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DAILY US OPENING NEWS - 06/06/11

 

·   Results from the Portuguese General election on Sunday showed that the centre-right PSD Party may form a government with the support of the CDS Party

 

·   A German finance ministry spokesman was quoted as saying that it is not certain whether there will be a second bailout for Greece and under what terms

 

·   Fed's Plosser said he expects somewhat tighter monetary policy possible by the end of this year

 

·   RANsquawk EU Morning Briefing Video: http://www.youtube.com/watch?v=zA8P0TDbfWU

 

Market Re-Cap

 

Results from the Portuguese general election on Sunday showed that the centre-right Social Democrats (PSD) registered a convincing win over the Socialists, and it became clear that they will form a government with their traditional allies the CDS Party. The news underpinned narrowing of the Portuguese/German 10-year government bond yield spread, and Portuguese stock index also outperformed its European peers. Elsewhere, despite the Troika recommendation on Greece last Friday, uncertainty remained on the country's debt situation, with a German finance ministry spokesman quoted as saying that it is not certain whether there will be a second bailout for Greece and under what terms. The indecision weighed on EUR/USD, and weakness was observed in major European indices, led by Italian FTSE MIB and Spanish IBEX 35 indices, with financials as the worst performing sector. Weakness in equities has supported Bunds, while most Eurozone peripheral spreads widened.

 

Looking forward, the economic calendar remains thin, however there is a Fed Outright Treasury Coupon Purchase operation in the maturity range of Dec'13-May'15, with a purchase target of USD 5-7bln, scheduled later in the session.

 

Asia Headlines:

 

Japanese PM Kan was urged by the secretaries general of the opposition LDP and New Komeito parties to step down by the end of this month. The secretary general of Kan’s governing DPJ also suggested that Kan should exit his post earlier than the current plan of August. Meanwhile, Moody’s said that the growing likelihood that the Japanese government will replace its PM in the near future adds to negative developments for the country’s sovereign rating. (Japan Today/RTRS)

US Headlines

 

Fed's Plosser said he expects somewhat tighter monetary policy possible by the end of this year. Plosser said that he is worried by the volatility of inflation expectations, adding that Fed inflation credibility may be weaker than thought. He also said that crisis may have hit US growth permanently, however sees a gradual recovery in the US economy. (RTRS/Sources)

 

EU and UK Headlines:

 

Latest on Greece: (Die Welt/Spiegel/RTRS/Kathimerini/Bild am Sonntag/FT More)

- Greece’s new aid package may amount to more than EUR 100bln if the country needs support in 2013 and 2014, according to a source citing officials at the German finance ministry. They are also proposing the extension of the maturity of Greek bonds, with investors who hold bonds maturing between 2012 and 2014 being asked to exchange them for seven-year bonds. However the FT reports that Greece may receive an additional EUR 60bln in financial support to meet a budget shortfall next year.

- Euro-zone officials will look to ask Greece’s creditors to exchange their soon to mature debt for debt with a longer maturity, a process that could begin as early as July once the new Greek aid package is approved at their meeting on June 20.

- EU officials will focus on preparing a new aid package for Greece that includes ‘voluntary’ roles for investors, following on from comments from EU’s Juncker that approval for the fifth tranche of Greece’s bailout will ‘conditionally include private sector involvement’. The scale of this contribution is said to be close to EUR 30bln.

 

In other news, Portugal’s centre-right Social Democrats (PSD) scored a convincing win over the Socialists in an election on Sunday. Results showed the PSD won 105 seats, or 39% of the vote, while the rightist CDS party obtained 24, allowing the two traditional government allies to have a strong majority in the 230-seat Parliament. The Socialists won 73 seats, 24 less than in the last election. CDS leader said he was ready to rule together with the Social Democrats. (RTRS)

 

·   Eurozone Sentix Investor Confidence (Jun) M/M 3.5 vs. Exp. 8.6 (Prev. 10.9) (RTRS)

·   German 6-month Bubill for EUR 4.565bln, bid/cover 1.70 vs. Prev. 1.50 (yield 1.1837% vs. Prev. 1.1796%) (RTRS)

 

EQUITIES

 

European equities traded lower during the session on the back of ongoing uncertainty over the Greek debt situation, with particular underperformance seen in Italian FTSE MIB and Spanish IBEX 35 indices. However, the Portugal’s market index outperformed its European peers due to indications of a stable government formation in the country following the latest general election. Moving into the North American open, equities continue to trade lower, with financials and utilities as worst performing sectors.

 

Index

DAX

CAC

FTSE

EUROSTOXX

SMI

Level

7088.77

3858.75

5852.65

2765.31

6388.48

Change (ticks)

-20.26

-31.93

-2.36

-23.80

-18.91

 

FX

 

Strength in the USD-Index weighed upon GBP/USD and EUR/USD, whereas EUR/USD came under further pressure following due to ongoing uncertainty surrounding the Greek debt situation. However, EUR/USD did receive some support later in the session following market talk of Asian names and a French corporate buying in the pair.

 

Currency

EURUSD

GBPUSD

USDJPY

Level

1.4607

1.6405

80.07

Change (pips)

-0.0028

-0.0021

-0.2700

 

COMMODITIES

 

WTI and Brent crude futures traded lower during the European session, weighed upon by global economic growth concerns, allied with strength in the USD-Index.

 

Oil & Gas News:

 

·   According to the IEA chief, OPEC must increase output, and not just quota ceiling, adding that IEA is ready to act if necessary. Also, Gulf Arab OPEC members led by Saudi Arabia will push for an increase in supplies in OPEC’s upcoming meeting. However, Iran’s OPEC governor said there is no need for OPEC to boost output at Wednesday’s meeting. Also, Iraq’s oil minister said that indications for global oil supply and demand are currently good.

·   According to Tehran Times, Iran’s caretaker oil minister will represent the country at this week’s OPEC meeting.

·   According to the IEA, the prospect of new, unconventional gas resources across the globe will push world gas demand past coal just after 2025 and come close to oil around 2035. It further said that gas glut will disappear by 2015, and global gas demand will grow 2% annually until 2035. It further said that gas will meet one quarter of global energy demand by 2035.

·   According to Total’s CEO, market needs to be reassured that there will be no cut in oil supply, adding that today there is no shortage of oil supply. He added that crude oil’s price volatility is hurting consumers and the swings in prices must be reduced.

 

Geopolitical News:

 

·   Colonel Gadaffi’s regime is close to collapse and his army is suffering hundreds of desertions every day, according to generals who fled Libya and plan to fight alongside the rebels. In related news, NATO has launched intensive air raids in the Libyan capital Tripoli against Gaddafi troops according to witnesses.

·   Syrian forces have killed a further 35 protesters in a northern Syrian village. Meanwhile, Syria said 23 people were killed in Sunday’s protest near the Golan Heights, when Israeli troops fired at Palestinian demonstrators who marched to the frontier fence.

·   Yemen Tribal chief al-Ahmar has agreed to a conditional truce and withdrawn forces occupying buildings. In other news, Yemeni President Saleh, who was wounded and is in Saudi Arabia for treatment, will not step down and will return to Yemen according to a Saudi official.

 

 

 

 

Commodity

WTI Nymex

OTC Spot Gold

Level

99.04

1544

Change (NYSEARCA:USD)

-1.18

2.05

 

LOOKING AHEAD

 

Economic Releases

 

CDT

BST

 

DATA

EXP

PREV

0730

1330

CA

Building Permits M/M (Apr)

 

17.2%

0900

1500

US

Employment Trends M/M (May)

 

100.5

0900

1500

CA

Ivey PMI M/M (May)

 

57.7

0900

1500

CA

Ivey PMI SA M/M (Apr)

58.8

57.8

 

Speakers

0830

1430

US

Secretary of State Clinton

1100

1700

EU

ECB’s Trichet speech at International Economic Forum of the Americas

1215

1815

US

Treasury Secretary Geithner

1445

2045

US

Fed’s Bernanke speaks at the International Monetary Conference (Voting Member)

1600

2200

FR

Foreign Minister Juppe

1630

2230

US

Fed’s Fisher (Voting Member)

 

Auctions

0745

1345

FR

EUR 8bln combined 12-, 15-, 25- and 51-week T-Bill Auctions

1000

1600

US

Fed’s Outright Trea. Coup.  Purch. Dec’13-May’15 (USD 5-7bln)

 

Earnings

US

National Semiconductor

 

**Notes:

Chinese Market Holiday

New Zealand Market Holiday

 

Prices taken at 1250BST