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DAILY US OPENING NEWS - 04/08/11

 

 

·   Forex intervention was seen from Japan overnight to curb the strength in JPY, which together with further monetary easing by the BoJ weighed upon the currency across the board

 

·   The Eurozone 10-year government bond yield spreads narrowed in early trade after some analysts pointed out that the ECB may reactivate its Securities Market Programme (NYSE:SMP)

 

·   Bond auctions from Spain saw decent bid/cover ratios, however a substantial increase in yields

 

·   The ECB kept its benchmark interest rate unchanged at 1.50% as expected, however focus remains on the press-conference following the rate-decision to gaze into central bank’s future policy direction

 

·   The Bank of England kept its benchmark interest rate and asset purchase target unchanged, as expected, at 0.50% and GBP 200bln respectively

 

·   RANsquawk EU Morning Briefing Video: http://www.youtube.com/watch?v=L1-X12-o2pE

 

 

Market Re-Cap

 

Markets witnessed forex intervention from Japan overnight to curb the strength in JPY, which together with further monetary easing by the BoJ weighed upon the currency across the board, and observed USD/JPY to gain around 300 pips since the initial intervention. In other forex news, strength in the USD-Index weighed upon EUR/USD and GBP/USD as well as commodity-linked currencies, whereas the NZD came under further pressure after New Zealand's finance minister said that strength in NZD is a headwind for the economy. Elsewhere, European equities traded lower in early trade, however did come off their earlier lows after some analysts pointed out that the ECB may reactivate its Securities Market Programme (SMP), which also helped the Eurozone peripheral 10-year government bond yield spreads to narrow. In other news, the BoE kept its benchmark interest rate and asset purchase target unchanged at 0.50% and GBP 200bln respectively as expected, whereas the ECB left its key interest rate unchanged at 1.50% as expected.

 

Moving into the North American open, markets look ahead to the ECB's press-conference following its rate decision to gaze into future policy-direction of the central bank. US jobless claims data is also scheduled for later in the session, whereas in fixed income there is another Fed's Outright Treasury Coupon Purchase operation in the maturity range of Feb'17-Jul'18, with a purchase target of USD 2.75-3.5bln.

 

 

Asia Headlines:

 

The BoJ kept its overnight call rate target unchanged at 0.0%-0.1% by a unanimous vote, and decided to ease monetary policy further. The BoJ will increase asset fund’s JGB buying by JPY 2trl and will increase Treasury discount bills by JPY 1.5trl. BoJ said forex and capital market moves stemming from overseas developments may hurt Japan business sentiment and economic activity. It also said that more caution is needed on downside risks to Japanese economy, and there remains high uncertainty on Japan’s economic outlook. It further said that it may take time for Japan to achieve price stability. (RTRS)

 

Elsewhere, according to a PBOC report, China will use various monetary policy tools to combat inflation expectations, including further boosting the flexibility of the CNY exchange rate. The report said the PBOC will continue using the required reserve ratio, price-based tools such as interest rates, open market operations and macro prudential regulation on banks to manage inflation expectations. (Financial News)

 

 

US Headlines

 

The Federal Reserve should consider a new round of securities purchases to spur the economy if growth and employment keep languishing and inflation recedes, former top Fed officials said in a roundtable with WSJ. (WSJ)

 

 

 

 

 

 

EU and UK Headlines:

 

Officials on Wednesday night said the ECB's monthly meeting was expected to see a reversal on the buying of sovereign bonds after 18 weeks of staying out of the markets, because of an EU institutional vacuum that threatens to drag down Italy and Spain, the region's third and fourth-largest economies. (Telegraph)

 

·       German Factory Orders SA (Jun) M/M 1.8% vs. Exp. -0.2% (Prev. 1.8%, Rev. to 1.5%)

·       German Factory Orders NSA (Jun) M/M 9.5% vs. Exp. 6.7% (Prev. 12.2%, Rev. to 11.7%) (RTRS)

 

·       Spanish bond auction for EUR 2.2bln, 3.40% 30-Apr-14, bid/cover 2.1 vs. Prev. 2.49 (yield 4.813% vs. Prev. 4.037%)

·       Spanish bond auction for EUR 1.1bln, 4.40% 31-Jan-15, bid/cover 2.4 vs. Prev. 2.08 (yield 4.984% vs. Prev. 2.862%) (RTRS)

 

 

EQUITIES

 

European equities traded lower during the session, however recovered somewhat after analysts pointed out that the ECB may reactivated its Securities Market Programme (SMP). Strength in the USD-Index weighed upon commodities, which in turn witnessed underperformance in basic materials and oil & gas sectors. Moving into the North American open, equities continue to trade lower, with basic materials and industrials as the worst performing sectors.

 

Index

DAX

CAC

FTSE

EUROSTOXX

SMI

Level

6634.83

3436.85

5525.49

2499.61

5506.23

Change (ticks)

-5.76

-18.09

-59.02

1.78

23.08

 

 

FX

 

Markets witnessed forex intervention from Japan overnight to curb the strength in JPY, which together with further monetary easing by the BoJ weighed upon the currency across the board, and observed USD/JPY to gain around 300 pips since the initial intervention. In other forex news, strength in the USD-Index weighed upon EUR/USD and GBP/USD as well as commodity-linked currencies, whereas the NZD came under further pressure after New Zealand's finance minister said that strength in NZD is a headwind for the economy.

 

Currency

EURUSD

GBPUSD

USDJPY

Level

1.4253

1.6342

79.78

Change (pips)

-0.0070

-0.0085

2.7200

 

 

COMMODITIES

 

WTI crude futures traded under pressure during the European session weighed upon by strength in the USD-Index, together with growing signs of faltering global economic recovery.

 

Oil & Gas News:

·       Iran is poised to reduce next month’s crude export prices to the lowest level this year after cuts by Saudi Arabia yesterday. National Iranian Oil Co. will set Iranian light for September shipment at USD 1.01 a barrel over the average of Persian Gulf benchmark Oman and Dubai grades, down USD 0.60 from August, based on quarterly formula tied to Saudi prices. In other news, Indian Oil Corp. will make a payment to Iran for oil soon, according to the chairman R.S. Butola.

·       Goldman Sachs reduced its estimate for US end-summer natural gas inventories by 1% after the recent heatwave, while forecasting prices will remain under pressure as temperatures ease.

 

Geopolitical News:

·       Beijing has called a Japanese report criticising a lack of transparency in China’s military spending “irresponsible”, and expressed its strong dissatisfaction with the paper.

·       Moves by Iran to deploy more-advanced centrifuge machines for the production of nuclear fuel are raising new concerns that Tehran could significantly shorten the time it would need to produce nuclear bombs. In related news, Iran has no intention of making an atomic bomb and its nuclear programme is for purely peacefully purposes, President Ahmadinejad said.

 

Commodity

WTI Nymex

OTC Spot Gold

Level

91.05

1667.85

Change (NYSEARCA:USD)

-0.88

6.10

 

 

LOOKING AHEAD

 

Economic Releases

 

CDT

BST

 

DATA

EXP

PREV

0700

1300

US

RBC Consumer Outlook Index M/M (Aug)

 

43.7

0730

1330

US

Initial Jobless Claims W/W (Jul 30)

405K

398K

0730

1330

US

Continuing Claims W/W (Jul 23)

3700K

3703K

0930

1530

US

EIA Natural Gas Storage Change W/W (Jul 29)

38

43

N/A

N/A

US

ICSC Chain Store Sales Y/Y (Jul)

 

6.9%

 

Speakers

0730

1330

EU

ECB’s Trichet Press Conference following Rate Announcement

1700

2300

NZ

Finance Minister English

 

Auction

1000

1600

US

Fed’s Outright Trea. Coup. Purch. Feb’17-Jul’18 (USD 2.75-3.5bln)

 

Earnings

US

Apache Corp, PG&E

 

Prices taken at 1239BST