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DAILY US OPENING NEWS - 10/10/11

 

·      Risk-appetite gathered pace during the European session after Germany and France demonstrated a united front in tackling the ongoing Eurozone crisis. Meanwhile, Russia said that it may help the EU and Spain with the debt crisis, and is ready in principle to buy the Spanish government debt

 

·      S&P affirmed France's ratings at AAA, with a stable outlook, and affirmed Belgium's ratings at AA+, with a negative outlook

 

·      Slovak government party SAS turned down a compromise offer from coalition partners on the EFSF ratification, however the Slovak Parliamentary Budget Committee recommended the EFSF approval

 

·      Weakness in the USD-Index provided support to EUR/USD and GBP/USD

 

·      The governments of Belgium and France agreed to nationalise the Belgian subsidiary of Dexia

 

·      RANsquawk European Morning Briefing Video: http://youtu.be/xTlaLdW0PNU

 

Market Re-Cap

 

European equities traded higher for a vast majority of the European session after Germany and France demonstrated a united front in tackling the ongoing Eurozone crisis, together with enhanced prospects of an approval of changes to the EFSF by the Eurozone members despite hurdles in the Slovakian parliament. The appetite for risk strengthened further following comments from Russia that it may help the EU and Spain with the debt crisis, and is ready in principle to buy the Spanish government debt. Weakness in the USD-Index provided support to oil & gas and basic materials sectors, however financials underperformed on concerns over further recapitalisation of the European banks and after ECB's lending to the European banks registered its highest level this year. In fixed income, the Eurozone 10-year government bond yield spreads with respect to Bunds widened across the board following sovereign rating downgrade of Italy and Spain by Fitch late on Friday, allied with Moody's placing Belgium on review for a potential downgrade. In the forex market, weakness in the USD-Index helped EUR/USD and GBP/USD, whereas the former received further support after S&P affirmed the sovereign ratings for France and Belgium. Also, NZD strengthened partly on the back of comments from Moody's that it is comfortable with the country's AAA rating.

 

Looking forward the economic calendar remains thin, however markets will watch closely any developments in relation to the Eurozone debt situation. In fixed income, French T-Bill auctions, the ECB's bond purchase announcement, and the BoE's asset purchase operation in the maturity range of 2015-2020 are scheduled for later in the session.

 

Asian Headlines

 

China should keep interest rates at ‘reasonable’ and ‘appropriate’ levels to stabilise prices and manage inflation according to three officials from the PBOC. The chances that China will increase interest rates and the reserve requirements for banks in Q4 is very small, with monetary policy possibly entering an ‘observation period’. (China Securities Journal)

 

EU and UK Headlines:

 

German Chancellor Merkel said France and Germany want common criteria for bank recapitalisation and that the two nations have a shared position on all subjects. President Sarkozy said that Europe must solve its problems by G-20 meeting in early November and that he wants accelerated economic co-ordination in Eurozone. Sarkozy added that there was no disagreement with Germany on EFSF. (RTRS/Sources)

 

·       Eurozone Sentix Investor Confidence (Oct) M/M -18.5 vs. Exp. -19.0 (Prev. -15.4)

·       German Trade Balance (EUR) (Aug) M/M 11.8bln vs. Exp. 9.0bln (Prev. 10.4bln, Rev. to 10.5bln)

·       German Exports (Aug) M/M 3.5% vs. Exp. 1.1% (Prev. -1.8%, Rev. to -1.2%)

·       German Imports (Aug) M/M 0.0% vs. Exp. 0.6% (Prev. -0.3%, Rev. to 0.5%)

·       Italian Industrial Production SA (Aug) M/M 4.3% vs. Exp. 0.2% (Prev. -0.7%, Rev. -0.3%)

·       Italian Industrial Production WDA (Aug) Y/Y 4.7% vs. Exp. -2.7% (Prev. -1.6%, Rev. -1.1%)

·       Italian Industrial Production NSA (Aug) Y/Y 4.6% vs. Prev. -4.6% (Rev. 4.2%) (RTRS)

 

·       German 6-month Bubill auction for EUR 3.68bln, bid/cover 2.0 vs. Prev. 2.40 (yield 0.291% vs. Prev. 0.180%) (RTRS)

 

EQUITIES

 

European equities traded higher for a vast majority of the European session after Germany and France demonstrated a united front in tackling the ongoing Eurozone crisis, together with enhanced prospects of an approval of changes to the EFSF by the Eurozone members despite hurdles in the Slovakian parliament. The appetite for risk strengthened further following comments from Russia that it may help the EU and Spain with the debt crisis, and is ready in principle to buy the Spanish government debt. Weakness in the USD-Index provided support to oil & gas and basic materials sectors, however financials underperformed on concerns over further recapitalisation of the European banks and after ECB's lending to the European banks registered its highest level this year.

 

Index

DAX

CAC

FTSE

EUROSTOXX

SMI

Level

5696.96

3124.95

5354.3

2284.8

5683.86

Change (ticks)

21.26

29.39

50.90

15.61

31.63

 

FX

 

Weakness in the USD-Index helped EUR/USD and GBP/USD, whereas the former received further support after S&P affirmed the sovereign ratings for France and Belgium. Also, NZD strengthened partly on the back of comments from Moody's that it is comfortable with the country's AAA rating. In other news, CAD received support on the back of news that Sinopec will acquire Daylight Energy for CAD 2.2bln in cash, together with strength in WTI and Brent crude futures.

 

Currency

EURUSD

GBPUSD

USDJPY

Level

1.3585

1.5651

76.75

Change (pips)

0.0207

0.0089

0.0200

 

COMMMODITIES

 

WTI and Brent crude futures traded higher during the European session on the back of risk appetite together with weakness in the USD-Index.

 

Oil & Gas News:

·       Saudi oil Minister sees no decline in Global oil demand and the Kingdom’s exports. He added that demand for Saudi oil will rise in next 2 years.

·       Senior oil ministry official says two bombs hit pipelines on Friday transporting crude from Iraq's biggest oilfield  Rumalia.

·       The Japanese government plans to increase its bases for stockpiling crude oil and petroleum products to reinforce preparations for possible major disasters, government sources said Saturday.

·       Iran has confirmed Gazprom will not be involved in the development of a major on-shore oilfield, accusing the Russian state energy giant of dragging its feet over the project, the semi-official Fars news agency reported.

·       Iran OPEC governor says no need to cut OPEC output quotas at the next meeting.

·       Oman 2011 oil production to average about 870,000 BPD according to Oman oil ministry's Jashmi. Oman also sees oil prices at USD 90-100 per barrel in 2012 according to a senior government oil official.

·       Russian economy minister sees oil drop to USD 90 by the end of 2012 according to Interfax.

 

Geopolitical News:

·       Yemeni president Saleh made vague comments that he is willing to leave power in his first major speech since returning to Yemen, but he gave no concrete plan for the future of the country. Yemen's opposition cast doubt that the embattled leader was serious.

·       The National Transitional Council forces said they had managed to take control of a central neighbourhoods and Sirte university on Sunday, but faced stiff resistance from Gaddafi loyalists.

 

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

 

Commodity

WTI Nymex

OTC Spot Gold

Level

84.39

1664.2

Change (NYSEARCA:USD)

1.41

26.35

 

LOOKING AHEAD

 

Economic Releases

 

 

CDT

BST

 

Speakers

0730

1330

EU

 Deputy Finance Minister Asmussen Faces EU Confirmation Hearing for ECB Board Post

0800

1400

EU

EU’s Barroso

0930

1530

UK

Treasury Committee Hears Testimony from Banking Commission

0930

1530

GR

Greek Deputy Prime Minister Pangalos

1100

1700

EU

ECB’s Nowotny

1700

2300

EU

ECB’s Trichet Speaks at Hearing on ESRB

 

Auctions

0745

1345

FR

EUR 7.5bln combined 12-, 23-, 27- & 49-week T-Bill Auctions

0830

1430

EU

ECB Announces Bond Purchases

0845

1445

UK

BoE Asset Purchase Facility GBP 1.7bln 2015-2020 Gilt Purchases

 

** Note: Columbus Day – Normal trading hours apply with the exclusion of CBOT Floor which is closed

             Japanese Market Holiday

             Canadian Market Holiday

 

Prices taken at 1210BST