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DAILY US OPENING NEWS - 02/05/11

 

·   According to US President Obama, US Special Forces in Pakistan killed Osama Bin-Laden

 

·   Better than expected manufacturing PMI data from most core Eurozone countries strengthened risk-appetite

 

·   Commerzbank shares traded higher after co. said it generated an operating profit of approximately EUR 1.1bln in the first quarter of 2011

 

·   RANsquawk EU Morning Briefing Video: http://www.youtube.com/watch?v=w8m0Q-gTDJA

 

Market Re-Cap

 

News emerged overnight that Osama Bin Laden was killed by US Special Forces in Pakistan, which promoted risk-appetite in the market, with strength seen in equities and the USD-Index, whereas bunds, CHF and JPY came under pressure. However, as the session progressed, European equities came off their best levels, and the USD-Index slipped back near unchanged at the 73.00 level. Further positive sentiment came in the market following strong manufacturing PMI data from most core European countries, which in turn supported EUR/USD. Also worth noting that owing to market holidays in China and UK, trading volume remained thin, with around 117K Bund future contracts traded at the time of writing.

 

Moving into the North American open, markets look ahead to ISM manufacturing data from the US, allied with another Fed's Outright Treasury Coupon Purchase operation in the maturity range of May'18 - Feb'21, with a purchase target of USD 6-8bln.

 

Asian Headlines

 

Pimco said it expects China’s economy will grow at a slower pace than consensus forecasts while inflation is likely to be quicker than many are predicting. (Sources)

 

·   Chinese Manufacturing PMI (Apr) M/M 52.9 vs. Exp. 53.9 (Prev. 53.4) (RTRS)

 

US Headlines:

 

Fed’s Bullard said it is “reasonable” to expect that the Fed will begin tightening by the end of 2011 in order to get ahead of inflation. (WSJ)

 

In other news, borrowing by small US businesses rose in March, data released by PayNet Inc on Monday showed, but at a slower pace than in recent months. Thompson Reuters/Paynet small business leading index rose 12% in March from a year earlier. (RTRS)

 

EU and UK Headlines:

 

Pimco’s El-Erian said that a Greek debt restructuring is imperative and the longer one is delayed, the greater the economic and social cost. However, Regling said Greek sovereign debt restructuring should be the last resort. Also, according to Greek finance minister, Greece doesn’t need to restructure its debt, but it should seek extension for the repayment of the EUR 110bln bailout from international lenders, and renegotiate to cut the yield on the debt. (Kathimerini/Handelsblatt/Les Echos/Liberation)

 

Meanwhile, Finland’s Euro-sceptic True Finns party said it was sticking to its pre-election stance that it cannot support Portugal’s bailout package. However, they added that the party is ready to participate in government forming talks led by National Coalition Party. (RTRS)

 

·   Eurozone Manufacturing PMI (Apr F) M/M 58.0 vs. Exp. 57.7 (Prev. 57.5)

·   Germany Manufacturing PMI (Apr F) M/M 62.0 vs. Exp. 61.7 (Prev. 60.9)

·   French Manufacturing PMI (Apr F) M/M 57.5 vs. Exp. 56.9 (Prev. 55.4)

·   Italian Manufacturing PMI (Apr) M/M 55.5 vs. Exp 56.0 (Prev. 56.2) (RTRS)

 

 

 

 

 

 

EQUITIES

 

Risk-appetite emerged from news regarding the assassination of Osama Bin-Laden, which helped European equities to trade higher during the session, however prices did come off their best levels as the session progressed partly on the back of light news flow. Further positive sentiment entered the market following better than expected manufacturing PMI data from most core Eurozone countries. In equity specific news, Commerzbank shares traded higher after co. said it generated an operating profit of approximately EUR 1.1bln in the first quarter of 2011. Moving into the North American open, equities maintain their strength, with technology and utilities as best performing sectors.

 

Index

DAX

CAC

EUROSTOXX

SMI

Level

7568.94

4115.8

3018.27

6556.82

Change (ticks)

54.48

8.88

7.02

17.12

 

FX

 

The USD-Index traded higher overnight and in early European trade following news of Osama Bin-Laden’s death, however as the session progressed priced pared back earlier gains to trade near unchanged at the 73.00 level. The news also weighed upon CHF and JPY, whereas CHF came under further pressure following worse than expected retail sales and PMI data from Switzerland. Meanwhile, better than expected manufacturing PMI data from most core Eurozone countries provided support to EUR/USD.

 

Currency

EURUSD

GBPUSD

USDJPY

Level

1.4846

1.6687

81.38

Change (pips)

0.0039

-0.0020

0.1900

 

COMMODITIES

 

WTI and Brent crude futures came under selling pressure overnight and through the European session following the news of Osama Bin-Alden’s assassination by US Special Forces, despite continuing unrest in the MENA region.  

 

Geopolitical News:

·   US President Obama has confirmed Osama bin Laden was killed by a US military operation conducted within the last 24 hours.

·   The U.S. Department of Homeland Security expects "threats of retaliation" from al Qaeda in the aftermath of Osama bin Laden's death, a department official told CNN early Monday. The Homeland Security official said the agency remains "at a heightened state of vigilance," although the national terror-threat level was not immediately raised following bin Laden's death. Meanwhile, Pakistani Taliban threatens to attack US and Pakistani targets.

·   Following the death of one of Gaddafi’s sons in a NATO attack, retaliatory tank shelling has begun in Misrata before the funeral commences.  Meanwhile, Libyan rebels have rejected Gaddafi's latest offer of a conditional ceasefire and negotiations upon an end to NATO attacks, saying the time for compromise had passed.

·   Yemeni president Saleh has refused to sign a GCC led agreement to give up power in exchange for legal immunity.

 

Oil & Gas News:

·   Rebels controlling eastern Libya have boosted security at oilfields, but other time-consuming measures are needed before they can resume crucial exports, with buyers still in contact with the rebels, an oil official said.

·   Saudi Arabia boosted oil production in April to approximately 8.5mln BPD, up 200,000 barrels from March due to higher demand.  Meanwhile, Russian oil production also rose to 10.24mln BPD in April from 10.19mln BPD in March.

 

Other News:

·   Silver futures dropped as much as 13%, its biggest intraday drop since Oct’08, after CME raised the amount of cash that traders must deposit for speculative positions.

 

Commodity

WTI Nymex

OTC Spot Gold

Level

112.11

1556.38

Change (NYSEARCA:USD)

-1.82

-7.33

 

LOOKING AHEAD

 

Economic Releases

 

CDT

BST

 

DATA

EXP

PREV

0730

1330

CA

Industrial Product Price M/M (Mar)

 

0.7%

0730

1330

CA

Raw Materials Price Index M/M (Mar)

 

1.8%

0900

1500

US

Construction Spending M/M (Mar)

0.3%

-1.4%

0900

1500

US

Annual Revisions: Construction Spending

 

 

0900

1500

US

ISM Manufacturing M/M (Apr)

59.6

61.2

0900

1500

US

ISM Prices Paid M/M (Apr)

83.0

85.0

1100

1700

IT

New Car Registrations Y/Y (Apr)

 

-27.6%

1200

1800

IT

Budget Balance M/M (Apr)

 

-21.0B

1200

1800

IT

Budget Balance (Year to date) Y/Y (Apr)

 

-31.3B

N/A

N/A

UK

Halifax House Prices SA M/M (Apr)

0.1%

0.1%

N/A

N/A

UK

Halifax House Prices 3M/Y (Apr)

-2.9%

-2.9%

 

Speaker

0800

1400

UK

BoE’s King testifies to European Parliament

 

Auctions

0745

1345

FR

EUR 8.5bln combined 13-, 26-, and 52-week T-Bills

1000

1600

US

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

 

Earnings

US

Anadarko Petroleum, Chesapeake Energy

 

**Notes:

Chinese Market Holiday, UK Market Holiday

 

Prices taken at 1217BST