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DAILY US OPENING NEWS - 01/07/11

 

·   Growing prospects of the next tranche of the Greek aid being approved during the weekend underpinned positive sentiment, however softer manufacturing PMI data from China, UK, and core Eurozone countries dented appetite for risk

 

·   According to an official, Greece will get up to EUR 85bln in new rescue funds, adding that Greek combined aid from both rescues will be EUR 195bln

·   According to a spokesman, Eurogroup meeting in Brussels, scheduled for Sunday, is changed to Saturday evening conference call of ministers

 

·   Worse than expected manufacturing PMI data from the UK weighed upon GBP across the board

 

·   RANsquawk EU Morning Briefing Video: http://www.youtube.com/watch?v=tbFDBUJfLp4

 

Market Re-Cap

 

European equities lacked any firm direction during the session weighed upon by softer manufacturing PMI data from China, UK and Core Eurozone countries. However, growing prospects of the next tranche of the Greek aid being approved during the weekend underpinned positive sentiment, which also rendered support to the EUR. Elsewhere, GBP came under pressure across the board on the back of weaker than expected manufacturing PMI data from the UK, which saw EUR/GBP print a 15-month high.

 

Moving into the North American open, markets look ahead to key economic data from the US in the form of University of Michigan Confidence, Construction Spending, and ISM Manufacturing figures. It is worth noting that volumes may be lower than usual later in the session owing to the Independence Day holiday in the US on Monday.

 

Asia Headlines:

 

·   Japan Tankan Large Manufacturers Index (Q2) Q/Q -9 vs. Exp. -7 (Prev. 6)

·   Japan Jobless Rate (May) M/M 4.5% vs. Exp. 4.8% (Prev.4.7%)

·   Japan National CPI (May) Y/Y 0.3% vs. Exp. 0.2% (Prev. 0.3%)

·   China Manufacturing PMI (Jun) M/M 50.9 vs. Exp. 51.5 (Prev. 52.0), 28th-month low.

·   China HSBC Manufacturing PMI (Jun) M/M 50.1 vs. Prev. 51.6 (RTRS)

 

US Headlines

 

Fed’s Bullard said bolstering extended period language is hard to do in practise and a large balance sheet could turn into a lot of inflation if Fed doesn’t play its card right. However, if the economy is not performing well Fed should consider taking additional action, but situation is different now than last summer especially on inflation side. (RTRS)

 

Elsewhere, US Senate Democrats have discussed with President Obama a scaled back budget deal that would avert a looming default but force Congress to tackle the politically toxic issue again before 2012 elections, a Senate Democratic aide said. Such a deal would cover the country’s borrowing needed for seven months, the aide said, adding it is one of a handful of options discussed in meetings. Negotiators will need to reach an agreement on raising the US debt limit no later than July 22nd so that legislation can get passed in time to stave off a default on US debt, two Democratic officials familiar with the talks said. (RTRS/Sources)

 

In other news, US Treasury Secretary Geithner said if Congress does not raise debt ceiling it will be “unthinkably damaging” for the economy. Interest rates would rise, the US would have to pay more to borrow money, stocks would fall, savings would be depleted and more people would be out of work he said.  (RTRS)

 

Also, US Treasury Secretary Geithner is considering stepping down after this year, but will not make a decision until contentious negotiations over the US debt ceiling are completed, according to people familiar with his thinking. However, Geithner said he’ll stay in his job for the “foreseeable future”. (RTRS/Sources)

 

EU and UK Headlines:

 

According to an official, Greece will get up to EUR 85bln in new rescue funds, adding that Greek combined aid from both rescues will be EUR 195bln. The official further said that the EU is mulling ways to cope with Greek "selective default". (Sources)

 

 

Austrian finance minister said he is confident that Greece will get next tranche of loans. He also said that he is awaiting suggestions from the Austrian private sector on the Greek contribution, however there is no deadline for private sector contributions for the aid. He added that there is no alternative to the Greek austerity drive, no matter how painful. (RTRS)

 

·   Eurozone Manufacturing PMI (Jun F) M/M 52.0 vs. Exp. 52.0 (Prev. 54.6), lowest since December 2009

·   Eurozone Unemployment Rate (May) M/M 9.9% vs. Exp. 9.9% (Prev. 9.9%)

·   German Manufacturing PMI (Jun F) M/M 54.6 vs. Exp. 54.9 (Prev. 57.7), lowest since January 2010

·   French Manufacturing PMI (Jun F) M/M 52.5 vs. Exp. 52.5 (Prev. 54.9)

·   Italian Manufacturing PMI (Jun) M/M 49.9 vs. Exp. 50.6 (Prev. 52.8), lowest since October 2009

·   UK Manufacturing PMI (Jun) M/M 51.3 vs. Exp. 52.1 (Prev. 52.1, Rev. to 52.0) (RTRS)

 

EQUITIES

 

European equities lacked any firm direction during the session weighed upon by softer manufacturing PMI data from China, UK and Core Eurozone countries. However, growing prospects of the next tranche of the Greek aid being approved during the weekend underpinned positive sentiment, which provided support to financials in particular. Utilities performed well partly on the back of news that the French Energy Regulator, CRE, is aiming to boost prices for electricity by more than 5% from January 2012. However, the telecommunications sector underperformed partly on the back of comments from Morgan Stanley that it sees another 15% downside in Nokia shares. Vodafone also traded lower after it warned that a USD 2.5bln tax bill it faces in India could double.

 

Moving into the North American open, European equities are trading mixed with financials and utilities as best performing sectors.

 

Index

DAX

CAC

FTSE

EUROSTOXX

SMI

Level

7383.73

3982.4

5966.14

2851.97

6218.36

Change (ticks)

7.49

0.19

20.43

3.44

31.29

 

FX

 

EUR traded higher during the session on growing prospects that the next tranche of the Greek aid will be approved during the weekend, despite softer manufacturing PMI data from the core Eurozone countries. EUR/USD received further strength on the back of market talk of a US bank buying in the pair. In other news, GBP came under pressure across the board following weaker than expected manufacturing PMI data from the UK, which saw EUR/GBP print a 15-month high.

 

Elsewhere, Japanese finance minister Noda said Japan will take decisive steps on FX if JPY moves are excessive and disorderly. However, he added that FX interventions won’t target any specific JPY level. (RTRS)

 

Currency

EURUSD

GBPUSD

USDJPY

Level

1.4485

1.6011

80.77

Change (pips)

-0.0017

-0.0042

0.2100

 

COMMODITIES

 

WTI and Brent Crude futures traded in negative territory heading into the extended holiday period in the US allied with weaker than expected Chinese manufacturing PMI, which fell to a 28-month low.

 

Oil & Gas News

·   The US government expects to sell all 30mln barrels of oil it offered in an auction this week from the Strategic Petroleum Reserve and is prepared to take more action to ensure oil supplies are adequate to meet demand, according to an administration official.  The official also said Saudi Arabia has been clear that is committed to fulfilling its promise of producing more oil to help meet global demand. However, some of the oil being released from the US Strategic Petroleum Reserve to bring down prices may be held by traders for later sale rather than sent directly to refiners for processing into gasoline or other fuels.

·   Iran said they will halt oil exports to Indian refiners for August if payment dispute is not resolved, according to industry sources.

·   German crude being sold in the IEA release will be available for physical delivery on Monday and will be sold at market prices, according to the German Sales Agency.

·   The amount of European gasoline scheduled to be transported across the Atlantic may decline 17% in the next two weeks, a possible sign that superior profits for US refiners are curbing imports.

·   Commerzbank said they were sticking to their assessments that the oil price will fall to USD 100 a barrel by 2011 year end. Commerzbank added they do not see oil price falling below this mark for longer lasting period of time due to the IEA decision to release oil stockpiles.

Geopolitical News:

·   Libyan Rebels are pulling back from near Bir Al-Ghanam, South of Tripoli which is under rocket fire from government forces.

Commodity

WTI Nymex

OTC Spot Gold

Level

94.31

1490.81

Change (NYSEARCA:USD)

-1.11

-9.54

 

LOOKING AHEAD

 

Economic Releases

 

CDT

BST

 

DATA

EXP

PREV

0855

1455

US

University of Michigan Confidence M/M (Jun F)

72.0

71.8

0900

1500

US

Construction Spending M/M (May)

0.1%

0.4%

0900

1500

US

ISM Manufacturing M/M (Jun)

51.8

53.5

0900

1500

US

ISM Prices Paid M/M (Jun)

71.8

76.5

0930

1530

US

ECRI Weekly Index W/W (Jul 1)

 

127.0

0930

1530

US

ECRI Weekly Annualised Y/Y (Jul 1)

 

2.9%

1100

1700

IT

New Car Registrations Y/Y (Jun)

 

3.6%

1200

1800

US

Baker Hughes Rig Count W/W (Jul 1)

 

1882

1200

1800

IT

Budget Balance M/M (Jun)

 

-5.0B

1200

1800

IT

Budget Balance (Year to Date) Y/Y (Jun)

 

-44.8B

1600

2200

US

Domestic Vehicle Sales Y/Y (Jun)

9.40M

9.22M

1600

2200

US

Total Vehicle Sales Y/Y (Jun)

12.08M

11.76M

 

Speakers

0800

1400

EU

European Council’s President Van Rompuy

0830

1430

GE

Deputy Finance Minister Kampeter

1100

1700

EU

European Council’s President Van Rompuy

N/A

N/A

EU

EU’s Commissioner Barnier

N/A

N/A

EU

European Commission’s President Barroso

N/A

N/A

POR

Bank of Portugal Conference

 

**Notes:

Market closes due to US Independence Day holiday on Monday:

·          Floor Trade: CME/CBOT (Regular Close), NYSE (Regular Close), NYMEX (Regular Close)

·          Electronic Trade:

Ø        CME Globex – Equity (Regular Close), Interest Rate (Early Close 1515CDT/2115BST), FX (Early Close 1515CDT/2115BST), NYMEX (Regular Close)

o         Eurex (Regular Close)

o         NYSE LIFFE Sterling Based Products (Regular Close)

RANdesk will remain open as normal.

 

Prices taken at 1226BST

 

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