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DAILY US OPENING NEWS - 20/01/11

 

 

  • Persistently high Chinese inflation, allied to stronger than expected GDP re-ignited fears of further monetary tightening from the PBOC

 

  • EFSF’s Regling said that Spain and Portugal are able to finance themselves on market, adding that Greece does not need a restructuring of debt

 

  • EU Commission said it is confident that Greece will be able to refinance itself after 2013, and rejected any news regarding Greek debt restructuring

 

 

Market Re-Cap

 

Overnight Asian equities came under pressure on the back of fears regarding further monetary tightening following persisting inflation in China, allied with profit taking after better than expected GDP data from China. Chinese rate hike fears weighed upon commodities resulting in basic materials and oil & gas sectors underperforming in the European session. However, the Spanish IBEX 35 and Italian FTSE MIB indices outperformed following successful government debt auctions this week from peripheral Eurozone countries, with strength seen in financials. Also, European peripheral 10-year government bond yield spreads with respect to bund tightened following comments from EFSF’s Regling and the EU Commission, waning some Eurozone debt and sovereign concerns.

 

Looking forward, markets look ahead to US corporate earnings from the likes of Morgan Stanley, and Google, key jobless and home sales data from the US. In fixed income attention will turn to a 2y-5y-7y Note refunding announcement, USD 13bln 10-year TIPS auction, allied with another Fed’s Outright Treasury Coupon purchase in the maturity range of Aug’28-Nov’40, with purchase target USD 1.5-2.5bln.

 

Asia Headlines:

 

Japanese manufacturing confidence improved in January for the first time in three months, according to a Reuters Tankan poll, in a sign the economy is likely to start picking up after a small contraction expected in the final quarter of 2010. (RTRS) It is worth noting that the poll has a 95% correlation with the BOJ’s closely watched quarterly Tankan survey.

 

·   Chinese Real GDP (Q4) Y/Y 9.8% vs. Exp. 9.4% (Prev. 9.6%)

·   Chinese GDP Year-to-Date (Q4) Y/Y 10.3% vs. Exp. 10.2% (Prev. 10.6%)

·   Chinese CPI (Dec) Y/Y 4.6% vs. Exp. 4.6% (Prev. 5.1%)

·   Chinese PPI (Dec) Y/Y 5.9% vs. Exp. 5.7% (Prev. 6.1%)

·   Chinese Industrial Production (Dec) Y/Y 13.5% vs. Exp. 13.4% (Prev. 13.3%)

·   Chinese Retail Sales (Dec) Y/Y 19.1% vs. Exp. 18.7% (Prev. 18.7%) (RTRS)

 

US Headlines:

 

President Barack Obama is riding a surge of public support into next week's State of the Union address, with more Americans approving of his performance and more seeing him as a political moderate, according to a new Wall Street Journal/NBC News poll. In the survey, 53% said they approved of the job Mr. Obama is doing as president, up eight percentage points from December. 41% said they disapprove of the president's performance, down from 48% last month. The poll surveyed 1,000 adults from Jan. 13-17. (WSJ)

 

In other news, Russia’s central bank sold a monthly record of US Treasuries in November, citing US and Russia data and its own calculations. Russia sold USD 9.9bln of notes and bought USD 2.8bln for a net reduction of USD 7.1bln in the period, the most in a month since at least 1994. (Vedomosti)

 

Elsewhere, China will continue to diversify its foreign exchange investments from US Treasuries in a bid to control risk, citing a researcher with the State Information Centre. (China Daily)

 

EU and UK Headlines:

 

Despite EFSF’s Regling and the EU Commission denying the possibility of a Greek debt restructuring, it is worth noting that according to a senior Eurozone government official, European governments are discussing plans to buy back tens of billions of Euros in Greek sovereign debt once final decisions on the structure of a permanent Eurozone bailout mechanism are reached. (Sources)

 

In other news, Spain plans to pour billions more EUR’s into its troubled savings banks and force them to be more open about their lending practices, people familiar with the matter said. In a first step, Spain is preparing to issue EUR 3bln in debt in coming days, sources said. Government officials are putting plans in place to eventually raise as much as EUR 30bln, according to these people, though some say the final tally will be less. (WSJ)

 

Elsewhere, UK CBI Chief Economic Adviser said the BOE will probably have to raise rates by mid-year. (Sources)

 

·   UK CBI Business Optimism (Jan) M/M 7 vs. Exp. 3 (Prev. 2)

·   UK CBI Trends Total Orders (Jan) M/M -16 vs. Exp. -1 (Prev.-3) (RTRS)

 

·   French auction sells EUR 2.925bln, 12-Jul-13 BTAN 4.50%, bid/cover 2.624 vs. Prev. 3.715 (yield 1.49% vs. Prev. 1.23%)

·   French auction sells EUR 1.000bln, 25-Oct-14 OAT 4%, bid/cover 5.44 vs. Prev. 2.85 (yield 2.01% vs. Prev. 2.78%)

·   French auction sells EUR 5.056bln, 15-Feb-16 BTAN 2.25%, bid/cover 2.389 vs. Prev. 2.437 (yield 2.54% vs. Prev. 2.00%) (RTRS)

 

EQUITIES

 

European peripheral indices, including the Spanish IBEX 35 index and Italian FTSE MIB index, outperformed their European peers following successful peripheral Eurozone government debt auctions this week. Comments from EFSF’s Regling that Spain and Portugal are able to finance themselves on market, and Greece does not need a restructuring of debt, as well as similar comments on Greece from the EU Commission provided further support to the peripheral indices. However, weakness in the basic materials and oil & gas sectors on the back of fears regarding further monetary tightening by the PBOC weighed upon core European indices, affecting FTSE 100 index in particular. Moving into the North American open, European bourses are trading mixed with basic materials and industrials as the worst performing sectors.

 

Morgan Stanley - Co.’s Q4 EPS cont-ops USD 0.43 (basic EPS cont-ops USD 0.44) vs. Exp. USD 0.28, and Q4 revenue USD 7.80bln vs. Exp. USD 7.32bln. Co. said Tier 1 capital ratio, under Basel 1, was approximately 16.0% at the end of the quarter, adding that the board of directors declared a USD 0.05 quarterly dividend per common share. (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

7039.23

3972.14

5899.73

2933.59

6495.16

Change (ticks)

-43.53

-4.57

-76.97

9.83

-64.5

 

FX

 

Weakness in the USD index helped EUR/USD and GBP/USD, with EUR/USD receiving further help from EFSF’s Regling who said Spain and Portugal can finance themselves in the market, and Greece doesn’t need to restructure its debt. In other news, Turkish Lira (TRY) fell 1.0% against the USD after the Turkish central bank cut the benchmark repo rate by 25 BPS.

 

Currency

EURUSD

GBPUSD

USDJPY

Level

1.3516

1.5999

82.18

Change (pips)

0.0043

0.0003

0.1600

 

COMMMODITIES

 

WTI Crude futures lost ground today to move back towards the USD 91 level, weighed upon by further fears of monetary policy tightening in China after the country announced stronger than expected growth in December with persistently high inflation.

 

 

Oil & Gas News:

  • The IEA’s chief economist Birol has said rising oil prices will be a risk for the global economic recovery, which is still uncertain in Europe and the US.
  • China's implied oil demand surged 19% to a record 9.6mln BPD last month, while domestic crude production rose 9% to 4.12mln BPD. CNPC has warned the country may face a diesel shortage in 2011 due to the expansion in refining capacity lagging behind the increase in consumption. Meanwhile China added 12mln barrels of crude to its strategic petroleum reserve over the course of last year, according to Reuters calculations.

 

Geopolitical News:

  • North Korea have proposed high level military talks with the South in a bid to defuse tensions, to which South Korea have accepted. Meanwhile the US and China released a statement yesterday saying that both countries agree on the critical importance of maintaining peace and stability on the Korean peninsula and will cooperate closely on the issue.

 

Commodity

WTI Nymex

OTC Spot Gold

Level

90.25

1363.6

Change (NYSEARCA:USD)

-0.61

-6.33

 

LOOKING AHEAD

 

Economic Releases

 

CST

GMT

 

DATA

EXP

PREV

0730

1330

US

Initial Jobless Claims W/W (Jan 15)

420K

445K

0730

1330

US

Continuing Claims W/W (Jan 8)

3985K

3879K

0730

1330

CA

Leading Indicators M/M (Dec)

0.3%

0.3%

0730

1330

CA

Wholesale Sales M/M (Nov)

0.3%

0.0%

0900

1500

US

Philadelphia Fed. M/M (Jan)

20.7

24.3

0900

1500

US

Existing Home Sales M/M (Dec)

4.87M

4.68M

0900

1500

US

Existing Home Sales (%) M/M (Dec)

4.1%

5.6%

0900

1500

US

Leading Indicators M/M (Dec)

0.6%

1.1%

0900

1500

EU

Eurozone Consumer Confidence M/M (Jan A)

-12.0

-11.0

0930

1530

US

EIA Natural Gas Storage Change W/W (Jan 14)

-228

-138

1000

1600

US

DOE Crude Oil Inventories W/W (Jan 14)

-500K

-2154K

1000

1600

US

DOE Gasoline Inventories W/W (Jan 14)

2500K

5081K

1000

1600

US

DOE Distillate Inventory W/W (Jan 14)

1000K

2652K

1000

1600

US

DOE Cushing Crude Inventory W/W (Jan 14)

 

-117K

1000

1600

US

DOE Refinery Utilisation W/W (Jan 14)

-0.50%

-1.60%

1500

2100

US

RPX Composite 28 day Y/Y (Nov)

 

-2.29%

1500

2100

US

RPX Composite 28 day Index Y/Y (Nov)

 

189.29

1545

2145

NZ

Retail Sales M/M (Nov)

1.2%

-2.5%

1545

2145

NZ

Retail Sales Ex-Auto M/M (Nov)

0.5%

-1.6%

Speakers

0700

1300

UK

BOE’s Executive Director for Financial Stability Haldane

0830

1430

EU/UK

ECB’s Trichet and BOE’s King speak at first ESRB press conference

0945

1545

SZ

SNB’s Danthine

1100

1700

SZ

SNB’s Hildebrand

1200

1800

EU

ECB’s Tumpel Gugerell

N/A

N/A

EU

EU’s Rehn

Auction

1000

1600

US

2y-5y-7y Note Refunding Announcement

1000

1600

US

Fed’s Outright Treasury Coup. Purch. Aug 2028 – Nov 2040 (USD 1.5-2.5bln)

1200

1800

US

USD 13bln 10y TIPS Auction

Earnings

US

Advanced Micro Devices, Capital One Financial, Freeport-McMoran, Google, Intuitive Surgical, Union Pacific

 

**Notes: WTI crude February futures expiry

Prices taken at 1236GMT