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DAILY US OPENING NEWS - 11/02/11

 

 

·   The Egyptian military issued a statement guaranteeing changes to the constitution and to carry out a free and fair election. Earlier Egyptian 5-year CDS rose 39 BPS to 380 BPS on political uncertainty

 

·   PPI data from the UK was higher than expected, however, UK's ONS said that the impact of an 8% annual rise in UK's construction output will have a minimal upward impact on Q4 GDP

 

·   Nokia shares plummeted more than 10% after the company announced major restructuring plans

 

·   RANsquawk European Morning Briefing Video: http://www.youtube.com/watch?v=0KYWsY3YKz4

 

Market Re-Cap

 

Following on from yesterday, with President Mubarak of Egypt agreeing to transfer power to his vice-president but refusing to immediately step down, markets continued to track the ongoing political situation in Egypt, which also saw WTI crude futures trade in positive territory in early European session. However, later in the session, the Egyptian military issued a statement guaranteeing changes to the constitution and to carry out a free and fair election, which weighed upon WTI, paring most of the earlier gains. In the forex market, strength in the USD-index weighed upon major pairs including EUR/USD and GBP/USD. Meanwhile, equity markets traded lower, with particular weakness seen in the technology sector, weighed upon by more than 10% fall in Nokia shares after the company announced major restructuring plans.

 

Moving forward, markets look ahead to the trade balance and preliminary University of Michigan confidence data from the US, allied with another Fed's Outright Treasury Coupon Purchase operation in the maturity range of Aug'16-Jan'18, with a purchase target of USD 6-8bln.

 

Asian Headlines

 

China’s central bank has imposed punitive reserve requirement measures on some small and medium sized banks as part of its quest to tame inflation. Citing sources it did not name, the newspaper said the PBOC had tailor-made different reserve requirement ratios for various city commercial banks after the Lunar New Year holiday. The paper did not give any details on the levels of the reserve requirement ratios that were imposed. The official requirement stands at 19.5% for big banks. (China Securities Journal)

 

US Headlines

 

NY Fed’s Dudley is likely to be reappointed to another five-year term in the coming days, a source familiar with the matter said. (RTRS)

 

In other news, Fed’s balance sheet expanded to USD 2.483trl in the week ended Feb. 9 vs. Prev. USD 2.452trl the prior week. Also Foreign central banks’ overall holdings of US marketable securities at the Fed rose USD 8.75bln in the week ended Feb. 9 to stand at USD 3.368trl. (RTRS)

 

EU and UK Headlines:

 

German Finance Minister said he wants to deliver a comprehensive Eurozone crisis package in March. Also, French finance minister Lagarde said leaders will make proposal on comprehensive package on March 11th. (RTRS)

 

·   UK PPI Input NSA (Jan) M/M 1.7% vs. Exp. 1.4% (Prev. 3.4%, Rev. to 3.9%)

·   UK PPI Output NSA (Jan) M/M 1.0% vs. Exp. 0.5% (Prev. 0.5%, Rev. to 0.4%)

·   UK PPI Output Core NSA (Jan) M/M 0.7% vs. Exp. 0.3% (Prev. 0.2%, Rev. to -0.1%) (RTRS)

 

EQUITIES

 

European equities traded in negative territory, with particular underperformance seen in the technology sector, weighed upon by more than 10% decline in Nokia shares after the company announced major restructuring plans. Financials also traded lower as market players continue to focus on the Eurozone debt problems, with particular emphasis on Portugal, which also weighed upon the Spanish IBEX 35, and Italian FTSE MIB indices. Moving into the North American open, equities continue its move in negative territory, with technology, and consumer services as the worst performing sectors.

 

Index

DAX

CAC

FTSE

EUROSTOXX

SMI

Level

7325.83

4059.05

6007.11

3000.42

6620.2

Change (ticks)

-14.45

-36.09

-12.90

-25.26

8.14

 

FX

 

Strength in the USD-index weighed upon major pairs including EUR/USD and GBP/USD, with EUR/USD coming under further pressure as some market players continued to focus on debt concerns in the Eurozone, especially Portugal. GBP/USD did move up around 15 pips following higher than expected PPI data from the UK, however comments from UK's ONS that the impact of an 8% annual rise in UK's construction output will have a minimal upward impact on Q4 GDP continued to pressure GBP/USD triggering stops through 1.6000 level, triggering stops on the descent.

 

In other news, AUD came under pressure across the board after Australia’s central bank chief said that interest rates will probably stay on hold until late in the year.

 

Currency

EURUSD

GBPUSD

USDJPY

Level

1.3523

1.5982

83.59

Change (pips)

-0.0080

-0.0116

0.3600

 

COMMMODITIES

 

WTI crude futures traded higher on the back of President Hosni Mubarak’s transferring of power to the vice president and his refusal to step down. However, a statement from the military guaranteeing changes to the constitution and free and fair elections saw prices pare earlier gains.

 

Oil & Gas News:

  • Egyptian Ports report Suez Canal working as normal.
  • China’s 2011 crude oil imports may rise 11% on stockpiling.
  • Gazprom expects European gas prices to rise by 15% this year.
  • According to the EU energy commissioner, Guenther Oettinger, Europe’s economic recovery could be negatively affected if crude oil prices stay above USD 100 per barrel for long.

 

Geopolitical News:

  • President Hosni Mubarak said he would transfer powers to his vice president but would not immediately step down as demanded by protesters.
  • Military guaranteeing changes to the constitution and free and fair elections. 
  • Iran says an explosion has damaged a major gas pipeline near Tehran but the fire has been controlled and the pipeline is under repair.

 

 

Commodity

WTI Nymex

OTC Spot Gold

Level

86.97

1360.23

Change (NYSEARCA:USD)

0.24

-3.58

 

 

 

 

 

 

 

 

 

 

 

 

LOOKING AHEAD

 

Economic Releases

 

CST

GMT

 

DATA

EXP

PREV

0730

1330

US

Trade Balance (USD) M/M (Dec)

-40.5B

-38.3B

0730

1330

CA

Int’l Merchandise Trade (NYSEARCA:CAD) M/M (Dec)

-0.3B

-0.1B

0855

1455

US

Uni. of Michigan Confidence M/M (Feb P)

75.0

74.2

0900

1500

US

ECRI Weekly Index W/W (Feb 11)

 

128.9

0900

1500

US

ECRI Weekly Annualised Y/Y (Feb 11)

 

3.7%

1200

1800

US

Baker Hughes Rig Count W/W (Feb 11)

 

1739

 

Speaker

0815

1415

EU

EU  Central Bankers speak at conference on achieving sustainable growth

 

Auction

1000

1600

US

Fed’s Outright Treasury Coup. Purch. Aug 2016 – Jan 2018 (USD 6-8bln)

 

 

**Notes:         

  Japanese market holiday

  CME Eurodollar February options expiry

 

Prices taken at 1219GMT