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DAILY US OPENING NEWS - 12/07/11

 

·   The mood of Eurozone finance ministers is tilting towards more flexibility in restructuring of Greek debt

 

·   Dutch finance minister said a selective default for Greece is not excluded anymore, however Belgium have said they see no country defaulting

 

·   According to an article in the ABC newspaper, citing unnamed sources, as many as six Spanish banks have failed the European stress tests, including five savings banks and one medium-sized bank

·   Successful T-Bill bill auctions from Italy, Belgium and Greece helped equities and EUR to come off their worst levels, allied with unconfirmed market talk of the ECB and China buying in the European debt

 

·   RANsquawk EU Morning Briefing Video: http://www.youtube.com/watch?v=AAqzB0kedC8

 

Market Re-Cap

 

Risk-aversion remained the dominant theme during the early European session on the back of fears of contagion to core Eurozone countries from the peripherals. The mood of Eurozone finance ministers tilting towards more flexibility in restructuring of Greek debt, and with the Dutch finance minister not negating a selective default for Greece exacerbated the risk-averse tone. Moreover, an article in the ABC newspaper, citing unnamed sources, that as many as six Spanish banks have failed the European stress tests, including five savings banks and one medium-sized bank, also weighed on sentiment. European equities, led by financials, traded lower in early trade, which supported Bunds as the Italian 10-year bond yield crossed the 6% mark for the first time since 1997. However, a reversal of sentiment was observed as the session progressed, supported by market talk of the ECB and China buying in the European bonds, together with successful T-Bill auctions from Italy and Greece, which observed narrowing of the Eurozone peripheral 10-year government bond yield spreads. Elsewhere, GBP/USD plummeted around 70 pips following lower than expected CPI figures from the UK, which also provided strength to Gilts.

 

Moving into the North American open, markets look ahead to key economic data from the US in the form of trade balance, and IBD/TIPP economic optimism, as well as the FOMC minutes later in the session. In fixed income, USD 32bln 3-year Note auction is also scheduled for later.

 

Asia Headlines:

 

BoJ Target Rate (Jun) M/M 0.10% vs. Prev. 0.10% (RTRS/Sources)

The BoJ revised up its assessment of the economy, encouraged by a pickup in factory output and the prospects for recovery in business sentiment. BoJ says Japan’s economy will resume moderate recovery from latter half of fiscal 2011/12. Worries about supply chains are easing and uncertainty rising somewhat on long-term power supply constraints. BoJ says need to continue watching Europe sovereign debt woes and impact of balance sheet adjustments in the US economy.

 

US Headlines

 

There was no movement on a dispute over revenues in debt talks between President Obama and congressional leaders at the White House on Monday, a Democratic official familiar with the meeting said. Meanwhile, Democratic congressional leaders made clear in talks lead by President Obama that there would not be votes from their side to pass a deficit-cutting bill if it contained only spending cuts, Democratic officials familiar with the talks said. Also, speaker of the House of Representatives Boehner pushed for immediate spending cuts at Monday’s debt reduction meeting with President Obama and fellow congressional leaders, a Republican aide said. (RTRS)

 

·   US NFIB Small Business Optimism (Jun) M/M 90.8 vs. Exp. 91.2 (Prev. 90.9) (RTRS)

 

EU and UK Headlines:

 

Eurozone finance ministers said reaffirmed commitment to safeguard stability in the Eurozone and demonstrated their readiness to adopt further measures to improve Eurozone systemic capacity to resist contagion. They said this includes enhancing flexibility and scope of EFSF rescue fund, steps also include lengthening maturities of loans and lowering interest rate on loans. ECB confirms its position that credit event or selective default should be avoided. Eurozone finance ministers have tasked a working group to propose measures to reinforce current policy response to the Greek crisis. (RTRS)

 

 

 

·   UK CPI (Jun) Y/Y 4.2% vs. Exp. 4.5% vs. (Prev. 4.5%)

·   UK RPI (Jun) Y/Y 5.0% vs. Exp. 5.2% (Prev. 5.2%)

·   UK DCLG UK House Prices (May) Y/Y -1.6% vs. Prev. -0.3%

·   UK Visible Trade Balance (GBP/mln) (May) M/M -8478 vs. Exp. -7336 (Prev. -7389, Rev. to -7643)

·   UK BRC Like-for-Like Sales (Jun) Y/Y -0.6% vs. Exp. -1.4% (Prev. -2.1%)

·   UK RICS House Price Balance (Jun) M/M -27% vs. Exp. -25% (Prev. -28%) (RTRS)

 

·   Italian 12-month BOT auction for EUR 6.75bln, bid/cover 1.55 vs. Prev. 1.71 (yield 3.670% vs. Prev. 2.174%)

·   Greek 26-week T-Bill auction for EUR 1.25bln, bid/cover 2.88 vs. Prev. 2.58 (yield 4.900% vs. Prev. 4.960%)

·   Belgian 3-month T-Bill auction for EUR 1.645bln, bid/cover 1.20 vs. Prev. 2.97 (yield 1.305% vs. Prev. 1.313%)

·   Belgian 12-month T-Bill auction for EUR 1.070bln, bid/cover 1.54 vs. Prev. 2.18 (yield % vs. Prev. 1.884%) (RTRS)

 

EQUITIES

 

In early trade equities came under pressure, led by financials, as debt-contagion fear gripped the market, which resulted in sharp underperformance in the Italian FTSE MIB and Spanish IBEX 35 indices. An article in the ABC newspaper, citing unnamed sources, that as many as six Spanish banks have failed the European stress tests, including five savings banks and one medium-sized bank, also weighed on sentiment. However, as the session progressed equities came off their worst levels partly on the back of successful T-Bill auctions from Italy and Greece. Moving into the North American open, equities continue to trade in negative territory, with basic materials and technology as worst performing sectors.

 

Index

DAX

CAC

FTSE

EUROSTOXX

SMI

Level

7134.66

3756.3

5863.08

2679.19

5977.6

Change (ticks)

-95.59

-51.21

-66.08

-29.95

-75.4

 

FX

 

EUR/USD remained under pressure during the European session amid-risk aversion emerging from Eurozone’s debt contagion fears, however did recover somewhat following successful T-Bill auctions from Italy and Greece. In other news, GBP/USD plummeted around 70 pips following lower than expected CPI figures from the UK. Also, AUD remained under pressure partly on the back of a sharp fall in Australian business confidence data overnight.

·   Australia NAB Business Confidence (Jun) M/M 0 vs. Prev. 6 (RTRS)

 

Currency

EURUSD

GBPUSD

USDJPY

Level

1.3966

1.5845

79.72

Change (pips)

-0.0063

-0.0062

-0.5400

 

COMMODITIES

 

WTI and Brent crude futures have come under pressure as markets moved to risk off mode, Italian contagion fears and a stronger USD-Index has weighed on prices. However moving into the North American open, prices have come off their lows as the USD-Index has eased of its highs.

 

Oil & Gas News

·   Iraq is pumping 2.75MBPD which is the first time since 2003, and oil exports have reached 2.2 MBPD.

·   The IEA said the amount of oil to be released from emergency reserves, to make up disrupted Libyan supply, would be slightly less than earlier stated after sales by member countries met with mixed demand.

 

Geopolitical News:

·   Secretary of State Hillary Clinton, following a mob attack on the US embassy in Damascus, said that Syrian President Al-Assad has lost his legitimacy, an assessment the Obama administration has been reluctant to make.

·   Saboteurs blew up an Egyptian pipeline distribution station in northern Sinai today which supplies natural gas to Israel.

·   The Iranian foreign minister says he has held “very fruitful” talks with the UN nuclear chief.

 

 

 

Commodity

WTI Nymex

OTC Spot Gold

Level

94.31

1547.33

Change (NYSEARCA:USD)

-0.84

-6.15

 

LOOKING AHEAD

 

Economic Releases

 

CDT

BST

 

DATA

EXP

PREV

0730

1330

US

Trade Balance (USD) M/M (May)

-44.0B

-43.7B

0730

1330

CA

International Merchandise Trade M/M (May)

-0.7B

-0.9B

0755

1355

US

Redbook M/M (Jul 12)

 

0.9%

0755

1355

US

Redbook Y/Y (Jul 12)

 

5.2%

0900

1500

US

IBD/TIPP Economic Optimism M/M (Jul)

43.9

44.6

0900

1500

US

JOLTs Job Openings M/M (May)

 

2972

0930

1530

UK

DMO’s Gilt Size Announcement

 

 

1300

1900

US

FOMC Minutes

 

 

1530

2130

US

API Crude Oil Inventories W/W (Jul 8)

 

-3172K

1530

2130

US

API Gasoline Inventories W/W (Jul 8)

 

-1914K

1530

2130

US

API Distillate Inventory W/W (Jul 8)

 

-1625K

1530

2130

US

API Cushing Crude Inventory W/W (Jul 8)

 

-459K

 

Speakers

0730

1330

WLD

OECD’s Secretary General Gurria

1100

1700

EU

European Council’s President Van Rompuy

1200

1800

EU

ECB’s Nowotny

1300

1900

US

President Obama

N/A

N/A

EU

EU’s Economic & Financial Affairs (EcoFin) Council Meeting

 

Auction

1200

1800

US

USD 32bln 3-year Note Auction

 

Prices taken at 1255BST

 

 

 

 

 

 

 

 

 

 

 

 

 

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