DAILY US OPENING NEWS - 20/05/11
Macro
Seeking Alpha Analyst Since 2008
· Markets switched back its focus on peripheral Eurozone debt troubles, which dented earlier risk-appetite
· The Greek/German 10-year government bond yield spread widened beyond the 1300BPS psychological level
· According to an article in WSJ, the ECB warned it may pull the plug on funding for Greek banks in the event of any restructuring of Greece's government debt
· RANsquawk EU Morning Briefing Video: http://www.youtube.com/watch?v=H0U0ThDLlDk
Market Re-Cap
European equities traded higher during the early session, supported by strength in basic materials and oil & gas sectors, however as the session progressed equities came off their earlier highs to venture into negative territory, which helped Bunds to recover. In other news, the Greek/German 10-year government bond yield spread widened beyond the 1300BPS psychological level as worries persisted around the debt situation in Greece, with market participants looking for further transparency. In forex news, EUR came under pressure as US participants entered the market and reacted to the Eurozone peripheral spreads' widening. In other currency news, Goldman Sachs boosted their NZD/USD forecast which supported the pair.
Moving into the North American open, markets look ahead to another Fed's Outright Treasury Coupon Purchase operation in the maturity range of Nov'16-May'18, with a purchase target of USD 6-8bln scheduled for later in the session.
Asian Headlines
BOJ Target Rate (May) M/M 0.10% vs. Exp. 0.10% (Prev. 0.10%) by unanimous vote. (RTRS)
In a surprise move, Deputy Governor Nishimura dropped his proposal to loosen policy further with an expansion of the central bank’s asset-buying scheme. The BOJ also maintained its economic assessment, saying the economy is facing strong downward pressure, mainly on output, due to the impact of the March 11 earthquake.
In other news, PBOC’s Governor Zhou Xiaochuan said the government is trying to finds a balance between controlling inflation and supporting growth. He added that country’s loose monetary policy could sow the seeds of inflation and even asst price bubbles. In other news, China is aiming to get its monetary policy “back to normal”, according to Zhang Tao, head of the international department at the PBOC. (RTRS/Sources)
US Headlines:
The US Senate will place its annual budget process on hold to give the outcome of bipartisan deficit-reduction talks a greater chance of becoming law, the Senate Budget committee Chairman Kent Conrad said. (RTRS)
In other news, Treasury’s Deputy Secretary Wolin said US doesn’t discriminate in foreign investments. He added that US has not made any judgement about candidates for IMF managing director role. (RTRS/Sources)
Elsewhere, the Fed’s balance sheet expanded to USD 2.742tln in the week ending May 18 from USD 2.729tln the prior week. Also, foreign central banks’ overall holding of US marketable securities at the Fed fell by USD 11.13bln in the week ended May 18 to stand at USD 3.45tln. (RTRS)
EU and UK Headlines:
The ECB warned it may pull the plug on funding for Greek banks in the event of any restructuring of Greece's government debt, an escalation in what until now has been a behind-the-scenes dispute with euro-zone governments over the best way to handle Athens's fiscal crisis. The ECB, which has kept Greek banks afloat by accepting the country's bonds as collateral for short-term loans, is also worried about its own balance sheet should a default occur.
(WSJ)
· Eurozone Current Account SA (Mar) M/M -4.7bln vs. Prev. -7.2bln (Rev. to -6.5bln)
· Eurozone Current Account NSA (Mar) Y/Y -3.8bln vs. Prev. -9.5bln (Rev. to -8.9bln) (RTRS)
EQUITIES
In early European session equities traded higher helped by strength in basic materials and oil & gas sectors, while financials also demonstrated strength. However, as the session progressed and US participants entered into the market, equities pared back earlier gains and ventured into negative territory as focus shifted to peripheral Eurozone debt concerns. In equity specific news, Royal Dutch Shell shares demonstrated strength after co. said it has approved a final investment decision in Australia’s Prelude floating LNG project, whereas BP shares rose following co.’s announcement it had reached an agreement with Moex Offshore for USD 1.065bln. Moving into the North American open, most European indices are trading in minor negative territory, however the oil & gas sector is still outperforming its European peers.
Index | DAX | CAC | FTSE | EUROSTOXX | SMI |
Level | 7311.64 | 4013.18 | 5959.46 | 2874.28 | 6569.94 |
Change (ticks) | -46.59 | -14.56 | 3.47 | -16.32 | 11.99 |
FX
EUR came under substantial pressure, moving into the North American open, as US market participants focused on peripheral Eurozone debt concerns, which also led high-yield commodity linked currencies to pare back earlier gains. In other news, NZD/USD gained strength as Goldman Sachs boosted its forecast for the pair, whereas EUR/NOK came under pressure following hawkish comments from the Norges Bank chief.
Currency | EURUSD | GBPUSD | USDJPY |
Level | 1.4219 | 1.6228 | 81.70 |
Change (pips) | -0.0090 | -0.0009 | 0.0900 |
COMMODITIES
WTI and Brent crude futures gradually gained strength overnight and during early European session on the back of short-covering allied with weakness in the USD-Index. However, moving into the North American open, most of the earlier gains were pared as the market focused its attention on peripheral Eurozone debt concerns.
Oil & Gas News:
· The profit from producing gasoline may shrink this summer as refineries in the US and Atlantic Basin increase supplies, according to JP Morgan.
Geopolitical News:
· Gaddafi will inevitably leave power, US President Obama said, as NATO intensified its weeks-long bombing of government targets and said it had sunk eight Libyan warships.
· Iran’s Guardian Council said that it is “unlawful” for President Ahmadinejad to oversee the country’s oil ministry, according to Fars News Agency.
In other news, China overtook India to become the largest market for gold bars and coins in the first quarter of this year, as rising inflation inspired a surge in bullion investment. The surge in Chinese buying has supported prices, even as some investors in the west were cutting exposure to gold amid expectations that improving economic conditions and rising interest rates would mark an end to the gold rally. (FT - More) Meanwhile, Citigroup raised its 2011 Gold price forecast.
Commodity | WTI Nymex | OTC Spot Gold |
Level | 98.59 | 1493.88 |
Change (USD) | 0.15 | 0.53 |
LOOKING AHEAD
Economic Releases
CDT | BST |
| DATA | EXP | PREV |
0730 | 1330 | CA | Retail Sales M/M (Mar) | 0.9% | 0.4% |
0730 | 1330 | CA | Retail Sales Less Autos M/M (Mar) | 0.7% | 0.7% |
0900 | 1500 | EU | Eurozone Consumer Confidence M/M (May A) | -12.0 | -11.6 |
0930 | 1530 | US | ECRI Weekly Index W/W (May 20) |
| 129.7 |
0930 | 1530 | US | ECRI Weekly Annualised Y/Y (May 20) |
| 6.4% |
1200 | 1800 | US | Baker Hughes Rig Count W/W (May 20) |
| 1830 |
| |||||
Speakers | |||||
0700 | 1300 | US | Fed’s Dudley | ||
0800 | 1400 | EU | ECB’s Noyer | ||
0840 | 1440 | SZ | SNB’s Danthine | ||
0845 | 1445 | EU | ECB’s Weidmann | ||
| |||||
Auction | |||||
1000 | 1600 | US | Fed’s Outright Trea. Coup. Purch. Nov’16-May’18 (USD 6-8bln) | ||
**Notes:
UST June options expiry
WTI Crude June futures expiry
E-mini DOW/NASDAQ 100/S&P 500 May options expiry
NASDAQ 100/S&P 500 May Options expiry
CAC 40 May options & futures expiry
Prices taken at 1233BST
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