DAILY US OPENING NEWS - 10/05/11

 

·   Markets continue to focus on debt concerns surrounding Greece, with earlier reports of a potential new deal for Greece later denied by Greek and EU sources (refer to the EU section of the report for further details)

 

·   CHF came under pressure following lower than expected CPI data from Switzerland

 

·   WTI and Brent crude futures traded in negative territory during the European session after the CME Group raised its margins for those products

 

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

 

Market Re-Cap

 

The ongoing debt concerns surrounding Greece remained the prime focus of the markets today, with comments from a senior Greek official that a new Greek deal is possible as early as June which boosted the EUR across the board, provided strength to the financials sector, and saw aggressive tightening of the Greek/German 10-year government bond yield spread with respect to bunds. However, these comments were swiftly denied by Greek and Eurozone officials. In other news, CHF came under pressure following lower than expected CPI data from Switzerland, whereas AUD traded lower on news of widening Australian budget deficit. Elsewhere, WTI and Brent crude futures traded in negative territory during the European session after the CME Group raised its margins for those products, allied with strength in the USD-Index.

 

Moving forward, markets look ahead to economic data from the US in the form of IBD/TIPP Economic Optimism, import price index, and wholesale inventories. In fixed income, USD 32bln 3-year Note auction, allied with Fed's Outright Treasury Coupon Purchase in the maturity range of May'15 - Oct'16, with a purchase target of USD 5-7bln are scheduled for later in the session.

 

Asian Headlines

 

According to an unnamed PBOC official, China will not stop monetary tightening unless it sees three consecutive monthly declines or stability in consumer inflation or housing prices. He also said that new loans in the first four months of this year were about 10% less then the amount in the same period last year. (China Business News)

 

·   China Trade Balance (Apr) Y/Y USD 11.42bln vs. Exp. 3.20bln (Prev. 0.14)

·   China Exports (Apr) Y/Y 29.9% vs. Exp. 29.5 (Prev. 35.8%)

·   China Imports (Apr) Y/Y 21.8% vs. Exp. 28.9% (Prev. 27.3%) (RTRS)

 

US Headlines:

 

Fed’s Lacker said the Fed may need to raise interest rates late this year if a forming economic recovery drives up inflation expectations, adding that Fed must remain vigilant about inflation, and inflation expectations. (RTRS)

 

In other news, Pimco’s Bill Gross raised his bet against the US government-related debt in April to 4% from 3%. Pimco also raised it cash position to 37% in April from 31% in March. (RTRS)

 

Elsewhere, John Boehner, Republican speaker of the House of Representatives, laid down a new red line in US budget talks on Monday, saying Congress should not increase the US debt ceiling unless it approves spending cuts greater than the new borrowing limit. (FT - More)

 

·   US NFIB Small Business Optimism (Apr) M/M 91.2 vs. Exp. 91.8 (Prev. 91.9) (RTRS)

 

EU and UK Headlines:

 

According to a senior Greek official, new Greek deal is possible as early as June, adding that the deal could total EUR 27bln in 2012, and could total EUR 32bln in 2013. However, these comments were denied by Greek finance ministry and a senior Eurozone source. Also, according to an article in Kathimerini newspaper, the IMF is arranging an EUR 80-100bln aid package to replace Greece's existing bailout programme. (RTRS/ Kathimerini)

 

Also, a senior German CSU MP said there are signs that conditions for payment of next Greek aid tranche may not be met, adding that no funds will be paid unless Greece meets criteria. However, Germany's Chancellor Merkel said we must see result of the current mission to Athens before deciding on easing Greek bailout terms. (RTRS)

 

·   French Industrial Production (Mar) M/M -0.9% vs. Exp. 0.4% (Prev. 0.4% Rev. to 0.5%)

·   French Manufacturing Production (Mar) M/M -1.0% vs. Exp 0.4% (Prev. 0.7% Rev. to 0.9%)

·   UK RICS House Price Balance (Apr) M/M -21% vs. Exp. -23% (Prev. -23%)

·   UK BRC Sales Like-for-Like (Apr) Y/Y 5.2% vs. Exp. 2.5% (Prev. -3.5%) (RTRS)

 

·   Greek 26-week T-Bill auction for EUR 1.625bln (inc. EUR 0.375bln in non-competitive bids), bid/cover 3.58 vs. Prev. 3.81 (yield 4.88% vs. Prev. 4.80%)

·   UK Index-Linked Gilt auction for GBP 1.2bln, 1.875% 2022 Index-Linked Gilt, bid/cover 2.05 vs. Prev. 1.86 (RTRS)

 

EQUITIES

 

European equities traded higher during the session, with particular strength seen in the financials sector, on the back of anticipation of a new deal to tackle Greek debt problems on horizon, which also observed outperformance in the Italian FTSE MIB index. Basic materials performed well partly due to strength in Rio Tinto shares after RBS put co. as its top mining pick. Moving into the North American open, equities continue to trade in positive territory, with basic materials and industrials as best performing sectors.

 

Index	DAX	CAC	FTSE	EUROSTOXX	SMI
Level	7521.33	4065.64	6016.71	2943.24	6541.22
Change (ticks)	110.81	58.38	74.02	40.84	64.33

 

FX

 

EUR gained strength across the board after a senior Greek official said that a new Greek deal is possible as early as June, however did pare back some of the earlier gains after the report was denied by Greek finance ministry as well as a senior Eurozone source. In other news, CHF came under pressure following lower than expected CPI data from Switzerland, whereas AUD traded lower on news of widening Australian budget deficit.

 

Elsewhere, SEK and NOK gained strength following strong industrial production data from Sweden and Norway respectively. It is also worth noting that according to the IMF, NZD may be as much as 20% overvalued relative to estimates of the equilibrium exchange rate.

 

·   Swiss CPI (Apr) M/M 0.1% vs. Exp. 0.5% (Prev. 0.6%)

·   Swiss CPI (Apr) Y/Y 0.3% vs. Exp. 0.6% (Prev. 1.0%) (RTRS)

 

Currency	EURUSD	GBPUSD	USDJPY
Level	1.4358	1.6352	80.57
Change (pips)	-0.0007	-0.0052	0.2100

 

COMMODITIES

 

WTI and Brent crude futures traded in negative territory during the European session after the CME Group raised its margins for those products, allied with strength in the USD-Index, however moving into the NYMEX pit open, prices came off their earlier lows.

 

Oil & Gas News:

 

·   CME Group raised WTI crude futures margin by 25%, the fourth rise since February, effective as of the close of business on May 10^th following volatile trading in recent sessions. The CME Group also raised the margins for Brent crude by 23.8% and for RBOB gasoline by 21.7%.

·   Bank of America said it vies the recent dip in oil as a short-term buying opportunity, adding that Brent should trade close to USD 122 per barrel in the second quarter, and USD 94 a barrel in the fourth quarter. It further said that potential drop in oil prices could be more pronounced if Libyan supplies come back. However, Bank of America said that a pullback in the second half of this year is still its central scenario, adding that fundamentals in oil market haven’t changed.

·   According to China’s General Administration of Customs, China imported 21.54mln tonnes of crude oil in April, down 0.6% from 21.67mln tonnes in the previous month. Imports of oil products fell 17% to 3.22mln tonnes, while exports of oil products fell 20.5% to 2.05mln tonnes.

·   Iran’s OPEC governor said that possible further changes in the structure of its oil ministry will not affect its tenure in the rotating office of the group’s president.

·   According to the State Oil Marketing Organisation, Iraq cut the price of Basra light crude to US buyers for June by USD 0.15 to a discount of USD 2.10 per barrel below the Argus benchmark, but raised prices to Asia.

·   According to a source, Saudi Aramco raised the official selling prices for light crude grades loaded in the Mediterranean Sea to customers in Europe.

·   According to a trade source, the North Sea Brent Crude oil stream will load around 120,000 BPD in June, down from around 155,000 BPD originally scheduled to load in May.

 

Commodity	WTI Nymex	OTC Spot Gold
Level	101.88	1514.35
Change (USD)	-0.67	0.60

 

LOOKING AHEAD

 

Economic Releases

 

CDT	BST		DATA	EXP	PREV
0730	1330	US	Import Price Index M/M (Apr)	1.8%	2.7%
0730	1330	US	Import Price Index Y/Y (Apr)	10.4%	9.7%
0755	1355	US	Redbook M/M (May 10)		1.3%
0755	1355	US	Redbook Y/Y (May 10)		5.5%
0900	1500	US	IBD/TIPP Economic Optimism M/M (May)	41.8	40.8
0900	1500	US	Wholesale Inventories M/M (Mar)	1.0%	1.0%
0900	1500	US	Wholesale Sales M/M (Mar)	1.4%	-0.8%
0930	1530	UK	UK DMO Gilt Size Announcement
1530	2130	US	API Crude Oil Inventories W/W (May 6)		3196K
1530	2130	US	API Gasoline Inventories W/W (May 6)		680K
1530	2130	US	API Distillate Inventory W/W (May 6)		-1492K
1530	2130	US	API Cushing Crude Inventory W/W (May 6)		111K
Speakers
0830	1430	US	Fed’s Duke
1145	1745	US	Fed’s Lacker
1300	1900	UK	BoE’s Tucker
N/A	N/A	WLD	IMF’s Strauss-Kahn
Auctions
1000	1600	US	Fed’s Outright Trea. Coup.  Purch. May’15-Oct’16 (USD 5-7bln)
1200	1800	US	USD 32bln 3y Note Auction
Earnings
US		Walt Disney

 

Prices taken at 1247BST