DAILY US OPENING NEWS - 05/04/11
Macro
Seeking Alpha Analyst Since 2008
· The PBOC raised its one-year deposit and lending rates by 25 basis points each, effective from tomorrow
· According to an article in Jornal de Negocios, Portugal's biggest banks will stop buying government debt in coming months and they are urging the government to seek a short term loan until parliamentary elections. However, the European Commission said no short term loan is available for Portugal without a request for the EU aid
· Moody's downgraded Portuguese bond rating to Baa1 from A3, still under review
· GBP/USD gained around 45 pips following stronger than expected services PMI data from the UK
· RANsquawk EU Morning Briefing Video: http://www.youtube.com/watch?v=_EHtHeSNUVY
Market Re-Cap
One of the main events today has been the PBOC raising its one-year deposit and lending rates by 25 basis points each, which weighed upon commodities, commodity-linked currencies as well as basic materials and oil & gas sectors. In other news, European equities came under pressure, led by financials, following an article in Jornal de Negocios that Portugal's biggest banks will stop buying government debt in coming months and they are urging the government to seek a short term loan until parliamentary elections. This news allied with worse than expected services PMI data from peripheral Eurozone countries like Spain and Ireland, as well as Moody's downgrade of Portuguese bond rating resulted in weakness in EUR and widening of the Portuguese/German 10-year government bond yield spread. Elsewhere, GBP/USD rose around 45 pips and Gilt futures fell 15 pips following stronger than expected services PMI data from the UK.
Moving ahead, markets look forward to the minutes of the FOMC meeting, as well as another Fed's Outright Treasury Coupon Purchase operation in the maturity range of May'18 - Feb'21, with a purchase target of USD 6.5-8.5bln.
Asian Headlines
Japanese finance minister Noda said he wants BOJ to continue supporting economy via monetary policy, adding that he plans to seek G7’s continued cooperation at the coming G7 meeting. (RTRS)
In other news, Japanese economics minister Yosano said that the JPY recent weakening means that rising crude oil prices may directly hurt Japans economy Also, Japans National Strategy minister, Geinba said Japan would consider issuing government debt to help finance an extra budget for disaster relief if spending cuts are not enough. He also said the size of the extra budget could be bigger than people have speculated. (RTRS)
US Headlines:
Fed’s Bernanke said he expects the recent spike in inflation to be ‘transitory’ and Fed will act if he’s wrong. He further said that the US must address fiscal issues or risk slower growth and potentially even a crisis, adding that commodity price increases generated primarily by global supply and demand. (RTRS)
In other news, a Republican budget plan due to be unveiled on Tuesday would cut USD 5.8trl from US spending over the next 10 years, a congressional aide familiar with the proposal said. The plan, which would take effect when the next fiscal year starts on Oct. 1, is expected to propose sweeping changes to the Medicare and Medicaid health programs, as well as hard caps on government spending and tax cuts. It is also worth noting that according to an article in the Washington Post, there is general agreement that the government would almost definitely shut down if Democrats and Republicans don’t reach a budget deal by tonight. (RTRS/Washington Post)
Also in the news, Treasury Secretary Geithner said the US will hit the legal limit on its ability to borrow no later than May 16. However, he said that default by the US is unthinkable. (RTRS)
EU and UK Headlines:
ECB allotted EUR 84.533bln in its 7-day refinancing operation vs. Exp. EUR 100bln. (RTRS)
· Eurozone Services PMI (Mar F) M/M 57.2 vs Exp. 56.9 (Prev. 56.8)
· Germany Services PMI (Mar F) M/M 60.1 vs Exp. 60.1 (Prev. 58.6)
· France Services PMI (Mar F) M/M 60.4 vs Exp. 60.7 (Prev. 59.7), 7 month high
· Italian Services PMI (Mar) M/M 53.3 vs Exp.51.8 (Prev. 53.1)
· UK Services PMI (Mar) M/M 57.1 vs Exp.52.5 (Prev. 52.6) (RTRS)
· Austrian bond auction for EUR 0.8bln, 3.2% 20-Feb-17, bid/cover 2.306 vs. Prev. 2.66 (yield 3.210% vs. Prev. 2.974%)
· Austrian bond auction for EUR 0.7bln, 3.65% 20-Apr-22, bid/cover 3.057 vs. Prev. 2.70 (yield 3.812% vs. Prev. 3.647%)
· UK Conventional Gilt Auction for GBP 3.5bln, 3.75% Sep'21, bid/cover 1.72 vs. Prev. 2.04 (RTRS)
EQUITIES
European equities traded under pressure, led by financials, due to ongoing sovereign and fiscal concerns surrounding Eurozone peripheral states, which also observed the Spanish IBEX 25 index to underperform its peers. According to an article in Jornal de Negocios saying that Portugal's biggest banks will stop buying government debt in coming months and they are urging the government to seek a short term loan until parliamentary elections, weighed upon sentiment. Worse than expected services PMI data from the Eurozone peripheral countries also weighed upon peripheral indices.
Elsewhere, basic materials and oil & gas sectors came under pressure after the PBOC hiked its one-year lending and deposit rates by 25 basis points each. Moving into the North American open, equities continue to trade in negative territory with weakness observed in financials and basic materials.
Index | DAX | CAC | FTSE | EUROSTOXX | SMI |
Level | 7148.24 | 4018.33 | 5997.15 | 2936.23 | 6414.66 |
Change (ticks) | -27.09 | -24.59 | -19.83 | -19.61 | 0.06 |
FX
GBP/USD gained around 45 pips following stronger than expected services PMI data from the UK, allied with market talk of a UK clearer buying in the pair. In other news, EUR remained under pressure due to ongoing sovereign and fiscal concerns surrounding Eurozone peripheral states. Elsewhere, commodity-linked currencies came under pressure after the PBOC hiked its one-year lending and deposit rates by 25 basis points each.
· Australia RBA Cash Target (Apr) M/M 4.75% vs. Prev. 4.75% (RTRS)
Currency | EURUSD | GBPUSD | USDJPY |
Level | 1.4175 | 1.6230 | 84.31 |
Change (pips) | -0.0046 | 0.0098 | 0.2500 |
COMMODITIES
WTI crude futures traded under pressure overnight on the back of analysts forecasting an increase in US crude oil inventories, and came under further pressure in the European session after the PBOC raised its one year deposit and lending rates by 25 basis points each.
Geopolitical News:
· According to rebel fighters, an air strike destroyed two government military vehicles in the east Libyan oil town of Brega.
· A government spokesman said, Libya is ready to hold elections and reform its political system but only its own people can decide whether Gaddafi can stay at the helm.
Oil & Gas News:
· According to former Saudi oil minister, oil could leap to USD 200-300 a barrel if Saudi Arabia is hit by serious political unrest.
· French Prime Minister said the government is planning for oil companies to pay a “special contribution’ to limit the rise in oil prices.
· According to a source Libya’s opposition is set to export its first oil since the rebellion against Muammer Gaddafi began one month ago.
· According to a source, oil prices have hit an all time high in GBP terms, further squeezing incomes and increasing pressure on Bank of England to raise interest rates. The 17% fall of GBP against the USD over the past two years has raised the GBP price per barrel to GBP 74.60 higher than the record set in 2008.
Commodity | WTI Nymex | OTC Spot Gold |
Level | 107.78 | 1432.45 |
Change (USD) | -0.69 | -1.50 |
LOOKING AHEAD
Economic Releases
CDT | BST |
| DATA | EXP | PREV |
0755 | 1355 | US | Redbook W/W (Apr 5) |
| -0.3% |
0755 | 1355 | US | Redbook W/W (Apr 5) |
| 2.6% |
0900 | 1500 | US | ISM Non-Manufacturing Composite M/M (Mar) | 59.5 | 59.7 |
1300 | 1900 | US | Minutes of FOMC Meeting |
|
|
1530 | 2130 | US | API Crude Oil Inventories W/W (Apr 1) |
| 5691K |
1530 | 2130 | US | API Gasoline Inventories W/W (Apr 1) |
| -1953K |
1530 | 2130 | US | API Distillate Inventory W/W (Apr 1) |
| -112K |
1530 | 2130 | US | API Cushing Crude Inventory W/W (Apr 1) |
| 1689K |
| |||||
Speakers | |||||
0715 | 1315 | NOR | Norges Bank Governor Olsen | ||
0725 | 1325 | US | Fed’s Lockhart | ||
0900 | 1500 | US | Treasury Secretary Geithner | ||
1145 | 1745 | US | Fed’s Kocherlakota | ||
1145 | 1745 | US | Fed’s Lockhart | ||
1200 | 1800 | US | Fed’s Plosser | ||
1230 | 1830 | EU | ECB’s Draghi | ||
| |||||
Auction | |||||
1000 | 1600 | US | Fed’s Outright Trea. Coup. Purch. May’18-Feb’21 (USD 6.5-8.5bln) | ||
| |||||
Earnings | |||||
US | Walgreen (Sales) | ||||
**Notes: Chinese Market Holiday
Prices taken at 1233BST
NYSE Liffe have announced an extension of their Liquidity Provider Programmes in the Three Month EONIA Swap Index Contract until the close of business on 31 October 2011, and an extension of the Member SLP Scheme, which shall now be referred to as the Member Liquidity Provider Programme for Euribor, Sterling, Euro Swiss, EONIA, Gilt and Euro Swapnote Futures until the close of business on 30 March 2012. In addition,. NYSE Liffe have announced an extension of the Designated Market Maker arrangements in Three Month EONIA Swap Index Contract and the Inter-contract Spread Strategy between Three Month EONIA Swap Index Contract and the Three Month Euro (EURIBOR) Interest Rate Futures Contract until 29 April 2011. If you require any further information, please contact your LIFFE account manager.
NYSE Euronext and its affiliates (hereafter “NYSE Euronext”) shall not be liable, except where required by law, for any loss arising from the use or misuse of the information provided to Real-time Analysis and News Limited for transmission via its “Squawk” service (“a Communication”) howsoever arising. NYSE Euronext shall not be responsible for any errors or omissions contained in any Communication. Those wishing either to trade in any products available through NYSE Euronext or to offer and sell them to others should consider both their legal and regulatory position in the relevant jurisdiction and the risks associated with such products before doing so and are urged to take advice in this regard. A Communication shall not constitute or contain investment advice nor be an invitation or inducement to engage in investment activity
Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.