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DAILY US OPENING NEWS - 26/10/11

·      German Chancellor Merkel said that all models that involve the ECB are not on the agenda tonight, however both leverage models are going to be discussed

 

·      According to a senior EU source, IMF thinks 60% Greek debt write-down is not enough, and it should be 65% or more

 

·      Widening was observed in the Greek/German 10-year government bond yield spread ahead of the EU leaders' summit today

 

·      According to a draft statement from the EU heads of state, banks would need guarantees on liabilities for more direct support for access to funding. It further said that there is broad agreement on requiring banks to have capital ratio of 9%, to be attained by June 30th 2010

 

·      There were reports that the Italian PM Berlusconi may resign

 

·      RANsquawk European Morning Briefing Video: http://www.youtube.com/watch?v=4tbzMXKX9_Y

 

Market Re-Cap

 

European equities traded mixed during the session as uncertainty persisted surrounding the outcome of the EU leaders' summit in Brussels today and market participants remained nervous that a deal on the issue of PSI and haircut on the Greek debt holding may not be reached today. Political uncertainty in Italy with the possibility of a resignation by PM Berlusconi also weighed on sentiment, whereas strong European corporate earnings from the likes of Merck KGaA and SAP had limited reaction on the market. Elsewhere, Bund futures traded in minor negative territory, whereas most Eurozone 10-year government bond yield spreads with respect to Bunds narrowed. However, widening was observed in the Greek/German spread ahead of the EU leaders' summit. In the forex market, the USD-Index traded in negative territory, which provided some support to EUR/USD. Also, strength was observed in CHF and JPY backed by Eurozone debt concerns, which led EUR/CHF to breach the 1.2200 level and stops were triggered to the downside below that level. In other news, USD/JPY printed a fresh record low at 75.71, whereas weakness was observed in AUD across the board following weaker than expected CPI data from Australia overnight.

 

Moving into the North American open, the EU leaders' summit will remain the main focus in the market, however participants will also look for economic releases from the US in the form of durable goods, new home sales, and DOE oil inventories report. In fixed income, BoE's Gilt purchase operation in the maturity range of 2022-2036, Fed's Outright Treasury Coupon sales in the maturity range of Mar'14-Oct'14, with a sales target of USD 8-9bln, and USD 35bln 5-year Note auction are also scheduled for later.

 

Asian Headlines:

 

BoJ Governor Shirakawa said the BoJ is already buying huge amounts of JGB’s now adding that BoJ cannot beat deflation with monetary policy alone but hopes to do what it can on monetary front. (RTRS)

 

In other news, the BoJ will discuss additional monetary easing measures to help blunt the impact of a strong JPY on the Japanese economy at its policy board meeting on Thursday. The central bank will consider expanding its asset-buying program by around JPY 5trl and also consider purchasing longer-term government bonds. (Nikkei)

 

US, EU and UK Headlines:

 

According to a draft statement from the EU heads of state, banks would need guarantees on liabilities for more direct support for access to funding. It further said that there is broad agreement on requiring banks to have capital ratio of 9%, to be attained by June 30th 2010, however there is no overall target sum given. The draft said that to raise capital, banks should first use private sources, including restructuring and conversion of debt to equity instruments. (RTRS)

 

In other news, a Chinese diplomat in Brussels said China supports EU efforts to deal with the debt crisis, but there is nothing concrete on investing in the EFSF’s SPV. Also, an EFSF spokesman said that he cannot confirm if China has said it will participate in the EFSF's SPV. In related news, Brazil rejected the idea of buying European bonds to help ease the Eurozone’s debt crisis. (RTRS/Sources)

 

·       US MBA Mortgage Applications (Oct 21) W/W 4.9% vs. Prev. -14.9% (RTRS)

 

 

·       ECB allotted EUR 44.564bln in its 3-month refinancing operation vs. Exp. EUR 65bln

·       ECB allotted EUR 56.934bln in its 12-month refinancing operation vs. Exp. EUR 50bln

·       Italian 6-month BOT auction for EUR 8.5bln, bid/cover 1.57 vs. Prev. 1.74 (yield 3.535% vs. Prev. 3.071%), yield highest since Sep’08 (RTRS)

 

BarCap US Treasury month-end extension seen at +0.09yrs

 

EQUITIES

 

European equities traded mixed during the session as uncertainty persisted surrounding the outcome of the EU leaders' summit in Brussels today and market participants remained nervous that a deal on the issue of PSI and haircut on the Greek debt holding may not be reached today. Political uncertainty in Italy with the possibility of a resignation by PM Berlusconi also weighed on sentiment, whereas strong European corporate earnings from the likes of Merck KGaA and SAP had limited reaction on the market. Moving into the North American open, equities continue to trade mixed, with telecommunications and technology as the best performing sectors.

 

GlaxoSmithKline – Co.’s Q3 EPS ex items GBP 0.285 vs. Exp. GBP 0.285, and Q3 total group revenue GBP 7.10bln vs. Exp. USD 6.98bln. Co. expects a full year impact of around GBP 325mln from US reform and European cuts. (RTRS)

 

**Note: For US equities news in detail, kindly refer to the RANsquawk Daily US Equity Opening News report.

 

Index

DAX

CAC

FTSE

EUROSTOXX

SMI

Level

6068.72

3186.66

5536.52

2350.85

5699.38

Change (ticks)

21.97

12.37

10.98

6.89

-9.41

 

FX

 

The USD-Index traded in negative territory, which provided some support to EUR/USD. Also, strength was observed in CHF and JPY backed by Eurozone debt concerns, which led EUR/CHF to breach the 1.2200 level and stops were triggered to the downside below that level. In other news, USD/JPY printed a fresh record low at 75.71, whereas weakness was observed in AUD across the board following weaker than expected CPI data from Australia overnight.

 

·       Australian Consumer Prices (Q3) Q/Q 0.6% vs. Exp. 0.6% (Prev. 0.9%)

·       Australian Consumer Prices (Q3) Y/Y 3.5% vs. Exp. 3.5% (Prev. 3.6%) (RTRS)

 

Currency

EURUSD

GBPUSD

USDJPY

Level

1.3938

1.5989

75.87

Change (pips)

0.0030

-0.0012

-0.2200

 

COMMMODITIES

 

WTI and Brent crude futures lacked any firm direction as participants remained cautious ahead of the DOE inventories release later today and the EU leaders’ summit.

 

Oil & Gas News:

·       Iraq will ask OPEC to be under a quota system in 2014 and Iraq will not oversupply the oil market, according to Iraq's SOMO director. Iraq’s oil output has averaged 2.9MBPD since the start of 2011, with output forecasted to average 3.4MBPD in 2012 and 4.5MBPD in 2013.

·       More barrels of Libyan crude are set to hit international oil markets next month, according to traders.

·       CME lowered initial margins for Tier 1 speculators on NYMEX heating oil futures to USD 7,830 per contract from USD 8,775; down 11%.

·       According to a Goldman Sach’s commodities analyst, Currie, the oil market is getting tighter by the minute.

 

**Note: For commodities news in detail, kindly refer to the RANsquawk Daily Energy Commentary report.

 

Commodity

WTI Nymex

OTC Spot Gold

Level

93.45

1709.83

Change (NYSEARCA:USD)

0.28

4.30

 

LOOKING AHEAD

 

Economic Releases

 

CDT

BST

 

DATA

EXP

PREV

0730

1330

US

Durable Goods Orders M/M (Sep)

-1.0%

-0.1%

0730

1330

US

Durable ex. Transportation M/M (Sep)

0.4%

-0.1%

0730

1330

US

Cap Goods Orders Nondef ex-Air M/M (Sep)

0.3%

1.1%

0900

1500

US

New Home Sales M/M (Sep)

300K

295K

0900

1500

US

New Home Sales M/M (Sep)

1.7%

-2.3%

0930

1530

CA

Monetary Policy Report M/M

 

 

0930

1530

US

DOE Crude Oil Inventories W/W (Oct 21)

1750K

-4729K

0930

1530

US

DOE Gasoline Inventories W/W (Oct 21)

-1500K

-3324K

0930

1530

US

DOE Distillate Inventory W/W (Oct 21)

-1900K

-4266K

0930

1530

US

DOE Cushing Crude Inventory W/W (Oct 21)

 

471K

0930

1530

US

DOE Refinery Utilisation W/W (Oct 21)

-0.05%

-1.10%

1100

1700

FR

Jobseekers – Net Change M/M (Sep)

23.5

-2.0

1100

1700

FR

Total Jobseekers M/M (Sep)

 

2754.5K

1500

2100

NZ

RBNZ Official Cash Rate M/M (Oct)

2.50%

2.50%

1645

2245

NZ

Trade Balance M/M (Sep)

-440M

-641M

1645

2245

NZ

Exports M/M (Sep)

3.51B

3.44B

1645

2245

NZ

Imports M/M (Sep)

3.90B

4.08B

 

Speakers

0830

1430

EU

ECB’s Coene

0900

1500

EU

ECB’s Stark

0930

1530

UK

BoE’s FPC Member Jenkins

0930

1530

CA

Monetary Policy Report

1000

1600

EU

ECB’s Mersch

1200

1800

FR

French President Sarkozy

1215

1815

EU

Euro-Area Leaders Hold Summit

1300

1900

UK

BoE’s Posen

1615

2215

CA

BoC’s Governor Carney

 

Auctions

0845

1445

UK

BoE Asset Purchase Facility GBP 1.7bln 2022-2036 Gilt Purchases

1000

1600

US

Fed’s Outright Trea. Coup. Sales Mar’14-Oct’14 (USD 8-9bln)

1200

1800

US

USD 35bln 5y Note Auction

 

Earnings

US

Aflac, Akamai, Allergan, Allegheny Technologies, Boeing, Cabot Oil & Gas, ConocoPhillips, Exelon, Hess, Lockheed Martin, Norfolk Southern, Southern Co., Visa

 

**Notes: Natural Gas/Heating Oil/RBOB November options expiry (1930BST/1330CDT)

 

Prices taken at 1219BST