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DAILY US OPENING NEWS - 05/01/11

 

  • Services PMI data for peripheral Eurozone countries came out worse than expected, however those for the core Eurozone countries exceeded expectations

  • An increase in the average yield of the Portuguese 6-month T-Bill auction re-ignited Eurozone sovereign concerns, allied to the Greek/German spread trading back to a record high

 

Market Re-Cap

 

Overnight Nikkei average inched down 0.2% after moving in a tight range on Wednesday, with a broad commodity sell-off prompting investors to take profits after it hit a near eight-month closing high the previous day, and similar sentiment was also observed among European equities. In fixed income, bunds traded higher in tandem with US Treasuries and JGBs, helped by weakness in equities alongside a well-bid bund auction. Gilts too made gains helped by a weaker than expected construction PMI release from the UK.

 

Asia Headlines:

 

According to an article in the China Securities Journal, China’s central bank is planning to begin this year a monthly review of banks’ required reserves as part of wider monetary policy reform. (China Securities Journal)

 

·   Chinese HSBC Services PMI (Dec) M/M 53.1 vs. Prev. 53.1 (RTRS)

 

EU Headlines

 

·   Eurozone Services PMI (Dec F) M/M 54.2 vs. Exp. 53.7 (Prev. 55.4)

·   German Services PMI (Dec F) M/M 59.2 vs. Exp. 58.3 (Prev. 59.2), stable at 39-month high registered in Nov

·   French Services PMI (Dec F) M/M 54.9 vs. Exp. 54.1 (Prev. 55.0)

·   Italian Services PMI (Dec) M/M 50.2 vs. Exp. 53.0 (Prev. 54.4), lowest since July

·   UK Construction PMI (Dec) M/M 49.1 vs. Exp. 50.9 (Prev 51.8) (RTRS)

 

·   German Bund auction for EUR 3.916bln, 14-Dec-12, bid/cover 1.6 vs. Prev. 1.19 (yield 2.87% vs. Prev. 2.59%), retention 21.7% vs. Prev. 20.6%

·   Portuguese sells EUR 500mln of 6-month T-Bill auction, bid-cover 2.6 vs. Prev. 2.4, yield 3.686% vs. Prev. 2.045% (RTRS)

 

US Headlines:

 

Fitch said that its outlook for the US banking industry will remain stable in 2011 as balance sheet and income statement fundamentals will improve modestly against a backdrop of still weak macro conditions. (RTRS)

 

In other news, according to an ex-PBOC adviser, China should reduce holdings of USD assets as much as possible. (Sources)

 

·   MBA Mortgage Applications (Dec 31) W/W 2.3% vs. Prev. -18.6% (Dec 17)

·   Challenger Job Cuts (Dec) Y/Y 32.0K vs. Prev. 48.7K

·   ABC Consumer Confidence (Jan 2) W/W -45 vs. Prev. -44 (RTRS)

 

EQUITIES

 

European equities continued their downtrend from yesterday, predominantly led by another commodity sell-off, on the back of profit taking, allied with a large sell order in the Eurostoxx, said to be related to a trading error or a CTA related trigger. It is worth noting that this morning's equity sell-off did coincide with worse than expected services PMI data from peripheral European countries, however the overall Eurozone PMI data beat expectations on the back of strong numbers from the core Eurozone countries, which provided a floor to the losses in equities. A sharp rise in the average yield of Portuguese 6-month T-Bill auction re-ignited Eurozone debt concerns and weighed upon Spain’s IBEX 35 Index and Italian FTSE MIB Index in particular. Moving into the North American open, equities have maintained weakness with basic materials and industrials as the worst performing sectors.

 

 

Index

DAX

CAC

FTSE

EUROSTOXX

SMI

Level

6857.27

3859.13

5975.2

2795.34

6432.41

Change (ticks)

-118.08

-56.90

-38.67

-48.83

-61.9

 

FX

 

The EUR traded under pressure as weaker peripheral Eurozone service PMIs allied with a record widening of Greek/German 10-year government bond yield spread re-ignited Eurozone sovereign fears. A sharp increase in the average yield of Portuguese 6-month T-Bill auction exerted further pressure on the single currency.

 

In other news, GBP/USD gained strength in early European trade on the back of market talk of a US bank and a UK clearer buying in the pair, however it fell sharply following a worse than expected Construction PMI data from the UK.

 

Currency

EURUSD

GBPUSD

USDJPY

Level

1.3229

1.5562

82.23

Change (pips)

-0.0079

-0.0025

0.1900

 

COMMMODITIES

 

WTI Crude futures prices continued to fall today and are now 4% below its 27 month high reached on Monday, weighed upon by a strengthening USD Index (+0.55%).

 

Oil & Gas News:

  • The IEA’s chief economist has warned that oil prices are entering a dangerous zone and may put the economic recovery for developed countries under threat, putting pressure on OPEC to increase production. However, Kuwait’s Oil minister has said that oil prices between USD 80 and USD 100 are fair, and does not expect OPEC to pump more oil during the first half of 2011.
  • Saudi Arabia produced 8.4mln BPD of crude oil during 2010, 4.3% above its OPEC quota, as more crude oil was used to meet domestic demand to fuel power plants.

 

Commodity

WTI Nymex

OTC Spot Gold

Level

88.17

1378.99

Change (NYSEARCA:USD)

-1.21

-1.73

 

LOOKING AHEAD

 

Economic Releases

 

CST

GMT

 

DATA

EXP

PREV

0715

1315

US

ADP Employment Change M/M (Dec)

100K

93K

0730

1330

CA

Industrial Product Price M/M (Nov)

0.3%

0.5%

0900

1500

US

ISM Non-Manufacturing Composite M/M (Dec)

55.7

55.0

0930

1530

US

DOE Crude Oil Inventories W/W (Dec 31)

-2000K

-1258K

0930

1530

US

DOE Gasoline Inventories W/W (Dec 31)

1000K

-2316K

0930

1530

US

DOE Distillate Inventory W/W (Dec 31)

800K

243K

0930

1530

US

DOE Cushing Crude Inventory W/W (Dec 31)

 

245K

0930

1530

US

DOE Refinery Utilisation W/W (Dec 31)

0.00%

0.10%

 

Speaker

1200

1800

US

Fed’s Hoenig

 

Auction

1000

1600

US

Fed’s Outright Treasury Coupon Purchase Aug 2028 - Nov 2040 (USD 1.5-2.5bln)

 

Prices taken at 1246GMT



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