Please Note: Blog posts are not selected, edited or screened by Seeking Alpha editors.

DAILY US OPENING NEWS - 15/06/11

 

·   Enhanced uncertainty surrounding Greek debt situation promoted risk-averse trade today

 

·   Moody’s placed France’s top three banks, BNP Paribas, Societe Generale, and Credit Agricole, on review for a possible downgrade

 

·   It is expected that UK’s Chancellor Osborne will endorse plans to “ring fence” retail banking businesses of UK banks today in his Mansion House speech

 

·   ECB’s Stark and Liikanen supported private sector involvement in Greek debt, as long as it is voluntary. However, Fitch said an announcement of Vienna type initiative would likely trigger Greek ratings downgrade to 'C'

 

·   RANsquawk EU Morning Briefing Video: http://www.youtube.com/watch?v=-vIc67H9wMQ

 

Market Re-Cap

 

The increasing uncertainty surrounding the second Greek bailout package following a stalemate at last night's meeting of Eurozone finance minsters has created risk-averse sentiment this morning.  The EUR has been weak across the board as traders have looked to safer havens and as a result the USD-index has performed strongly.  Elsewhere in the forex market, GBP has traded down following the release of the UK's employment data, with jobless claims showing the largest increase since July 2009. European equities have been under pressure with financials particularly underperforming following Moody's issuing a warning on the ratings of French banks due to their Greek exposure.  In fixed income, Bunds have consequently been trading in positive territory as Greek and Irish 10-year bond yield spreads have hit record levels.  However, the opening of the order book on the EFSF 10-year benchmark Eurobond has been received positively, beating its EUR 5bln target and keeping Bunds off the highest levels.

 

Looking forward focus will switch to US economic data in the form of CPI, Empire manufacturing and DOE crude inventories. There will be another Fed's Outright Treasury Coupon Operation in the maturity range of Dec'16-May'18, with a purchase target of USD 4-5bln and later on BoE's King speaks at Mansion House in London.

 

Asia Headlines:

 

Japanese finance minister Noda said he is ready to resign in exchange for the passage of bills related to bond sales and tax reforms. Also, according to Japan’s ruling Democratic Party Secretary General, Okada, country’s second extra budget will likely to be about JPY 2trl. (Jiji/Kyodo News)

 

In other news, according to PBOC’s adviser Li Daokui, China should raise interest rates, particularly deposit rates, to rein in persistent inflation, adding that inflation pressures are still large. Also, according to a report in China Daily, China may raise interest rates in weeks, if not days to prevent a surge in inflation. (China Securities Journal/China Daily)

 

US Headlines

 

Fed officials are discussing whether to adopt an explicit target for inflation, according to people familiar with the discussions. (Sources)

 

·   MBA Mortgage Applications (Jun 10) W/W 13.0% vs. Prev. -0.4% (RTRS)

 

EU and UK Headlines:

 

A German-inspired plan to reschedule Greek debt could force Eurozone governments to provide up to an extra EUR 20bln to avoid a meltdown of its financial sector, European finance ministers have been warned. A briefing paper circulated by the European Commission, and seen by the Financial Times, warned the extra money may be needed to recapitalise Greek banks following a proposed maturity extension of Greek government bonds, which would be classified by rating agencies as a “selective default”. A further cash reserve may be required for emergency Greek bank liquidity if the European Central Bank refuses to accept downgraded bonds as collateral. Ministers have been told all the Greek collateral – some EUR 70bln – might have to be replaced. (FT - More)

 

ECB’s Stark said the ECB is not against private sector involvement, however it must be voluntary. He also said that a partial or complete default must be avoided, adding that the ECB doesn’t finance member states. Also, ECB's Liikanen said voluntary solutions on private participation are recommended, and the ECB does not oppose them. He further said that a Vienna style package as such would not likely be opposed, however he called for the avoidance of any credit events. (RTRS/Sources)

 

·   UK Jobless Claims Change (May) M/M 19.6K vs. Exp. 6.5K (Prev. 12.4K, Rev. to 16.9K)

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

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

·   UK Nationwide Consumer Confidence (May) M/M 55 vs. Exp. 45 (Prev. 43, Rev. to 44) (RTRS)

 

·   German Schatz auction for EUR 4.9445bln, 14-Jun-13, bid/cover 1.4 vs. Prev. 1.9 (yield 1.570% vs. Prev. 1.790%, retention 17.60% vs. Prev. 16.31%)

·   UK Conventional Gilt auction for GBP 2.25bln, 4.25%, bid/cover 1.85 vs. Prev. 2.15, yield tail 0.3BPS

·   Portuguese 3-month T-Bill Auction for EUR 0.612bln, Bid/Cover 2.40 vs. Prev. 2.70 (Yield 4.863% vs. Prev. 4.967%)

·   Portuguese 6-month T-Bill Auction for EUR 0.388bln, Bid/Cover 3.80 vs. Prev. 3.70 (Yield 4.954% vs. Prev. 5.529%) (RTRS)

 

EQUITIES

 

European equities traded lower during the session, led by weakness in the financials sector, with particular underperformance sees in the Italian FTSE MIB and Spanish IBEX 35 indices. The ongoing debt situation surrounding Greece, allied with Moody’s placing France’s top three banks, BNP Paribas, Societe Generale, and Credit Agricole, on review for a possible downgrade, weighed on financials. Also, anticipation that UK’s Chancellor Osborne will endorse plans to “ring fence” retail banking businesses of UK banks, today in his Mansion House speech, brought further negative sentiment in the market. Moving into the North American open, equities continue to trade lower, with financials and telecommunications as worst performing sectors.

 

Index

DAX

CAC

FTSE

EUROSTOXX

SMI

Level

7176.04

3846.54

5792.31

2760.87

6249.95

Change (ticks)

-28.75

-18.04

-10.82

-19.07

-5.73

 

FX

 

The USD-Index traded in positive territory during the European session, which in turn weighed on EUR/USD and GBP/USD. Meanwhile, EUR/USD came under further pressure on the back of growing uncertainty surrounding the debt situation in Greece. Also, an unexpected decline in jobless claims change data from the UK exerted downward pressure on GBP/USD.

 

Elsewhere, after trading in negative territory for a vast majority of the European session, AUD/USD received some support following comments from the Russian Central Bank that it plans to start purchasing AUD into its reserves in the autumn. Also, Reserve Bank of Australia’s Governor Stevens said that an increase in Australian interest rates is still likely to be needed to restrain inflation amid trade and mining boom.

 

Currency

EURUSD

GBPUSD

USDJPY

Level

1.4310

1.6264

80.71

Change (pips)

-0.0130

-0.0107

0.2200

 

COMMODITIES

 

WTI and Brent crude futures both trade in negative territory moving into the NYMEX pit open amid ongoing Eurozone debt concerns, allied with strength in the USD-index.

 

Oil & Gas News:

·   Iran’s OPEC governor said there is no emergency in the oil market requiring an extraordinary OPEC meeting. He added he sees little market demand for extra Saudi output.

·   US and Saudi officials met to discuss an unprecedented agreement: exchanging urgently-needed high-quality crude oil stored in the US emergency reserve for heavier, low-quality oil from Saudi Arabia, according to people familiar with the plan.

·   China’s major oil refineries may cut processing volumes in June from a month earlier as more plants shut for scheduled maintenance, according to industry website oilchem.net.

·   US natural-gas producers are pumping fuel at a record pace as advances in drilling techniques help offset a decline in rigs. Companies increased gas output by about 11% since end of 2007 to a monthly record in March, Energy Department in Washington said.

 

Geopolitical News:

·   House Speaker John Boehner says the Obama administration clearly will be in violation of the War Powers Act by this weekend after failing to seek congressional consent for the U.S. military action in Libya. In a letter sent to the White House on Tuesday, the Ohio Republican says the upcoming weekend will mark 90 days from the first U.S. air strikes on Libya. Boehner asked President Barack Obama to explain by Friday what are the legal grounds for the operation.

·  Thousands of Syrians fled the historic town of Marrat-al-Numaan to escape tank forces thrusting into the country’s north in a widening military campaign to crush protests against President Assad.

 

Commodity

WTI Nymex

OTC Spot Gold

Level

98.93

1518.35

Change (NYSEARCA:USD)

-0.44

-5.43

 

LOOKING AHEAD

 

Economic Releases

 

CDT

BST

 

 

 

 

0730

1330

US

CPI M/M (May)

0.1%

0.4%

0730

1330

US

CPI Y/Y (May)

3.4%

3.2%

0730

1330

US

CPI Ex Food & Energy M/M (May)

0.2%

0.2%

0730

1330

US

CPI Ex Food & Energy Y/Y (May)

1.4%

1.3%

0730

1330

US

CPI Core Index SA M/M (May)

 

223.745

0730

1330

US

CPI NSA Y/Y (May)

225.550

224.906

0730

1330

US

Empire Manufacturing M/M (Jun)

12.00

11.88

0730

1330

CA

Manufacturing Sales  M/M (Apr)

-1.4%

1.9%

0800

1400

US

Total Net TIC Flows (USD) M/M (Apr)

 

116.0B

0800

1400

US

Net Long-Term TIC Flows (USD) M/M (Apr)

35.0B

24.0B

0815

1415

US

Industrial Production M/M (May)

0.2%

0.0%

0815

1415

US

Capacity Utilisation M/M (May)

77.0%

76.9%

0900

1500

US

NAHB Housing Market Index M/M (Jun)

16

16

0930

1530

US

DOE Crude Oil Inventories W/W (Jun 10)

-1750K

-4845K

0930

1530

US

DOE Gasoline Inventories W/W (Jun 10)

1000K

2209K

0930

1530

US

DOE Distillate Inventory W/W (Jun 10)

1125K

810K

0930

1530

US

DOE Cushing Crude Inventory W/W (Jun 10)

 

-1016K

0930

1530

US

DOE Refinery Utilisation W/W (Jun 10)

0.15%

1.20%

1030

1630

US

Cleveland Fed CPI M/M (May)

 

0.2%

1700

2300

NZ

Westpac Consumer Confidence Q/Q (Q2)

 

97.9

1730

2330

NZ

Business PMI M/M (May)

 

51.5

N/A

N/A

GR

General Strike in Greece

 

 

Speakers

0700

1300

EU

ECB’s Bini Smaghi

0800

1400

EU

ECB’s Constancio

1445

2045

UK

BoE’s King speaks at Mansion House, London

1600

2200

CA

Bank of Canada’s Governor Carney

Auctions

1000

1600

US

Fed’s Outright Trea. Coup. Purch. Dec’16-May’18 (USD 4-5bln)

N/A

N/A

EU

EFSF’s EUR 5bln 10-year Benchmark Bond

 

Prices taken at 1245BST

 

***************************************************************************

 

The NYSE LIFFE is inviting members to apply to participate in the Designated Market Maker (DMM) Programme in Euro Swapnote Futures Contracts. The DMM Programme will operate until the close of business on the 30th of December 2011. Please contact your LIFFE account manager and mention RANsquawk for more information.

 

NYSE Euronext and its affiliates (hereafter “NYSE Euronext”) shall not be liable, except where required by law, for any loss arising from the use or misuse of the information provided to Real-time Analysis and News Limited for transmission via its “Squawk” service (“a Communication”) howsoever arising. NYSE Euronext shall not be responsible for any errors or omissions contained in any Communication. 

 

Those wishing either to trade in any products available through NYSE Euronext or to offer and sell them to others should consider both their legal and regulatory position in the relevant jurisdiction and the risks associated with such products before doing so and are urged to take advice in this regard.  A Communication shall not constitute or contain investment advice nor be an invitation or inducement to engage in investment activity