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DAILY US OPENING NEWS - 02/03/11

 

 

·   Ongoing geopolitical tension in the Middle East continue to provide strength to WTI crude futures

 

·   Stronger than expected construction PMI data from the UK provided strength to GBP/USD, whereas a record increase in monthly Eurozone PPI figure boosted EUR/USD

 

·   S&P said it may still cut the sovereign ratings of Greece and Portugal, depending on the details of Europe’s crisis fund that Eurozone policymakers are discussing

 

·   RANsquawk European Morning Briefing Video: http://www.youtube.com/watch?v=YQGdVlkXl80

 

Market Re-Cap

 

As the focus of the market remained on the geopolitical tension in the Middle East, with particular emphasis on Libya, WTI crude futures maintained strength trading near USD 100 per barrel with persistent worries over any potential disruption to oil supplies. In other news, weakness in the USD-index helped GBP/USD and EUR/USD, with GBP/USD gaining further strength after a sharp rise in the construction PMI data from the UK, whereas the sharpest recorded gain, since January 1982, in the monthly Eurozone PPI figure boosted EUR/USD.

 

Moving forward, markets look ahead to key jobs data from the US and Fed's Beige book later in the session. Moreover, another Fed's Outright Treasury Coupon Purchase operation in the maturity range of Mar'15 - Aug'18, with a purchase target of USD 5-7bln is also scheduled.

 

Asian Headlines

 

BOJ’s Shirakawa warned that the central bank should not guide policy with the sole aim of creating inflation, stressing that achieving sustainable economic growth comes first. He also shrugged off new calls from some lawmakers for the BOJ to directly underwrite government bonds, signalling that such a move could give markets the impression the BOJ was printing money to finance public debt and push up bond yields. (RTRS)

 

US Headlines

 

The US House of Representatives voted to extend government funding for two more weeks, a move that would avert a federal shutdown but do nothing to resolve a bitter debate over the federal budget. The Senate agreed to vote on the House-passed measure at 1600 GMT on Wednesday. Current funding is due to expire on Friday. (RTRS)

 

In other news, US economists forecast as much as USD 100bln in municipal bond defaults in the next five years, according to a research by a firm headed by Nouriel Roubini. The report further said that most defaults will occur in special government projects and revenue-generating entities that aren’t viable, adding that state and local debt problems are not systemic in nature and they will not infect the financial system. (WSJ)

 

Elsewhere, John Williams will succeed Janet Yellen to lead San Francisco Fed. (RTRS)

 

·   US MBA Mortgage Applications (Feb 25) W/W -6.5% vs. Prev. 13.2%

·   US Domestic Vehicle Sales Y/Y (Feb) 10.22mln vs. Exp. 9.62mln (Prev. 9.59mln)

·   US Total Vehicle Sales Y/Y (Feb) 13.38mln vs. Exp. 12.60mln (Prev. 12.53mln, Rev. to 12.54mln) (RTRS)

 

EU and UK Headlines:

 

ECB’s Honohan said the interest rate Ireland is paying on an emergency EU/IMF bailout package is high, adding that default by Ireland on its loans was not an option. He also said that there would be no fire sale of bank assets because the state could not afford it. (RTRS/RTE)

 

In other news, according to former IMF chief economist, Kenneth Rogoff, Spain will have to seek a bailout from the Eurozone after Greece, Ireland and Portugal are forced to restructure their debts. (Cinco Dias)

 

·   Eurozone PPI (Jan) M/M 1.5% vs. Exp. 1.1% (Prev. 0.8%), sharpest gain since January 1982

·   Eurozone PPI (Jan) Y/Y 6.1% vs. Exp. 5.7% (Prev. 5.3%)

·   UK Construction PMI (Feb) M/M 56.5 vs. Exp. 52.8 (Prev. 53.7), highest in 8 months (RTRS)

 

 

 

·   German Bobl Auction for EUR 4.1375bln, 2% 26-Feb-16, bid/cover 1.9 vs. Prev. 1.8 (yield 2.39% vs. Prev. 2.49%)

·   Portuguese 6-month T-bill auction for EUR  0.55bln, bid/cover 2.6 vs. Prev. 4.8 (yield 2.984% vs. Prev. 2.984%)

·   Portuguese 12-month T-bill auction for EUR  0.45bln, bid/cover 3.1 vs. Prev. 1.9 (yield 4.057% vs. Prev. 3.987%)

 

EQUITIES

 

European equities traded lower throughout the European session as continued strength in oil prices raised concerns over the sustainability of weak global economic recovery, and moving into the North American open, equities continue their weakness with industrials and consumer goods as the worst performing sectors.

 

Index

DAX

CAC

FTSE

EUROSTOXX

SMI

Level

7184.44

4038.73

5909.58

2961.61

6580.22

Change (ticks)

-38.86

-28.42

-26.18

-21.66

-39.14

 

FX

 

Weakness in the USD-index helped GBP/USD and EUR/USD, with GBP/USD gaining further strength after a sharp rise in the construction PMI data from the UK, whereas the sharpest recorded gain, since January 1982, in the monthly Eurozone PPI figure boosted EUR/USD.

 

In other news, New Zealand’s PM, John Key, said he expects the New Zealand Central Bank to cut interest rates as the nation grapples with the aftermath of the Christchurch earthquake. (Sources) Weakness has been observed in NZD on the back of these dovish comments.

 

Currency

EURUSD

GBPUSD

USDJPY

Level

1.3820

1.6296

81.97

Change (pips)

0.0043

0.0029

0.1100

 

COMMMODITIES

 

WTI Crude futures have traded with little direction during the Asian and European sessions, pivoting at the USD 100 level, ahead of today’s DoE Inventory data and the on going crisis in the MENA region.

 

Oil & Gas News:

·  The IEA has increased its estimate for the amount of crude oil from Libya which is currently offline, to between 850K and 1mln BPD; however they add that European refiners appear to have ample stocks of crude until at least the end of March and Saudi Arabia can fill a gap if Libya halts output.

·   The IEA’s Chief Economist Birol has warned that a high oil price puts the economic recovery in Europe at a significant risk, whilst IEA's Tanaka says if oil price stays at USD 100 for rest of the year, the economic recovery will be difficult.

·   Royal Dutch Shell's CEO Boser said the situation in Libya is very concerning, but there is enough spare capacity in Saudi Arabia, and he sees OPEC countries making up for any shortfall in Libyan oil production.

·   The Deputy Governor of Russia’s Sakhalin Island has said that oil output from Sakhalin-2 is to fall to 5.7mln tonnes in 2011, from 6mln in 2010, whilst gas output will rise to 9.1 BCM in 2011 from 8.1 BCM in 2010.

 

Geopolitical News:

·   There were reports this morning of Gaddafi forces counter-attacking the Brega region, seizing an airport and warplanes bombing the town of Ajdabiyah, however a spokesman for the anti-Gaddafi coalition said that the rebel forces had re-established control of Brega, whilst adding that the rebels will probably seek foreign intervention and air strikes to help topple Gaddafi.

 

Commodity

WTI Nymex

OTC Spot Gold

Level

99.87

1433.35

Change (NYSEARCA:USD)

0.24

0.07

 

 

 

 

LOOKING AHEAD

 

Economic Releases

 

CST

GMT

 

DATA

EXP

PREV

0715

1315

US

ADP Employment Change M/M (Feb)

175K

187K

0730

1330

CA

Industrial Product Price M/M (Jan)

0.6%

0.7%

0730

1330

CA

Raw Materials Price Index M/M (Jan)

3.0%

4.2%

0930

1530

US

DOE Crude Oil Inventories W/W (Feb 25)

875K

822K

0930

1530

US

DOE Gasoline Inventories W/W (Feb 25)

0K

-2798K

0930

1530

US

DOE Distillate Inventory W/W (Feb 25)

-1350K

-1333K

0930

1530

US

DOE Cushing Crude Inventory W/W (Feb 25)

875K

822K

0930

1530

US

DOE Refinery Utilisation W/W (Feb 25)

0.40%

-1.80%

1300

1900

US

Fed’s Beige Book

 

 

N/A

N/A

UK

Halifax House Prices SA M/M (Feb)

-0.5%

0.8%

N/A

N/A

UK

Halifax House Prices 3M/Y (Feb)

-2.5%

-2.4%

 

Speakers

0700

1300

US

Fed’s Hoenig

0900

1500

US

Fed’s Bernanke to give semi-annual testimony at the House

1315

1915

US

Fed’s Lockhart

 

Auction

1000

1600

US

Fed’s Outright Treasury Coup. Purch. Mar’15-Aug’18 (USD 5-7bln)

 

Prices taken at 1238GMT