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DAILY US OPENING NEWS - 07/09/11

 

·       The German Constitutional Court rejected lawsuits aimed at blocking Germany's participation in the Eurozone bailouts; however said that the ruling is not a blank cheque for further bailouts

 

·       A Eurozone source said that the IMF has agreed to substantially lower the initial estimate for the European banking sector's capital needs

 

·       According to an article in the Irish Times, private sector participation in the Greek debt swap has so far reached the 75% mark

 

·       Higher than expected German industrial production data rendered support to EUR, however GBP came under pressure following worse than expected industrial production data from the UK

 

·       RANsquawk European Morning Briefing Video: http://youtu.be/NSg1natipUg

 

 

Market Re-Cap

 

European equities traded higher for a vast majority of the session helped by news that the German Constitutional Court rejected lawsuits aimed at blocking Germany's participation in the Eurozone bailouts, together with a sharp increase in the German industrial production data. Financials received further support after a Eurozone source said that the IMF has agreed to substantially lower the initial estimate for the European banking sector's capital needs. Strength in equities weighed upon Bunds, and general tightening was observed in the Eurozone 10-year government bond yield spreads, with particular narrowing seen in the Italian/German spread partly on the back of market talk of the ECB buying in the Italian government debt. However, the Greek/German spread widened due to the ongoing concern surrounding the Greek bond swap issue, together with downbeat comments by the Dutch finance minister on the progress of the Greek programme. In other news, weakness in the USD-Index helped EUR/USD, GBP/USD and commodity-linked currencies; however GBP/USD came under some pressure following weaker than expected industrial production data from the UK. Also, higher than expected GDP reading from Australia overnight rendered additional strength to AUD.

 

Moving into the North American open, markets look ahead to the oil inventories report from the US together with Fed's Beige Book release later in the session. Bank of Canada's rate decision and the Canadian PMI data is also scheduled for later in the session. Markets will also keep a close eye on comments from President Obama as well as Fed's Evans and Williams.

 

Asian Headlines:

 

The BOJ maintained the key interest rate at a range of 0.0% to 0.1% by a unanimous vote and refrained from loosening policy further via an expansion of its asset buying plan. The BOJ kept the economic assessment unchanged and said Japan’s economy is picking up steadily. It further said that output and exports have almost returned to pre-quake levels. (RTRS)

 

US Headlines:

 

President Obama will unveil a USD 300bln package to create new jobs in an address to Congress on Thursday citing Democratic sources. (CNN)

 

·       US MBA Mortgage Applications (Sep 2) W/W -4.9% vs. Prev. -9.6% (RTRS)

 

EU and UK Headlines:

 

·       German Industrial Production SA (Jul) M/M 4.0% vs. Exp. 0.5% (Prev. -1.1%, Rev. to -1.0%)

·       German Industrial Production NSA WDA (Jul) Y/Y 10.1% vs. Exp. 6.5% (Prev. 6.7%, Rev. to 6.6%)

·       UK Industrial Production (Jul) M/M -0.2% vs. Exp. 0.2% (Prev. 0.0%)

·       UK Industrial Production (Jul) Y/Y -0.7% vs. Exp. -0.4% (Prev. -0.3%)

·       UK Manufacturing Production (Jul) M/M 0.1% vs. Exp. 0.0% (Prev. -0.4%)

·       UK Manufacturing Production (Jul) Y/Y 1.9% vs. Exp. 1.9% (Prev. 2.1%)

·       UK BRC Shop Price Index (Aug) Y/Y 2.7% vs. Prev. 2.8% (RTRS)

 

·       Portuguese 3-month T-Bill auction for EUR 0.854bln, bid/cover 2.2 vs. Prev. 1.80 (yield 4.959% vs. Prev. 4.854%) (RTRS)

 

EQUITIES

 

European equities traded higher for a vast majority of the session helped by news that the German Constitutional Court rejected lawsuits aimed at blocking Germany's participation in the Eurozone bailouts, together with a sharp increase in the German industrial production data. Financials received further support after a Eurozone source said that the IMF has agreed to substantially lower the initial estimate for the European bank sector's capital needs. Moving into the North American open, equities continue to trade higher with industrials and financials as the best performing sectors.

 

Index

DAX

CAC

FTSE

EUROSTOXX

SMI

Level

5337.03

3040.07

5250.9

2134

5440.99

Change (ticks)

143.06

74.43

94.06

53.90

73.75

 

FX

 

Weakness in the USD-Index helped EUR/USD, GBP/USD and commodity-linked currencies; whereas EUR/USD received further support following higher than expected industrial production data from Germany. However, GBP/USD came under some pressure after weaker than expected industrial production data from the UK. In other news, AUD received strength following better than expected GDP data from Australia overnight.

 

·       Australian GDP (Q2) Q/Q 1.2% vs. Exp. 1.0% (Prev. -1.2%, Rev. -0.9%)

·       Australian GDP (Q2) Y/Y 1.4% vs. Exp. 0.7% (Prev. 1.0%) (RTRS)

 

Currency

EURUSD

GBPUSD

USDJPY

Level

1.4057

1.6002

77.19

Change (pips)

0.0059

0.0060

-0.4700

 

COMMODITIES

 

WTI crude futures traded in minor positive territory in early trade as cyclone and poor weather builds in the Gulf of Mexico.

 

Oil & Gas News:

·       Iran has been importing 4-5 cargoes of gasoline per month, most supplied by Chinese companies according to industry sources.

·       Russia has pumped the first gas into a new pipeline running under the Baltic Sea to Germany, which will tighten Moscow’s grip on the continent’s lucrative gas markets.

·       Syrian finance minister said today that they’ll be looking at Russia, China and non-Arab countries as oil-buyers. He also said not concerned about EU sanctions as no direct impact on economy.

 

Geopolitical News:

·      Intelligence sources reveal that Muammar Qaddafi, two of his sons and several thousand fighters have gone to ground at Targan. This is a remote are in the Saharan, which lies several hundred kilometres southwest of the remote desert town of Jiffra which, is more than 1,500 kilometres from rebel-held Tripoli and Sirte.

 

Commodity

WTI Nymex

OTC Spot Gold

Level

86.91

1838.63

Change (NYSEARCA:USD)

0.89

-36.78

 

LOOKING AHEAD

 

Economic Releases

 

CDT

BST

 

DATA

EXP

PREV

0755

1355

US

Redbook M/M (Sep 7)

 

0.1%

0755

1355

US

Redbook Y/Y (Sep 7)

 

4.0%

0800

1400

CA

Bank of Canada’s Rate Decision M/M (Sep)

1.00%

1.00%

0900

1500

US

JOLTs Job Openings M/M (Jul)

3074

3109

0900

1500

UK

NIESR GDP Estimate Q/Q (Aug)

 

0.6%

0900

1500

CA

IVEY PMI SA M/M (Aug)

52.3

46.8

0900

1500

CA

IVEY PMI NSA Y/Y (Aug)

52.2

45.4

1300

1900

US

Fed’s Beige Book

 

 

1530

2130

US

API Crude Oil Inventories W/W (Sep 2)

 

5128K

1530

2130

US

API Gasoline Inventories W/W (Sep 2)

 

-3108K

1530

2130

US

API Distillate Inventory W/W (Sep 2)

 

276K

1530

2130

US

API Cushing Crude Inventory W/W (Sep 2)

 

-563K

 

Speakers

0715

1315

GE

Bundesbank’s Vice President Lautenschlaeger

0730

1330

EU

European Council’s President Van Rompuy

0730

1330

UK

Prime Minister Cameron

0800

1400

EU

European Commissioner Rehn

1015

1615

US

Fed’s Evans (Voting Member)

1030

1630

EU

European Council’s President Van Rompuy

1100

1700

GE

Budget Committee Regular Session Addresses Debt Crisis

1500

2100

US

Fed’s Williams (Non-Voting Member)

1500

2100

US

President Obama

 

Prices taken at 1239BST