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DAILY US OPENING NEWS - 18/05/11

 

·   ECB policymakers continue to reject even a soft debt restructuring for Greece

 

·   ECB's Nowotny said that the ECB is moving to exit low rates and liquidity measures, adding that the ECB didn't turn dovish at the May meeting

 

·   The BoE’s MPC voted 6-3 and 8-1 to keep its benchmark interest rate unchanged at 0.50%, and its asset purchase target unchanged at GBP 200bln respectively

 

·   RANsquawk EU Morning Briefing Video: http://www.youtube.com/watch?v=_nZ5KEw0ZBA

 

Market Re-Cap

 

European equities traded in positive territory during a vast majority of the session, supported by increasing prospects that Greece may not need to go through a full debt restructuring, with ECB policymakers rejected even a soft debt restructuring for Greece, which also boosted the EUR and weighed on Bunds. ECB's Nowotny also said that the ECB is moving to exit low rates and liquidity measures, adding that the ECB didn't turn dovish at the May meeting. In other news, GBP came under pressure following worse than expected jobs data from the UK, however did receive some support after tone of BoE's May minutes was not as dovish as markets anticipated, with the BoE's MPC voted 6-3 to keep the key benchmark rate unchanged at 0.50%. Elsewhere, JPY gained strength across the board following higher than expected reading in the Reuters Tankan Manufacturing Sentiment Index, however the AUD came under pressure after Moody's downgraded ratings on Australia's four major banks to Aa2.

 

Moving ahead, apart from the DOE inventory data, the economic calendar remains thin, however markets look forward to another Fed's Outright Treasury Coupon Purchase operation in the maturity range of Aug'28-May'41, with a purchase target of USD 1.5-2.5bln.

 

Asian Headlines

 

Japanese corporate pessimism eased in May in a sign business sentiment may have bottomed out two months after March 11 earthquake, however companies remain cautious over the outlook due to the ongoing nuclear crisis and power supply problems, a Reuters poll showed. The Reuters Tankan Manufacturing Sentiment Index rose 4 points from April to -9. The monthly poll has a 95% correlation with the BoJ’s closed watched Tankan survey. (RTRS)

 

In other news, the PBOC will increase the role of interest rates in managing inflation expectations, PBOC said in its 2010 annual report. (RTRS)

 

Also, China’s annual housing inflation slowed slightly in April with prices rising 4.3%, a further sign that forceful policy tightening is helping to cool exuberant price rises. The gains in April compares with an annual 5.2% rise in March. (RTRS)

 

US Headlines:

 

US Treasury Secretary Geithner said the country’s debt situation was so severe that Congress must deal with it or face risk the country will be charged much higher interest rates to borrow. Geithner said if fiscal agreement is not reached ahead of August 2nd when default looms, Congress must raise the debt limit, adding that it is ‘not an option’ for congress to fail to raise the debt limit and fail to protect the country’s creditworthiness. Geithner added the US needs to cut deficits gradually but dramatically over the next 3-5 years. (RTRS)

 

Deficit –reduction talks among high-profile group of US Senators foundered on Tuesday in a bleak sigh for other lawmakers trying to hammer out a deal to tackle the country’s budget woes. Republican Tom Coburn, one the Senate’s leading fiscal conservatives, told reports he was dropping out of the bipartisan “gang of six” after months of meetings. (RTRS)

 

US MBA Mortgage Applications (May 13) W/W 7.8% vs. Prev. 8.2% (RTRS)

 

EU and UK Headlines:

 

ECB policymakers’ comments on Greek debt restructuring: (RTRS/Sources)

·   ECB's Stark said the EU/IMF plan for Greece ensures debt sustainability, adding that Greek debt restructuring would be a catastrophe.

·   ECB's Bini Smaghi rejected soft restructuring option for Greece.

·   ECB's Nowotny said there is no plan for new Greek aid, and he doesn't see restructuring as relevant.

·   ECB's Constancio said re-profiling of Greek debt is risky.

 

In other news, according to a report, German government will revise 2011 GDP growth forecast to 3.0% or above. (RTRS)

 

·   UK Jobless Claims Change (Apr) M/M 12.4K vs. Exp. 0.0K (Prev. 0.7K Rev. to 6.4K)

·   UK Claimant Count Rate (Apr) M/M 4.6% vs. Exp. 4.5% (Prev. 4.5%)

·   UK ILO Unemployment Rate (Mar) 3M/Y 7.7% vs. Exp. 7.8% (Prev. 7.8%) (RTRS)

 

·   German Bobl auction for EUR 4.90545bln, 2.75% 08-Apr-16, bid/cover 1.9 vs. Prev. 1.9 (yield 2.45% vs. Prev. 2.68%, retention 18.2% vs. Prev. 21.04%)

·   Portuguese 2-month T-Bill auction for EUR 1bln, bid/cover 2.1 vs. Prev. 1.9 (yield 4.657% vs. Prev. 4.652%) (RTRS)

 

EQUITIES

 

European equities traded in positive territory during a vast majority of the session, supported by increasing prospects that Greece may not need to go through a full debt restructuring, with ECB policymakers rejected even a soft debt restructuring for Greece. Strength in commodities helped basic materials and oil & gas sectors, whereas financials remained a mid-performer. Moving into the North American open, equities continue to maintain strength, with basic materials and oil & gas as best performing sectors.

 

Index

DAX

CAC

FTSE

EUROSTOXX

SMI

Level

7272.95

3962.73

5896.65

2855.21

6521.97

Change (ticks)

16.30

21.15

35.65

5.61

25.41

 

FX

 

EUR gained strength supported by increasing prospects that Greece may not need to go through a full debt restructuring, with ECB policymakers rejected even a soft debt restructuring for Greece. Also, ECB's Nowotny said that the ECB is moving to exit low rates and liquidity measures, adding that the ECB didn't turn dovish at the May meeting.

 

In other news, GBP came under pressure following worse than expected jobs data from the UK, however did receive some support after tone of BoE's May minutes was not as dovish as markets anticipated, with the BoE's MPC voted 6-3 to keep the key benchmark rate unchanged at 0.50%. Elsewhere, JPY gained strength across the board following higher than expected reading in the Reuters Tankan Manufacturing Sentiment Index, however the AUD came under pressure after Moody's downgraded ratings on Australia's four major banks to Aa2, allied with worse than expected consumer confidence data from Australia.

 

·   Australia Westpac Consumer Confidence SA (May) -1.3% vs. Prev. 1.2%

·   Australia Westpac Consumer Confidence Index (May) 103.9 vs. Prev. 105.3 (RTRS)

 

Currency

EURUSD

GBPUSD

USDJPY

Level

1.4225

1.6154

81.11

Change (pips)

-0.0012

-0.0098

-0.3100

 

COMMODITIES

 

WTI crude futures traded higher during the European session supported by a drop in API oil inventories overnight, allied with growing prospects that Greece may not need a full debt restructuring and hence waning some concerns surrounding peripheral Eurozone states' debt. Markets now look ahead to the DOE oil inventory data to be released later in the US session.

 

Oil & Gas News:

·   The US Senate blocked a move by Democrats to repeal billions of USD in tax breaks for the top five oil companies operating in the US in a procedural vote on Tuesday.

·   Yemen President and opposition have agreed to sign Gulf-Brokered power transition deal after US and European mediation, which is to be completed today, according to opposition.

·   Russian President Medvedev said gas price formula for Ukraine could be changed in the future.

·   Libyan’s rebel National Transitional Council wants to represent the country at June’s OPEC meeting, according to spokesman Shammam who told AFP.

·   Iranian President Ahmadinejad will head June’s OPEC meeting according to the Fars news agency.

·   Tunisia has threatened to report Libya to the U.N. Security Council if cross-border shelling continues.  Elsewhere in Libya, rebels want to represent the country at June’s OPEC meeting.

·   The US Coast Guard said it re-opened the Mississippi River near Natchez, Mississippi, on Tuesday, one day after shutting the key US waterway due to flooding.

 

Commodity

WTI Nymex

OTC Spot Gold

Level

98.06

1492.1

Change (NYSEARCA:USD)

1.15

5.30

 

LOOKING AHEAD

 

Economic Releases

 

CDT

BST

 

DATA

EXP

PREV

0730

1330

CA

Leading Indicators M/M (Apr)

0.6%

0.8%

0730

1330

CA

Wholesale Sales M/M (Mar)

1.2%

-0.6%

0930

1530

US

DOE Crude Oil Inventories W/W (May 13)

1700K

3781K

0930

1530

US

DOE Gasoline Inventories W/W (May 13)

1000K

1275K

0930

1530

US

DOE Distillate Inventory W/W (May 13)

500K

-843K

0930

1530

US

DOE Cushing Crude Inventory W/W (May 13)

 

1124K

0930

1530

US

DOE Refinery Utilization W/W (May 13)

0.43%

-1.10%

1300

1900

US

Minutes of FOMC Meeting

 

 

 

Speakers

0800

1400

SW

Riksbank’s Governor Ingves

0730

1330

FR

Finance Minister Lagarde

0730

1330

WLD

OECD’s Chief Economist Padoan

N/A

N/A

EU

15th Roundtable with the Government of Greece

N/A

N/A

FI

Finland’s negotiations for formation of a coalition government

N/A

N/A

EU

EU’s Barroso

 

Auction

1000

1600

US

Fed’s Outright Trea. Coup.  Purch. Aug’28-May’41 (USD 1.5-2.5bln)

 

 

Prices taken at 1252BST