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DAILY US OPENING NEWS - 06/01/11

 

  • Chinese Vice Premier Li said China will buy as much Spanish debt as it has of Greek and Portuguese combined

 

  • The PBOC said that it will implement differentiated reserve requirement ratio measures

  • A record fall in UK’s Services PMI weighed upon GBP across the board, which saw GBP/USD drop over 50 pips

 

 

Market Re-Cap

 

The European morning has been quiet in light of the Epiphany public holiday observed across much of Europe. Overnight in Asia the Nikkei rose 1.4% following the general optimism after the forecasting busting ADP print yesterday and that sentiment has carried over into the European morning with bund futures continuing the downward trend and also weighed upon by roughly EUR 9bln of supply from France foreseen.

 

Looking ahead the focus will remain on the weekly jobs report from the US and the 3y-10y-30y Note Refunding announcement, where the Treasury plans to reopen a total of USD 66bln to be auctioned next week.

 

Asia Headlines:

 

According to sources, Chinese regulators may review lending by the nation’s banks on a monthly or even weekly basis this year to ensure loans extended in a balanced way. (Securities Times)

 

US Headlines:

 

Former Fed’s Volcker plans to leave his role as head of a panel of experts advising President Barack Obama on the economy, sources familiar with the decision said. (RTRS)

 

EU and UK Headlines:

 

Chinese Vice Premier Li said China will buy as much Spanish debt as it has of Greek and Portuguese combined. Also, China Commerce Ministry said China has been increasing holdings of Euro debt, including Spain. (El Pais/RTRS)

 

Elsewhere, Belgian/German 10-year government bond yield spread widened, suffering from a domestic political stalemate. The New Flemish Alliance rejected plans for national administrative reform as proposed by Royal Mediator Johan Vande Lanotte. (RANsquawk/IFR)

 

·   Eurozone Business Climate Indicator (Dec) M/M 1.31 vs. Exp. 1.00 (Prev. 0.96, Rev. to 0.91)

·   Eurozone Retail Sales (Nov) M/M -0.8% vs. Exp. 0.2% (Prev. 0.5%)

·   Eurozone Retail Sales (Nov) Y/Y 0.1% vs. Exp. 2.1% (Prev. 1.8%)

·   German Factory Orders SA (Nov) M/M 5.2% vs. Exp. 1.0% (Prev. 1.6%)

·   German Factory Orders NSA (Nov) Y/Y 20.6% vs. Exp. 15.9% (Prev. 17.9%) (RTRS)

 

·   UK Services PMI (Dec) M/M 49.7 vs. Exp. 53.0 (Prev. 53.0), lowest since April 2009 (RTRS)

 

Also, according to an article in the WSJ, the BOE could surprise complacent investors by an early interest-rate hike, as members of the Bank's MPC are starting to worry they're losing credibility about their willingness to maintain price stability, particularly as the public's inflation expectations start to ratchet higher. (WSJ)

 

EQUITIES

 

European bourses traded higher during the session on the back of higher closes on Wall Street and Nikkei, allied with market expectations of a better than estimated payrolls data from the US due tomorrow. Also, strong Eurozone Business Climate Indicator and German Factory Orders figures helped sentiment. In equity specific news, BP shares rose following comments from the White House oil spill commission that cost cutting moves put in place by BP and its partners ultimately contributed to the Macondo blowout and spill, which supports BP’s conclusions that the disaster was

 

 

a result of multiple causes involving multiple companies. Also, strength was observed in Total’s shares after the company reported gas discovery offshore Scotland. Moving into the North American open, equities continue to trade higher, with telecommunications and basic materials as best performing sectors.

 

Index

DAX

CAC

FTSE

EUROSTOXX

SMI

Level

7022.32

3940.43

6086.95

2862.12

6570.48

Change (ticks)

82.50

35.82

43.09

28.38

51.23

 

FX

 

General concerns still linger over the general state over the Euro-Zone periphery and as such the EUR has traded on the back foot once again, despite better than expected Eurozone Business Climate Indicator and German Factory Orders figures.

 

In other news, GBP/USD dropped at straight 50 pips on the back of a much weaker than expected UK service PMI with Markit noting that weather conditions and new business were particularly weak. Separately the BOE provided an update on lending conditions reporting that demand for mortgages for house purchase fell markedly in Q4 with further falls

 

Elsewhere, the PBOC said that it will implement differentiated reserve requirement ratio measures, and will address CNY exchange rate by referencing basket of currencies. Separately, Chinese Foreign Ministry said it will continue the reform of the CNY exchange rate mechanism. Also, PBOC vice governor said that China will discuss with the EU on diversifying reserve currencies. (Xinhua/Sources)

 

Currency

EURUSD

GBPUSD

USDJPY

Level

1.3116

1.5494

83.14

Change (pips)

-0.0033

-0.0021

-0.1100

 

COMMMODITIES

 

WTI Crude futures traded steady throughout the European session, however as we head towards the North American open, prices have dropped back below the USD 90 level, in tandem with the USD Index moving to fresh session highs (+0.30%)

 

Oil & Gas News:

  • Qatar’s Oil minister has said he does not see any oil supply shortages and there will be no OPEC emergency meeting unless there are oil supply shortages.
  • UK lawmakers have recommended a set of new measures to ensure a deep-water drilling disaster does not happen in the North Sea but stopped short of pushing for a ban on drilling.

 

Geopolitical News:

  • North Korea has said it is ready to make gestures to alleviate anti-North Korean sentiment in South Korea after the sinking of warship and the shelling of an island last tear, however South Korea has dismissed a North Korean call for unconditional talks to ease tensions, saying the offer was “propaganda” it does not take seriously.

 

Commodity

WTI Nymex

OTC Spot Gold

Level

90.25

1373.25

Change (NYSEARCA:USD)

-0.05

-5.08

 


 

LOOKING AHEAD

 

Economic Releases

 

CST

GMT

 

DATA

EXP

PREV

0730

1330

US

Initial Jobless Claims W/W (Jan 1)

408K

388K

0730

1330

US

Continuing Claims W/W (Dec 25)

4080K

4128K

0900

1500

CA

Ivey PMI M/M (Dec)

54.0

57.5

0930

1530

US

EIA Natural Gas Storage Change W/W (Dec 31)

-132

-136

1500

2100

US

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

 

-1.86%

1500

2100

US

RPX Composite 28-day Y/Y (Oct)

 

189.21

 

Auctions

1000

1600

US

Fed’s Outright Treasury Coupon Purchase Jan 2015 - June 2016

(USD 6-8bln)

1000

1600

US

3y-10y-30y note refunding announcement

 

Earnings

US

Monsanto

 

Prices taken at 1226GMT



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