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DAILY US OPENING NEWS - 21/04/11

 

 

·   Strong corporate earnings from the US provided strength to European equities

 

·   Persistent USD weakness provided support to EUR/USD and GBP/USD

 

·   ECB’s Trichet said that the ECB has not yet decided on a series of rate rises

 

·   The Portuguese/German 10-year government bond yield spread widened beyond the psychological 600 BPS level, whereas the Irish 2-year bond yield touched a record high of 10.77%

 

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

 

Market Re-Cap

 

European equities traded higher throughout the session on the back of strong corporate earning results from the US, with particular outperformance seen in technology sector with stellar earnings from the likes of Apple and Qualcomm. In fixed income, as the session progressed, bunds came off their earlier lows to trade near unchanged, and the Portuguese/German 10-year government bond yield spread widened beyond the psychological 600 BPS level, whereas the Irish 2-year bond yield touched a record high of 10.77%. Also noted was some dovish comments from ECB's Trichet who said the ECB has not yet decided on a series of rate rises. Elsewhere, persistent weakness in the USD-Index provided support to EUR/USD and GBP/USD, while GBP/USD received further support from better than expected retail sales data from the UK.

 

Moving forward, markets look ahead to the jobless data from the US, and retail sales figures from Canada, while corporate earnings from the US remain the focus. In fixed income, 2-, 5-, and 7-year quarterly refunding announcement, allied with USD 14bln 5-year TIPS auction is scheduled for later in the session.

 

Asian Headlines

 

The OECD sees Japan’s 2011 growth at 0.8% vs. its previous forecast of 1.70%, however sees Japanese economic growth recovering to 2.3% in 2012. It added that the BoJ should buy more JGB if the economic outlook worsens, and Japan should raise sales tax as soon as possible. (Sources)

 

In other news, BoJ’s Shirakawa said that the central bank will continue efforts to bring Japan out of deflation and the persistent price falls were behind the lack of strength in the economy’s growth. (RTRS)

 

Elsewhere, according to an official from China’s National Development and Reform Commission, Zhou Wangjun, China’s inflation is expected to remain high in the second quarter as excess liquidity worldwide has pushed up global commodity prices. He also said a 5% increase in China’s CPI isn’t high if the country’s average wages grow 15% annually in the five years through 2015. In other news, according to chairman of the China Banking Regulatory commission, Liu Mingkang, the ultra-loose monetary policies in developed countries are driving up global inflation. Also, China will speed up reforms of resource and property-related taxes as well as the bank interest rate system this year, according to China Securities Journal. (Hexun.com/Financial Times Deutschland/RTRS/China Securities Journal)

 

US Headlines

 

President Obama said he believes the US economy could lapse back into recession if government spending is cut too deeply. Obama also said the lack of a serious plan to tackle US deficits could become a big drag on the economy if investors pull back.(RTRS)

 

In other news, investor Jim Rogers said he will short US Treasury bond if it rises another 3 or 4 points. (RTRS)

 

EU and UK Headlines:

 

UK DMO said it cut 2011/12 Gilt sales by GBP 1.5bln to GBP 167.5bln. (RTRS)

 

·   German IFO Business Climate (Apr) M/M 110.4 vs. Exp 110.5 (Prev. 111.1)

·   German IFO Current Assessment (Apr) M/M 116.3 vs. Exp. 115.5 (Prev. 115.8)

·   German IFO Expectations (Apr) M/M 104.7 vs Exp. 105.5 (Prev. 106.5)

·   UK Retail Sales (Mar) M/M 0.2% vs. Exp. -0.5% (Prev. -0.8%, Rev. to -0.9%)

·   UK Retail Sales (Mar) Y/Y 1.3% vs. Exp. 1.0% (Prev. 1.3%, Rev. to 1.1%)

·   UK Public Finances (PSNCR) (Apr) M/M 24.8bln vs. 14.0bln (Prev. 7.0bln, Rev. to 6.7bln)

·   UK Public Sector Net Borrowing (Mar) M/M 16.4bln vs. 18.7bln (Prev. 10.3bln, Rev. to 7.9bln) (RTRS)

 

EQUITIES

 

EU stock futures have continued to trade higher today buoyed by further positive US corporate earnings. This time Apple smashed street estimates after the close yesterday and GE this morning beat the consensus estimates and hiked their dividend by USD 0.01c. Given the renewed risk appetite demand for commodities remains high and as suck basic materials are up sharply for a second day with financials are the standout sector.

 

For all US corporate earnings in full detail please refer to www.ransquawk.com or alternatively a US equity opening news report shall be sent out to professional users at 1300BST/0700CDT.

 

Index

DAX

CAC

FTSE

EUROSTOXX

SMI

Level

7308.76

4030.84

6035.42

2944.76

6465.02

Change (ticks)

59.57

26.22

13.16

23.33

20.21

 

 

FX

 

The USD index has continued to weaken today following further risk appetite after several solid US corporate earnings. Consequently, EUR/USD has posted strong gains with GBP/USD printing a fresh 16-month high also underpinned by a forecast beating UK retail sales report and lower net borrowing for the month of March. Looking ahead the latest weekly jobs numbers will likely guide direction in the USD and USD/JPY continues to be drawn towards the option expiry level at 82.00.

 

Currency

EURUSD

GBPUSD

USDJPY

Level

1.4612

1.6569

82.03

Change (pips)

0.0089

0.0160

-0.5300

 

COMMODITIES

 

WTI and Brent crude futures traded higher during the European session primarily on the back of weakness in the USD-Index, and further positive US corporate earnings.

 

Oil & Gas News:

 

·   Saudi Arabia expects crude production to average 8.7mln bpd from now until 2015, adding that average crude output will rise 10.8mln bpd by 2030 as long as supplies from other nations don’t fluctuate sharply.

·   China foreign ministry said believes oil pipeline dispute with Russia can be resolved by friendly negotiations on win-win basis, adding that operations are going smoothly and oil supplies are stable.

 

Geopolitical News:

 

·   Fighting in Libya’s besieged rebel city of Misrata killed at least 10 civilians, and NATO urged non-combatants to avoid troops so it could step up air strikes.

·   Plain clothes security forces toting Ak-47’s deployed in Homs overnight, a witness said, as the central Syrian city defied a crackdown following the killing of 21 pro-democracy protesters this week.

 

Commodity

WTI Nymex

OTC Spot Gold

Level

108.15

1506.98

Change (NYSEARCA:USD)

1.03

4.42

 

 

 

 

 

 

LOOKING AHEAD

 

Economic Releases

 

CDT

BST

 

DATA

EXP

PREV

0730

1330

US

Initial Jobless Claims W/W (Apr 16)

390K

412K

0730

1330

US

Continuing Claims W/W (Apr 9)

3675K

3680K

0730

1330

CA

Retail Sales M/M (Feb)

0.5%

-0.3%

0730

1330

CA

Retail Sales Less Autos M/M (Feb)

0.5%

0.0%

0900

1500

US

Philadelphia Fed M/M (Apr)

36.4

43.4

0900

1500

US

Leading Indicators M/M (Mar)

0.3%

0.8%

0900

1500

US

House Price Index M/M (Feb)

-0.3%

-0.3%

0930

1530

US

EIA Natural Gas Storage Change W/W (Apr 15)

52

28

0930

1530

US

ECRI Weekly Index W/W (Apr 21)

 

130.6

0930

1530

US

ECRI Weekly Annualised Y/Y (Apr 21)

 

6.8%

1200

1800

US

Baker Hughes Rig Count W/W (Apr 21)

 

1772

1500

2100

US

RPX Composite 28-day Index Y/Y (Feb)

 

179.50

1500

2100

US

RPX Composite 28-day Y/Y (Feb)

 

-3.39%

 

Auction

0800

1400

US

2y-5y-7y Quarterly Note Refunding Announcement

1030

1630

US

USD 14bln 5y TIPS Auction

 

Earnings

US

Advanced Micro Devices, Honeywell, SanDisk

 

Prices taken at 1254BST

 

**Notes:

Ahead of Good Friday, market closes are as follows:

·         Floor Trade: CME/CBOT (FX and Interest Rate close at 1200CT/1800BST), NYSE (Regular Close), NYMEX (Regular Close)

·         Electronic Trade:

Ø       CME Globex – Equity (Regular Close), Interest Rate (Regular Close), FX (Regular Close), NYMEX (Regular Close), NYSE (Regular Close)

·         Eurex (Regular Close)

NYSE LIFFE (Regular Close)