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DAILY US OPENING NEWS - 06/05/11

 

·   Markets keep a close eye on the US nonfarm payrolls data due to be released at 1330 BST

 

·   AUD gained strength across the board on hawkish comments from RBA overnight, whereas a sharp jump in Canadian employment data helped CAD

 

·   Stronger than expected PPI data from the UK provided some support to GBP

 

·   RANsquawk EU Morning Briefing Video: http://www.youtube.com/watch?v=43x5GaSJBRM

 

Market Re-Cap

 

WTI crude futures traded lower during the European session, at one point falling more than USD 4 per barrel, weighed upon by strength in the USD-Index, allied with concerns surrounding the pace of US economic recovery, however as the session progressed prices pared back some of earlier losses. In the forex market, AUD received a boost across the board following hawkish comments from the Reserve Bank of Australia in its quarterly monetary policy statement, whereas GBP/USD gained around 20 pips following stronger than expected PPI data from the UK. In fixed income, bund futures traded higher during the session, and European peripheral 10-year government bond yield spreads with respect to bunds marginally widened ahead of the nonfarm payrolls data from the US due at 1330 BST.

 

Moving forward, the main focus of the market remains on the nonfarm payrolls data from the US, however there is another Fed’s Outright Treasury Coupon Purchase operation in the maturity range of Nov’13 – Apr’15, with a purchase target of USD 5-7bln scheduled for later in the session.

 

Asian Headlines

 

According to former PBOC advisor, Fan Gang, China’s monetary policy may shift to “less tightening” in the second half of this year after inflation likely peaked in April or this month. (Sources)

 

In other news, the China Banking Regulatory Commission does not plan to raise the minimum down payment for first-home buyers to 50% from the current 30%, refuting some media accounts. (RTRS)

 

US Headlines:

 

Republicans edged toward a White House plan that would cut some spending now and set long-term deficit reduction targets, but said more difficult decisions on taxes and healthcare spending would have to wait until after the 2012 election. (RTRS)

 

EU and UK Headlines:

 

ECB's Nowotny said markets over-interpreted ECB on Thursday, adding that ECB's stance should not be interpreted as dovish. Also, ECB's Trichet said the ECB remains "extremely alert" on inflation. (RTRS)

 

·   UK PPI Input NSA (Apr) M/M 2.6% vs. Exp. 1.6% (Prev. 3.7%, Rev. to 3.8%)

·   UK PPI Input NSA (Apr) Y/Y 17.6% vs. Exp. 16.3% (Prev. 14.6%, Rev. to 14.8%)

·   UK PPI Output NSA (Apr) M/M 0.8% vs. Exp. 0.7% (Prev. 0.9%, Rev. to 1.1%)

·   UK PPI Output NSA (Apr) Y/Y 5.3% vs. Exp. 5.1% (Prev. 5.4%, Rev. to 5.6%)

·   UK PPI Output Core NSA (Apr) M/M 0.6% vs. Exp. 0.3% (Prev. 0.4%, Rev. to 0.5%)

·   UK PPI Output Core NSA (Apr) Y/Y 3.4% vs. Exp. 3.0% (Prev. 3.0%, Rev. to 3.1%)

·   German Industrial Production SA (Mar) M/M 0.7% vs. Exp. 0.5% (Prev. 1.6%, Rev. to 1.7%)

·   German Industrial Production WDA NSA (Mar) Y/Y 11.2% vs. Exp. 10.3% (Prev. 14.8%, Rev. to 15.2%) (RTRS)

 

EQUITIES

 

European equities traded mixed during the session ahead of the nonfarm payrolls data from the US later in the session, though DAX index outperformed its European peers with particular strength seen in ThyssenKrupp shares after co. unveiled plans for a major revamp that may see it make EUR 10bln in divestments. In other equity specific news, RWE and Iberdrola shares gained strength following comments from sources that companies held merger talks before dropping them in February. Moving into the North American open, equities lack any real direction ahead of the US nonfarm payrolls data.

 

 

Index

DAX

CAC

FTSE

EUROSTOXX

SMI

Level

7399.4

4007.63

5893.22

2918.04

6482.47

Change (ticks)

22.44

2.76

-26.76

-8.50

32.44

 

FX

 

AUD received a boost across the board following hawkish comments from the Reserve Bank of Australia in its quarterly monetary policy statement, whereas GBP/USD gained around 20 pips following stronger than expected PPI data from the UK. Also, CAD received support following a sharp jump in net change in employment data from Canada.

 

·   Canadian Net Change in Employment (Apr) M/M 58.3K vs. Exp. 20.0K (Prev. -1.5K)

·   Canadian Unemployment Rate (Apr) M/M 7.6% vs. Exp. 7.7% (Prev. 7.7%) (RTRS)

 

Currency

EURUSD

GBPUSD

USDJPY

Level

1.4501

1.6422

80.30

Change (pips)

-0.0038

0.0033

0.2300

 

COMMODITIES

 

WTI crude futures continued their decline in early European trading, extending yesterday’s volatility which saw the NYSE enact the uptick rule in some oil ETFs, futures have recovered slightly ahead of the Nymex pit open although remain under-pressure below the USD 100 level.

 

Oil & Gas News:

·   OPEC will increase exports for the first time since February as refiners prepare to meet peak summer demand for driving fuels, according to Oil Movements.

·   In a contrasting statement, according to an OPEC delegate, OPEC is unlikely to change its output target at the June meeting because of the uncertain geopolitical situation, saying there is no shortage of crude or refined products in the market and yesterday’s sell-off in oil was very welcome.

·   Oil prices are likely to peak this summer as the loss of Libyan crude production has an increased impact on the market amid rising demand in Europe and Japan according to Nomura.

·   Goldman Sachs says wary of potential for further downside in oil in coming days although the extent of yesterday’s move has removed some of the risk premium and further downside might be limited. Goldman Sachs adds that they see fundamentals tightening over the course of this year, likely pushing prices back to recent highs by 2012.

·   Oil may fall below USD 90 a barrel if the USD extends its advance according to the Schork Group.

 

Geopolitical News:

·   Thousands of Kurds have been demonstrating in Eastern Syria demanding political freedom while maintaining national unity, according to a senior Kurd source.

·   Syrian Security forces have stepped up raids in the suburbs of the nations capital of Damascus in an attempt to prevent today’s mass protest.

·   Russia and China have agreed to coordinate their efforts to stabilise the middle-eastern region and broker peace talks in North Africa.

·   France has said it has given 14 Libyan officials 48hrs to leave the country, following the closure last month of the Libyan embassy in France.

 

Commodity

WTI Nymex

OTC Spot Gold

Level

97.29

1478.58

Change (NYSEARCA:USD)

-2.51

4.28

 

 

 

 

 

 

 

 

LOOKING AHEAD

 

Economic Releases

 

CDT

BST

 

DATA

EXP

PREV

0730

1330

US

Change in Nonfarm Payrolls M/M (Apr)

185K

216K

0730

1330

US

Change in Manufacturing Payrolls M/M (Apr)

20K

17K

0730

1330

US

Change in Private Payrolls M/M (Apr)

200K

230K

0730

1330

US

Unemployment Rate M/M (Apr)

8.8%

8.8%

0730

1330

US

Average Hourly Earning M/M (Apr)

0.2%

0.0%

0730

1330

US

Average Hourly Earning Y/Y (Apr)

1.8%

1.7%

0730

1330

US

Average Weekly Hours M/M (Apr)

34.3

34.3

0930

1530

US

ECRI Weekly Index W/W (May 6)

 

129.3

0930

1530

US

ECRI Weekly Annualised Y/Y (May 6)

 

7.5%

1130

1730

UK

First results for UK’s AV Referendum

 

 

1200

1800

US

Baker Hughes Rig Count W/W (May 6)

 

1818

1400

2000

US

Consumer Credit (USD) M/M (Mar)

5.000B

7.617B

1400

2000

UK

Official result for UK’s AV Referendum

 

 

 

Speakers

0900

1500

US

Fed’s Dudley

1045

1645

US

Fed’s Bullard

 

Auction

1000

1600

US

Fed’s Outright Trea. Coup. Purch. Nov’13-Apr’15 (USD 5-7bln)

 

**Notes:

USD-Index May options expiry

 

Prices taken at 1253BST