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

DAILY US OPENING NEWS - 08/07/11

 

·   Focus of the market remains on the nonfarm payroll data from the US, where market participants hope to see more jobs added to the US economy as compared to the previous month

 

·   Renewed market talk that the Italian finance minister may resign as he is opposed to any vote winning tax cut policies weighed on financials

 

·   According to banking sources, all five Italian banks involved in EU stress tests have passed. A source also said that all German banks stress-tested by the EBA have passed, based on their own calculations

·   A sharp increase in the net change in employment from Canada provided a boost to CAD

 

·   RANsquawk EU Morning Briefing Video: http://www.youtube.com/watch?v=FL06P5v2VEM

 

Market Re-Cap

 

European equities traded lower during the session, amid risk-aversion, with particular weakness seen in financials, which led the Italian FTSE MIB and Spanish IBEX 35 indices to underperform their European peers. Renewed market talk that the Italian finance minister may resign as he is opposed to any vote winning tax cut policies proved to be a catalyst behind the fall in financials. It also coincided with suspension of Unicredit shares, as well as widening of the Italian/German 10-year government bond yield spread to record highs. However, later in the session comments from banking sources that all five Italian banks involved in EU stress tests have passed them provided some support to equities. Meanwhile, EUR/USD remained under pressure due to the ongoing Eurozone debt concerns, and strength in the USD-Index, however CAD received a boost across the board following much higher than expected net change in employment data from Canada.

 

Moving into the North American open, the focus of the market remains on the nonfarm payroll data from the US, where market participants hope to see more jobs added to the US economy as compared to the previous month. Apart from that, the economic calendar remains thin, however, wholesale inventories data from the US is scheduled for later in the session.

 

Asia Headlines:

 

China shouldn’t halt monetary tightening in the second half of the year, according to a CBRC official, Yu Xuejun, and predicted that China will likely raise interest rates by as much as 0.75% in the second half. In other news, according to Chinese government officials, Sheng Songcheng and Yan Qingmin, government will watch current measures and take action in the second half if necessary. Yan Qingmin also said that China needs innovation in its monetary policy tools as the market has become immune to the standard moves taken by the PBOC to curb excess credit. (21st Century Business Herald/Financial News/China Securities Journal)

 

US Headlines

 

President Obama said he would not sign a short-term extension of the US debt ceiling and said negotiators would work through the weekend on a deal to avoid a debt default. (RTRS)

 

In other news, California Governor Jerry Brown’s financial plan for the state got a vote of confidence in the municipal bond market as S&P boosted its credit outlook to stable from negative, while maintained its A- rating. (Sources)

 

Elsewhere, Fed’s balance sheet rose to USD 2.854trl in the week ended July 6th from USD 2.849trl in the week ended June 29th. Also, foreign central banks’ overall holdings of US marketable securities at the Fed rose USD 12.71bln in the week ended July 6th, to stand at USD 3.453trl. (RTRS)

 

EU and UK Headlines:

 

According to a draft EU document, European countries will support banks that fail stress tests if those lenders cannot raise capital from investors within six months. It said banks that fail EU stress tests must submit capital plans by the end of September 2011 or sooner, and if a failing bank presents no credible plan by the deadline, its government will stand ready with steps to maintain financial stability. If measures are unsuccessful and deterioration at a bank is likely to endanger systemic stability, process of restructuring and resolution will be initiated, the document said. (RTRS)

 

 

 

In other news, the IMF executive board is expected to approve the disbursement of just over EUR 3bln for Greece today, in time to help the country pay debts falling due this month. The payment is part of a EUR 110bln EU/IMF bailout package crafted for Greece last year. (RTRS)

 

·   German Trade Balance (EUR) (May) M/M 14.8bln vs. Exp. 12.2bln (Prev. 10.9bln Rev. to 10.8bln)

·   German Current Account (EUR) (May) M/M 6.9bln vs. Exp. 7.0bln (Prev 8.8bln Rev. to 9.0bln)

·   UK PPI Input NSA (Jun) M/M 0.4% vs. Exp. -0.1% (Prev. -2.0%, Rev. to -1.7%)

·   UK PPI Output NSA (Jun) M/M 0.1% vs. Exp. 0.1% (Prev. 0.2%)

·   UK PPI Output Core NSA (Jun) M/M 0.2% vs. Exp. 0.2% (Prev. 0.2%) (RTRS)

 

EQUITIES

 

European equities traded lower during the session, amid risk-aversion, with particular weakness seen in financials, which led the Italian FTSE MIB and Spanish IBEX 35 indices to underperform their European peers. Renewed market talk that the Italian finance minister may resign as he is opposed to any vote winning tax cut policies proved to be a catalyst behind the fall in financials. It also coincided with suspension of Unicredit shares, as well as widening of the Italian/German 10-year government bond yield spread to record highs. However, later in the session comments from banking sources that all five Italian banks involved in EU stress tests have passed them provided some support to equities. Moving into the North American open, European equities are trading mixed, with utilities and technology being the worst performing sector.

 

Index

DAX

CAC

FTSE

EUROSTOXX

SMI

Level

7499.16

3978.48

6066.67

2836.41

6239.91

Change (ticks)

27.72

-1.48

12.12

-8.10

28.8

 

FX

 

EUR/USD traded lower during the European session on the back of debt concerns surrounding Eurozone countries, allied with strength in the USD-Index. In other news, USD/JPY continues to trade near its option expiry level of 81.30, which is rumoured to be larger than 1bln. Elsewhere, CAD received a boost across the board following much higher than expected net change in employment data from Canada.

 

·   Canadian Net Change in Employment (Jun) M/M 28.4K vs. Exp. 15.0K (Prev. 22.3K)

·   Canadian Unemployment Rate (Jun) M/M 7.4% vs. Exp. 7.4% (Prev. 7.4%) (RTRS)

 

Currency

EURUSD

GBPUSD

USDJPY

Level

1.4251

1.5955

81.40

Change (pips)

-0.0113

-0.0019

0.1500

 

COMMODITIES

 

WTI Crude futures are trading in negative territory as sentiment in European markets drops on fears that European Banks may fail stress tests and political instability in Italy.

 

Oil & Gas News:

·   North Sea Brent crude oil loading programme set at 135,000 BPD in August, according to trade source.

·   Exports of North Sea Brent crude for August will be unchanged from this month at seven cargoes, shipments will total 4.2mln barrels or 135,000 BPD.

·   The BGOV Barometer shows that Nymex crude-oil futures are higher after the IEA announced it would release 60mln barrels of oil over a 30 day period, according to analysts, a planned boost to Saudi Arabian production in H2 2011 may not be enough to stem further price increases.

·   Nat Gas futures may push for further gains according to IAF Advisors due to warmer than normal weather and an active hurricane season.

 

In other news, Central banks have pulled 635 tonnes of gold from the Bank for International Settlements in the past year, the largest withdrawal in more than a decade. The move, disclosed in the BIS’s annual report, marks a sharp reversal from the previous year when central banks added to deposits of gold at the so-called “bank for central banks” rather than lending it directly to the private sector amid growing concerns over counterparty risk.

 

Commodity

WTI Nymex

OTC Spot Gold

Level

98.41

1528.3

Change (NYSEARCA:USD)

-0.26

-4.08

 

LOOKING AHEAD

 

Economic Releases

 

CDT

BST

 

DATA

EXP

PREV

0730

1330

US

Change in Non-Farm Payrolls M/M (Jun)

105K

54K

0730

1330

US

Change in Manufacturing Payrolls M/M (Jun)

5K

-5K

0730

1330

US

Change in Private Payrolls M/M (Jun)

130K

83K

0730

1330

US

Unemployment Rate M/M (Jun)

9.1%

9.1%

0730

1330

US

Average Hourly Earning M/M (Jun)

0.2%

0.3%

0730

1330

US

Average Hourly Earning Y/Y (Jun)

1.9%

1.8%

0730

1330

US

Average Weekly Hours M/M (Jun)

34.4

34.4

0900

1500

US

Wholesale Inventories M/M (May)

0.6%

0.8%

0900

1500

US

Wholesale Sales M/M (May)

0.2%

0.3%

0930

1530

US

ECRI Weekly Index W/W (Jul 8)

 

126.4

0930

1530

US

ECRI Weekly Annualised Y/Y (Jul 8)

 

2.0%

1200

1800

US

Baker Hughes Rig Count W/W (Jul 8)

 

1886

1400

2000

US

Consumer Credit (USD) M/M (May)

4.000B

6.247B

 

Speakers

1230

1830

EU

ECB’s Bini-Smaghi

N/A

N/A

EU

IMF discusses next loan tranche to Greece

 

**Notes:

USD-Index July Options expiry

 

Prices taken at 1243BST