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DAILY US OPENING NEWS - 29/11/11

 

·      According to La Tribune, the French sovereign rating outlook may be downgraded to negative by S&P within a week to 10 days

 

·      Moody's said it is considering to lower debt ratings for banks in 15 European countries, including Spain, Italy, Austria and France

 

·      Italian BTP auctions observed a decent bid and Italy sold near the top end of the target range, however a sharp jump was observed in yields

 

·      ECB failed to fully sterilize its bond purchases which weighed on EUR/USD and DAX futures

 

Market Re-Cap

 

Early European session witnessed risk-averse sentiment on the back of an article in La Tribune that the French sovereign rating outlook may be downgraded to negative by S&P, together with news that Moody's is considering to lower debt ratings for banks in 15 European countries, including Spain, Italy, Austria and France. This resulted in the Italian FTSE MIB and Spanish IBEX 35 indices to underperform their European peers, with financials as the worst performing sector. However, in a stark reversal of fortunes, European equities pared earlier losses, and financials became one of the best performing sectors helped by market talk of successful BTP auctions, together with a positive outlook update by BASF. Strength in equities weighed upon Bunds, and the Eurozone 10-year government bond yield spreads narrowed across the board heading into the Italian bond auction results, with particular tightening seen in the Italian/German spread helped by market talk of the ECB buying Italian paper. The BTP auctions observed a decent bid and Italy sold near the top end of the target range, however a sharp jump was observed in yields, which weighed on sentiment and as the session progressed the Italian/German spread re-widened. In the forex market, EUR/USD, GBP/USD and commodity-linked currencies all received support as the USD-Index weakened, whereas GBP strengthened partly on the back of market talk of an Asian sovereign buying in the currency. Also, EUR/GBP came under selling pressure partly due to market talk of a Spanish bank selling in the cross.

 

Moving into the North American open, markets will keep a close eye on UK's Chancellor Osborne autumn statement, together with the OBR's economic and fiscal forecasts. Markets also look ahead to key economic data from the US in the form of S&P/Case Shiller HPI, consumer confidence as well as the API oil inventories report. In fixed income, another Fed's Outright Treasury Coupon Purchase operation in the maturity range of Feb'36-Nov'41, with a purchase target of USD 2.25-2.75bln, together with BoE's Gilt purchase operation in the maturity range of 2038-2060 are also scheduled for later in the session.

 

Asian Headlines:

 

China will start lowering banks’ reserve requirements as early as December according to a RTRS poll. The poll of 19 analysts showed 10 thought China’s central bank could start cutting banks’ reserve requirement ratio from December by 50 BPS. (RTRS)

 

US Headlines

 

Fitch affirms United States 'AAA' rating, outlook revised to Negative. (RTRS)

Fitch said the affirmation of the 'AAA' rating reflects the still strong economic and credit fundamentals in the US. The USD’s status as the global reserve currency and the depth of the US treasury market underpin a low cost of fiscal funding and remain the global benchmarks. However, Fitch recognizes that there is considerable uncertainty surrounding the US economy's output. The negative outlook means a slightly over 50% chance of a cut over the next 2 years, and they may cut the rating if the deficit cut plan fails in 2013 or economy worsens and sees the Federal debt held by the public to be over 90% of US GDP.

 

Barcap US Treasury month-end extension seen at +0.06yrs

 

EU and UK Headlines

 

Moody’s said it’s considering lower debt ratings for banks in 15 European nations to reflect the potential removal of government support. Moody’s said the greatest number of ratings to be reviewed were in Spain, Italy, Austria and France. The review could lead to an average potential downgrade of subordinated debt by two notches. (RTRS)

 

In other news, some European nations, struggling to find buyers for their bonds, are pressuring their own already-stressed banks to fill the gap by acting as a lender of last resort – in certain cases, pushing the amount of risky European debt on those institutions’ books even higher. (WSJ)

 

·       Eurozone Business Climate Indicator (Nov) M/M -0.44 vs. Exp. -0.30 (Prev. -0.18, Rev. to -0.19)

·       Eurozone Consumer Confidence (Nov F) M/M -20.4 vs. Exp. -20.4 (Prev. -20.4)

·       UK Net Consumer Credit (Oct) M/M 0.0bln vs. Exp. 0.5bln (Prev. 0.6bln)

·       UK Net Lending Sec. on Dwellings (GBP) (Oct) M/M 1.3bln vs. Exp. 0.5bln (Prev. 0.3bln, Rev. 0.5bln)

·       UK Mortgage Approvals (Oct) M/M 52.7K vs. Exp. 51.8K (Prev. 51.0K, 51.2K)

·       UK Nationwide House Prices SA (Nov) M/M 0.4% vs. Exp. 0.0% (Prev. 0.4%)

·       UK Nationwide House Prices NSA (Nov) Y/Y 1.6% vs. Exp. 1.3% (Prev. 0.8%) (RTRS)

 

·       Italian BTP auction for EUR 3.5bln, 6.00% Nov'14, bid/cover 1.502 (yield 7.89%)

·       Italian BTP auction for EUR 1.499bln, 4.00% Sep'20, bid/cover 1.538 vs. Prev. 1.49 (yield 7.28% vs. Prev. 5.470%)

·       Italian BTP auction for EUR 2.5bln, 5.00% Mar'22, bid/cover 1.335 vs. Prev. 1.27 (yield 7.56% vs. Prev. 6.060%)

·       Belgian 3-month T-Bill auction for EUR 0.502bln, bid/cover 5.61 vs. Prev. 1.45 (yield 2.185% vs. Prev. 1.575%)

·       Belgian 12-month T-Bill auction for EUR 0.513bln, bid/cover 2.76 vs. Prev. 1.85 (yield 2.438% vs. Prev. 1.086%) (RTRS)

 

EQUITIES

 

Early European session witnessed risk-averse sentiment on the back of an article in La Tribune that the French sovereign rating outlook may be downgraded to negative by S&P, together with news that Moody's is considering to lower debt ratings for banks in 15 European countries, including Spain, Italy, Austria and France. This resulted in the Italian FTSE MIB and Spanish IBEX 35 indices to underperform their European peers, with financials as the worst performing sector. However, in a stark reversal of fortunes, European equities pared earlier losses, and financials became one of the best performing sectors helped by market talk of successful BTP auctions, together with a positive outlook update by BASF. The BTP auctions observed a decent bid and Italy sold near the top end of the target range, however a sharp jump was observed in yields, which weighed on sentiment. Moving into the North American open, European equities are trading mixed, with basic materials and financials 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

5753.63

3024.57

5315.95

2226.56

5509.68

Change (ticks)

8.30

11.64

3.19

4.80

-12.98

 

FX

 

EUR/USD, GBP/USD and commodity-linked currencies all received support as the USD-Index weakened, whereas GBP strengthened partly on the back of market talk of an Asian sovereign buying in the currency. Also, EUR/GBP came under selling pressure partly due to market talk of a Spanish bank selling in the cross.

 

Currency

EURUSD

GBPUSD

USDJPY

Level

1.3345

1.5625

77.81

Change (pips)

0.0025

0.0115

-0.1700

 

COMMMODITIES

 

WTI crude futures briefly moved back above USD 99 per barrel in the European session, supported by weakness in the USD-Index as risk appetite came into the market ahead of the Italian bond auctions.

 

Oil & Gas News:

·       Iran’s OPEC governor says does not foresee OPEC increasing production ceiling.

·       Asia fuel oil demand may rise 9.3% by 2015 to 200mln tons according to Chemoil Adani CEO Basheer Sayeed.

 

Geopolitical News:

·       Russia said it opposes arms embargo on Syria and believes the international community should stop threatening Damascus with ultimatums according to foreign minister Lavrov. The Turkish foreign minister says Turkey does not want to consider military option for intervention in Syria, but is ready for any scenario.

·      Russia activated its missile shield in Kaliningrad according to Russian President Medvedev.

 

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

 

Commodity

WTI Nymex

OTC Spot Gold

Level

98.27

1712.26

Change (NYSEARCA:USD)

0.06

-0.09

 

LOOKING AHEAD

 

Economic Releases

 

CST

GMT

 

DATA

EXP

PREV

0645

1245

US

ICSC Chain Stores W/W (Nov 29)

 

-0.9%

0645

1245

US

ICSC Chain Stores Y/Y (Nov 29)

 

2.8%

0730

1330

UK

OBR’s Economic and Fiscal Forecasts

 

 

0730

1330

CA

Current Account (USD) Q/Q (Q3)

-11.1B

-15.3B

0755

1355

US

Redbook M/M (Nov 29)

 

1.7%

0755

1355

US

Redbook Y/Y (Nov 29)

 

3.7%

0800

1400

US

S&P/CS Composite-20 Y/Y (Sep)

-3.00%

-3.80%

0800

1400

US

S&P/CS 20 City SA M/M (Sep)

0.10%

-0.05%

0800

1400

US

S&P/CS Home Price Index M/M (Sep)

 

142.84

0800

1400

US

S&P/CS HPI Y/Y (Q3)

-3.10%

-5.88%

0800

1400

US

S&P/CS HPI Y/Y (Q3)

 

130.12

0900

1500

US

Consumer Confidence M/M (Nov)

44.0

39.8

0900

1500

US

House Price Index M/M (Sep)

-0.1%

-0.1%

0900

1500

US

House Price Purchase Index Q/Q (Q3)

 

-0.6%

1400

1900

US

Fed’s Discount Rate Minutes

 

 

1530

2130

US

API Crude Oil Inventories W/W (Nov 25)

 

-5569K

1530

2130

US

API Gasoline Inventories W/W (Nov 25)

 

5416K

1530

2130

US

API Distillate Inventory W/W (Nov 25)

 

-886K

1530

2130

US

API Cush. Crude Inventory W/W (Nov 25)

 

791K

1545

2145

NZ

Building Permits M/M (Oct)

 

-17.1%

1750

2350

JN

Industrial Production M/M (Oct P)

1.1%

-3.3%

1750

2350

JN

Industrial Production Y/Y (Oct P)

-1.0%

-3.3%

N/A

N/A

UK

BoE Housing Equity Withdrawal Q/Q (Q2) (GBP)

-6.0B

-5.8B

 

Speakers

0630

1230

UK

Chancellor Osborne’s Autumn Statement

0630

1230

EU

ECB’s Stark

0645

1245

GE

Chancellor Merkel

1000

1600

EU

Eurozone Finance Ministers’ Meeting

1030

1630

US

Fed’s Yellen (Voting Member)

1030

1630

EU

European Commission’s President Barroso

1115

1715

US

Fed’s Raskin (Voting Member)

1127

1727

US

Fed’s Lockhart (Non-voting Member)

1530

2130

US

Fed’s Williams (Non-voting Member)

1700

2300

EU

European Commissioner Almunia

 

Auctions

0845

1445

UK

BoE Asset Purchase Facility GBP 1.7bln 2038-2060 Gilt Purchases

0930

1530

UK

DMO 4.25% 2040 Conventional Gilt & 1.25% 2032 Index-Linked Gilt Size Announcements

1000

1600

US

Fed’s Outright Trea. Coup.  Purch. Feb’36-Nov’41 (USD 2.25-2.75bln)

1030

1630

US

USD 35bln 4-week T-Bill Auction

 

Prices taken at 1224GMT