Please Note: Blog posts are not selected, edited or screened by Seeking Alpha editors.

DAILY US OPENING NEWS - 19/11/10

 

 

  • The PBOC raised its reserve requirement ratio by 50 basis points, effective November 29th

 

  • Fed’s Bernanke said high unemployment could threaten the recovery, and Fed's Kocherlakota said that the QE is a move in the right direction

 

  • According to EU sources, the EU/IMF financial aid plan for Ireland is likely to be announced next week

 

  • According to an article in the FT, French and German officials are pressing Ireland to increase its low corporate tax (12.5%) in return for an aid package

 

 

Overnight News

 

ASIA

 

JGBs edged up overnight as bargain hunters tiptoed into the market after a week-long slide that took yields to multiple month highs. Meanwhile the Nikkei (+0.1%) marked a five month closing high above 10,000 for a second day on Friday, propelled by hedge fund inflows from overseas and with a fall in the JPY providing additional support. But the index lost steam after scoring an intraday high in the morning as profit-taking emerged, with market players saying they were reluctant to actively take positions ahead of the weekend and the US Thanksgiving holiday next week. (RTRS)

 

Also, Shanghai Stock Index ended up 0.8%, in a mild technical rebound, as speculative retail investors, wary of a potential interest rate rise as early as today, cut their holdings in banks such as Everbright Bank, and tentatively bought up brokerage issues. (RTRS)

 

 

US

 

Fed’s Bernanke said high unemployment could threaten the recovery and further US disinflation could hinder any progress. Bernanke also went on to say that the Fed won’t have problems exiting at the appropriate time and that he expects US growth to pick up and unemployment to decline somewhat next year. Also, Fed's Kocherlakota said that the QE is a move in the right direction, and he supported the decision. (RTRS/Sources)

In other news, the US Fed’s balance sheet grew for a third straight week, to USD 2.297trl in the week ended Nov. 17 from USD 2.295trl in the previous week. Also, foreign central banks’ overall holdings of US marketable securities at the Fed rose by USD 10.4bln in the week ended Nov. 17 to stand at USD 3.344trl. (RTRS)

 

 

Bonds

 

EUROPEAN GOVERNMENT BONDS

 

Bunds traded higher in early European trade on the back of strength in T-Notes and JGBs, allied with the weakness in European equities, however as the session progressed, prices came off the best levels, and moving into the North American open are trading near unchanged. European peripheral 10-year bond yield spreads with respect to bunds generally have been muted and bund future volumes remain light with no major US data scheduled today.

 

Maturity

2

5

10

30

Bund (Dec 10)

Level

1.101

1.833

2.693

3.197

127.52

Change (bps)

-0.462

0.636

-0.919

-1.361

0.02

 

 

GILTS

 

NYSE LIFFE Gilt futures traded in tandem with bunds and moving into the North American open, prices have maintained strength and are trading in positive territory.

 

 

Maturity

2.000

5.000

10.000

30.000

Gilt (Dec 10)

Level

1.080

2.096

3.388

4.354

120.59

Change (bps)

-3.702

-2.885

-0.916

1.279

0.01

 

EQUITIES

 

European bourses trade in negative territory, weighed upon by the basic materials and financials sectors, with markets looking for further clarity over the shape of the Irish bailout package, if one emerges. An article in the FT, saying that French and German officials are pressing Ireland to increase its low corporate tax in return for an aid package brought further uncertainty to the market. In equity specific news, Bayer shares outperformed during the European session following news of a EUR 1bln cost-cutting programme by the company to bolster product development. However, news of the PBOC raising the reserve requirement ratio by another 50 basis points didn’t have a sustained impact on European bourses, as it was largely expected, and moving into the North American open, equities have maintained weakness with basic materials and financials as the worst performing sectors.

 

Index

DAX

CAC

FTSE

EUROSTOXX

SMI

Level

6813.89

3838.09

5702.25

2830.44

6569.1

Change (ticks)

-18.22

-29.88

-66.46

-24.79

-44.27

 

FX

 

The USD index traded in negative territory throughout the European session following comments from Fed's Bernanke that high unemployment in the US could threaten the recovery, allied with Fed's Kocherlakota, currently a rotating FOMC member but soon to be a member of the Board of Governors at the Fed, advocating in the favour of latest Fed's quantitative easing move. Weakness in the USD index, allied with increasing perception of an Irish bailout helped EUR/USD and GBP/USD.

 

In other news, another 50 basis points reserve requirement hike by the PBOC weighed upon commodity linked currencies such as AUD, NZD, and CAD.

 

Currency

EURUSD

GBPUSD

USDJPY

Level

1.3699

1.6027

83.38

Change (pips)

0.0056

-0.0014

-0.1400

 

COMMMODITIES

 

In early European trade, January WTI crude future moved above the USD 83.00 level as market sentiment tilted towards a resolution of the Irish debt crisis in the near future, allied with weakness in the USD index (-0.3%) after the Fed’s chairman Bernanke said high unemployment in the US could threaten the recovery. However, heading into the North American open, prices have pared earlier gains and are  trading in negative territory following the news that the PBOC raised its reserve requirement ratio by 50 basis points.

 

Oil & Gas News:

  • Chinese state refiners are ramping up diesel imports starting this month to help meet increased demand.
  • According to a market report, refiners’ profit from turning oil into gasoline more than doubled this month as plants along the US East Coast shut for repairs and imports from Europe declined in the aftermath of a French strike.

 

Commodity

WTI Nymex

OTC Spot Gold

Level

81.64

1354.7

Change (NYSEARCA:USD)

-0.21

1.63

 

 

LOOKING AHEAD

 

Economic Releases

 

CST

GMT

 

DATA

EXP

PREV

0930

1530

US

ECRI Weekly W/W (Nov 19)

 

123.90

0930

1530

US

ECRI Weekly Annualised Y/Y (Nov 19)

 

-5.7%

1200

1800

US

Baker Hughes Rig Count W/W (Nov 19)

 

1685

 

Speakers

 

CST

GMT

 

 

0645

1245

UK

BOE’s Tucker

0815

1415

EU

ECB’s Trichet

1000

1600

EU

EU Trade Commissioner De Gucht

 

Auction

 

CST

GMT

 

 

1000

1600

US

Fed’s Outright Treasury Coup. Purch. Aug 2028 – Nov 2040

(Exp. USD 1.5-2.5bln)

 

 Prices taken at 1230 GMT

 

 

 



Disclosure: No Position