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DAILY US OPENING NEWS - 17/05/11

 

·   Stronger than expected CPI data from the UK boosted GBP and weighed upon Gilt futures

 

·   Solid T-Bill auction results from Spain promoted risk-appetite, and led the Spanish/German 10-year government bond yield spread to narrow

 

·   Greek vice minister has said he is willing to discuss soft debt restructuring if needed

 

·   AUD received support following hawkish comments from the RBA in its May minutes

 

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

 

Market Re-Cap

 

Volatility has been observed in the EUR and Bunds following mixed comments from ECB and EU officials regarding a soft Greek debt restructuring. Earlier in the session, strong Spanish auction results gave impetus to European equities, supported the EUR and prompted the Spanish/German 10-year government bond yield spread to narrow.

Elsewhere, higher than expected CPI data from the UK saw healthy buying in GBP and a consequent fall in Gilt futures.

 

Looking forward there will be economic data from the US in the form of housing starts and building permits, API crude oil inventories and another Fed's Outright Treasury Coupon Purchase operation in the maturity range of May'15-Nov'16 with a purchase target of USD 5-7bln.

 

Asian Headlines

 

BoJ’s Shirakawa said the country’s economy was in a very severe state due to damage from the March earthquake, signalling that the central bank was sticking to its ultra-loose monetary policy bias. Shirakawa repeated that the BOJ would do its utmost to beat deflation but added that any price rises needed to be driven by solid economic growth. In other news, Japan’s finance minister Noda said overcoming deflation is the top policy priority for Japan. (RTRS)

 

In other news, Japan’s cabinet approved economic policy guidelines that pledged to secure funding for reconstruction over the next three years and reaffirm a commitment to fiscal and other policy goals in place before the devastating earthquake and tsunami two months ago. (RTRS)

 

US Headlines:

 

As the US reached its USD 14,300bln debt limit on Monday, Paul Ryan, the Republican chairman of the budget committee in the House of Representatives said he guessed that a deal to avert default would probably only happen at the “last minute”. (FT - More)

 

In other news, Pimco's Gross said QE3 will take form of language instead of buying and said that Treasury 10yr yields may be 4% in about a year. (Sources)

 

EU and UK Headlines:

 

EU’s Juncker said first disbursement for Portugal will be in end-May , large restructuring of Greek debt is not an option, however Juncker said would not exclude in definite way reprofiling. He goes on to say Irish interest rate was not discussed in depth. Juncker said Eurozone finance ministers are very close to agreement on legal text of ESM, and they did not take decisions on EFSF lending rates and guarantees. Also, Eurozone finance ministers said for the first time that they would consider asking Greece’s private creditors to extend the maturities on their bonds to buy Athens more time to pay down its huge debt. (RTRS)

 

In other news, ECB's Tumpel-Gugerell said the ECB’s policy is still accommodative, however the ECB is closely monitoring inflation data. Tumpel-Gugerell further said that the ECB is not pre-committed on rates. (RTRS)

 

Elsewhere, BoE's MPC nominee Broadbent said there are arguments on both sides on raising rates, adding that he sees no evidence that inflation expectations have been de-anchored. He also said that domestic interest rates in the UK is not the best way to control asset bubbles. (RTRS)

 

·   UK CPI (Apr) Y/Y 4.5% vs. Exp. 4.1% (Prev. 4.0%)

·   UK RPI (Apr) Y/Y 5.2% vs. Exp. 5.2% (Prev. 5.3%)

·   German ZEW Survey (Economic Sentiment) (May) M/M 3.1 vs. Exp. 4.5 (Prev. 7.6)

·   German ZEW Survey (Current Situation (Mar) Y/Y 91.5 vs. Exp. 87.5 (Prev. 87.1)

·   Eurozone ZEW Survey (Economic Sentiment) (May) M/M 13.6 vs. Exp. 17.3 (Prev. 19.7) (RTRS)

 

·   Spanish 12-month T-Bill auction for EUR 4.27bln, bid/cover 2.50 vs. Prev. 1.63 (yield 2.546% vs. Prev. 2.770%)

·   Spanish 18-month T-Bill auction for EUR 1.2bln, bid/cover 4.10 vs. Prev. 2.04 (yield 3.095% vs. Prev. 3.364%)

·   Greek 13-week T-Bill auction for EUR 1.625bln (incl. EUR 0.375bln in non-comp. bids), bid/cover 3.3 vs. Prev. 3.45 (yield 4.06% vs. Prev. 4.100%) (RTRS)

 

EQUITIES

 

European equities traded mixed during the session with support coming from well received T-Bill auctions from Spain, however came under pressure following comments from EU’s Juncker and Greek vice minister on potential for a soft restructuring of Greek debt. Moving into the North American open, most European indices are trading in minor negative territory, with health care and technology as worst performing sectors.

 

Index

DAX

CAC

FTSE

EUROSTOXX

SMI

Level

7317.49

3969.93

5909.7

2869.68

6525.67

Change (ticks)

-70.05

-19.89

-13.99

-11.63

-38.48

 

FX

 

GBP received a boost following stronger than expected CPI data from the UK, which saw GBP/USD to rise around 55 pips. In other news, EUR/USD gained strength on the back of well-received T-Bill auctions from Spain, however did come under pressure after EU's Juncker said we have to get to a soft restructuring of Greek debt.

 

Elsewhere, AUD received support following hawkish comments from the RBA in its May minutes, however JPY traded under pressure following dovish comments from the BoJ. Also, CHF received support on the back of M&A flows, in particular purchases of Swiss Nycomed and Landis+Gyr.

 

Currency

EURUSD

GBPUSD

USDJPY

Level

1.4172

1.6230

81.56

Change (pips)

0.0016

0.0038

0.7700

 

COMMODITIES

 

WTI crude futures traded in minor negative territory in early European trade as debt concerns surrounding peripheral Eurozone countries persisted, however moved back in positive territory later in the session as the USD-Index lost strength.

 

Oil & Gas News:

·   China’s oil demand this year may slow to 6.7% to 482.96mln tons, slowing from 9.6% growth in 2010, while gasoline demand may increase 4% to 22.33mln tons after 3% gain in 2010, according to Zhang Fuqin, Deputy Chief Engineer at China National Petroleum corp’s Petroleum and Petrochemical Engineering Institute.

·   Merrill Lynch said they see support for August gasoline crack at USD 17-19, they see little support for gasoline at the end of summer. They also said that US gasoline demand may be flagging this summer.

·   Iran’s oil and gas reserves have risen by 500MBPD and 5tln cubic feet respectively with the discovery of new onshore oil and gas fields in the south and west of the country, according to Kayhan Daily newspaper.

·   Iran president Ahaminejad’s role as caretaker of country oil ministry will not affect Iran’s policies on oil or OPEC according to foreign ministry spokesman Mehmanparast.

·   Libya’s top oil official, Shokri Ghanem, has stepped down from his post according to rebel finance and oil minister. In other news, Ali-Tarhouni, the rebels finance and oil minister, said he hopes to represent Libya in the upcoming OPEC meeting in June.

 

Geopolitical News:

·   According to UK, NATO struck Libyan intelligence and Training facilities in Tripoli overnight.

·   Iran’s foreign ministry denied a U.N report that Tehran had exchanged missile technology with North Korea.

 

 

 

Commodity

WTI Nymex

OTC Spot Gold

Level

97.37

1493.3

Change (NYSEARCA:USD)

0.00

4.00

 

LOOKING AHEAD

 

Economic Releases

 

CDT

BST

 

DATA

EXP

PREV

0730

1330

US

Housing Starts M/M (Apr)

568K

549K

0730

1330

US

Housing Starts  M/M (Apr)

3.5%

7.2%

0730

1330

US

Building Permits M/M (Apr)

590K

594K

0730

1330

US

Building Permits M/M (Apr)

0.9%

11.2%

0730

1330

CA

International Securities Transactions M/M (Mar)

5.000B

2.502B

0755

1355

US

Redbook M/M (May 17)

 

-2.0%

0755

1355

US

Redbook Y/Y (May 17)

 

4.7%

0815

1415

US

Industrial Production M/M (Apr)

0.4%

0.8%

0815

1415

US

Capacity Utilisation  M/M (Apr)

77.6%

77.4%

1530

2130

US

API Crude Oil Inventories W/W (May 13)

 

2948K

1530

2130

US

API Gasoline Inventories W/W (May 13)

 

-1835K

1530

2130

US

API Distillate Inventory W/W (May 13)

 

582K

1530

2130

US

API Cushing Crude Inventory W/W (May 13)

 

1897K

1745

2345

NZ

Producer Prices Input Q/Q (Q1)

 

0.9%

1745

2345

NZ

Producer Prices Output Q/Q (Q1)

 

0.2%

 

Speakers

1130

1730

SZ

SNB’s Jordan

N/A

N/A

EU

EcoFin Meeting

N/A

N/A

GR

15th Roundtable with the Government of Greece

N/A

N/A

EU

European Economic Congress 2011

 

Auction

1000

1600

US

Fed’s Outright Trea. Coup.  Purch. May’15-Nov’16 (USD 5-7bln)

 

 

 

 

 

Earnings

US

Dell

 

**Notes:

WTI crude June options expiry

 

Prices taken at 1252BST