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DAILY US OPENING NEWS - 10/02/11

 

 

·   Market talk of the ECB buying in Portuguese debt surfaced after the yield on Portuguese 10-year government bond went above 7.4%

 

·   There were unconfirmed reports regarding the death of Saudi King Abdullah, however, a foreign ministry official denied the rumour later in the session

 

·   The Bank of England kept its key benchmark interest rate unchanged at 0.50%, and asset purchase target unchanged ay GBP 200bln as expected

 

·   ECB's Weber said he will not make a statement and declined to comment on his future. However he said he has spoken to Merkel about his plans

 

·   According to a German government coalition lawmaker, haircut of Greek debt is unavoidable, adding that a rating below 'AAA' for the EFSF could be accepted

 

·   RANsquawk European Morning Briefing Video: http://www.youtube.com/watch?v=QlpLfLjC2ds

 

Market Re-Cap

 

Portugal remained the dominant theme in the market today, with the yield on Portuguese 10-year government bond above 7.4%, which promoted concerns that Portugal may be next in line to get bailed-out following the footsteps of Greece and Ireland, which got bailed out once their respective yields crossed 7%. European equities traded lower during the session, with particular weakness observed in the Spanish IBEX 35, and Italian FTSE MIB indices, with financials as the worst performing sector partly due to concerns over Portugal. Also, bund futures gained upward momentum, partly due to a well-received 10-year Note auction from the US yesterday, with widening seen in the European peripheral 10-year government bond yield spreads, and the Portuguese/German spread wider by as much as 32 BPS. However, following market talk of the ECB buying in Portuguese debt, bunds came off their best levels, and peripheral spreads tightened. In other major news of the day, after touching earlier lows, WTI crude futures rose around USD 1 a barrel following unconfirmed news that the Saudi King Abdullah is dead, prompting concerns over Egypt as Abdullah has remained a strong supporter of the Egyptian President Mubarak. However, later in the session, a foreign ministry official denied the rumour.

 

Moving forward, markets look ahead to key jobless data from the US, and USD 16bln 30-year Note auction, following yesterday's well-received 10-year Note auction, are also scheduled for later in the session.

 

US Headlines

 

Fed’s Lockhart said the US economy may not need further help from the Fed when its USD 600bln stimulus plan runs out in June, but that decision will hinge on the path of the economy. Lockhart added that housing still posed a significant downside risk to growth and urged policymakers to stamp out even the smallest risk of deflation. Lockhart said inflation in the US has been falling and a recent rise in energy costs doesn’t signal a broad surge in prices. Lockhart added that the US economy warrants low rate for an extended period and that the US economy is likely to grow 3-4% in 2011. (RTRS/Sources)

 

Also, NY Fed’s Sack said recent bond purchases have had a helpful effect on financial conditions, with the rise in long-term interest rates largely due to economic optimism. Sack added that the strength of the economic recovery will be key to whether or not the Fed decides to do a third round of asset purchases. (RTRS)

 

In other news, fewer US homes entered the foreclosure process in January than in any month in more than 3 years, the latest sign lenders are taking longer to move against homeowners who have fallen behind on mortgage payments, foreclosure listing firm RealtyTrac said. (Yahoo)

 

EU and UK Headlines:

 

·   UK Industrial Production (Dec) M/M 0.5% vs. Exp. 0.5% (Prev. 0.4%, Rev. to 0.6%)

·   UK Manufacturing Production (Dec) M/M -0.1% vs. Exp. 0.4% (Prev. 0.6%) (RTRS)

 

·   Italy sells EUR 7.5bln of 12-month T-Bills, bid/cover 1.639 vs. Prev. 1.63 (yield 1.862% vs. Prev. 2.067%) (RTRS)

 

 

EQUITIES

 

European equities traded lower during the session, with particular weakness observed in the Spanish IBEX 35, and Italian FTSE MIB indices, with financials as the worst performing sector partly due to growing concerns over Portugal. Weaker quarterly corporate earnings from the likes of Credit Suisse, and Shire exerted further pressure on stocks. Moving into the North American open, equities continue to trade lower, with financials and telecommunications as the worst performing sectors.

 

Index

DAX

CAC

FTSE

EUROSTOXX

SMI

Level

7296.63

4063.86

5999.19

3004.54

6589.13

Change (ticks)

-24.27

-26.88

-53.10

-27.08

-42.51

 

FX

 

EUR traded under pressure because concerns regarding a Portuguese bailout re-emerged as the yield on Portuguese 10-year government bond went above 7.4%. In other news, GBP/USD spiked 50 pips lower on fast money move after the BOE kept its key benchmark interest rate unchanged at 0.5%. Elsewhere, AUD came under pressure following the liquidation of long AUD positions, despite an increase in Australian employment as some analysts noted that the increase was primarily due to a rise in part-time employment.

 

Currency

EURUSD

GBPUSD

USDJPY

Level

1.3642

1.6071

82.79

Change (pips)

-0.0091

-0.0031

0.4300

 

COMMMODITIES

 

WTI crude futures spiked higher to trade at USD 87 following unconfirmed reports that Saudi King Abdullah had died, however the overwhelming strength in the USD Index (+0.50%) due to Eurozone sovereign fears has weighed on oil prices and as we head into the North American open, prices are back in negative territory.

 

Oil & Gas News:

  • IEA has said world oil demand growth will expand faster this year than previously expected, with total consumption topping 90 MBPD by Q4 2011. IEA said rising production from OPEC will help meet the demand but warned of the damaging impact on the global economy of a further rise in oil prices.
  • OPEC has raised its 2011 global oil demand forecast by 170 KBPD to 1.40 MBPD, it says recent moves in Brent and US Crude reflect factors specific to those Crudes and do not indicate a tight oil market.
  • Merrill Lynch has commented that a near-term drop in oil is a 'buying opportunity', they also add that they see Brent Crude dropping below USD 90 in the short term.
  • Iraq Basra oil exports restored to 1.56 MBPD today from 0.984 MBPD yesterday.

 

Geopolitical News:

  • The Egyptian government resisted growing pressure today from key ally the US and from a still energetic popular protest movement, both demanding radical and immediate political change.
  • Iran has paid North Korea a total of USD 2bln for enriched uranium over the past 3 years, according to sources. In other news, North Korea has said it will no longer take part in military talks with Seoul after walking out on a preliminary meeting.
  • There have been unconfirmed reports that Saudi Arabia King Abdullah has died, according to Islam News, this has been officially denied by a Saudi ministry official, this follows a personal telephone call on January 29, where King Abdullah told President Obama not to humiliate Mr Mubarak. In other new Saudi Arabia has threatened to prop up President Mubarak if the White House tries to force a swift change of regime in Egypt.

 

Commodity

WTI Nymex

OTC Spot Gold

Level

86.4

1357.53

Change (NYSEARCA:USD)

-0.31

-6.13

 

 

 

LOOKING AHEAD

 

Economic Releases

 

CST

GMT

 

DATA

EXP

PREV

0730

1330

US

Initial Jobless Claims W/W (Feb 5)

410K

415K

0730

1330

US

Continuing Claims W/W (Jan 29)

3900K

3925K

0730

1330

CA

New Housing Price Index M/M (Dec)

0.2%

0.3%

0900

1500

US

Wholesale Inventories M/M (Dec)

0.7%

-0.2%

0900

1500

UK

NIESR GDP Estimate Q/Q (Jan)

 

0.5%

0930

1530

US

EIA Natural Gas Storage Change W/W (Feb 4)

-192

-189

1100

1900

US

Monthly Budget Statement (USD) M/M (Jan)

-55.0B

-42.6B

1300

1900

US

Fed’s Tentative Outright Treasury Operation Schedule Release

 

 

 

Speakers

1145

1745

US

Fed’s Lockhart

1215

1815

CA

BoC Deputy Governor Murray

1630

2230

AU

RBA Governor Stevens

N/A

N/A

WLD

IMF’s Strauss-Kahn

 

Auction

1200

1800

US

USD 16bln (Act) 30y Note Auction

 

Earnings

US

Kraft, Philip Morris

 

Prices taken at 1245GMT