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DAILY US OPENING NEWS - 01/12/11

 

·      Lower than expected manufacturing PMI data from China prompted concerns surrounding sustainability of the Chinese growth, and raised hopes for further monetary easing measures by the PBOC soon

 

·      Successful bond auctions from Spain and France resulted in significant tightening of the Spanish/German and French/German 10-year government bond yield spreads with heavy buying from domestic accounts

 

·      Market talk of the ECB buying in Italian and Spanish government debt via SMP

 

·      Gilt futures dropped more than 50 ticks following a lackluster Gilt auction from the UK’s DMO

 

·      RANsquawk European Morning Briefing Video: http://www.youtube.com/watch?v=rYjI0BuDQhY

 

Market Re-Cap

 

Overnight markets witnessed lower than expected manufacturing PMI data from China prompting concerns on sustainability of the Chinese growth, however losses in equities were capped on the back of yesterday's coordinated action by major central banks to enhance liquidity in the global financial system. Appetite for risk received additional support following well bid Spanish bond auctions, however European equities traded mixed for a vast majority of the session. The Eurozone 10-year government bond yield spreads generally tightened helped by successful bond auctions from Spain together with market talk of the ECB buying Italian and Spanish government debt. Also, Gilt futures fell over 50 ticks on the back of a lacklustre conventional Gilt auction from the UK. In the forex market, GBP/USD gained partly on the back of market talk of an Asian sovereign buying in the pair, however AUD remained under pressure following softer Chinese manufacturing PMI data together with concerns surrounding the Australian economic growth.

 

Moving into the North American open, markets look ahead to key economic data from the US in the form of jobless claims, construction spending, ISM manufacturing, and vehicle sales. Markets will also keep a close eye on developments pertaining to the Eurozone debt crisis, whereas in fixed income the BoE is scheduled to release details of its APF operations for next week later in the session.

 

Asian Headlines:

 

Japanese PM Noda asked the finance minister Azumi to compile a fourth supplementary budget for the financial year to next March to provide support for businesses hurt by a strong JPY and flooding in Thailand. Azumi said the budget will not rely on new bond issuance and he wants to compile it by mid-December. Azumi also said there is no change in Japan’s policy to take firm measures against excessive and disorderly currency moves driven by speculators. (Kyodo)

 

·       Chinese PMI Manufacturing (Nov) M/M 49.0 vs. Exp. 49.8 (Prev. 50.4)

·       Chinese HSBC Manufacturing PMI (Nov) M/M 47.7 vs. Prev. 51.0 (RTRS)

 

US Headlines

 

Fed’s Fisher said that a decision to alter the terms of dollar swap lines with foreign central banks was meant to help economic growth, not bailout Europe. (RTRS)

 

In other news, according to reports, the Fed could opt for further measures to ease the sovereign debt crisis in Europe by cutting the US discount lending rate or restarting a programme that auctions loans to banks. (Sources)

 

EU and UK Headlines

 

·  Eurozone Manufacturing PMI (Nov F) M/M 46.4 vs. Exp. 46.4 (Prev. 47.1), lowest since July 2009

·  German Manufacturing PMI (Nov F) M/M 47.9 vs. Exp. 47.9 (Prev. 49.1), activity drops at fastest level since mid-2009

·  French Manufacturing PMI (Nov F) M/M 47.3 vs. Exp. 47.6 (Prev. 47.6)

·  Italian Manufacturing PMI (Nov) M/M 44.0 vs. Exp. 43.0 (Prev. 43.3)

·  UK Manufacturing PMI (Nov) M/M 47.6 vs. Exp. 47.0 (Prev. 47.4, Rev. 47.8) (RTRS)

 

·  Spanish bond auction for EUR 1.2bln, 3.00% Apr'15, bid/cover 2.70 vs. Prev. 2.10 (yield 5.187% vs. Prev. 3.639%)

·  Spanish bond auction for EUR 1.15bln, 3.15% Jan'16, bid/cover 2.80 vs. Prev. 1.79 (yield 5.276% vs. Prev. 4.045%)

·  Spanish bond auction for EUR 1.4bln, 3.80% Jan'17, bid/cover 2.70 vs. Prev. 1.80 (yield 5.544% vs. Prev. 4.782%)

·  French OAT auction for EUR 0.595bln, 4.25% Oct'17, bid/cover 4.403 vs. Prev. 2.16 (yield 2.42% vs. Prev. 3.080%)

·  French OAT auction for EUR 1.571bln, 3.25% Oct'21, bid/cover 3.046 vs. Prev. 2.24 (yield 3.18% vs. Prev. 3.220%)

·  French OAT auction for EUR 1.1bln, 3.50% Apr'26, bid/cover 3.239 vs. Prev. 2.60 (yield 3.65% vs. Prev. 3.770%)

·  French OAT auction for EUR 1.08bln, 4.50% Apr'41, bid/cover 2.257 vs. Prev. 2.22 (yield 3.94% vs. Prev. 3.720%)

·  UK Conventional Gilt auction for GBP 3bln, 3.75% 2021 Gilt, bid/cover 1.61 vs. Prev. 1.76 (RTRS)

 

EQUITIES

 

Overnight markets witnessed lower than expected manufacturing PMI data from China prompting concerns on sustainability of the Chinese growth, however losses in equities were capped on the back of yesterday's coordinated action by major central banks to enhance liquidity in the global financial system. Appetite for risk received additional support following well bid Spanish bond auctions, however moving into the North American open, European equities are trading mixed, with telecommunications and oil & gas 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

6064.28

3147.87

5532.91

2325.71

5692.45

Change (ticks)

-24.56

-6.75

27.49

-4.72

40.14

 

FX

 

GBP/USD gained partly on the back of market talk of an Asian sovereign buying in the pair, however AUD remained under pressure following softer Chinese manufacturing PMI data together with concerns surrounding the Australian economic growth.

 

Currency

EURUSD

GBPUSD

USDJPY

Level

1.3487

1.5730

77.68

Change (pips)

0.0041

0.0026

0.0600

 

COMMMODITIES

 

Moving into the NYMEX pit open WTI crude futures lacked any firm direction, with support coming from ongoing geopolitical tension related to Iran, however gains were capped following a weaker than expected Chinese manufacturing PMI data

 

Oil & Gas News:

·       Goldman Sachs said they are maintaining their oil price forecast, but risks are intensifying to both the upside and downside.

·       Iraq November oil exports are up 2.2% on the month at 2.135 MBPD according to SOMO.

 

Geopolitical News:

·       US General Martin Dempsey, the chairman of the Joint Chiefs of Staff, said he did not know whether Israel would alert the US ahead of time if it decided to take military action against Iran.

·       Israeli defence minister says an Israeli attack on Iran is not imminent but all options remain open to stop what Israel sees as an Iranian bid to develop nuclear weapons.

 

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

 

Commodity

WTI Nymex

OTC Spot Gold

Level

100.36

1747.38

Change (NYSEARCA:USD)

0.00

1.00

 

LOOKING AHEAD

 

Economic Releases

 

CST

GMT

 

DATA

EXP

PREV

0700

1300

US

RBC Consumer Outlook Index M/M (Dec)

 

39.6

0730

1330

US

Initial Jobless Claims W/W (Nov 26)

390K

393K

0730

1330

US

Continuing Claims W/W (Nov 19)

3650K

3691K

0830

1430

CA

RBC Manufacturing PMI SA M/M (Nov)

 

53.66

0900

1500

US

Construction Spending M/M (Oct)

0.3%

0.2%

0900

1500

US

ISM Manufacturing M/M (Nov)

51.7

50.8

0900

1500

US

ISM Prices Paid M/M (Nov)

45.0

41.0

0930

1530

US

EIA Natural Gas Storage Change W/W (Nov 25)

10

9

1100

1700

IT

New Car Registrations Y/Y (Nov)

 

-5.5%

1200

1800

IT

Budget Balance M/M (Nov)

 

-1.9B

1200

1800

IT

Budget Balance (Year to Date) Y/Y (Nov)

 

-60.8B

1600

2200

US

Total Vehicle Sales Y/Y (Nov)

13.40M

13.20M

1600

2200

US

Domestic Vehicle Sales Y/Y (Nov)

10.40M

10.29M

N/A

N/A

US

ICSC Chain Store Sales Y/Y (Nov)

 

3.7%

 

Speakers

0800

1400

US

Treasury Secretary Geithner

0800

1400

US

Fed’s Tarullo (Voting Member)

0800

1400

US

Fed’s Lockhart (Non-voting Member)

0805

1405

US

Fed’s Bullard (Non-voting Member)

0830

1430

GE

Finance minister Schaeuble

1030

1630

US

IMF’s chief Lagarde

1100

1700

EU

ECB’s Nowotny

1130

1730

FR

President Sarkozy

1200

1800

EU

ECB’s Ordonez

1200

1800

EU

European Council’s President Van Rompuy

N/A

N/A

EU

European Commissioner Barnier

N/A

N/A

SP

PM Elect Rajoy

 

Auctions

1000

1600

UK

BoE Confirms Details of Following Week’s APF Operations

1030

1630

US

USD 56bln combined 3-, and 6-month T-Bills

 

Earnings

US

Ford (Sales), JC Penney (Sales), Kohl’s Corp (Sales), Kroger, Ross Stores (Sales), Target (Sales), TJX (Sales)

 

Prices taken at 1226GMT