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DAILY US OPENING NEWS - 14/04/11

 

 

·   IFO's Sinn said he sees formal default in Greece in the near future, adding that situation in Portugal is very similar to Greece. Also, S&P analyst Kraemer said risk of Greek debt restructuring has risen

 

·   Yields on the 10-year Greek and Portuguese government bonds printed all time highs of over 13% and over 9% respectively

 

·   Better than expected Nationwide Consumer Confidence data from the UK provided a boost to GBP/USD

 

·   Fed’s Bullard said Fed’s thought likely to turn to exit strategy, adding that natural thing for Fed is to make a decision on the end of QE2

 

·   RANsquawk EU Morning Briefing Video: http://www.youtube.com/watch?v=5GO9ZGxi6kg

 

Market Re-Cap

 

Concerns surrounding Eurozone peripheral states remained the focus of the market today, which saw yields on the 10-year Greek and Portuguese government bonds to print all time highs of over 13% and over 9% respectively, which also weighed upon EUR as the session progressed. European equities traded lower, with financials as one of the worst performing sectors, which resulted in the Spanish IBEX 35 and Italian FTSE MIB indices to underperform its European peers. In other news, GBP/USD traded higher on the back of stronger than expected Nationwide Consumer Confidence report from the UK, allied with weakness in the USD-Index, which fell to a 16-month low overnight.

 

Moving forward, markets look ahead to key economic data from the US in the form of jobless and PPI figures, allied with a slew of Fed speakers. In fixed income, another Fed's Outright Treasury Coupon Purchase operation is scheduled in the maturity range of May'18-Feb'21, with a purchase target of USD 6-8bln, allied with USD 13bln 30-year Note auction, and 5-year TIPS refunding announcement, later in the session.

 

Asian Headlines

 

According to Hong Kong’s Phoenix TV, citing an unnamed source:

Chinese March CPI rose 5.3%-5.4% Y/Y; March PPI rose 7.4% Y/Y; March Industry Output up 14.8% Y/Y; and March Retail Sales up 17.4% Y/Y. (Phoenix TV)

 

In other news, China is likely to raise bank reserve requirements in the near term to soak up excessive cash in the economy. (China Securities Journal)

 

Elsewhere, Moody’s changed its outlook for the China property sector to negative from stable. The change reflects Moody’s expectations for the fundamental credit conditions of the sector over the next 12 to 18 months. (Sources)

 

US Headlines:

 

Fed’s Bullard said Fed’s thought likely to turn to exit strategy, adding that natural thing for Fed is to make a decision on the end of QE2, then go on pause for some time. He added whether to start tightening by selling assets or raising rates is an active debate at the Fed. (RTRS)

 

In other news, Treasury Secretary Geithner said Democrats and Republicans are in fundamental disagreement over taxes, however Congress won’t take the risk on US defaulting on debt, and should raise the debt limit soon. (RTRS)

 

EU and UK Headlines:

 

ECB’s Weber said if current trends continue, further policy normalisation is warranted, adding that even after 25 basis points hike, policy is accommodative, and economy is doing much better. Also, ECB’s Bini-Smaghi said further Eurozone interest rate hikes will depend on economy, and inflation, adding that minimum interest rate level less justified as risk of deflation and recession decreases. He also said that debt restructuring would bring Greek economy to its knees, and have devastating effect. (RTRS/Sources)

 

In other news, Greek finance minister said Greece may delay plans to raise between EUR 25-30bln in the financial markets in 2012. (Sources)

 

 

 

·   Italian BTP auction for EUR 4.5bln, 3.75% 15-Apr-16, bid/cover 1.25 (yield 3.83%)

·   Italian BTP auction for EUR 1.5bln, 4.75% 01-Aug-23, bid/cover 1.61 vs. Prev. 2.5 (yield 4.88% vs. Prev. 3.98%)

·   UK Conventional Gilt auction for GBP 2bln, 4.25% Dec'40, bid/cover 1.6 vs. Prev. 1.87 (RTRS)

 

EQUITIES

 

European equities traded lower partly on the back of debt concerns surrounding Eurozone peripheral states, with financials as one of the worst performing sectors, which resulted in the Spanish IBEX 35 and Italian FTSE MIB indices to underperform its European peers. Comments from Bundesbank's Zeitler that German banks may require capital of EUR 50bln to fulfil Basel 3 rules, allied with Societe Generale downgrading Deutsche Bank also contributed towards weakness in financials. In other equity specific news, Reckitt Benckiser shares fell more than 7% on news of departure of its CEO. Moving into the North American open, equities continue to trade in negative territory, with technology and financials as the worst performing sectors.

Index

DAX

CAC

FTSE

EUROSTOXX

SMI

Level

7113.64

3959.03

5950.09

2909.88

6357.49

Change (ticks)

-64.33

-47.20

-60.35

-40.10

-6.81

 

FX

 

The USD-Index printed a 16-month low overnight, which in turn provided support to EUR/USD and GBP/USD, whereas GBP/USD received further strength following stronger than expected Nationwide Consumer Confidence data from the UK. However, as the session progressed, EUR came under pressure as concerns surrounding the debt situation in Eurozone peripheral states dented the market sentiment, which also led EUR/USD to venture in negative territory.

 

In other news, Goldman Sachs is sticking to its call that USD will remain weak over the coming months despite being clearly undervalued, adding that it will take significant changes to spark a turnaround in the USD's fortunes. Goldman expects EUR/USD to be at 1.4000, 1.4500, and 1.5000 in three, six and twelve months respectively. (Sources)

Currency

EURUSD

GBPUSD

USDJPY

Level

1.4385

1.6328

83.07

Change (pips)

-0.0058

0.0059

-0.7700

 

COMMODITIES

 

WTI crude futures lacked any real direction during the European session with support coming from the ongoing geopolitical tension in the MENA region as well as weakness in the USD-index, however demand concerns from top crude consumers, allied with potential for further monetary tightening by major economic powers weighed on prices.

 

Oil & Gas News:

 

·   According to a spokesman for Kuwait National Petroleum, Kuwait resumed crude exports this morning after the weather improved.

·   Angolan oil minister said that geopolitics and the war in Libya are the main factors of rising oil prices.

 

Geopolitical News:

 

·   Overnight, leaders from the “BRICS” nations joined in criticising the Western air campaign in Libya, according to a government source at the “BRICS” summit.

·   Meanwhile, Libyan rebels warned of a massacre in Misrata if NATO does not intervene strongly, however French foreign minister said France is not currently in favour of arming the rebels. Also, according to a rebel spokesman, Libyan government forces hit Misrata with Grad rockets.

·   Yemeni opposition rejected GCC’s initiative, and said it will not go to Riyadh for talks on power transfer. It demanded that President Saleh quit within two weeks.

Commodity

WTI Nymex

OTC Spot Gold

Level

106.43

1455.95

Change (NYSEARCA:USD)

-0.68

-1.35

 

 

LOOKING AHEAD

 

Economic Releases

 

CDT

BST

 

DATA

EXP

PREV

0730

1330

US

Initial Jobless Claims W/W (Apr 9)

380K

382K

0730

1330

US

Continuing Claims W/W (Apr 2)

3703K

3723K

0730

1330

US

PPI M/M (Mar)

1.0%

1.6%

0730

1330

US

PPI Y/Y (Mar)

6.1%

5.6%

0730

1330

US

PPI ex. Food & Energy M/M (Mar)

0.2%

0.2%

0730

1330

US

PPI ex. Food & Energy Y/Y (Mar)

1.9%

1.8%

0730

1330

CA

Manufacturing Sales M/M (Feb)

-0.4%

4.5%

0930

1530

US

EIA Natural Gas Storage Change W/W (Apr 8)

35

-45

N/A

N/A

IR

Irish Central Bank Quarterly Review

 

 

 

Speakers

0730

1330

US

Treasury Secretary Geithner

0730

1330

SZ

SNB’s Danthine

0745

1345

WLD

World Bank’s President Zoellick

0800

1400

US

Fed’s Duke

0820

1420

US

Fed’s Kocherlakota

0830

1430

WLD

IMF’s Strauss-Kahn

1130

1730

US

Fed’s Plosser

1145

1745

FR

Finance Minister Lagarde

1215

1815

US

Fed’s Tarullo

1230

1830

US

Fed’s Plosser

1700

2300

EU

ECB’s Orphanides

1745

2345

US

Fed’s Lacker

N/A

N/A

WLD

G-20 Finance Ministers’ Meeting

 

Auctions

1000

1600

US

5y TIPS Refunding Announcement

1000

1600

US

Fed’s Outright Trea. Coup. Purch. May’18-Feb’21 (USD 6-8bln)

1200

1800

US

USD 13bln 30y Note Auction

 

Earnings

US

Google, Progressive Corp.

 

 

Prices taken at 1226BST

 

**Notes:

WTI Crude May options expiry

SMI April Options Expiry

 

 

 

 

 

 

 

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