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DAILY US OPENING NEWS - 12/12/11

 

·      Moody's said that the European crisis is still in a critical and volatile stage, adding that it will revisit ratings of all EU sovereigns in the first quarter of next year

 

·      According to S&P, it wanted to send a strong signal that the Eurozone is facing risk of a major recession, and significant credit crunch

 

·      The Italian/German 10-year government bond yield spread widened despite a successful T-Bill auction from Italy as well as market talk of the ECB buying Italian government paper

 

·      Deutsche Bank cut its UK growth forecast for 2012 to zero, and said it now expects the BoE to buy a further GBP 75bln of Gilts in February, then a final GBP 50bln in May

 

·      RANsquawk European Morning Briefing Video: http://www.youtube.com/watch?v=II34_xSMv6c

 

Market Re-Cap

 

European equities traded lower during the session on continued worries about a successful implementation of measures agreed by the EU leaders in their summit last week, together with downbeat comments from Moody's saying that the European crisis is still in a critical and volatile stage. Moody's said that it will revisit ratings of all EU sovereigns in the first quarter of next year, while market participants already await S&P's decision on the Eurozone sovereign ratings after having placed them on credit watch negative last week. Comments from a senior US official that the Fed won't contribute new cash for the Eurozone debt crisis further weighed on financials, whereas basic materials and oil & gas sectors remained under pressure on the back of strength in the USD-Index. Weakness in equities rendered support to Bund futures, whereas the Eurozone 10-year government bond yield spreads generally widened across the board. Particular widening was observed in the Italian/German spread despite a decent 12-month T-Bill auction from Italy, allied with market talk of the ECB buying Italian government paper.

 

In the forex market, the USD-Index strengthened during the European session, which in turn exerted pressure on EUR/USD, GBP/USD and commodity-linked currencies. Commodity-linked currencies came under further pressure following lacklustre trade balance reports from China and Australia. Also, downbeat comments from Deutsche Bank regarding the UK economy weighed on GBP/USD in early trade, although the pair came off its earlier lows partly on the back of market talk of Middle Eastern names and a UK Clearer buying in GBP/USD.

 

Moving into the North American open, the economic calendar remains thin, however US monthly budget statement is scheduled for later in the session. In fixed income, USD 32bln 3-year Note auction, together with Fed's Outright TIPS purchase in the maturity range of Jan'18-Feb'41, with a purchase target of USD 1-1.5bln, as well as another BoE's Gilt purchase operation in the maturity range of 2015-2020 are also due later.

 

Asian Headlines:

 

According to Nikkei news, Japan may cut their yearly growth forecast below 2.5%. (Nikkei)

 

·       Japanese Consumer Confidence (Nov) M/M 38.1 vs. Exp. 38.3 (Prev. 38.6)

·       Chinese Trade Balance (NYSEARCA:USD) (Nov) M/M 14.52bln vs. Exp. 15.20bln (Prev. 17.03bln) (RTRS)

 

Global Headlines

 

According to a senior US official, the Fed won’t contribute new cash for the Eurozone debt crisis, however he backed bilateral loans to an IMF-administered account. (Sources)

 

US, EU and UK Headlines

 

Moody’s said the Euro area sovereigns remain under pressure in the absence of decisive initiatives and they are to revisit all EU sovereigns in Q1 2012. They said there is a risk of negative Europe rating action in the coming months. Moody’s also said the Euro bank recapitalization plan is credit positive. (RTRS)

 

EQUITIES

 

European equities traded lower during the session on continued worries about a successful implementation of measures agreed by the EU leaders in their summit last week, together with downbeat comments from Moody's saying that the European crisis is still in a critical and volatile stage. Moody's said that it will revisit ratings of all EU sovereigns in the first quarter of next year, while market participants already await S&P's decision on the Eurozone sovereign ratings after having placed them on credit watch negative last week. Comments from a senior US official that the Fed won't contribute new cash for the Eurozone debt crisis further weighed on financials, whereas basic materials and oil & gas sectors remained under pressure on the back of strength in the USD-Index. Moving into the North American open, European equities continue to trade lower, 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

5905.89

3145.87

5506.86

2311.9

5802.62

Change (ticks)

-80.82

-26.48

-22.35

-30.69

9.05

 

FX

 

The USD-Index strengthened during the European session, which in turn exerted pressure on EUR/USD, GBP/USD and commodity-linked currencies. Commodity-linked currencies came under further pressure following lacklustre trade balance reports from China and Australia. Also, downbeat comments from Deutsche Bank regarding the UK economy weighed on GBP/USD in early trade, although the pair came off its earlier lows partly on the back of market talk of Middle Eastern names and a UK Clearer buying in GBP/USD.

 

·       Australian Trade Balance (Oct) M/M 1595mln vs. Exp. 2000mln (Prev. 2564mln, Rev. 2249mln) (RTRS)

 

Currency

EURUSD

GBPUSD

USDJPY

Level

1.3265

1.5626

77.80

Change (pips)

-0.0121

-0.0045

0.1500

 

COMMMODITIES

 

WTI and Brent crude futures headed lower during the European session after Chinese data over the weekend showed a decrease in their monthly trade balance, downbeat comments from Moody’s on Europe, and with strength in the USD-Index.

 

Oil & Gas News:

·       Saudi Arabia and other Gulf oil producers will support maintaining the status quo on OPEC’s output ceiling when the group meet on Wednesday. The IEA said a boost in Saudi oil output would provide welcome relief from the threat that high fuel prices pose to efforts to revive the global economy and the Iranian oil minister called on OPEC to accommodate returning Libyan crude and added that the oil market is currently balanced.

·       Kuwait is to pump 60,000 BPD heavy oil in 2016, and heavy oil output is to reach 270,000 BPD by 2030 according to Kuwait’s Oil company chairman Al-Rushaid.

 

Corporate News:

·       Norway’s Petroleum Directorate said ConocoPhillips has made a gas discovery south of Ula field in North Sea.

 

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

 

Commodity

WTI Nymex

OTC Spot Gold

Level

98.19

1679.38

Change (USD)

-1.22

-32.22

 

LOOKING AHEAD

 

Economic Releases

 

CST

GMT

 

DATA

EXP

PREV

1300

1900

US

Monthly Budget Statement (USD) M/M (Nov)

-140.0B

-150.4B

 

Speaker

1200

1800

CA

BoC’s Governor Carney

N/A

N/A

EU

EU’s Barroso

N/A

N/A

EU

EU Officials and Lawmakers Negotiate on Draft Derivatives Law

 

Auctions

0745

1345

FR

EUR 6.5bln combined 13-, 26- & 44-week T-Bill Auctions

0830

1430

EU

ECB Announces Bond Purchases

0845

1445

UK

BoE Asset Purchase Facility GBP 1.7bln 2015-2020 Gilt Purchases

1000

1600

US

Fed’s Outright TIPS Purch. Jan’18-Feb’41 (USD 1-1.5bln)

1030

1630

US

USD 56bln combined 3-, and 6-month T-Bill Auctions

1200

1800

US

USD 32bln 3y Note Auction

 

Prices taken at 1150GMT

 

 

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‘Market talk’ – Signifies information that has not been formally tested through traditional journalistic channels and therefore is to be treated as unsubstantiated. Any interpretation of the talk is taken at the readers own risk and is a representation of the rumours within the market place and never generated by ourselves.

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