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DAILY US OPENING NEWS - 27/09/11

 

· A European official said a detailed plan is being worked on leveraging EFSF money with the plan using some EFSF money to shore up bank capital.

 

· The Austrian finance minister said Euro-zone officials are to discuss the EFSF leveraging plan on Monday

 

· German Chancellor Merkel says we are not prepared to implement further stimulus programmes.

 

· Confirmation of the EFSF leveraging talks sparked outrage in Germany, where opposition politicians threatened to derail the plans by voting against a key amendment to the bail-out fund this Thursday.

 

· RANsquawk European Morning Briefing Video: http://www.youtube.com/watch?v=TfBo7Z6Ggz0

 

 

Market Re-Cap

 

Early European trade saw a continuation of the Asian session with easing concerns over the impact of the Europe debt crisis on the global economy. An interesting article in the Telegraph drew attention this morning, which said that the German opposition politicians threatened to derail boosting the Eurozone bail-out fund plans by voting against a key amendment to the fund this Thursday, although government bond yield spreads tighter across the board following reports that a detailed plan is being worked on leveraging the EFSF. Early in the session Spain's Salgado said plans to extend EFSF to EUR 2trl was not on the table, causing a downtick in EUR/USD, breaking through the 1.3500 handle, and earlier gains in the pair how now been pared back. The EU commission said no formal debate has started on EFSF leveraging and leveraging of the EFSF can be done without changing the treaty. Outside the Euro-zone UK CBI Reported Sales came in as expected at -15, with cable trading flat on the session despite some weakening in the USD-Index.

 

Looking forward to the North American open, market participants will be focussing on economic data in the form of US Consumer Confidence and political speakers EU's Junker, Fed's Fisher and the meeting between German Chancellor Merkel and Greek PM Papandreou after the European market close.

 

Asian Headlines

 

·   The IMF said Chinese inflation may decline below 4.5%, barring another wave of food price increases. Meanwhile, China should keep a proactive fiscal policy according to a researcher. (People’s Daily/21st Herald)

 

EU and UK Headlines:

 

·   A European official said a detailed plan is being worked on leveraging EFSF money with the plan using some EFSF money to shore up bank capital. The plan would use some as seed money for a European investment bank that would form a Special Purpose Vehicle that could issue bonds and sovereign debts. These bonds would be able to be used as collateral at the ECB with the plan awaiting approval from Eurozone governments. (CNBC/Sources)

·   EU commission says no formal debate has started on EFSF leveraging, however no comments were given relating to informal talks. The Austrian finance minister said Euro-zone officials are to discuss the EFSF leveraging plan on Monday (Sources)

·   German Chancellor Merkel says we are not prepared to implement further stimulus programmes. Echoed by a German government spokesman who said that the finance minister told the cabinet the EFSF volume will not be expanded, volume stands as it is. (RTRS)

·   Confirmation of the EFSF leveraging talks sparked outrage in Germany, where opposition politicians threatened to derail the plans by voting against a key amendment to the bail-out fund this Thursday. (Telegraph)

 

EQUITIES

 

Equity markets in Europe have reacted positively to the news that a detailed EFSF leveraging plan is being worked upon. As in the Asian session, financials have outperformed with French banks again seeing significant gains.  Elsewhere, the rally in commodity prices has helped the Basic Materials and Oil & Gas stocks so far in the European session, with the German and French bourses the main beneficiaries.

 

 

 

 

 

Index

DAX

CAC

FTSE

EUROSTOXX

SMI

Level

5566.15

2973.8

5230.87

2162.7

5537.76

Change (ticks)

220.59

114.46

141.50

79.35

136.75

 

 

FX

 

Despite the positive reaction in the equity markets regarding the EFSF developments EUR/USD has been trading relatively flat given the uncertainty created by Germany steadfastly refusing to acknowledge any increase to the EFSF beyond that which has already been agreed.  There has been market talk through the session that an Asian central bank has been trading a short-term 1.3400-1.3600 range in EUR/USD which has capped the upward momentum.  Elsewhere, commodity linked currencies have been well supported by the general strength in commodities with AUD looking to move back toward parity against the USD.  Commentary from JPMorgan noted that there is an increased risk of JPY intervention between now and the 30th of September which is the fiscal half-year end in Japan, with the BoJ possibly looking to help Japanese exporters.  As a result the JPY has weakened slightly across the board.

 

Currency

EURUSD

GBPUSD

USDJPY

Level

1.3542

1.5593

76.45

Change (pips)

0.0009

0.0028

0.0900

 

 

COMMMODITIES

 

The Asian and European sessions have both seen WTI crude futures trade in firm positive territory as commodities have rallied across the board from yesterday’s sell-off, aided by EFSF developments in Europe supporting risk sentiment. 

 

Oil & Gas News:

·   A Libyan oil official says oil exports are expected to resume today.

·   Supporters outnumbered critics at a government-sponsored hearing on the proposed TransCanada Corp's Keystone XL pipeline that would ship oil from Canada to the Texas Gulf Coast.

 

Commodity

WTI Nymex

OTC Spot Gold

Level

82.42

1671.5

Change (NYSEARCA:USD)

2.18

45.15

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

LOOKING AHEAD

 

Economic Releases

 

CDT

BST

 

DATA

EXP

PREV

0755

1355

US

Redbook M/M (Sep 27)

 

0.0%

0755

1355

US

Redbook Y/Y (Sep 27)

 

4.1%

0800

1400

US

S&P/CS 20 City SA M/M (Jul)

0.10%

-0.06%

0800

1400

US

S&P/CS Composite-20 Y/Y (Jul)

-4.40%

-4.52%

0800

1400

US

S&P/CS Home Price Index M/M (Jul)

 

141.30

0900

1500

US

Consumer Confidence M/M (Sep)

46.0

44.5

0900

1500

US

Richmond Fed Manufacturing Index M/M (Sep)

-11

-10

0930

1530

UK

DMO Announces Size of 3.75% 2021 Gilt Auction

 

 

1530

2130

US

API Crude Oil Inventories W/W (Sep 23)

 

2574K

1530

2130

US

API Gasoline Inventories W/W (Sep 23)

 

62K

1530

2130

US

API Distillate Inventory W/W (Sep 23)

 

81K

1530

2130

US

API Cushing Crude Inventory W/W (Sep 23)

 

-317K

N/A

N/A

CH

Leading Index M/M (Aug)

 

102.25

 

 

 

 

 

 

Speakers

0800

1400

EU

EU’s Juncker

1130

1730

US

Fed’s Lockhart (Non-Voting Member)

1220

1820

US

Fed’s Fisher (Voting Member)

1300

1900

GE

Chancellor Merkel

1300

1900

GR

Prime Minister Papandreou

1525

2125

CA

BoC Senior Deputy Governor Macklem

N/A

N/A

GE

Finance Minister Schaeuble

N/A

N/A

CC

Cypriot Cabinet Discusses EFSF Expansion Measurers Followed By a Vote in Parliament

N/A

N/A

JN

Finance Minister Azumi & Economics Minister Furukawa at a Cabinet Meeting

 

Auctions

1000

1600

US

Fed’s Outright TIPS Purch. Apr’13-Feb’41 (USD 0.25-0.75bln)

1200

1800

US

USD 35bln 2y Note Auction

 

Earnings

US

Paychex, Walgreen

             

 

Prices taken at 1220BST