DAILY US OPENING NEWS - 13/01/11

 

• Well received bond auction from Spain strengthened risk-appetite
  

• Moody’s said near term outlook for US debt ratios is not promising, and action is needed to avoid unfavourable US debt trajectory
  

• S&P said that US fiscal situation has deteriorated in the past six months, and it doesn’t rule out changing perspective on US rating
  

• RANsquawk European Morning Briefing Video: http://www.youtube.com/watch?v=qGyOZgxg29A

 

Market Re-Cap

 

Following a successful Portuguese bond auction yesterday, focus of the market shifted to the Spanish bond auction today, with particular outperformance seen in the Spanish IBEX 35 and Italian FTSE MIB indices on the back of positive sentiment. Leading up to the auction, European peripheral 10-year government bond yield spreads with respect to bunds generally tightened, led by the Spanish/German spread, and EUR/USD moved higher, however following a well-bid auction some profit taking was observed.

 

Looking ahead markets look forward to the ECB’s rate decision, and although no major policy change is anticipated, potential comments from ECB's Trichet on bond buying programme would be of particular interest. Also, a slew of key economic data from the US, allied with Fed’s Outright Treasury Coupon Purchase in the maturity range Jul’16 – Dec’17 with target purchase of USD 7-9bln, and USD 13bln 30-year note auction are scheduled for later in the session.

 

Asia Headlines:

 

Japan PM Kan may change cabinet on Friday. Kan will appoint former administrative reform minister Yukio Edano as his de facto deputy and give a fiscal hawk a key post when he reshuffles his cabinet this week. (RTRS)

 

Global Headlines:

 

Moody’s said near term outlook for US debt ratios is not promising, adding that falling US deficit won’t reverse debt trajectory, and action is needed to avoid unfavourable US debt trajectory. Also, S&P said that US fiscal situation has deteriorated in the past six months, and it doesn’t rule out changing perspective on US rating. (Sources)

 

Moody’s also said that French, German, UK, and US debt matrices are in line with Aaa ratings, however French debt affordability remains high despite no immediate rating worries. It further said that German debt affordability will remain very high. On UK, Moody’s said that UK spending review can keep debt cost in the Aaa territory, however lower growth and weaker fiscal cuts could hurt UK’s rating. (Sources)

 

In other news, the World Bank says global economy will grow 3.3% in 2011, down from 3.9% in 2010, and developing economies to grow 6% in 2011, down from 7% in 2010. The World Bank also predicts the US economy will grow 2.8% in 2011. Eurozone grow is expected to slow to 1.4% this year from 1.7% in 2010. Lastly they added economic growth in the world’s wealthier nations is still too slow to create enough jobs. (RTRS)

 

US Headlines:

 

Banks foreclosed on 69,847 properties in December, bringing the year's total to 1.05 million, topping the prior record of 918,000 homes seized in 2009, real estate data firm RealtyTrac said. (RTRS)

 

EU and UK Headlines:

 

German government spokesman said discussing a broadening of the Eurozone rescue fund is not on agenda currently, adding that the Euro rescue fund is currently absolutely able to fulfil its task. (RTRS)

 

Also worth noting, the Bank of England kept the key benchmark interest rate unchanged at 0.50%, and its asset purchase target unchanged at GBP 200bln as expected. (RTRS)

 

·   Spanish Apr'16 auction, for EUR 3bln, 3.25% bid/cover 2.1 vs. Prev. 1.6 (yield 4.542% vs. Prev. 3.576%)

·   Italian 01-Nov'16 sells EUR 3bln 3% bid/cover 1.412 vs. Prev. 1.41 (yield 3.67% vs. Prev. 3.24%)

·   Italian 01-Mar'26 sells EUR 3bln 4.5% bid/cover 1.420 vs. Prev. 1.30 (yield 5.06% vs. Prev. 4.81%) (RTRS)

 

 

EQUITIES

 

On the back of positive sentiment emerging from successful bond auctions from Portugal and Spain, the Spanish IBEX 35, and Italian FTSE MIB indices traded higher. However, underperformance was observed in FTSE 100 index primarily weighed upon by Royal Dutch Shell shares, which fell on market talk that company is guiding lower. DAX also traded in minor negative territory following news of a capital increase at Commerzbank. However, moving into the North American open, all European bourses are trading higher with financials and utilities as best performing sectors.

 

Index	DAX	CAC	FTSE	EUROSTOXX	SMI
Level	7072.59	3966.76	6041.89	2911.01	6589.61
Change (ticks)	3.81	21.69	-8.83	31.90	-24.14

 

FX

 

Moving into the Spanish auction, EUR/USD gained strength on anticipation of its success, however did pare back some gains on profit taking following a well bid auction. Weakness in the USD index also helped EUR/USD. In other news, GBP/USD fell about 10 pips after the BOE kept its benchmark interest rate unchanged at 0.50% as expected, however since then it has pared earlier losses and has moved into positive territory.

 

·   Australian Employment Change (Dec) M/M 2.3K vs. Exp. 25.0K (Prev. 54.6K)

·   Australian Unemployment Rate (Dec) M/M 5.0% vs. Exp. 5.1% (Prev. 5.2%) (RTRS)

 

Currency	EURUSD	GBPUSD	USDJPY
Level	1.3174	1.5786	82.98
Change (pips)	0.0043	0.0020	-0.0200

 

COMMMODITIES

 

WTI Crude futures are broadly unchanged with the USD Index flat on the session ahead of this afternoon’s US jobs data.

 

Oil & Gas News:

·   Norway’s Petroleum Directorate has cut its undiscovered oil and gas resource estimate by 21% to 2.6bln cubic metres of oil equivalent and said oil output would continue to decline in 2011, with oil production falling 6% this year.

·   The head of the Russian oil pipeline monopoly Transneft has said Russian oil deliveries to Belarus will likely resume by Tuesday, with the two sides locked in intense price talks. He added that he was sure the dispute would not affect oil supplies to other countries, but added that Russia had considering other backup options for its crude shipments.

 

Geopolitical News:

·   The US and Japan have vowed today to deepen military cooperation in the face of North Korean belligerence.

·   China has effectively rejected Iran’s invite to tour Tehran’s nuclear facilities, potentially smooth a source of friction before Chinese President Hu Jintao’s state visit to the US next week. Meanwhile Russia has said that Iran’s offer to tour the facilities deserved attention but cautioned that such a visit could never replace regular nuclear inspections or talks with major powers.

 

Commodity	WTI Nymex	OTC Spot Gold
Level	91.69	1380.71
Change (USD)	-0.17	-7.14

 

 

 

 

 

 

 

 

LOOKING AHEAD

 

Economic Releases

 

CST	GMT		DATA	EXP	PREV
0645	1245	EU	ECB Rate Announcement M/M (Jan)	1.00%	1.00%
0730	1330	EU	ECB Press Conference
0730	1330	US	Initial Jobless Claims W/W (Jan 8)	409K	409K
0730	1330	US	Continuing Claims W/W (Jan 1)	4080K	4103K
0730	1330	US	Trade Balance M/M (Nov)	-$40.5B	-$38.7B
0730	1330	US	Producer Price Index M/M (Dec)	0.8%	0.8%
0730	1330	US	Producer Price Index Y/Y (Dec)	3.8%	3.5%
0730	1330	US	PPI Ex Food & Energy M/M (Dec)	0.2%	0.3%
0730	1330	US	PPI Ex Food & Energy Y/Y (Dec)	1.4%	1.2%
0730	1330	CA	Int’l Merchandise Trade M/M (Nov)	-2.0B	-1.7B
0900	1500	US	Philadelphia Fed Business Index M/M (Jan)	25.0	24.3
0930	1530	US	EIA Natural Gas Storage Change W/W (Jan 13)	-145	-135
N/A	N/A	UK	NIESR GDP Estimate M/M (Dec)		0.6%
Speakers
0800	1400	GE	Finance Minister Schaeuble
1200	1800	US	Fed’s Bernanke speaks at FDIC Panel on Small Business Lending
1300	1900	EU	ECB’s Stark
Auctions
1000	1600	US	Fed’s Outright Treasury Coupon Purchase Jul 2016 - Dec 2017 (USD 7-9bln)
1200	1800	US	USD 13bln (Act) 30y Note Auction
Earnings
US			Intel

 

Prices taken at 1238 GMT

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