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DAILY US OPENING NEWS - 29/06/11

 

·   Growing prospects that the Greek austerity measures will likely go through Parliament today enhanced risk-appetite

·   Greek opposition lawmaker Papadimitriou as well as the Socialist Party dissenter Robopoulos said they will vote for the fiscal plan

 

·   ECB's Stark said that a "Brady Bond" style solution would be in violation of the EU's no bailout clause, and rejected the idea that banks could exchange the Greek debt for paper guaranteed by the EU states

 

·   Bank of Spain reiterated ECB's Trichet comment on strong vigilance

 

·   EBA’s chairman said speculation that up to 15 banks failed stress tests were unfounded, adding that results are not finalised yet

 

·   RANsquawk EU Morning Briefing Video: http://www.youtube.com/watch?v=4Hh5VQAkJfA

 

Market Re-Cap

 

Growing prospects that the Greek austerity measures will likely go through Parliament today enhanced risk-appetite, which in turn provided support to the EUR, equities and weighed upon the USD-Index. Strength in equities allied with a lack-lustre Bobl auction from Germany exerted pressure on Bunds, whereas Eurozone 10-year government bond yield spreads narrowed across the board. The EUR also received support after the Bank of Spain reiterated ECB's Trichet comment on strong vigilance. However, the currency came under some pressure after ECB's Stark said that a "Brady Bond" style solution would be in violation of the EU's no bailout clause, and rejected the idea that banks could exchange the Greek debt for paper guaranteed by the EU states.

 

Moving forward, the Greek austerity vote remains the main focus of the market, however pending home sales and DOE inventories data from the US, as well as Canadian CPI figures are also due. In fixed income, USD 29bln 7-year Note auction, allied with another Fed's Outright Treasury Coupon Purchase operation in the maturity range of Aug'28-May'41, with a purchase target of USD 2-3bln, are also scheduled for later in the session.

 

Asia Headlines:

 

China’s inflation is ‘most likely chronic’ and will remain a problem over the next decade, Li Daokui, an academic advisor to the PBOC said. Meanwhile China’s inflation is likely to average 5.3% this year, according to Li Jianwei, director of the macro economy research institute under the State Council’s Development Research Centre. (Sources)

 

·   Japan Industrial Production (May P) M/M 5.7% vs. Exp. 5.5% (Prev. 1.6%)

·   Japan Industrial Production (May P) Y/Y -5.9% vs. Exp. -6.3% (Prev. -13.6%) (RTRS)

 

Global News:

 

According to Bank of America, the withdrawal of excess liquidity measures could potentially translate into more volatility in the third quarter of this year. Bank of America also said that it is cutting back its overweight position in global equities, reducing its underweight in bonds, and pushing its commodity exposure back to neutral, as the next few months will offer a better entry point to reload on risky assets. (Sources)

 

US Headlines

 

Fed’s Bullard said the Fed, amid persistent worries about Europe's sovereign debt crisis, last week quietly approved the extension of a crisis-lending program that allows the ECB to tap the U.S. for USD. The Fed's dollar-lending agreements with the ECB as well as the central banks of England, Canada, Japan and Switzerland were scheduled to expire Aug 1st, the Fed and other central banks haven't yet disclosed renewal of the agreements, known as swap lines. (WSJ)

 

In other news, California legislature passed budget to close its USD 27.1bln deficit, and Governor Jerry Brown is expected to sign the budget by Friday. (WSJ)

 

·   US MBA Mortgage Applications (Jun 24) W/W -2.7% vs. Prev. -5.9% (RTRS)

 

BarCap month-end extensions: US Treasury +0.06 years

 

 

EU and UK Headlines:

 

Greek banks’ potentially crucial contribution to a voluntary debt rollover as part of a fresh bail-out plan for the crisis-hit country could be held back by European Central Bank restrictions on their activities. The ECB has not opposed a voluntary debt roll over, but it has ruled out rolling over the estimated EUR 45bln in Greek government bonds it owns and warned against any steps that would be deemed a default by rating agencies. (FT-More)

 

In other news, Greece’s planned sale of state assets may not bring in more than a quarter of the earmarked EUR 50bln unless more prime land and cultural heritage are added to the sales list, citing a report by Privatisation Barometer, a Milan based institute backed by Fondazione Eni Enrico Mattei and KPMG. (FT-More)

 

·   Eurozone Business Climate Indicator (Jun) M/M 0.92 vs. Exp. 0.90 (Prev. 0.99, Rev. to 0.98)

·   Eurozone Consumer Confidence (Jun F) M/M -9.8 vs. Exp. -10.0 (Prev. -10.0)

·   Eurozone Economic Confidence (Jun) M/M 105.1 vs. Exp. 105.0 (Prev. 105.5)

·   Eurozone Industrial Confidence (Jun) M/M 3.2 vs. Exp. 3.5 (Prev. 3.9, Rev. to 3.8)

·   Eurozone Services Confidence (Jun) M/M  9.9 vs. Exp. 9.0 (Prev. 9.2, Rev. to 9.3)

·   UK Net Consumer Credit (May) M/M 0.2bln vs. Exp. 0.4bln (Prev. 0.5bln)

·   UK Net Lending Sec. on Dwellings (May) M/M 1.1bln vs. Exp. 0.7bln (Prev. 0.7bln, Rev. to 1.0bln)

·   UK Mortgage Approvals (May) M/M 45.9K vs. Exp. 46.3K (Prev. 45.2K, Rev. to 45.4K) (RTRS)

 

·   German Bobl auction for EUR 4.825bln, 2.75% 08-Apr-16, bid/cover 1.1 vs. Prev. 1.9 (yield 2.160% vs. Prev. 2.450%, retention 19.60% vs. Prev. 18.24%) (RTRS)

 

BarCap month-end extensions: Euro Sovereign Index +0.06 years

BarCap month-end extensions: Sterling Index +0.22 years

 

EQUITIES

 

European equities traded higher during the session amid risk-appetite on the back of growing prospects of an approval of the Greek austerity package by Parliament today. This led to strength in financials, with the Italian FTSE MIB and Spanish IBEX 35 indices to outperform their European peers. Financials received further support after EBA’s chairman said speculation that up to 15 banks failed stress tests were unfounded, adding that results are not finalised yet. Weakness in the USD-Index helped basic materials and oil & gas sectors, and moving into the North American open, equities maintain their strength, with industrials and financials as best performing sectors.

 

Index

DAX

CAC

FTSE

EUROSTOXX

SMI

Level

7301.05

3923.35

5850.4

2806.7

6093.74

Change (ticks)

130.62

71.46

83.52

56.21

91.34

 

FX

 

Growing prospects that the Greek austerity measures will likely go through Parliament today provided strength to the EUR, which also received support after the Bank of Spain reiterated ECB's Trichet comment on strong vigilance. However, the currency came under some pressure after ECB's Stark said that a "Brady Bond" style solution would be in violation of the EU's no bailout clause, and rejected the idea that banks could exchange the Greek debt for paper guaranteed by the EU states.

 

In other news, CAD strengthened across the board after much higher than expected CPI data from Canada.

·   Canadian CPI (May) Y/Y 3.7% vs. Exp. 3.3% (Prev. 3.3%)

·   Canadian CPI (May) M/M 0.7% vs. Exp. 0.3% (Prev. 0.3%)

·   Bank of Canada CPI Core (May) M/M 0.5% vs. Exp. 0.2% (Prev. 0.2%)

·   Bank of Canada CPI Core (May) Y/Y 1.8% vs. Exp. 1.5% (Prev. 1.6%) (RTRS)

 

Elsewhere, according to Russian President Medvedev’s economic aide, Russia seeks to decrease its USD debt holdings, and may boost the portion of its reserves kept in CAD and AUD, while keeping the EUR portion constant. The aide added that Russian finance ministry has nothing against purchasing Spanish debt. (Sources)

 

 

 

 

Currency

EURUSD

GBPUSD

USDJPY

Level

1.4423

1.6032

81.03

Change (pips)

0.0052

0.0031

-0.0900

 

COMMODITIES

 

WTI and Brent crude futures have traded in positive territory with renewed risk appetitive across several risk assets, heading towards the results of the Greek austerity plan in parliament allied with weakness observed in the USD-Index.

 

Oil & Gas News:

·   The IEA is confident that Saudi Arabia will continue to boost its crude production in the wake of IEA’s stockpile release, according to IEA’s Tanaka. However, according to an article in the Telegraph, a growing split between consumers and major OPEC producers over prices means Saudi Arabia may no longer increase its oil output by as much as it pledged.

·   July Saudi fuel oil supplies into East Asia hit a 26 month high of 450,000 - 500,000 tonnes after 3 recent deals, according to trade sources.

·   The Alaskan Cook Inlet region of Alaska may hold about 19tln cubic feet of natural gas, the US Geological Survey said.

·   Goldman Sachs said US gas output may increase by 2.9bln cubic feet a day this year and 1.2bln next year compared with previous estimates of 1.3bln and 900mln respectively.

·   Australia’s minister for resources and energy, Martin Ferguson, said nuclear power generation closures would boost consumption of coal and LNG gas.

 

Geopolitical News:

·   Libya’s Gaddafi could fall within two to three months, the International Criminal Court’s prosecutor said, as rebels sought to build on a gradual advance towards Tripoli.

·   Iran’s Ahmadinejad may be forced to resign in coming weeks after his close friend and confidant Rahim-Mashaee, president chief of staff, was blamed for firing two intelligence ministers and for infuriating the Supreme Leader Ali Khamenei. In other news, Iran has tested a new radar system as part of a show of strength; it hopes to warn Israel and the US against any attack, according to a military commander.

 

Commodity

WTI Nymex

OTC Spot Gold

Level

93.98

1507.55

Change (NYSEARCA:USD)

1.09

6.15

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

LOOKING AHEAD

 

Economic Releases

 

CDT

BST

 

DATA

EXP

PREV

0900

1500

US

Pending Home Sales M/M (May)

3.0%

-11.6%

0900

1500

US

Pending Home Sales Y/Y (May)

 

-26.8%

0930

1530

US

DOE Crude Oil Inventories W/W (Jun 24)

-1500K

-1711K

0930

1530

US

DOE Gasoline Inventories W/W (Jun 24)

775K

-464K

0930

1530

US

DOE Distillate Inventory W/W (Jun 24)

1050K

1173K

0930

1530

US

DOE Cushing Crude Inventory W/W (Jun 24)

 

273K

0930

1530

US

DOE Refinery Utilisation W/W (Jun 24)

0.00%

3.10%

N/A

N/A

EU

European Commission’s Quarterly Report on Euro-area

 

 

N/A

N/A

EU

European Union’s Long Term Budget (2014-2020) Release

 

 

N/A

N/A

GR

Vote on the New Medium-Term Austerity Plan

 

 

N/A

N/A

GR

General Strike

 

 

 

Speakers

0730

1330

GE

Chancellor Merkel

0810

1410

UK

BoE’s Tucker

0900

1500

WLD

IMF’s Press Conference on the US Economy

0930

1530

EU

ECB’s Orphanides

1045

1645

EU

European Council’s President Van Rompuy

1100

1700

US

Fed’s Raskin (Voting Member)

1250

1850

US

President Obama

 

Auctions

1000

1600

US

Fed’s Outright Trea. Coup.  Purch. Aug’28-May’41 (USD 2-3bln)

1200

1800

US

USD 29bln 7y Note Auction

 

Earnings

US

Monsanto

 

Prices taken at 1244BST