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DAILY US OPENING NEWS - 23/11/11

 

·      Yet another technically uncovered Bund auction from Germany, with an exceptionally high retention of over 39%, witnessed a sharp selloff in Bund futures

 

·      Lacklustre manufacturing PMI data from China and core Eurozone countries promoted risk-aversion

 

·      News emerged overnight that the restructuring deal related to Dexia is being renegotiated, however the news was later denied by the French and Belgian governments

 

·      The Greek central bank said that Greece’s Eurozone membership is at stake, adding that October 26th deal is country’s “last opportunity”

 

·      The BoE’s MPC voted 9-0 to keep its benchmark interest rate and asset purchase facility unchanged at 0.50% and GBP 275bln respectively, according to the BoE’s November minutes

 

·      RANsquawk European Morning Briefing Video: http://www.youtube.com/watch?v=D28Exz4_59A

 

Market Re-Cap

 

Today market participants witnessed lacklustre manufacturing PMI data from China as well as core Eurozone countries, which together with concerns surrounding successful implementation of a rescue deal for Dexia weighed on the appetite for risk, and exerted downward pressure on European equities. Downbeat comments from the Greek central bank saying that country's Eurozone membership is at stake together with yet another technically uncovered Bund auction from Germany dented risk-appetite further. Bund futures came under heavy selling pressure post the auction, which also observed an exceptionally high retention of 39.2%, and the move was exacerbated after stops were triggered below yesterday's low of 136.73 to the downside. In the forex market, the USD-Index strengthened amid risk-aversion, which weighed on EUR/USD, GBP/USD and commodity-linked currencies, whereas EUR/USD printed a 6-week low following the Bund auction and continued its move downward after triggering stops below the 1.3400 level. Also, weakness was observed in CHF in early trade on the back of market talk of the SNB checking FX rates. Elsewhere, strength in the USD-Index allied with growing signs of a faltering global economic recovery weighed upon WTI and Brent crude futures.

 

Moving into the North American open, markets look ahead to key economic data from the US in the form of jobless claims, durable goods orders, personal income/spending, University of Michigan confidence, as well as the DOE oil inventories report. In fixed income, USD 29bln 7-year Note auction, together with another BoE's Gilt purchase operation in the maturity range of 2022-2036 are also scheduled for later in the session.

 

Asian Headlines:

 

Japanese market holiday.

 

Bank of America cut its forecast of Chinese inflation to 3.5%, from 4.5%. The reserve requirement ratio may be cut by 150bps in 2012 according to the report. The one-year deposit rate may be increased once by 25bps and one-year lending rate by 15bps. (Sources)

 

·       Chinese HSBC Manufacturing PMI (Nov) M/M 48.0 vs. Prev. 51.0 (RTRS)

 

US Headlines

 

President Obama challenged the US congress yesterday to vote next week to save an expiring payroll tax cut, a day after a high-profile effort to tackle huge US deficits collapsed in acrimony. (RTRS)

 

EU and UK Headlines

 

Belgium and France were holding fresh talks about a deal they had reached to rescue Dexia, as the planned rescue is unworkable as Belgium can’t meet its agreed share of the financing. Belgium’s finance minister Reynders denied that the accord reached between the two states to rescue the bank would be dismantled. They said talks concerned the distribution of the costs between the two countries after the bailout of Dexia. (De Standaard) The report was also denied by the French government during the European session.

 

In other news, Fitch said the recent adoption of new fiscal measures by the French government has enhanced the credibility of the government’s consolidation programme. However, additional measures are still likely to be necessary if the 3% of GDP target is to be met. Fitch further said that France's 'AAA' status continues to be underpinned by a high value added and diverse economy, adding that French banks do not need a state capital injection. (Sources)

 

·       Eurozone Manufacturing PMI (Nov A) M/M 46.4 vs. Exp. 46.5 (Prev. 47.1)

·       Eurozone Services PMI (Nov A) M/M 47.8 vs. Exp. 46.0 (Prev. 46.4)

·       German Manufacturing PMI (Nov A) M/M 47.9 vs. Exp. 48.5 (Prev. 49.1), lowest since July'09

·       German Services PMI (Nov A) M/M 51.4 vs. Exp. 50.0 (Prev. 50.6)

·       French Manufacturing PMI (Nov P) M/M 47.6 vs. Exp. 47.8 (Prev. 48.5), lowest since June 2009

·       French Services PMI (Nov P) M/M 49.3 vs. Exp. 44.6 (Prev. 44.6) (RTRS)

 

·       German Bund auction for EUR 3.644bln, 2.00% 04-Jan-22, bid/cover 1.1 (yield 1.980%, retention 39.2%), technically uncovered (RTRS)

 

EQUITIES

 

Today market participants witnessed lacklustre manufacturing PMI data from China as well as core Eurozone countries, which together with concerns surrounding successful implementation of a rescue deal for Dexia weighed on the appetite for risk, and exerted downward pressure on European equities. Downbeat comments from the Greek central bank saying that country's Eurozone membership is at stake together with yet another technically uncovered Bund auction from Germany dented risk-appetite further. Moving into the North American open, most European indices are trading in minor negative territory, with consumer services and telecommunications 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

5544.63

2858.36

5169.36

2128.6

5419.74

Change (ticks)

7.24

-12.32

-37.46

-8.21

-27.92

 

FX

 

The USD-Index strengthened amid risk-aversion, which weighed on EUR/USD, GBP/USD and commodity-linked currencies, whereas EUR/USD printed a 6-week low following the Bund auction and continued its move downward after triggering stops below the 1.3400 level. Also, weakness was observed in CHF in early trade on the back of market talk of the SNB checking FX rates.

 

Currency

EURUSD

GBPUSD

USDJPY

Level

1.3381

1.5564

77.22

Change (pips)

-0.0124

-0.0070

0.2500

 

COMMMODITIES

 

WTI and Brent crude futures traded lower during the European session following lacklustre manufacturing PMI data from China and the core Eurozone countries, and with strength in the USD-Index.

 

Oil & Gas News:

·       JP Morgan lowered its Brent and US crude prices for 2012, and downgraded commodities to underweight partly due to the economic uncertainty in Europe, the US and signs of weaker growth in China.

 

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

 

Commodity

WTI Nymex

OTC Spot Gold

Level

96.1

1688.78

Change (NYSEARCA:USD)

-1.91

-11.05

 

LOOKING AHEAD

 

Economic Releases

 

CST

GMT

 

DATA

EXP

PREV

0730

1330

US

Initial Jobless Claims W/W (Nov 19)

390K

388K

0730

1330

US

Continuing Claims W/W (Nov 11)

3621K

3608K

0730

1330

US

Durable Goods Orders M/M (Oct)

-1.2%

-0.8%

0730

1330

US

Durables Ex-Transportation M/M (Oct)

0.0%

1.7%

0730

1330

US

Cap Goods Ship Non-Def Ex-Air M/M (Oct)

 

-0.9%

0730

1330

US

Personal Income M/M (Oct)

0.3%

0.1%

0730

1330

US

Personal Spending M/M (Oct)

0.3%

0.6%

0730

1330

US

PCE Deflator Y/Y (Oct)

2.7%

2.9%

0730

1330

US

PCE Core M/M (Oct)

0.1%

0.0%

0730

1330

US

PCE Core Y/Y (Oct)

1.7%

1.6%

0845

1445

US

University of Michigan Confidence M/M (Nov F)

64.5

64.2

0930

1530

US

DOE Crude Oil Inventories W/W (Nov 18)

950K

-1056K

0930

1530

US

DOE Gasoline Inventories W/W (Nov 18)

1100K

992K

0930

1530

US

DOE Distillate Inventory W/W (Nov 18)

-1125K

-2136K

0930

1530

US

DOE Cushing Crude Inventory W/W (Nov 18)

 

890K

0930

1530

US

DOE Refinery Utilisation W/W (Nov 18)

0.50%

2.20%

0930

1530

US

ECRI Weekly Index W/W (Nov 23)

 

122.1

0930

1530

US

ECRI Weekly Annualised Y/Y (Nov 23)

 

-7.8%

1000

1600

US

Kansas City Fed Manufacturing Activity M/M (Nov)

9

8

1100

1700

US

EIA Natural Gas Storage Change W/W (Nov 18)

25

19

1200

1800

US

Baker Hughes Rig Count W/W (Nov 25)

 

2001

1545

2145

NZ

Trade Balance M/M (Oct)

-450M

-751M

1545

2145

NZ

Exports M/M (Oct)

3.76B

3.44B

1545

2145

NZ

Imports M/M (Oct)

4.27B

4.19B

 

Speakers

0900

1500

FR

Finance Minister Baroin

0900

1500

EU

EU’s Rehn

0930

1530

US

President Obama

1000

1600

IR

Deputy Finance Minister Howlin

1100

1700

FR

President Sarkozy

1100

1700

GE

Finance Minister Schaeuble

1100

1700

SW

Riksbank’s Deputy Governor Ekholm

1125

1725

CA

Bank of Canada Governor Carney

N/A

N/A

UK

BoE’s FPC Holds Meeting

N/A

N/A

EU

European Commission’s new package of measures on economic governance

N/A

N/A

US

Deadline for the “Super-Committee” to vote on a deficit reduction plan

 

Auctions

0845

1445

UK

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

1000

1600

US

3-, and 6-month T-Bill Size Announcement

1200

1800

US

USD 29bln 7-year Note Auction

 

**Note:

Japanese Market Holiday

Natural Gas December options expiry (1930GMT/1330CST)

 

Prices taken at 1240GMT