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DAILY US OPENING NEWS - 13/12/10

 

  • Shanghai Comp. rose 2.9% in relief that the PBOC raised only the RRR on Friday and not the main interest rate

  • Volumes in the bund future light heading into Xmas season and with a lack of major news & economic data

 



Market Re-Cap

 

Overnight in Asia the Shanghai Composite posted a gain of 2.9% as investors greeted Friday's increase to the reserve requirement ratio with relief that it wasn't an interest rate hike. Separately the latest CPI reading showed inflation above the 5% level as was largely expected with industrial production and retail sales broadly inline.

 

As such bund futures have traded lower this morning in light volumes following the downtick in UST's overnight as Japanese investors continue to be sellers of US debt pushing the 10yr US yield to a fresh six month high. Fresh market moving news from Europe has been light with the FT speculating that EU officials are considering plans to overhaul the EFSF and use it to buy bonds of distressed government where as Germany and its officials continue to discount the idea.

 

In other asset classes EU equity markets have been underpinned by strength in the basic materials sector as the January WTI crude future has gained over a USD 1 ahead of the NYMEX open with reports overnight that China's refineries were running at record levels last month. Elsewhere, the USD index has weakened ahead of the North American entrance helping underpin the rise in EUR/USD as peripheral spread moves have been muted and the price action broke above the 10DMA. Meanwhile, GBP has been the weaker of the majors as the coalition comes under attack with Lib Dem ratings hit on the latest university fees announcement, asking prices for UK home sales falling for a second month and with a major Swiss bank rumoured to have sold GBP/USD in decent size this morning.

 

Looking ahead, there is little in terms of economic data releases. However the Fed is due to conduct another asset repurchase today at 1600GMT, targeting Jun-2016 - Nov 2017 maturities in the range of USD 7-9bln.

 

 

Asia Headlines:

 

China’s economy is expected to grow about 9.5% to 10% next year with inflation of more than 3% and not exceeding 5%, citing Li Daokui, an adviser to the PBOC. (21ST Century Business Herald/Caixin Online) In other news China’s new loans won’t exceed CNY 8trln this year, citing an unidentified person close to government authorities. Also, at the weekend President Hu Jintao reaffirmed a shift to a prudent monetary policy from the previous appropriately loose stance. Elsewhere in Japan, according to BoJ’s Shirakawa expanding asset buying is an option. (Nikkei)

 

China’s FX regulator SAFE said this morning that they will make a big effort to preserve and increase the value of FX assets. (RTRS)

 

US Headlines:

 

Economists have grown more optimistic about the outlook for US growth next year, predicting the expansion will accelerate as 2011 progresses, according to the latest Wall Street Journal forecasting survey. On average, the economists now predict GDP will grow 2.6% in the current quarter at a seasonally adjusted annual rate, up from the 2.4% growth they projected in last month’s survey.

 

Fed are unlikely to sway QE2 roll-out and are this week expected to stick with their asset purchase policy. (NYSE:FT)

 

EU Headlines:

 

European officials are considering plans to overhaul the Euro zone’s EUR 440bln rescue fund and use it to buy bonds of distressed governments. The measures would make it easier to aid debt-laden countries without resorting to fully-fledged bail-outs. (FT)

 

 

 

 

 

Portugal’s economic problems can be resolved without seeking help from the IMF, according to comments from Portugal’s Prime Minister.

 

Fine Gael who is expected to form a coalition government with the Labour party after elections next year has said it will seek to renegotiate the EU/IMF EUR 85bln rescue package to get a lower interest rate if it is elected to power. A Fine Gael spokesman has said that he expects his party to vote against the aid package on Wednesday’s vote; however a government spokesman has said the vote will pass even without opposition support.

 

EQUITIES

 

Index

DAX

CAC

FTSE

EUROSTOXX

SMI

Level

7031.97

3889.38

5865.81

2857.65

6544.45

Change (ticks)

25.80

32.03

52.86

18.12

25.31

 

FX

 

Currency

EURUSD

GBPUSD

USDJPY

Level

1.3262

1.5756

83.95

Change (pips)

0.0036

-0.0046

0.0000

 

 

COMMMODITIES

 

Ahead of the NYMEX pit open, WTI Crude futures are trading up towards the USD 89 level, underpinned by a report showing that Chinese refineries ran at record rates in November, a weaker USD (-0.20%) and general strength in the Equity markets.

 

Oil & Gas News:

 

  • OPEC ministers on Saturday agreed to keep oil supply curbs in place with no change in production, despite a recent surge in crude prices to 2-year highs of USD 90. OPEC will next meet in June. Meanwhile, Iranian Oil Minister Mirkazemi will take over OPEC’s rotating Presidency from Ecuador’s Wilson Pastor from January 1st.
  • The CEO of Total has said that the current USD 90 oil price is a good price and it does not hurt the global economy, whilst the Omani Oil Minister has said that the current oil price is fair given the weakness in the USD.
  • Chinese oil refineries increased crude processing to record levels in November, following an increase in fuel prices which encouraged companies to maximize production. Oil processing volumes increased 10% to 36.65mln metric tons.

 

Commodity

WTI Nymex

OTC Spot Gold

Level

88.95

1391.1

Change (NYSEARCA:USD)

1.16

5.10

 

 

 

 

 

 

 

 

 

 

 

 

LOOKING AHEAD

 

Economic Releases

 

0730

1330

CA

Capacity Utilisation Rate Q/Q (Q3)

 

76.0%

1500

2100

NZ

REINZ Housing Price Index M/M (Nov)

 

3161.5

1500

2100

NZ

REINZ Housing Price Index M/M (Nov)

 

-0.9%

1545

2145

NZ

Retail Sales M/M (Oct)

-0.8%

1.6%

1545

2145

NZ

Retail Sales Ex-Auto M/M (Oct)

-1.0%

1.6%

N/A

N/A

UK

BOE’s Quarterly Bulletin

 

 

N/A

N/A

UK

Nationwide Consumer Confidence M/M (Nov)

 

52

 

 

Speakers

0730

IT

Berlusconi Holds Cabinet Meeting, Debate on Confidence Votes

1300

EU

ECB’s Ordonez

1830

EU

ECB’s Trichet

N/A

WLD

OECD Chief Economist Padoan

N/A

CA

BOC’s Carney

 

Prices taken at 1155GMT

 

 

 



Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.