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DAILY US OPENING NEWS - 06/10/11

· The ECB leaves its key benchmark interest rate unchanged at 1.50% as expected.

 

· The BoE increases the Asset Purchase Target by GBP 75bln, to GBP 275bln

The BoE keeps interest rates unchanged at 0.50% as expected.

 

· EU's Barroso says we are proposing coordinated action by member states to recapitalise banks.

 

· EBA says it is reviewing bank capital positions, no new round of stress tests have been scheduled.

 

·   US Treasury Secretary Geithner says the US is working closely with the IMF to encourage EU leaders to put in place strategy to stabilize the situation.

 

RANsquawk European Morning Briefing Video: http://www.youtube.com/watch?v=7GytiKE5C0U

 

Market Re-Cap

 

In early European trade risk appetite was again the dominant theme following the higher equity closes in Asia overnight.  Particular focus came upon comments from EU’s Barroso who said the EU Commission is proposing coordinated action by member states to recapitalise banks. This comment was also followed the European Banking Authority who said that they were reviewing bank capital positions with no new round of stress tests scheduled.  This spurred the equity markets across Europe with financial stocks gaining an immediate boost alongside the EUR currency which climbed against the USD sharply.  Bunds have been weighed by the general risk-on sentiment, with additional pressure observed following successful bond auctions from both Spain and Italy with lower yields across all six taps today.  The Spanish 10-year cash bond yield trading below the key 5.00% mark.  In the forex markets the CHF weakened dramatically across the board following the release of the SNB forex reserves data which showed an increase on the previous month, before the fast money move quickly reversed.  Elsewhere, all attention focused on the Bank of England key rate decision in which the benchmark rate was kept unchanged, however the Bank announced a further GBP 75bln of QE.  This caused extravagant moves in UK related assets with Gilts spiking higher by 100 ticks and GBP/USD falling 150pips.

 

Looking forward Trichet’s last press conference looms large following the ECB keeping its rate unchanged. In terms of economic data there will be the weekly unemployment claims data from the US with Operation Twist conducting its first selling of securities.  

 

Asian Headlines

 

·  China is relying too much on fixed investment and may have a ‘hard landing’ by 2014 according to Nouriel Roubini. (RTRS)

 

EU and UK Headlines:

 

·  The BoE increases the Asset Purchase Target by GBP 75bln, to GBP 275bln.

The BoE keeps interest rates unchanged at 0.50% as expected. (RTRS)

·  The ECB leaves its key benchmark interest rate unchanged at 1.50% as expected. (RTRS)

·  EU's Barroso says we are proposing coordinated action by member states to recapitalise banks. (RTRS)

·  EBA says reviewing bank capital positions, no new round of stress tests. (Sources)

·  Luxembourg's finance minister says the country is to take minority stake in local arm of Dexia. (RTRS)

 

EQUITIES

 

Equity markets have gained ground this morning with focus remaining on the European banking sector. Comments early on from EU’s Barroso said that the EU are proposing coordinated action by member states to recapitalise banks, which gave strong support to European markets. Although the EBA initially said there would be no new round of stress tests, they did later suggest it has not been excluded. French banks are again outperforming with BNP Paribas up around 7%,with strong gains also seen in all of the major European banks. Underperformance is seen in telecommunications which follows the tragic passing of former Apple CEO Steve Jobs.

 

 

 

 

 

 

Index

DAX

CAC

FTSE

EUROSTOXX

SMI

Level

5590.49

3042.5

5218.19

2223.89

5589.62

Change (ticks)

117.46

68.60

116.02

44.47

84.63

 

 

FX

 

GBP/USD and EUR/USD have both seen large moves today. Cable spiked lower with news that the BoE increased the asset purchase target by GBP 75bln, to GBP 275bln. Cable dropped around 150 pips with weakness seen across the board in sterling, and sympathy moves were also seen in other major currency pairs including the EUR/USD, moving 50 pips lower before another spike to the downside on the announcement that ECB has left their key interest rate unchanged. In other currency pairs the EUR/CHF pair spiked higher earlier following the release of higher than previous Swiss Foreign Currency Reserves data.

 

Currency

EURUSD

GBPUSD

USDJPY

Level

1.3311

1.5313

76.63

Change (pips)

-0.0037

-0.0147

-0.1600

 

 

COMMMODITIES

 

WTI crude futures continue to gain ground; continuing higher after yesterdays DoE numbers which showed increasing fuel demand.

 

Oil & Gas News:

·   Bank of America writes:

Following limited new CDU capacity additions in recent years, there is a large amount of new primary refinery capacity scheduled to come in 2012.BofA sees global oil refining output rising to 2 MBPD in 2012 and 1.6 MBPD in 2013, relative to just 0.63 MBPD this year. They expect refined petroleum product cracks in the Atlantic Basin to decline in 2012 relative to 2011. They also expect gasoline utilization rates to drop further in 2012, from already depressed levels this year, painting a very negative picture for gasoline crack spreads.

·   National Iranian oil is poised to set price premiums for next month’s crude sales to Asia at the highest in at least 11 years after increases by Saudi Arabia yesterday.

·   Iran said they do not see Libyan output at over 500,000 BPD by the end of the year, and OPEC may hold an urgent meeting if oil price keeps falling.

 

Commodity

WTI Nymex

OTC Spot Gold

Level

80.78

1652.15

Change (NYSEARCA:USD)

1.10

11.10

 

For a full energy briefing please refer to the Daily Energy Commentary report sent to your inbox earlier today or the RANsquawk website.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

LOOKING AHEAD

 

Economic Releases

 

CDT

BST

 

DATA

EXP

PREV

0700

1300

US

RBC Consumer Outlook Index M/M (Oct)

 

40.2

0730

1330

US

Initial Jobless Claims W/W (Oct 1)

410K

391K

0730

1330

US

Continuing Claims W/W (Sep 24)

3725K

3729K

0730

1330

CA

Building Permits M/M (Aug)

0.3%

-0.6%

0900

1500

CA

IVEY PMI M/M (Sep)

 

57.6

0900

1500

CA

IVEY PMI SA M/M (Sep)

54.0

56.4

0930

1530

US

EIA Natural Gas Storage Change W/W (Sep 30)

99

111

N/A

N/A

US

ICSC Chain Store Sales Y/Y (Sep)

 

4.6%

N/A

N/A

UK

New Car Registrations Y/Y (Sep)

 

7.3%

N/A

N/A

UK

Halifax House Prices SA M/M (Sep)

0.2%

-1.2%

N/A

N/A

UK

Halifax House Prices 3M/Y (Sep)

-2.1%

-2.6%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Speakers

0730

1330

EU

ECB’s Trichet Holds Monthly Press Conference

0900

1500

US

Treasury Secretary Geithner Testifies on FSOC to Congress

1000

1600

EU

German Chancellor Merkel Meets Troika and OECD Heads

1000

1600

US

Fed’s Fisher (Voting Member)

1300

1900

US

Treasury Secretary Geithner Testifies on FSOC to Congress

N/A

N/A

POR

Bank of Portugal Publishes Autumn Economic Bulletin

N/A

N/A

JN

BoJ Starts Two Day Monetary Policy Meeting

 

Auctions

1000

1600

US

3y-, 10y- and 30y Note Refunding Announcement

1000

1600

US

Fed’s Outright Treasury Securities Sale Jan’12 – Jul’12

 

**Note: Chinese Market Holiday

             Netherlands to Debate EFSF expansion today

             Today the Fed will sell treasuries in its first sale under Operation Twist            

 

 

Prices taken at 1232BST