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DAILY US OPENING NEWS - 16/11/11

 

·      Market talk that the ECB is buying Eurozone government bonds, while some traders suggested that the ECB bought over EUR 2bln worth of government debt

 

·      Bunds came under pressure following a technically uncovered Schatz auction from Germany

 

·      UniCredit shares came under pressure after news emerged that co.'s CEO is meeting with the ECB, to ask for more access to ECB funding for Italian banks by widening type of collateral used

 

·      GBP came under selling pressure following higher than expected ILO unemployment rate from the UK, and after the BoE slashed its growth and inflation forecasts for the UK

 

·      German Chancellor said that she believes treaty changes are needed to win back market confidence, and Germany therefore is willing to give up some national sovereignty

 

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

 

Market Re-Cap

 

European equities traded mixed during the session weighed upon by concerns surrounding the ongoing political and debt situation in many Eurozone countries, together with uncertainty about the effectiveness of tackling debt challenges by the new Italian and Greek governments. In equity specific news, UniCredit shares came under pressure after news emerged that co.'s CEO is meeting with the ECB, to ask for more access to ECB funding for Italian banks by widening type of collateral used. Weakness in equities provided support to Bunds, however prices did come under pressure following a technically uncovered Schatz auction from Germany. However, the Eurozone 10-year government bond yield spreads tightened in early trade, led by the Italian/German spread, on the back of market talk of the ECB buying the Italian government debt, while some traders suggested that the ECB bought over EUR 2bln worth of government debt. In the forex market, GBP came under selling pressure following higher than expected ILO unemployment rate from the UK, and extended losses after the BoE slashed its growth and inflation outlook in its quarterly inflation report. Also, the USD-Index regained strength as the session progressed, which weighed upon EUR/USD, GBP/USD and commodity-linked currencies.

 

Moving into the North American open, markets look ahead to a slew of key economic data from the US in the form of CPI, industrial production, capacity utilisation, and the DOE oil inventories report. In fixed income, Fed's Outright Treasury Coupon sales operation in the maturity range of Nov'13-Feb'14, with a purchase target of USD 8-8.75bln, allied with another BoE's Gilt purchase operation in the maturity range of 2022-2036 are also scheduled for later.

 

Asian Headlines:

 

BoJ maintained its key interest rate at a range of 0% to 0.1% by a unanimous vote.  BoJ announced no new monetary easing steps and also cut economic assessments. BoJ added that they must continue to carefully watch how global economic and market uncertainty could affect the Japanese economy. BoJ mentioned that changes in CPI is likely to remain about 0% for time being. (RTRS/Sources)

 

US Headlines

 

The New York Fed said it will be increasing the collateral requirements on 21 primary-dealer banks in transactions dealing with mortgage-backed securities, in an effort to lower the settlement risks with its counterparties. The spokesman gave no further information but the WSJ said the changes would begin on Monday. Separately the WSJ said the Fed may impose a 2.5% initial margin on the USD amount of the mortgage-backed securities transactions from the dealers. (RTRS/WSJ)

 

In other news, US Treasury Secretary Geithner said housing continues to drag on the US economy and urged congress to take steps to boost short term growth. (Sources)

 

·       US MBA Mortgage Applications (Nov 11) -10.0% vs. Prev. 10.3% (RTRS)

 

EU and UK Headlines

 

·       Eurozone CPI (Oct) Y/Y 3.0% vs. Exp. 3.0% (Prev. 3.0%)

·       UK ILO Unemployment Rate (Sep) 3M/Y 8.3% vs. Exp. 8.2% (Prev. 8.1%), rate highest since 1996

·       UK Jobless Claims Change (Oct) M/M 5.3K vs. Exp. 21.0K (Prev. 17.5K, Rev. to 13.4K)

·       UK Claimant Count Rate (Oct) M/M 5.0% vs. Exp. 5.1% (Prev. 5.0%) (RTRS)

 

·       German Schatz auction for EUR 4.815bln, 0.25% Dec'13, bid/cover 1.10 (yield 0.39%; retention 19.7%), technically uncovered

·       Portuguese 3-month T-Bill auction for EUR 0.773bln, bid/cover 2.4 vs. Prev. 2.0 (yield 4.895% vs. Prev. 4.997%)

·       Portuguese 6-month T-Bill auction for EUR 0.350bln, bid/cover 4.1 vs. Prev. 3.7 (yield 5.250% vs. Prev. 5.250%) (RTRS)

 

EQUITIES

 

European equities traded mixed during the session weighed upon by concerns surrounding the ongoing political and debt situation in many Eurozone countries, together with uncertainty about the effectiveness of tackling debt challenges by the new Italian and Greek governments. In equity specific news, UniCredit shares came under pressure after news emerged that co.'s CEO is meeting with the ECB, to ask for more access to ECB funding for Italian banks by widening type of collateral used. Elsewhere, oil & gas and basic materials sectors came under pressure as the USD-Index strengthened. However, equities did receive support after German Chancellor Merkel said that she believes EU treaty changes are needed to win back market confidence, and Germany therefore is willing to give up some national sovereignty. Moving into the North American open, equities continue to trade mixed, with telecommunications and basic materials as the worst performing sectors.

 

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

 

Index

DAX

CAC

FTSE

EUROSTOXX

SMI

Level

5890

3048.88

5490.59

2254.86

5671.98

Change (ticks)

-43.14

-0.25

-26.85

0.86

7.07

 

FX

 

GBP came under selling pressure following higher than expected ILO unemployment rate from the UK, and extended losses after the BoE slashed its growth and inflation outlook in its quarterly inflation report. Also, the USD-Index regained strength as the session progressed, which weighed upon EUR/USD, GBP/USD and commodity-linked currencies.

 

Currency

EURUSD

GBPUSD

USDJPY

Level

1.3490

1.5791

76.93

Change (pips)

-0.0049

-0.0031

-0.1000

 

COMMMODITIES

 

Moving into the NYMEX pit open, WTI crude futures came under some selling pressure as the USD-Index strengthened and ahead of the DOE oil inventories report.

 

Oil & Gas News:

·       IEA’s head said the balance between supply and demand in oil markets is getting tighter and hoped that OPEC will come to a unanimous decision on output in December. The IEA’s head added that high oil prices could endanger economic recovery in Europe and says it is up to OPEC to decide whether to raise oil output in December.

 

Geopolitical News:

·       Iran’s armed forces chief said last week's deadly blast at revolutionary guard’s base happened during a military research and denied any sabotage by Israel. In other news, according to Iran’s Salehi, the country will send an analytical response to IAEA’s report.

 

Other News:

 

·       ANZ said it expects the continued focus on Europe’s debt problems to cause gold prices to end the year at USD 1,850 an ounce and possibly rally above USD 2,000 an ounce in 2012. (RTRS)

 

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

 

Commodity

WTI Nymex

OTC Spot Gold

Level

99.16

1773.47

Change (NYSEARCA:USD)

-0.21

-7.36

 

LOOKING AHEAD

 

Economic Releases

 

CST

GMT

 

DATA

EXP

PREV

0730

1330

US

CPI M/M (Oct)

0.0%

0.3%

0730

1330

US

CPI Y/Y (Oct)

3.7%

3.9%

0730

1330

US

CPI Ex-Food & Energy M/M (Oct)

0.1%

0.1%

0730

1330

US

CPI Ex-Food & Energy Y/Y (Oct)

2.1%

2.0%

0730

1330

US

CPI Core Index SA M/M (Oct)

 

226.137

0730

1330

US

Consumer Price Index NSA Y/Y (Oct)

226.621

226.889

0800

1400

US

Net Long Term TIC Flows (USD) M/M (Sep)

54.0B

57.9B

0800

1400

US

Total Net TIC Flows (USD) M/M (Sep)

 

89.6B

0815

1415

US

Industrial Production M/M (Oct)

0.4%

0.2%

0815

1415

US

Capacity Utilisation M/M (Oct)

77.6%

77.4%

0900

1500

US

NAHB Housing Market Index M/M (Nov)

18

18

0930

1530

US

DOE Crude Oil Inventories W/W (Nov 11)

-1000K

-1370K

0930

1530

US

DOE Gasoline Inventories W/W (Nov 11)

-1000K

-2107K

0930

1530

US

DOE Distillate Inventory W/W (Nov 11)

-2200K

-6020K

0930

1530

US

DOE Cushing Crude Inventory W/W (Nov 11)

 

-932K

0930

1530

US

DOE Refinery Utilisation W/W (Nov 11)

0.50%

-2.70%

1030

1630

US

Cleveland Fed CPI M/M (Oct)

 

0.2%

1545

2145

NZ

Producer Prices – Inputs Q/Q (Q3)

 

0.9%

1545

2145

NZ

Producer Prices – Outputs Q/Q (Q3)

 

1.4%

 

Speakers

0700

1300

GE

Chancellor Merkel

0730

1330

IR

Prime Minister Kenny

0730

1330

GE

Finance Minister Schaeuble

0730

1330

IT

Italian Debt Agency Head Cannata

0900

1500

IT

Italian Senate leaders meet to set the vote of confidence date for Mario Monti

0900

1500

POR

Portuguese Finance Minister on Troika review

1000

1600

IT

Mario Monti to be sworn in as the PM

1015

1615

US

Fed’s Lacker (Non-Voting Member)

1100

1700

GE

Finance Minister Schaeuble

1130

1730

IT

Italian Parliament leaders meet to set the vote of confidence date for Mario Monti

1145

1745

US

Fed’s Rosengren (Non-Voting Member)

1200

1800

GR

Greek PM meeting with the IIF

1215

1815

WLD

World Bank President Zoellick

1230

1830

GE

Deputy Finance Minister Asmussen

1530

2130

AU

RBA Governor Stevens

N/A

N/A

GR

Confidence Vote in Parliament for New Transition Government

 

Auctions

0845

1445

UK

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

1000

1600

US

Fed’s Outright Trea. Coup. Sales Nov’13-Feb’14 (USD 8.00-8.75bln)

             

 

Prices taken at 1248GMT