DAILY US OPENING NEWS - 14/01/11

 

• The PBOC raised its reserve requirement ratio by 50 basis points, and a PBOC adviser said there is still room for further rate hikes
  

• JPMorgan, in its fourth quarter corporate earnings, reported a beat on EPS and revenue
  

• French finance minister Lagarde said an increase in the EFSF is an option
  

• RANsquawk European Morning Briefing Video: http://www.youtube.com/watch?v=1zglARZ8CoI

 

Market Re-Cap

 

China remained the central focus in the markets today with rumours overnight of a potential reserve requirement ratio hike by the PBOC which weighed upon Chinese and Japanese equities, this also contributed towards a lower start to European bourses, led by commodity linked stocks. Later in the session saw official confirmation as the PBOC raised the reserve requirement ratio by 50 basis points due to which equities came under further pressure.

 

Looking ahead, markets focus its attention to a slew of key economic data from the US, as well as another Fed's Outright Treasury Coupon Purchase in the maturity range of Jan'15 - Jun'16, and purchase target of USD 6-8bln.

 

Asia Headlines:

 

Japan's PM Kan appointed, Kaoru Yosano, a fiscal hawk to a key post and replaced his deputy in a cabinet revamp on Friday to cope with a divided parliament and tackle reforms to rein in public debt. Kan retained, Finance Minister Yoshihiko Noda, Foreign Minister Seiji Maehara and Defence Minister Toshimi Kitazawa. (RTRS)

 

In other news, Japanese finance minister Noda said he is ordered by the PM to watch FX carefully and cooperate with the BOJ. (RTRS)

 

US Headlines:

 

The Fed’s balance sheet rose to a new high to USD 2.451trl in the week ended Jan. 12 from USD 2.418trl the prior week. Also, foreign central banks’ overall holdings of US marketable securities at the Fed fell USD 8.99bln in the week ended Jan. 12 to USD 3.346trl. (RTRS)

 

EU and UK Headlines:

 

French finance minister Lagarde said an increase in the EFSF is an option, however France has to consider option whether fund can be used to purchase sovereign bonds. (RTRS)

 

In other news, Spanish Banks' ECB borrowing rose to EUR 70bln vs. Prev. EUR 64.5bln, according to the Bank of Spain. However, Irish Lenders' ECB borrowings fell to EUR 132bln on Dec. 31. (RTRS/Sources)

 

Elsewhere, the Centre for Economics & Business Research (CEBR) has estimated that growth this year will slide back to just 1.1%, compared with the official forecast of 2.1%. "The chances of a double dip for the UK economy have risen from 10pc in October to 20% now," the CEBR said. (Telegraph)

 

·   Eurozone Trade Balance SA (Nov) M/M -1.9bln vs. Exp. 1.7bln (Prev. 3.6bln, Rev. to 3.5bln)

·   UK PPI Input NSA (Dec) Y/Y 12.5% vs. Exp. 10.2% (Prev. 9.0%, Rev. to 9.2%)

·   UK Output NSA (Dec) Y/Y 4.2% vs. Exp. 3.9% (Prev. 3.9%, Rev, to 4.1%)

·   UK PPI Output Core NSA (Dec) Y/Y 2.9% vs. Exp. 3.0% (Prev. 3.3%) (RTRS)

 

EQUITIES

 

European equities traded lower during the session weighed upon by yet another hike in the reserve requirement ratio by the PBOC. In equity specific news, following earlier gains on the back of market talk that Smith & Nephew, in FTSE 100, and Biomet plan to a potential merger, Smith & Nephew shares fell sharply around 6% after co. denied the rumour. Also, Thyssenkrupp shares, in DAX, shed over 3% following news of departure of its CFO.

 

 

 

JPMorgan – Co.’s Q4 EPS USD 1.12 vs. Exp. USD 1.00, and Q4 revenue USD 26.10bln vs. Exp. USD 24.22bln. Co. said Q4 investment banking net revenue was USD 6.2bln, and Tier 1 common ratio was 9.8% at Dec. 31, 2010. However, co. said in mortgage business, credit costs still remain at abnormally high levels and continue to be significant drag on returns. (RTRS/Sources)

 

If you require further information regarding US corporate news please refer to the RANsquawk ‘US equity opening news’ sheet or visit RANsquawk.com.

 

Index	DAX	CAC	FTSE	EUROSTOXX	SMI
Level	7034.32	3960.19	5957.15	2897.39	6511.01
Change (ticks)	-40.79	-14.64	-66.73	-18.23	-51.46

 

FX

 

Weakness in commodities, on the back of another reserve requirement ratio hike by the PBOC, led the USD index to strengthen, which in turn weighed upon EUR/USD and GBP/USD. EUR/USD also came under pressure following profit taking after stark gains made throughout the weak on the back of an easing in Eurozone debt fears, and a hawkish ECB stance yesterday delivered by Trichet. Commodity linked currencies such as AUD and CAD also lost strength on the back of PBOC’s decision.

 

Currency	EURUSD	GBPUSD	USDJPY
Level	1.3343	1.5854	82.92
Change (pips)	-0.0021	0.0016	0.1100

 

COMMMODITIES

 

WTI Crude futures traded lower during the European session, weighed upon after China tightened monetary policy further by raising the Reserve Requirement Ratio for the fourth time in just over two months.

 

Oil & Gas News:

• Preliminary data from the Norwegian Petroleum Directorate (NPD) showed gas production from the Norwegian continental shelf rose to an estimated 10.9 BCM last month, up from 10.1 BCM in November, while output remained steady.
• Bank of America have released a research note advising that they do not view an increase in production from Iraq as a major threat to their medium term positive outlook on price oil prices.

 

Geopolitical News:

• Chinese vice Foreign Minister Tiankai has said that the six party talks were more suitable than the UN Security Council for solving the nuclear standoff on the Korean Peninsula, he added that China was ‘still not very clear’ on the state of North Korea’s claimed Uranium enrichment programme.

 

Commodity	WTI Nymex	OTC Spot Gold
Level	90.37	1368.18
Change (USD)	-1.03	-5.60

 

 

 

 

 

 

 

 

 

 

 

LOOKING AHEAD

 

Economic Releases

 

CST	GMT		DATA	EXP	PREV
0730	1330	US	Consumer Price Index M/M (Dec)	0.4%	0.1%
0730	1330	US	Consumer Price Index Y/Y (Dec)	1.3%	1.1%
0730	1330	US	CPI Ex. Food & Energy M/M (Dec)	0.1%	0.1%
0730	1330	US	CPI Ex. Food & Energy Y/Y (Dec)	0.8%	0.8%
0730	1330	US	Consumer Price Index NSA Y/Y (Dec)	219.100	218.803
0730	1330	US	CPI Core Index SA M/M (Dec)	222.200	221.982
0730	1330	US	Advance Retail Sales M/M (Dec)	0.8%	0.8%
0730	1330	US	Retail Sales Less Autos M/M (Dec)	0.7%	1.2%
0730	1330	US	Retail Sales Ex. Auto & Gas M/M (Dec)	0.3%	0.8%
0815	1415	US	Industrial Production M/M (Dec)	0.5%	0.4%
0815	1415	US	Capacity Utilization M/M (Dec)	75.6%	75.2%
0855	1455	US	Uni. of Michigan Confidence M/M (Jan P)	75.5	74.5
0900	1500	US	Business Inventories M/M (Nov)	0.6%	0.7%
0930	1530	US	ECRI Weekly W/W (Jan 14)		128.9
0930	1530	US	ECRI Weekly Annualised W/W (Jan 14)		3.3%
1030	1630	US	Cleveland Fed CPI M/M (Dec)		0.1%
1200	1800	US	US Baker Hughes Rig Count W/W (Jan 14)		1700
Speakers
1145	1745	US	Fed’s Lacker
1215	1815	US	Fed’s Rosengren
N/A	N/A	EU/GE	ECB’s Weber and Finance Minister Schaeuble meet
N/A	N/A	PO	Finance Minister Dos Santos
Auctions
1000	1600	US	Fed’s Outright Treasury Coupon Purchase Jan 2015 – Jun 2016 (USD 6-8bln)
Earnings
US			M&T Bank

 

**Notes: US Martin Luther King Day Schedule:

·          Floor Trade: CME/CBOT (Regular Close), NYMEX (Regular close)

·          Electronic Trade:

CME Globex – Equity (Regular Close), Interest Rate (Early close: 1515CST/2115GMT), FX (Early close: 1515CST/2115GMT), NYMEX (Early close: 1515CST/2115GMT), NYSE (Regular close)

 

Prices taken at 1241 GMT

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