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DAILY US OPENING NEWS - 09/06/11

 

·   The ECB kept its key benchmark interest rate unchanged at 1.25% as expected; focus now shifts to ECB’s press-conference at 1330 BST

 

·   The BoE kept its key benchmark interest rate and asset purchase targets unchanged as expected at 0.50% and GBP 200bln respectively

 

·   Fitch said some Spanish regions are yet to show evidence of curbing expenses enough to meet goals

 

·   RANsquawk EU Morning Briefing Video: http://www.youtube.com/watch?v=UuOdNHs3zWM

 

Market Re-Cap

 

Ongoing peripheral Eurozone debt concerns, allied with worse than expected Greek GDP data, and downbeat comments by Fitch on various Spanish regions promoted risk-aversion. This in turn provided strength to Bunds, and saw widening of Eurozone peripheral 10-year government bond yield spreads. In the equity market core Eurozone stock indices traded higher, however weakness was observed in the peripheral Spanish IBEX 35 and Italian FTSE MIB indices. Elsewhere, as expected the BoE kept both the interest rate and asset purchase target unchanged, at 0.50% and GBP 200bln respectively, and focus will fall upon the ECB rate decision with particular emphasis on Trichet's press conference.

 

Looking further ahead there will be US employment data and wholesale sales allied with a USD 13bln 30-year note auction and another Fed's Outright Treasury Coupon Purchase operation in the maturity range of Dec'16-May'18, with a purchase target of USD 6-8bln.

 

Asia Headlines:

 

Japanese finance minister Yoshihiko Noda emerged as a possible frontrunner to replace Naoto Kan as premier after Asahi newspaper said ruling party executives would back his candidacy. (RTRS)

 

IMF’s Lipsky said Chinese inflation is likely to cool to a 4% pace by the end of 2011, and Chinese economy may grow about 9.5% this year and next. (Sources)

 

The residential-property bubble in China appears to be deflating, as prices are dropping in some major cities. The downward trend is damping some undesired real-estate speculation but also raising the prospect that the world's second largest economy may slow more rapidly than anticipated and damage global growth prospects. (WSJ)

 

·   Japanese GDP (Q1 F) Q/Q -0.9% vs. Exp. -0.8% (Prev. -0.9%)

·   Japanese Consumer Confidence (May) M/M 34.2 vs. Exp. 34.5 (Prev. 33.1) (RTRS)

 

US Headlines

 

PIMCO’s Bill Gross said that the Fed would not be able to start a third round of quantitative easing after the second round expires at the end of this month. He further said that the Fed will try to keep interest rates low with its official statements. (RTRS)

 

EU and UK Headlines:

 

·   UK Visible Trade Balance (GBP/mln) (Apr) M/M -7389 vs. Exp. -7549 (Prev. -7660 Rev. to -7708)

·   UK Trade Balance Non-EU (GBP/mln) (Apr) M/M -4339 vs. Exp. -4350 (Prev. -4479 Rev. to -4495)

·   UK Total Trade Balance (GBP/mln) (Apr) M/M -2762 vs. Exp. -2950 (Prev. -3005 Rev. to -2793)

·   Greek GDP (Q1 F) Q/Q 0.2% vs. Exp. 0.7% (Prev. 0.8%) (RTRS)

 

EQUITIES

 

European equity markets have seen a split performance today between the relative strength observed in the core supported by the utility sector against weakness in the Spanish IBEX and Italian FTSE MIB. On an individual stock basis Nokia shares were downgraded by one notch and put on watch negative at S&P and comments from the CEO today dismissed any speculation of a takeover given the recent fall in the share price as he was quoted as saying “the company is not for sale”.

 

 

Index

DAX

CAC

FTSE

EUROSTOXX

SMI

Level

7078.87

3842.54

5813.74

2753.03

6247.08

Change (ticks)

18.64

4.56

4.85

0.97

-9.78

 

FX

 

Earlier today the ECB kept interest rates on hold as expected at 1.25% with the market keenly awaiting the ECB press conference as to whether Trichet will signal a July rate hike by using the cord words “strong vigilance”. Any lack of vigilance with a more measured approach for a hike further down the line would likely result in an aggressive sell-off in EUR/USD so 1330 BST will be key for direction as we enter the later stages of the week. In other moved of note, AUD/USD sold-off aggressively overnight after much worse than expected employment data where as NZD/USD bucked the trend to print a record high at 0.8274 after hawkish comments on inflation from Gov. Bollard despite keeping rates on hold at 2.50%.

 

Currency

EURUSD

GBPUSD

USDJPY

Level

1.4618

1.6425

80.03

Change (pips)

0.0035

0.0021

0.1400

 

COMMODITIES

 

WTI and Brent crude futures came under pressure during the early European session after comments from OPEC’s Secretary General that currently the oil market remains well supplied, however as the session progressed prices have pared their earlier losses and are currently trading in positive territory.

 

Oil & Gas News:

·   OPEC Secretary General said the current OPEC output will be 2MBPD short of demand in Q3, but OPEC could raise output by 2MBPD without any problems. He added there is plenty of oil in the market today, stocks are high, OPEC is looking for a moderate oil price and oil price risk premium is USD 15-20 a barrel. The OPEC Secretary General said more regulation is needed to stem extreme price volatility, especially urging the EU and US to toughen regulations. He went on to add that it is the sovereign right of OPEC members to hike output without consensus.

·   The Libyan rebels’ oil minister said they will look to resume oil production from the east of the country ‘soon’.

·   Credit Agricole said the OPEC indecision is not ‘bullish’ for oil and Saudi Arabia will raise output in the absence of a quota. Similarly, Commerzbank said that Brent will not be above USD 120 per barrel on a ‘lasting basis’ due to the likelihood of Saudi Arabia boosting output.

·   Obama administration will extend Gulf of Mexico leases expiring by the end of 2015 to compensate oil producers for delays caused by last year’s moratorium, government official said.

 

Geopolitical News:

·   A senior US official said that Iranian uranium enrichment plan is a brazen example of deepening nuclear non-compliance.

·   Turkey threw open its borders to anxious Syrians refugees and urged their government to curb violence against civilians. Meanwhile, Britain and France asked the UN Security Council to condemn President Assad.

 

Commodity

WTI Nymex

OTC Spot Gold

Level

101.4

1536.15

Change (NYSEARCA:USD)

0.66

-1.50

 

 

 

 

 

 

 

 

 

 

LOOKING AHEAD

 

Economic Releases

 

CDT

BST

 

DATA

EXP

PREV

0730

1330

US

Initial Jobless Claims W/W (Jun 3)

419K

422K

0730

1330

US

Continuing Claims W/W (May 28)

3700K

3711K

0730

1330

US

Trade Balance (USD) M/M (Apr)

-48.8B

-48.2B

0730

1330

CA

International Merchandise Trade M/M (Apr)

0.6B

0.6B

0730

1330

CA

New Housing Price Index M/M (Apr)

0.1%

0.0%

0730

1330

CA

New Housing Price Index Y/Y (Apr)

1.8%

1.9%

0900

1500

US

Wholesale Inventories M/M (Apr)

1.0%

1.1%

0900

1500

US

Wholesale Sales M/M (Apr)

1.2%

2.9%

0930

1530

US

EIA Natural Gas Storage Change W/W (Jun 3)

78

83

 

Speakers

0730

1330

EU

ECB’s Press Conference following rate announcement

1030

1630

US

Fed’s Yellen (Voting Member)

1300

1900

EU

ECB’s Trichet at joint ECB-NY Fed Conference

 

Auctions

1000

1600

US

Fed’s Outright Trea. Coup.  Purch. Dec’16-May’18 (USD 6-8bln)

1200

1800

US

USD 13bln 30y Note Auction

 

Earnings

US

National Semiconductor

 

 

Prices taken at 1259BST