DAILY US OPENING NEWS - 31/05/11

 

·   According to an article in the WSJ, Germany is considering dropping its push for an early restructuring of Greek bonds

 

·   EU's Juncker said a total Greek debt restructuring is not an option, whereas ECB's Tumpel-Gugerell said it is not the case that the ECB will soften its stance on restructuring, adding that reprofiling is not an option

 

·   Weakness in the USD-Index provided support to WTI crude futures, as well as basic materials and oil & gas sectors

 

·   JPY came under pressure after Moody’s placed Japan’s sovereign ratings on review for a possible downgrade

 

·   RANsquawk EU Morning Briefing Video: http://www.youtube.com/watch?v=3Ua5KwpmFr8

 

Market Re-Cap

 

Risk-appetite remained the predominant theme today, supported by an article in the WSJ that Germany is considering dropping its push for an early restructuring of Greek bonds, allied with comments from EU's Juncker rejecting any restructuring. This resulted in general strength in the EUR and European equities, with outperformance seen in European peripheral indices. Weakness in the USD-Index helped commodities, which in turn supported basic materials and oil & gas sectors, whereas a rise in WTI crude futures underpinned the strength in CAD. Elsewhere, JPY traded under pressure after Moody's placed Japan's sovereign ratings on review for a possible downgrade.

 

Moving forward, markets look ahead to a slew of key economic data from the US including Chicago PMI and Consumer confidence, allied with Bank of Canada's rate decision. In fixed income, 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 is also scheduled for later in the session.

 

Asia Headlines:

 

Moody’s placed Japan’s sovereign ratings on review for a possible downgrade, citing concerns about a weak policy response to faltering economic growth prospects and debt situation. It further said that JGB funding crisis is unlikely in the near to medium term, however pressures could build over longer term. Moody’s intends to complete review of Japan’s sovereign rating within three months. Moody’s said at some point in future a tipping point could be reached in which market would put risk premium on JGBs. It further said that it didn’t see any progress on whether government and LDP could reach consensus on fiscal policy, and Japan’s macroscopic outlook is also weaker than expected. (RTRS)

 

In other news, Japanese ruling party powerbroker Ozawa has hinted he will back a no-confidence motion against PM Kan if he refuses to quit. However, PM Kan refused to step down saying he wanted first to resolve the nuclear crisis. (RTRS)

 

·   Japan Markit/JMMA Manufacturing PMI (May) M/M 51.3 vs. Prev. 45.7

·   Japan Jobless Rate (Apr) M/M 4.7% vs. Exp. 4.7% (Prev. 4.6%)

·   Japan Industrial Production (Apr P) M/M 1.0% vs. Exp. 2.0% (Prev. -15.5%)

·   Japan Industrial Production (Apr P) Y/Y -14.0% vs. Exp. -12.4% (Prev. -13.1%) (RTRS)

 

US, EU and UK Headlines:

 

EU said it is getting very close to end Troika Greek review mission, whereas a source in German ruling coalition said Troika has agreed to lower the VAT rate for Greece. (RTRS)

 

·   Eurozone CPI Estimate (May) Y/Y 2.7% vs. Exp. 2.8% (Prev. 2.8%)

·   Eurozone Unemployment Rate (Apr) M/M 9.9% vs. Exp. 9.9% (Prev. 9.9.%)

·   German Unemployment Change (000's) (May) M/M -8K vs. Exp. -30K (Prev. -37K)

·   German Unemployment Rate SA (May) M/M 7.0% vs. Exp. 7.0% (Prev. 7.1%) (RTRS)

 

Note: BarCap US month end extension seen at +0.11 years

Note: Month-end Extension: iBoxx Euro Sovereign Index: +0.02 years into May

Note: Month-end Extension: iBoxx Sterling Index +0.07 years

 

 

EQUITIES

 

European equities traded higher throughout the session amid renewed risk-appetite, with financials being one of the better performing sector, and outperformance seen in European peripheral indices. Weakness in the USD-Index helped commodities, which in turn provided support to basic materials and oil & gas sectors. Moving into the North American open, equities continue to trade in positive territory, with industrials and basic materials as best performing sectors.

 

Index	DAX	CAC	FTSE	EUROSTOXX	SMI
Level	7297.95	3999.38	5990.45	2864.6	6557.65
Change (ticks)	137.65	56.85	51.58	50.26	86.85

 

FX

 

EUR received strength following an article in the WSJ saying that Germany is considering dropping its push for an early restructuring of Greek bonds, allied with comments from EU's Juncker rejecting any restructuring. In other news, strength in WTI crude futures provided support to CAD, however Bank of Canada’s rate decision later in the session remains a risk-event for CAD. Elsewhere, JPY came under pressure after Moody’s placed Japan’s sovereign ratings on review for a possible downgrade.

 

Currency	EURUSD	GBPUSD	USDJPY
Level	1.4384	1.6504	81.55
Change (pips)	0.0102	0.0029	0.6100

 

COMMODITIES

 

WTI and Brent crude futures traded higher during the European session amid renewed risk-appetite, allied with weakness in the USD-Index.  Fears of a civil war in Yemen leading to potential supply disruptions also supported prices.

 

Oil & Gas News:

·   Due to the US market holiday at the beginning of the week, the API Inventory numbers will now be released on Wednesday 1^st June, with the DOE Inventory numbers released on Thursday 2^nd June.

·   Libya’s rebels have used up their stock of crude oil, with no certainty about when production can resume from vulnerable south-eastern oil fields, according to a spokesman for the Arabian Gulf Oil Co.

 

Geopolitical News:

·   A tenuous truce ending days of street fighting in the Yemeni capital has broken down between tribal groups and forces loyal to President Saleh, bringing the country closer to civil war.

·   South Africa’s President Zuma said that Gaddafi was emphatic in stating he would not leave Libya during talks in Tripoli.  It was reported over the weekend that if Zuma’s peace mission failed, Britain and France would launch strikes against Gaddafi forces.

 

Commodity	WTI Nymex	OTC Spot Gold
Level	102.06	1536.5
Change (USD)	1.47	-0.65

 

 

 

 

 

 

 

 

 

 

 

LOOKING AHEAD

 

Economic Releases

 

CDT	BST		DATA	EXP	PREV
0730	1330	US	Midwest Manufacturing M/M (Apr)		85.0
0730	1330	US	ISM New York Index M/M (May)		525.1
0730	1330	CA	Industrial Product Price M/M (Apr)	0.7%	0.9%
0730	1330	CA	Raw Materials Price Index M/M (Apr)	3.0%	5.7%
0800	1400	US	S&P/CaseShiller Home Price Index Y/Y (Mar)		139.27
0800	1400	US	S&P/CaseShiller City SA M/M (Mar)	-0.24%	-0.18%
0800	1400	US	S&P/ CaseShiller Composite-20 Y/Y (Mar)	-3.40%	-3.33%
0800	1400	US	S&P/CaseShiller HPI Y/Y (Q1)		130.38
0800	1400	US	S&P/CaseShiller  HPI Y/Y (Q1)		-4.13%
0800	1400	CA	Bank of Canada Rate M/M (May)	1.00%	1.00%
0845	1445	US	Chicago PMI M/M (May)	62.0	67.6
0900	1500	US	Consumer Confidence M/M (May)	66.5	65.4
0900	1500	US	NAPM Milwaukee M/M (May)	60.5	68.0
0930	1530	US	Dallas Fed Manufacturing Activity M/M (May)	8.0	10.5
0930	1530	UK	DMO Gilt Size Announcement
0930	1530	UK	Quarterly Gilt Operation Calendar
N/A	N/A	POR	IMF’s Technical Assistance Mission visits Portugal
Speakers
1100	1700	EU	ECB’s Noyer
1100	1700	EU	ECB’s Nowotny
Auction
1000	1600	US	Fed’s Outright Trea. Coup. Purch. Aug’28-May’41 (USD 1.5-2.5bln)

 

 

**Notes:

Bund/Bobl/Schatz June options expiry

Heating Oil/RBOB June futures expiry

 

Prices taken at 1251BST