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DAILY US OPENING NEWS - 17/06/11

 

·   Market talk that a new Greek aid package could be worth as much as EUR 150bln against a previous estimate of EUR 120bln

 

·   German Chancellor Merkel and French President Sarkozy demonstrated a united front in their approach to tackle the Greek problem

 

·   German chancellor Merkel said she wants involvement of private creditors on a voluntary basis, and wants to work with the ECB on investors’ role in Greece

 

·   French President Sarkozy said that we have found an agreement on the private sector involvement on Greece, in line with the Vienna initiative

 

·   RANsquawk EU Morning Briefing Video: http://www.youtube.com/watch?v=Wv6PkIb0SHs

 

Market Re-Cap

 

Ongoing uncertainties surrounding the Greek debt situation, allied with signs of an apparent slowdown in the global economic recovery promoted risk-aversion in early European trade. However, in a stark reversal, risk-appetite re-emerged following market talk that a new Greek aid package could be worth as much as EUR 150bln against a previous estimate of EUR 120bln. Allied to this, German Chancellor Merkel and French President Sarkozy demonstrated a united front in their approach to tackle the Greek problem, whereas markets also observed a re-shuffle of the Greek cabinet, which brought further positive sentiment. As a consequence, the USD-Index ventured back in negative territory, in turn providing support to EUR/USD and GBP/USD. European equities pared back earlier losses, as financials advanced, and the Italian FTSE MIB and the Spanish IBEX 35 indices outperformed their European peers. Strength in equities weighed on bunds, and European peripheral 10-year government bond yield spreads narrowed.

 

Moving forward, markets look ahead to economic data from the US in the form of University of Michigan confidence and leading indicators. In fixed income, Fed's Outright TIPS purchase operation in the maturity range of Apr'13-Feb'41, with a purchase target of USD 1.5-2bln is also scheduled.

 

Asia Headlines:

 

BoJ’s Deputy Governor Nishimura did not repeat his proposal for further monetary easing at the central bank’s policy meeting on May 19th-20th because he saw few signs of a further worsening in sentiment, minutes of the meeting showed. Another Central Bank member said a need for easing remains but should mull best timing, few members said the risk of sentiment worsening remains, and one member said downward pressure on the economy is potentially big. (RTRS)

 

Global Headlines:

 

China’s vital interests are at stake if Europe cannot resolve its debts crisis, the Chinese Foreign Ministry said. Vice Foreign Ministry Fu Ying, made it plain that China had tried to help Europe overcome its troubles by buying more European debt and encouraging bilateral trade. (RTRS)

 

In other news, former Fed’s Chairman Greenspan said a default by Greece is almost certain and could drive the US economy into recession. (Sources)

 

US Headlines

 

Vice President Biden said he and a group of US lawmakers trying to hash out a deficit-reduction plan are determined to find USD 4tln in savings and prove to financial markets around the worlds that the government is serious about tackling the nation’s debt. (Sources)

 

In other news, Fed’s balance sheet expanded to USD 2.811tln in the week ended June 15th from USD 2.795tln the prior week. Also, foreign central bank’s overall holding of US marketable securities at the Fed rose USD 10.74bln in the week ended June 15th to stand at USD 3.457tln.  (RTRS)

 

 

 

 

 

 

EU and UK Headlines:

 

German chancellor Merkel said she wants involvement of private creditors on a voluntary basis, and wants to work with the ECB on investors’ role in Greece. She further said that she will do everything necessary to protect and stabilise the EUR. She also said that we are not talking about September for a Greek aid deal, however there is work to be done. (RTRS/Sources)

 

Also, French President Sarkozy said France and Germany have the same position on Greece and EUR, adding that a Greek deal needs to be agreed in accordance with the ECB. Sarkozy also said that we have found an agreement on the private sector involvement on Greece, in line with the Vienna initiative. (RTRS/Sources)

 

In the short-end, Short Sterling (Sep'11) has risen after further investment banks (UBS/RBS) pushed back their call for the first UK rate hike to February 2012 from previous estimates of an August move. Separately, front-month Eurodollar futures have also seen some relief on the back of the apparent consensus between Germany and France on how to proceed on the issue of Greece reversing some of the pressure that has been observed over the past few days.

 

·   Eurozone Trade Balance SA (EUR) (Apr) M/M -2.9bln vs. Exp. -2.7bln (Prev. -0.9bln Rev. to -2.2bln)

·   Eurozone Construction Output SA (Apr) M/M 0.7% vs. Prev. -0.3% (Rev. to -0.1%) (RTRS)

 

EQUITIES

 

European equities traded lower in early trade amid Greek debt concerns, allied with signs of a faltering global economic recovery. However, as the session progressed, equities recovered and moved back in positive territory after Germany and France took a unified approach on the issue of Greece. This led financials to advance, and the Italian FTSE MIB and Spanish IBEX 35 indices to outperform their European peers. Moving into the North American open, equities trade in positive territory, with financials and telecommunications as best performing sectors.

 

In other news, banks are being targeted for capital surcharges of 2.5% of their assets, adjusted for risk, on top of the ‘Basel III’ minimum of 7%. Citigroup, JPMorgan, Bank of America, Deutsche Bank, HSBC, BNP Paribas, Royal Bank of Scotland and Barclays would have to maintain core tier one capital ratios of 9.5%, according to three people briefed on the discussions. Goldman Sachs, Morgan Stanley, UBS and Credit Suisse would be in the next category down, facing a surcharge of 2% and total minimum ratio of 9%. Another 10% to 15% banks are likely to face surcharges ranging from 0.5% to 2%. There is an “empty bucket” above the highest tier that would carry a surcharge of at least 3%. (FT - More)

 

Index

DAX

CAC

FTSE

EUROSTOXX

SMI

Level

7206.16

3836.87

5721.38

2778.19

6179.42

Change (ticks)

95.96

44.56

22.57

47.57

21.75

 

FX

 

EUR traded under pressure in early European trade as Greek debt concerns persisted, however as the session progressed, and risk-appetite gathered pace, EUR/USD and GBP/USD moved back in positive territory, as the USD-Index weakened.

 

Elsewhere, China may issue an important CNY policy on June 19th as it is the one-year anniversary of the country’s decision to allow the currency to resume appreciating. (National Business Daily)

 

Currency

EURUSD

GBPUSD

USDJPY

Level

1.4279

1.6174

80.30

Change (pips)

0.0075

0.0016

-0.3300

 

COMMODITIES

 

WTI and Brent crude futures traded lower early in the European session amid ongoing Greek debt concerns, allied with strength in the USD-Index. However as the session progressed, prices came off their worst levels after growing signs of a united approach by European leaders to tackle the Greek situation, which also pushed the USD-Index into negative territory.

 

Oil & Gas News:

 

·   BNP Paribas has raised its 2011 WTI crude price forecast to USD 103 per barrel, also raising its 2011 Brent Crude price forecast by USD 4 per barrel to USD 116 per barrel.

·   Russia has failed to reach an agreement on an elusive 30-year gas supply deal with China in time for signing on today, with the two sides unable to bridge differences on price.

·   European oil refiners are likely to start reducing operating rates in coming weeks as shrinking supplies of regional crude boost prises and hurt processing profits, according to JP Morgan Chase.

·   OPEC will begin to report higher oil output for Venezuela after members accepted the addition of 500,000 BPD of Orinoco heavy crude, oil minister Ramirez said. Meanwhile, the Iraqi oil minister said OPEC will hold a meeting in September.

·   Saudi June loading fuel oil exports were 485,000 tonnes, down 25% from May, amid peak summer demand, according to trade sources.

 

Geopolitical News:

 

·   President Saleh vowed to overcome Yemen’s crisis, signalling once again he has no plans to quit, and in the latest wave of raids, gunmen attacked government buildings and a checkpoint. In other news, President Saleh will not return to Yemen, according to Saudi official.

·   At least six explosions heard in south-east of Libyan capital Tripoli, plums of smoke rise into sky.

 

Commodity

WTI Nymex

OTC Spot Gold

Level

93.48

1526.7

Change (NYSEARCA:USD)

-1.47

-3.10

 

LOOKING AHEAD

 

Economic Releases

 

CDT

BST

 

DATA

EXP

PREV

0730

1330

CA

Wholesale Sales M/M (Apr)

-0.3%

0.1%

0800

1400

WLD

IMF’s Economic, Financial & Fiscal Update

 

 

0855

1455

US

University of Michigan Confidence M/M (Jun P)

74.0

74.3

0900

1500

US

Leading Indicators M/M (May)

0.3%

-0.3%

0930

1530

US

ECRI Weekly Index W/W (Jun 17)

 

127.7

0930

1530

US

ECRI Weekly Annualised Y/Y (Jun 17)

 

4.1%

1200

1800

US

Baker Hughes Rig Count W/W (Jun 17)

 

1855

N/A

N/A

WLD

BIS Annual Report

 

 

N/A

N/A

WLD

IMF’s Global Financial Stability Report

 

 

N/A

N/A

WLD

IMF’s World Economic Outlook

 

 

 

Speakers

0900

1500

EU

European Council’s President Van Rompuy

N/A

N/A

EU

EU’s Competition Commissioner Almunia

 

Auction

1000

1600

US

Fed’s Outright TIPS Purchase Apr’13-Feb’41 (USD 1.5-2bln)

 

**Notes:

E-mini DOW/NASDAQ 100/S&P 500 June options and futures expiry

Regular DOW June options and futures expiry

CAC 40 June options & futures expiry

 

Prices taken at 1248BST

 

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