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DAILY US OPENING NEWS - 18/01/11

 

 

  • German economics minister said he sees no reason to expand the EFSF fund, however there is a need to optimise it

 

  • According to a finance ministry source, Greece is not discussing extending repayment of all outstanding debt

 

  • Well received peripheral Eurozone T-Bill auctions, allied with a sharp jump in German ZEW Survey Economic Sentiment boosted risk-appetite. According to the Greek debt agency chief, foreign take up in Greek 3-month T-Bill auction was about 80%

 

  • A much higher than expected UK CPI print at 3.7% Y/Y boosted GBP/USD, and has weighed on Gilt futures

 

 

Market Re-Cap

 

General risk-appetite dominated market sentiment during the European session, starting with comments from Eurozone finance minister pledging to strengthen the safety net for debt-strapped countries, allied with softening stance from Germany on enhanced flexibility of the EFSF fund. Comments from Russian deputy PM that Russia will consider buying Spanish debt again further strengthened positive sentiment. As a consequence, equities traded higher led by the Spanish 35 and Italian MIB indices, with financials outperforming other sectors. As the session progressed more positive news came in the form of a sharp increase in German ZEW Survey Economic Sentiment, which saw EUR/USD rise more than 30 pips, and well received T-Bill auctions from Spain, Greece and Belgium, with noticeable fall in the average yields. It is also worth noting that the Irish/German 10-year government bond yield spread widened on the back of ongoing political uncertainty in Ireland. Elsewhere, a much higher than expected UK CPI print at 3.7% Y/Y saw GBP/USD rise more than 60 pips, and put Gilt futures under pressure.

 

Moving forward, markets look ahead to a slew of US corporate earnings of the likes of Citigroup, IBM, and Apple, key economic data in the form of US Empire Manufacturing, as well as another Fed's Outright TIPS Purchase in the maturity range Apr'13 - Feb'40, with purchase target of USD 1-2bln.

 

US Headlines

 

Only two months after his party suffered a humiliating defeat in the midterm congressional elections, President Barack Obama's popularity has turned from negative to positive in a series of polls, while opposition to his signature achievement of health care reform is falling. Pollsters attributed the president's recovery to several compromise deals reached with Congress before the end of 2010 as well as his widely-praised message of national unity made in the aftermath of the mass shooting in Tucson, Arizona. (Telegraph)

 

In other news, US public pensions face a shortfall of USD 2,500bln that will force state and local governments to sell assets and make deep cuts to services, according to the former chairman of New Jersey’s pension fund. (FT More)

 

Asia Headlines:

 

China’s central bank has cut its 2011 lending target for banks by 10% from last year, citing unidentified banking sources. (Securities Journal)

 

In other news, China’s economy may have grown as much as 10.3% last year, citing Li Daokui an adviser to the PBOC.

Also, China should speed up the pace of raising interest rates when necessary to eliminate negative real rates, citing PBOC adviser Xia Bin. (China Business News/ 21st Century Business Herald)

 

EU and UK Headlines:

 

Belgian finance minister said good progress has been made to increase size of the EFSF, adding that he is working on the quality and quantity of the EFSF. (Sources)

 

In other news, according to EU Presidency source, EU finance ministers said banks stress tests methodology will be more comprehensive to include trading book and banking book, and they agree to test bank liquidity in the next round of stress tests. Source added that EU stress tests will encompass the same 91 banks as in 2010, however 2011 EU bank

 

stress tests will include stringent tests of core tier 1 capital. Source also said that the IMF will conduct parallel stress tests of banks in Britain, Sweden, and Luxembourg. (RTRS)

 

Elsewhere, Irish MPs are to decide the fate of Brian Cowen, the prime minister, in a secret ballot on Tuesday, amid splits in the government and looming electoral "annihilation" for the Fianna Fail party. (Telegraph) The no confidence motion proceedings are expected to start at 1730 GMT.

 

·   German ZEW Survey (Economic Sentiment) (Jan) M/M 15.4 vs. Exp. 7.0 (Prev. 4.3)

·   German ZEW Survey (Current Situation) M/M 82.8 vs. Exp. 83.7 (Prev. 82.6)

·   UK CPI (Dec) Y/Y 3.7% vs. Exp. 3.4% (Prev. 3.3%)

·   UK RPI (Dec) Y/Y 4.8% vs. Exp. 4.7% (Prev. 4.7%)

·   UK Nationwide Consumer Confidence (Dec) M/M 53 vs. Exp. 44 (Prev. 45)

·   UK RICS House Price Balance (Dec) M/M -39% vs. Exp. -44% (Prev. -44%) (RTRS)

 

·   Spanish 12-month sells EUR 4.5bln bid/cover 2.2 vs. Prev. 2.23 (yield 2.947% vs. Prev. 3.449%)

·   Spanish 18-month sells EUR 1.04bln bid/cover 4.1 vs. Prev. 4.54 (yield 3.367% vs. Prev. 3.721%)

·   Greece sells EUR 650mln in 13-week T-Bills bid/cover 2.86 vs. Prev. 2.86 (yield 4.10% Prev. 4.10%)

·   Belgian 3-month sells EUR 1.551bln bid/cover 2.34 vs. Prev. 3.61 (yield 0.631% vs. Prev. 0.661%)

·   Belgian 12-month sells EUR 1.605bln bid/cover 2.00 vs. Prev. 1.49 (yield 1.443% vs. Prev. 1.821%) (RTRS)

 

EQUITIES

 

European bourses traded higher during the European session on the back of recent progress made on the EFSF fund in the Eurozone finance ministers’ meeting, well received T-Bill auctions from Spain, Greece, and Belgium, as well as a sharp rise in German ZEW Survey Economic Sentiment. As a consequence, the Spanish IBEX 35 and Italian MIB indices outperformed its European peers, and moving into the North American open, equities have maintained strength with financials and oil & gas as best performing sectors.

 

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

7148.85

4012.08

6052.33

2948.21

6645.7

Change (ticks)

70.79

36.67

66.63

37.58

67.53

 

FX

 

EUR/USD traded higher throughout the European session on the back of comments from the Eurozone finance ministers’ meeting with regards to the EFSF fund, well received peripheral Eurozone T-Bill auctions, allied with much better than expected German ZEW Survey Economic Sentiment. Market talk of a real money buyer, and German names buying in EUR/USD provided further strength to the pair.

 

In other news, a much higher than expected UK CPI print at 3.7% Y/Y saw GBP/USD rise more than 60 pips. The ONS said air transport, petrol, diesel, gas and food prices pushed up December CPI.

 

Currency

EURUSD

GBPUSD

USDJPY

Level

1.3395

1.5988

82.54

Change (pips)

0.0101

0.0100

-0.1400

 

COMMMODITIES

 

WTI Crude futures have retraced their Asian session losses to trade almost flat ahead of the NYMEX pit open buoyed by a rebound in European Equity markets.

 

Oil & Gas News:

  • OPEC’s Secretary General have said that world oil markets have more than enough supply and factors including speculation and a weak US Dollar have played a part in boosting oil prices.

 

  • The IEA have said in their monthly report that world oil demand will be higher than initially expected in 2011 but will slow significantly from the pace last year. The group raised its 2011 oil demand growth forecast for this year by 80,000 BPD to 1.41mln BPD.
  • Bernstein have reduced their 2011 US Natural Gas price forecast to USD 5.50 from USD 6.50 and said that despite an 8% reduction in the number of gas rigs since August, a further 12% reduction is needed to bring supply and demand back into balance.
  • Mohammed Saleh al-Sada has replaced Abdullah al-Attiyah as Qatar’s Oil minister.
  • Iraqi Kurdish authorities agreed in a meeting with their Iraqi counterparts in Baghdad to resume halted oil exports from their region "at the start of February," the office of the Kurdish Prime Minister said.

 

Geopolitical News:

  • A South Korean think tank has said that North Korea is spending about a third of its national income on its military, a much larger amount than announced.

 

Commodity

WTI Nymex

OTC Spot Gold

Level

91.24

1368.3

Change (NYSEARCA:USD)

-0.30

5.65

 

LOOKING AHEAD

 

Economic Releases

 

CST

GMT

 

DATA

EXP

PREV

0730

1330

US

Empire Manufacturing M/M (Jan)

13.00

10.57

0800

1400

US

Total New TIC Flows M/M (Nov)

 

$7.5B

0800

1400

US

Net Long-term TIC Flows M/M (Nov)

$40.0B

$27.6B

0800

1400

CA

Bank of Canada Rate Announcement M/M (Jan)

1.00%

1.00%

0900

1500

US

NAHB Housing Market Index M/M (Jan)

17

16

1600

2200

US

ABC Consumer Confidence W/W (Jan 16)

 

-40

1730

2330

AU

Westpac Consumer Confidence SA M/M (Jan)

 

0.2%

1730

2330

AU

Westpac Consumer Confidence Index M/M (Jan)

 

111.0

 

Auction

1000

1600

US

Fed’s Outright TIPS Purch. Apr. 2013 – Feb 2040 (USD 1-2bln)

 

Earnings

US

Apple, Charles Schwab, Citigroup, Fastenal, Forest Laboratories, IBM, Linear Technology

 

Prices taken at 1237 GMT