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DAILY US OPENING NEWS - 20/12/10

 

  • Fed's Bullard says USD 600bln QE2 number is very much reviewable and changeable

 

  • South Korea’s military have fired dozen’s of artillery rounds during live-fire drill from the disputed island of Yeonpyeong

 

  • Low trade volumes dominated the session amid light economic calendar

 

 

Market Re-Cap

 

Geopolitical tensions dominated the market sentiment on Monday. That’s after South Korea conducted live-firing drills. However despite threats last week, there was no retaliation from its neighbour and in fact, a North Korean official said that it doesn’t feel the need to respond to all military provocations. The risk averse sentiment saw the German Bund future briefly move above 125.00, aided by light volumes and a trigger of buy stops. Since then, prices have retreated but remain in positive territory. Elsewhere, peripheral bonds yield spreads have widened today, led primarily by the Belgian 10y bond following vague market chatter of an imminent sovereign downgrade. Worth noting that last week saw S&P rating agency put the country on rating watch negative.

 

 

Asia Headlines:

 

China’s inflation may exceed 5% to 6% in some months of next year according to a researcher at the State Council’s Development Research Centre.

 

US Headlines:

 

Fed's Bullard says USD 600bln QE2 number is very much reviewable and changeable. (NASDAQ:CNBC)

 

Fitch raised US growth forecasts (citing accommodative monetary policy) by 0.6% in both 2011 and 2012 to 3.2% and 3.3% respectively. Unemployment is now also expected by Fitch to moderate to 9.1% in 2011 and 8.7% in 2012

 

 

EU Headlines:

 

The ECB said it has serious concerns that legislation introduced by the Irish government to fix its banking system threatens the ECB’s ability to run its liquidity operations. In a position paper published on its website, the ECB said legal flaws in Ireland’s bailout legislation could effect its right over collateral security. (Sources) However since then, the Irish finance ministry defended the new banking law, which will impose losses on subordinated bondholders. (RTRS)

 

Roubini says the probability of a breakdown in the EUR currency is 30%. (Le Ruppublica) While PIMCO’s Bosomworth warned of Eurozone member default and noted that he favours the temporary exit of Greece, Ireland and Portugal. (Die Welt)

 

OECD says Spain could raise taxes further if more consolidation measures needed. The organisation also added that:

  • Spain's banking sector has withstood crisis well, has abundant capital
  • Spain's growth rate remains weak over coming years, to reach 1.8% in 2012
  • High sovereign debt spreads persist in Spain private sector could be affected

 

 

EQUITIES

 

Heading into the North American open, equities are trading higher amid light volumes which may have exacerbated the move higher. Gains are being led by the utilities and industrial sectors, while the automakers also posted solid gains after Daimler’s CEO said that co. is set for a dynamic start to the New Year. (NYSEARCA:FAZ) Elsewhere, according to press reports Xstrata and Rio Tinto have offered about GBP 5bln for the Columbian assets of America’s Drummond Coal. (The Sunday Times)

 

 

 

 

Index

DAX

CAC

FTSE

EUROSTOXX

SMI

Level

7055.89

3910.7

5906.24

2857.48

6557.45

Change (ticks)

73.44

43.35

34.49

35.71

19.29

 

 

FX

 

The EUR has underperformed today as concerns continue to linger how the weaker states will deal with looming 2011 debt refinancing obligations, as well as market chatter that Belgium sovereign rating will get cut. Elsewhere, despite the risk averse sentiment, GBP remains higher against the greenback and the EUR following reports from the CBI which sees the BoE hiking rates within six months in order to curb inflation. Also worth noting that EUR/CHF printed fresh record low at 1.2699.

 

 

Currency

EURUSD

GBPUSD

USDJPY

Level

1.3161

1.5546

83.75

Change (pips)

-0.0027

0.0013

-0.2300

 

 

COMMMODITIES

 

Heading into the North American open WTI crude futures are trading higher amid renewed geopolitical tensions in the Korean peninsula, with the January future also set to expire at the NYMEX pit close today.

 

Oil & Gas News:

  • A crude oil pipeline between Russia and China succeeded in its trial run, according to China National Petroleum Corp.
  • US heating demand this week is expected to be 2.1% below normal, the National Weather Service forecast today. Demand for heating oil this week will average 4.6% above normal, the NWS said.

 

 

Corporate News:

  • US energy firm Chevron said today it had suspended production from a pipeline in Nigeria’s Delta state which had been breached in an attack on Friday. Chevron said it was investigating the damage to its Dibi-Abiteye pipeline but did not say how much production would be lost from shutting down the stream.

 

Geopolitical News:

  • South Korea’s military have fired dozen’s of artillery rounds during live-fire drill from the disputed island of Yeonpyeong today, which prompted China to renew its call for talks to defuse tensions on the Korean peninsula. North Korea military denounces South Korea's drill.

 

 

Commodity

WTI Nymex

OTC Spot Gold

Level

88.65

1385.38

Change (NYSEARCA:USD)

0.63

9.92

 

 

 

 

 

 

 

 

 

 

LOOKING AHEAD

Economic Releases – Prices taken at 1247GMT

 

CST

GMT

 

DATA

EXP

PREV

0730

1330

US

Chicago Fed Nat Activity Index M/M (Nov)

 

-0.28

0730

1330

CA

Wholesale Sales M/M (Oct)

0.7%

0.4%

0900

1500

EU

Eurozone Consumer Confidence M/M (Dec A)

 

-9.4

1700

2300

AU

Conference Board Leading Index M/M (Oct)

 

-0.1%

 

 

Auctions

0800

1400

FR

EUR 5bln combined 12- and 51 week T-Bills

1000

1600

US

Fed’s Outright Treasury Coupon Purchase Feb 2018 - Nov 2020

(USD 7-9bln)

1300

1900

US

Fed’s Outright Treasury Coupon Purchase Dec 2014 - May 2016

(USD 6-8bln)

 

Earnings

US

Adobe Systems, Paychex

         

 

 

 

 

 **Notes:

WTI Crude Jan. 2011 futures expiry  



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