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DAILY US OPENING NEWS - 07/02/11

 

 

  • ECB’s Gonzalez-Paramo said the ECB will have to raise interest rates if the rate of inflation does not begin to slow by the end of 2011

 

  • The Times Shadow MPC said that the BOE need to ignore warnings about the strength of the recovery and to raise interest rates

 

 

Market Re-Cap

 

European equities traded higher during the session, partly due to a nine-month closing high for the Nikkei average (+0.46%), with particular strength seen in Nokia (+2.8%) shares following comments from co.'s CEO on co.’s senior management reorganisation, positive comments from the likes of Volkswagen, Daimler, and Adidas, as well as strong corporate earning results from Julius Baer. Elsewhere, GBP gained strength on the back of hawkish comments from the Times Shadow MPC with respect to hiking interest rates, whereas EUR observed some early strength on the back of comments from ECB's Gonzalez-Paramo that the ECB will have to raise interest rates if the current level of inflation persists. However, as the session progressed, and the USD-index came off its worst levels, GBP/USD and EUR/USD pared back earlier gains.

 

Moving into the North American open, the economic calendar remains thin, however markets look forward to French T-Bill auctions, as well as another Fed's Outright Treasury Coupon Purchase in the maturity range of Feb'18 - Nov'20, with a purchase target of USD 7-9bln, later in the session.

 

Asian Headlines

 

BOJ’s Shirakawa said the central bank has not exhausted measures to support growth but sees the economy emerging from a lull, reinforcing views that an imminent monetary easing is unlikely. He added that easy monetary policy alone could not fix Japan’s problems such as persistent deflation and huge fiscal debt, calling for structural reforms and efforts to boost country’s potential growth. (RTRS)

 

US Headlines

 

US banks are still holding plenty of the type of so-called toxic asset that unnerved investors during the financial crisis. As of Sept. 30 2010, the top ten US owned banks held USD 13bln in ‘unrealised losses’ that have lasted at least a year. (WSJ)

 

EU and UK Headlines:

 

French economy minister Lagarde said that the Eurozone’s package of rescue funds were enough to face off future crisis. (RTRS)

 

In other news, Ireland has received a first tranche of EUR 3.6bln from the Eurozone rescue fund, slightly more than the initial amount agreed, according to unnamed EU officials, adding that the effective lending cost to Ireland was 5.9%. Also, according to an unnamed Greek government official, Greece is confident it has made enough progress on its fiscal consolidation plan to get the green light this week for a fourth tranche of EU/IMF aid, adding that the aid tranche is secured. (RTRS)

 

Elsewhere, in the UK, the Shadow MPC which meets under the auspices of the Institute of Economic Affairs has told the BOE to ignore warnings about the strength of the recovery and to raise interest rates. It marks the first time since the onset of the financial crisis that the majority (5-4) have voted to raise rates emphasising their concerns about inflation. (Sunday Times)

 

·   German Factory Orders SA (Dec) M/M -3.4% vs. Exp. -1.5% (Prev. 5.2%)

·   German Factory Orders NSA (Dec) Y/Y 19.7% vs. Exp. 21.3% (Prev. 20.6%)

·   Eurozone Sentix Investor Confidence (Feb) M/M 16.7 vs. Exp. 14.0 (Prev. 10.6) (RTRS)

 

·   German 6-month Bubill auction for EUR 4.93125bln, bid/cover 1.3 vs. Prev. 2.3 (yield 0.7628% vs. Prev. 0.4823%) (RTRS)

 

 

 

EQUITIES

 

European equities traded higher during the session, partly due to a nine-month closing high for the Nikkei average (+0.46%), with particular strength seen in Nokia (+2.8%) shares following comments from co.'s CEO that he is finalising senior executive changes as part of co.'s reorganisation, which also helped the technology sector. Also, positive comments from the likes of Volkswagen (+0.4%), Daimler (+1.5%) and Adidas (+2.7%) in Germany underpinned the gains in the DAX, whereas strong corporate earning results from Julius Baer (+2.5%) in the SMI partly helped financials, and in particular insurance stocks. Moving into the North American open, equities continue to trade higher with technology and financials as the best performing sectors.

 

Index

DAX

CAC

FTSE

EUROSTOXX

SMI

Level

7267.68

4080.06

6037.01

3021.58

6614.57

Change (ticks)

51.47

32.85

39.63

18.39

30.17

 

FX

 

GBP gained strength on the back of hawkish comments from the Times Shadow MPC with respect to hiking interest rates, whereas EUR observed some early strength on the back of comments from ECB's Gonzalez-Paramo that the ECB will have to raise interest rates if the current level of inflation persists. However, as the session progressed, and the USD-index came off its worst levels, GBP/USD and EUR/USD pared back earlier gains. EUR also came under further pressure following worse than expected factory orders from Germany.

 

US Treasury declined to name China a currency manipulator in a long-delayed semi-annual report. US Treasury said it is in China's interest to let nominal value of CNY to rise faster against the USD and other currencies, adding that recent CNY appreciation is "insufficient", and a more rapid progress is needed. (RTRS)

 

Currency

EURUSD

GBPUSD

USDJPY

Level

1.3548

1.6112

82.35

Change (pips)

-0.0033

0.0001

0.1700

 

COMMMODITIES

 

WTI crude futures remained flat around the USD 89 handle, with little economic data or announcements regarding Egyptian reforms to move the market.

 

Oil & Gas News:

·        Global oil prices could exceed USD 110 a barrel if political unrest in Egypt continues, according to a member of Kuwait’s Supreme Petroleum Council.

·        Iran’s Oil Minister sees no need for an OPEC emergency meeting even if the price of oil hits USD 120.

·        A pipeline rupture in Iran has reportedly caused a 20km oil slick along the shores of the Gulf, according to sources the spill was caused by an explosion in a corroded pipeline in Daylam, Iran.

·        Mexico has reopened the 113,000 BPD Dos Bocas oil exporting terminal in the Gulf of Mexico as bad weather eases.

·         East Mediterranean Gas Co.’s (EMG) pipeline from El-Arish, Egypt, to Ashkelon, Israel is intact and was not damaged by an explosion at a gas metering station in Egypt, according to Ampal-American Israel Corp, which has a 12.5% interest in EMG.

 

Geopolitical News:

  • Iran is mass producing Anti-ship missiles according to IRNA.

 

Commodity

WTI Nymex

OTC Spot Gold

Level

89.27

1347.66

Change (NYSEARCA:USD)

0.24

-1.19

 

 

 

 

 

LOOKING AHEAD

 

Economic Releases

 

CST

GMT

 

DATA

EXP

PREV

0730

1330

CA

Building Permits M/M (Dec)

 

-11.2%

1400

2000

US

Consumer Credit M/M (Dec)

$2.00B

$1.346B

 

Speakers

0700

1300

EU

ECB’s Weber

1115

1715

EU

ECB’s Mersch

 

Auctions

0745

1345

FR

EUR 8bln combined 91-, 182-, and 364-days T-Bills

1000

1600

US

Fed’s Outright Treasury Coupon Purchase Feb 2018 – Nov 2020 (USD 7-9bln)

 

** Notes: Chinese Market Holiday

 

Prices taken at 1224GMT

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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NYSE LIFFE: A record month in Euribor® packs and bundles and Short Sterling packs

 

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