DAILY US OPENING NEWS - 08/04/11
Macro
Seeking Alpha Analyst Since 2008
· GBP/USD printed fresh session highs following much stronger than expected PPI data from the UK, however the pair did come under some pressure after the RBS pushed back their call for a first rate hike from the BOE to August from May this year
· Markets keep a close eye on the ongoing EcoFin meeting for any details on Portuguese bailout
· Weakness in the USD-Index provided strength to commodities, which in turn helped commodity-linked currencies as well as basic materials and oil & gas sectors
· RANsquawk EU Morning Briefing Video: http://www.youtube.com/watch?v=0FmJM-bPD8M
Market Re-Cap
Weakness in the USD-Index provided strength to commodities, which in turn helped commodity-linked currencies as well as basic materials and oil & gas sectors, whereas WTI crude futures received a further boost from the ongoing geopolitical tension in the MENA region. In equities, financials also demonstrated strength as news yesterday of Portugal opting for a bailout, allied with the ongoing EcoFin meeting rendered positive sentiment in the market. Elsewhere, GBP/USD printed fresh session highs following much stronger than expected PPI data from the UK, with the Y/Y PPI output printing its highest since Oct'08.
Moving forward, the economic calendar remains thin, however markets look ahead to Canadian unemployment data, as well as comments from Fed's Lockhart and Fisher later in the session.
Asian Headlines
The Bank of Japan downgraded economic assessment in its April monthly report, and said that Japan’s economy is under strong downward pressure. (RTRS/Sources)
In other news, according to a researcher with the State Information Centre, Zhang Monan, Chinese monetary policy may focus more on price tools such as interest rates in the future, adding that China’s monetary policy may gradually take fluctuations in asset prices into account. (Economic Information Daily)
US Headlines:
Overnight, President Obama and congressional leaders failed to reach a deal to avert a government shutdown but narrowed their differences in their struggle to overcome a bitter budget deadlock. Meanwhile, Obama said there had been progress towards a budget deal to avert a government shutdown and he hoped to be able to announce a deal on Friday. In latest news, US House Democrat Hoyer said there is no budget deal yet to avoid government shutdown, however both sides are very close to the deal. Also, according to a Democratic aide, Democrats and Republicans have agreed on size of spending cuts in the budget deal. (RTRS)
EU and UK Headlines:
ECB’s Gonzalez-Paramo said all options are on the table regarding future rate hikes, adding that that there is no impact on Spain so far from Portugal call for the EU/IMF bailout but the situation remains fragile. Also, ECB’s Tumpel-Gugerell said monetary policy has to react pre-emptively to inflation risks.
In other news, Eurozone finance ministers said Portugal bailout programme can be adopted by mid-May, adding that Portugal bailout programme will have ambitious fiscal adjustment. They further said that the bailout programme will contain measures to maintain liquidity and solvency of banks, and it should include privatisation programme. (RTRS)
Also worth noting, Portugal will need as much as EUR 90bln, including EUR 10bln in June, under a bailout package from the European Union and the International Monetary Fund, people familiar with the situation said Thursday. (WSJ)
· German Trade Balance (EUR) (Feb) M/M 12.1bln vs. Exp. 13.0bln (Prev. 10.1bln)
· UK PPI Input NSA (Mar) M/M 3.7% vs. Exp. 2.1% (Prev. 1.1%, Rev. to 1.4%)
· UK PPI Input NSA (Mar) Y/Y 14.6% vs. Exp. 12.5% (Prev. 14.6%, Rev. to 14.9%)
· UK PPI Output NSA (Mar) M/M 0.9% vs. Exp. 0.6% (Prev. 0.5%)
· UK PPI Output NSA (Mar) Y/Y 5.4% vs. Exp. 5.1% (Prev. 5.3%)
· UK PPI Output Core NSA (Mar) M/M 0.4% vs. Exp. 0.3% (Prev. 0.1%, Rev. to 0.0%)
· UK PPI Output Core NSA (Mar) Y/Y 3.0% vs. Exp. 2.9% (Prev. 3.1%) (RTRS)
EQUITIES
Weakness in the USD-Index provided support to commodities, which in turn helped basic materials and oil & gas sectors in Europe, whereas financials also demonstrated strength as news yesterday of Portugal opting for a bailout, allied with the ongoing EcoFin meeting rendered positive sentiment in the market. Moving into the North American open, equities continue to trade higher with basic materials and financials as best performing sectors.
In other news, the European Banking Authority (EBA) set Europe bank stress test pass mark at 5% of core tier 1 capital, adding that not all German banks’ “silent participations” eligible in EU stress test. It further said failing banks are expected to have a plan by the end of 2011 for capital raising, sales, and shrinking loan book. It also said that 90 banks will undergo the stress test this year, with banks from Austria, Denmark, Ireland and Norway been added. (RTRS)
Index | DAX | CAC | FTSE | EUROSTOXX | SMI |
Level | 7222.54 | 4066.67 | 6063.16 | 2989.03 | 6492.08 |
Change (ticks) | 43.76 | 38.37 | 55.79 | 25.34 | 26.51 |
FX
GBP/USD printed fresh session highs following much stronger than expected PPI data from the UK, with the Y/Y PPI output printing its highest since Oct'08, however the pair did come under some pressure after the RBS pushed back their call for a first rate hike from the BOE to August from May this year. Elsewhere, EUR/USD traded higher during the session as news yesterday of Portugal opting for a bailout, allied with the ongoing EcoFin meeting rendered positive sentiment to EUR. Also, weakness in the USD-Index provided strength to commodity linked currencies.
It is also worth noting that according to a report by the PBOC, China will allow CNY to be traded against a wide variety of currencies in the onshore foreign exchange market. However, the central bank did not name any of the new currency pairs that will be launched for trading. (RTRS)
· Canadian Unemployment Rate (Mar) M/M 7.7% vs. Exp. 7.7% (Prev. 7.8%)
· Canadian Net Change in Employment (Mar) M/M -1.5K vs. Exp. 28.0K (Prev. 15.1K) (RTRS)
Currency | EURUSD | GBPUSD | USDJPY |
Level | 1.4413 | 1.6364 | 85.29 |
Change (pips) | 0.0105 | 0.0041 | 0.3800 |
COMMODITIES
WTI crude futures traded higher during the European session as concerns surrounding geopolitical tension in the MENA region persisted, allied with weakness in the USD-index which supported prices.
Oil & Gas News:
· Oil production in Libya would remain constrained even after fighting between pro-government forces and rebels ends, according to Nomura.
· China will introduce tax measures to ensure sufficient fuel production if global oil prices exceed USD 130 a barrel, according to an unidentified National Development and Reform Commission official.
· Drilling activity in the UK North Sea slumped by 25% in the first quarter in a further blow to the languishing sector, according to Deloitte.
· Three gas pipelines explode in Iran’s QOM province but the cause of the explosion is unclear, according to the Mehr news agency.
Geopolitical News:
· An aid ship reached besieged Misrata, as a US general said the overall conflict is settling into a stalemate between regime forces and rebel fighters however Libyan rebels have said they are fighting Gaddafi’s forces who are trying to enter the city of Misrata.
· NATO said today that there is no purely military solution to the situation in Libya.
Commodity | WTI Nymex | OTC Spot Gold |
Level | 111.72 | 1470.85 |
Change (USD) | 1.42 | 12.77 |
LOOKING AHEAD
Economic Releases
CDT | BST |
| DATA | EXP | PREV |
0715 | 1315 | CA | Housing Starts M/M (Mar) | 181.0K | 181.9K |
0900 | 1500 | US | Wholesale Inventories M/M (Feb) | 1.0% | 1.1% |
0900 | 1500 | US | Wholesale Sales M/M (Feb) | 1.8% | 3.5% |
0930 | 1530 | US | ECRI Weekly Index W/W (Apr 8) |
| 130.0 |
0930 | 1530 | US | ECRI Weekly Annualised Y/Y (Apr 8) |
| 6.5% |
1200 | 1800 | US | Baker Hughes Rig Count W/W (Apr 8) |
| 1776 |
| |||||
Speakers | |||||
0700 | 1300 | US | Fed’s Lockhart | ||
0915 | 1515 | US | Fed’s Fisher | ||
N/A | N/A | EU | Economic & Financial (EcoFin) Affairs Council | ||
Prices taken at 1247BST
**Notes:
USD-Index April options expiry
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