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DAILY US OPENING NEWS - 13/05/11

 

·   Stronger than expected first quarter preliminary GDP data from Germany and France supported European equities and the EUR

 

·   Swedish finance minister said that his country has no intention to give aid to Portugal

 

·   In its semi-annual economic forecast, the European Commission cut its 2011 growth forecast for Portugal, Ireland and Greece

 

·   According to Goldman Sachs, oil prices are likely to be higher in the next 12 months

 

·   RANsquawk EU Morning Briefing Video: http://www.youtube.com/watch?v=T4k6QhUVaC0

 

Market Re-Cap

 

Despite a lower close in the Nikkei (-0.7%), European equities traded higher during the early session following stronger than expected first quarter preliminary GDP data from the likes of Germany and France, whereas strength in commodities helped underpin the basic materials sector. However, as the session progressed, equities pared back part of initial gains partly on the back of comments from the Swedish finance minister that his country has no intention to give aid to Portugal, allied with comments from the EU Commission cutting its forecast for many peripheral Eurozone countries, which also saw Bund futures come off their lows. In the forex space, EUR/USD traded higher amid renewed risk-appetite and weakness in the USD-Index, however weakness was observed in NZD after RBNZ's governor said that the key interest rate will be kept low.

 

Moving forward, markets look ahead to key economic data from the US in the form of CPI and University of Michigan confidence, allied with another Fed Outright Treasury Coupon Purchase operation in the maturity range of May'18-Feb'21, with a purchase target of USD 6-8bln.

 

Asian Headlines

 

China’s inflation pressure won’t recede as global commodities prices are likely to rebound and electricity prices may be raised because of power shortage according to Wang Xue, a researcher with Institute of Finance and Banking at the Chinese Academy of Social Sciences. (China Securitas Journal)

 

In other news, China won’t likely see large price gains because consumes spending power is limited and the government can use administrative measures to curb price increases in some cases, according to Xu Lianzhong, an official with the National Development and Reform Commission’s Analysis and Prediction Office. (China Securitas Journal)

 

US Headlines:

 

Fed’s balance sheet swelled to USD 2.729tln in the week ending May 11 from USD 2.703tln the prior week. Also Foreign central banks overall holdings of US marketable securities at the Fed increased USD 2.966bln in the week ended May 11 to stand at USD 3.460tln. (RTRS)

 

EU and UK Headlines:

 

The European Commission, in its semi-annual economic forecast:

-    Kept its forecast for 2011 Eurozone GDP growth unchanged at 1.6%.

-    Sees 2011 Greek GDP growth at -3.5% vs. its previous forecast of -3.0%.

-    Sees 2011 Irish GDP growth at +0.6% vs. its previous forecast of +0.9%.

-    Sees 2011 Portuguese GDP growth at -2.2% vs. its previous forecast of -1.0%.

-    Sees 2011 Eurozone inflation at 2.6% vs. its previous forecast of 2.2%. (RTRS)

 

In other news, ECB’s Nowotny said Greece has not met bailout conditions yet, however EU's Rehn said there is no need to take additional fiscal consolidation measures in Greece this year. EU's Rehn also said that Portuguese economy faces significant challenges, and Portugal needs to take bold steps. Rehn expects Portuguese bailout to be approved on Monday. (RTRS/Sources)

 

·   Eurozone GDP SA (Q1 P) Q/Q 0.8% vs. Exp. 0.6% (Prev. 0.3%)

·   German GDP SA (Q1 P) Q/Q 1.5% vs. Exp. 0.9% (Prev. 0.4%)

·   French GDP (Q1 P) Q/Q 1.0% vs. Exp. 0.6% (Prev. 0.4, Rev. to 0.3%)

·   Spain GDP (Constant SA) (Q1 P) Q/Q 0.3% vs. Exp. 0.2% (Prev. 0.2%)

·   Italian GDP SA & WDA Q/Q (Q1 P) 0.1% vs. Exp. 0.3% (Prev. 0.1%)

·   Portuguese GDP (Q1 P) Q/Q -0.7% vs. Exp. -0.3% (Prev. -0.3%, Rev. to -0.6%)

·   Greek GDP (Q1 P) Q/Q 0.8% vs. Prev. -1.4% (Rev. to -2.8%) (RTRS)

 

EQUITIES

 

Despite a lower close in the Nikkei (-0.7%), European equities traded higher during the early session following stronger than expected first quarter preliminary GDP data from the likes of Germany and France. Also, weakness in the USD-index boosted commodities, which in turn helped the basic materials sector. However, as the session progressed, equities gradually came off their earlier highs, partly on the back of comments from Swedish finance minister that his country has no intention to give aid to Portugal, allied with a downbeat tone on peripheral Eurozone economies in the European Commission’s semi-annual economic forecast. Moving into the North American open, equities are trading mixed, with health care and basic materials as best performing sectors, however weakness seen in financials.

 

Index

DAX

CAC

FTSE

EUROSTOXX

SMI

Level

7470.35

4045.57

5987.82

2916.9

6592.5

Change (ticks)

26.40

22.28

42.86

-0.15

29.91

 

FX

 

EUR/USD traded higher during the European session on the back of stronger than expected first quarter preliminary GDP data from the likes of Germany and France, allied with weakness in the USD-Index, whereas strength in commodities supported the AUD. However, NZD came under pressure following comments from RBNZ’s governor that the key interest rate will be kept low.

 

Currency

EURUSD

GBPUSD

USDJPY

Level

1.4285

1.6265

80.72

Change (pips)

0.0039

-0.0026

-0.2200

 

COMMODITIES

 

WTI crude futures gained strength during the European session on the back of renewed risk-appetite from stronger than expected GDP data from the likes of Germany and France, bullish comments on oil prices from Goldman Sachs, allied with weakness in the USD-Index. However, moving into the NYMEX pit open, prices came off their earlier highs, though still trading in positive territory.

 

Oil & Gas News:

·   According to Goldman Sachs’ Jeff Currie, oil is still “structurally bullish”, with oil volatility beginning to stabilise from next month. He also said oil prices are likely to be higher in the next 12 months. Oil demand will stay intact with the end of QE2, according to Goldman Sachs.

·   China’s April crude oil output rose to 3.6% to 16.8 million tons on previous year, and natural gas imports in April increased 72.7% from a year earlier to about 2.5bln cubic metres, according to the National Development and Reform Commission.

·   Liquefied natural gas markets will “significantly tighten” over the next three years as global spare production capacity drops in 2014, according to Sanford C Bernstein &Co.

 

Geopolitical News:

·   Libyan rebels will meet senior White House officials in Washington on Friday, seeking both cash and diplomatic legitimacy in their war to topple Gaddafi.

 

Commodity

WTI Nymex

OTC Spot Gold

Level

99.76

1510.03

Change (NYSEARCA:USD)

0.79

4.13

 

 

 

LOOKING AHEAD

 

Economic Releases

 

CDT

BST

 

DATA

EXP

PREV

0730

1330

US

CPI M/M (Apr)

0.4%

0.5%

0730

1330

US

CPI Y/Y (Apr)

3.1%

2.7%

0730

1330

US

CPI Ex. Food & Energy M/M (Apr)

0.2%

0.1%

0730

1330

US

CPI Ex. Food & Energy Y/Y (Apr)

1.3%

1.2%

0730

1330

US

CPI Core Index SA M/M (Apr)

 

223.331

0730

1330

US

CPI NSA Y/Y (Apr)

224.715

223.467

0855

1455

US

University of Michigan Confidence M/M (May P)

70.0

69.8

0900

1500

US

Durable Goods Annual Revisions

 

 

0930

1530

US

ECRI Weekly Index W/W (May 13)

 

128.7

0930

1530

US

ECRI Weekly Annualised Y/Y (May 13)

 

6.7%

1030

1630

US

Cleveland Fed CPI M/M (Apr)

 

0.1%

1200

1800

US

Baker Hughes Rig Count W/W (May 13)

 

1836

N/A

N/A

FI

Finnish Parliament Vote on Portugal’s Bailout Programme

 

 

 

Speaker

1130

1730

EU

ECB’s Stark

 

Auction

1000

1600

US

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

 

Prices taken at 1237BST

 

**Notes:

CME Eurodollar May options expiry