES

 

WTI Crude futures briefly tested USD 82.00, benefiting from a weaker USD (-0.50%) as risk appetite returned following a positive close in the Shanghai Composite Index (+0.94%) for the first time in four days.

 

Oil & Gas News:

  • Iranian President Ahmadinejad said that Iran is ready to sell its gas to Europe.
  • According to China’s energy bureau, China and Russia have not reached agreement over pricing for gas pipeline. The current gap expectation is USD 100 per thousand cubic meters.
  • The value of minerals and energy projects being developed in Australia rose 21% in the past six months to a record, boosted by liquefied natural gas and iron ore investments.
  • Xinhua reports that PetroChina plans to import 35,000t of diesel to ease China market shortage. Co. plans to keep refineries at full operating rate in December.  

 

 

 

Geopolitical News:

  • Iranian President Ahmadinejad said that word powers should stop threatening Iran if they want to achieve results at talks on Tehran’s nuclear program.

 

Commodity

WTI Nymex

OTC Spot Gold

Level

81.73

1356.05

Change (NYSEARCA:USD)

1.29

20.05

 

LOOKING AHEAD

 

Economic Releases

 

CST

GMT

 

DATA

EXP

PREV

0730

1330

US

Initial Jobless Claims W/W (Nov 13)

441K

435K

0730

1330

US

Continuing Claims W/W (Nov 6)

4290K

4301K

0730

1330

CA

Leading Indicators M/M (Oct)

0.1%

-0.1%

0730

1330

CA

International Sec. Transactions M/M (Sep)

7.000B

11.090B

0730

1330

CA

Wholesale Sales M/M (Sep)

-0.3%

1.2%

0900

1500

US

Leading Indicators M/M (Oct)

0.5%

0.3%

0900

1500

US

Philadelphia Fed M/M (Nov)

5.0

1.0

0900

1500

US

Mortgage Delinquencies Q/Q (Q3)

 

9.85%

0900

1500

US

MBA Mortgage Foreclosures Q/Q (Q3)

 

4.57%

0930

1530

US

EIA Natgas Sto. Chng. W/W (Nov 12)

8

19

1500

2100

US

RPX Composite 28-days Y/Y (Sep)

 

-2.68%

1500

2100

US

RPX Composite 28-day Index Y/Y (Sep)

 

195.01

 

Speakers

 

CST

GMT

 

 

0730

1330

EU

ECB’s Trichet speaks on approaches to monetary policy

0845

1445

UK

BOE’s Posen

1000

1600

US

Fed’s Warsh

1200

1800

US

Fed’s Warsh

1230

1830

US

Fed’s Kocherlakota,

1230

1830

US

Fed’s Pianalto

1230

1830

EU

EU’s Van Rompuy, and EU’s Barnier

1515

2115

US

Treasury’s Warren

1530

2130

US

Fed’s Plosser

N/A

N/A

EU

ECB’s Mersch

 

Auctions

 

CST

GMT

 

 

1000

1600

US

Fed’s Outright Treasury Coup. Purch. May 2013 – Nov 2014 Exp. USD 6-8bln

1000

1600

US

2y-5y-7y Note Refunding Announcement

 

US Earnings: Dell, GAP, Intuit, Marvell Technology

 

 

 Prices taken at 1230 GMT

 

 

 



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