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DAILY US OPENING NEWS - 14/12/11

 

·      A well-received Schatz auction from Germany rendered support to Bund futures

 

·      ECB allotted USD 5.122bln in its 7-day USD operation - a much higher allotment than usual

 

·      ECB's Weidmann said Bundesbank is only willing to provide fresh funds to the IMF if conditions on other countries' involvement are met, adding that losing AAA rating is not the end of the world

 

·      Market talk that S&P may downgrade France, however the talk remains unconfirmed

 

·      RANsquawk European Morning Briefing Video: http://www.youtube.com/watch?v=jHAlqQ30mWs

 

Market Re-Cap

 

Last night the FOMC refrained from additional monetary easing, while a potential sovereign downgrade of various Eurozone countries after S&P placed them on credit watch negative recently weighed on European equities. Weakness in equities rendered support to Bund futures, which gained further following a well-received Schatz auction from Germany. The Eurozone 10-year government bond yield spreads lacked any real direction, whereas the ECB allotted USD 5.122bln in its 7-day USD operation - a much higher allotment than usual.

 

In the forex market, EUR/USD received support in early trade on the back of market talk of Japanese names bidding in the pair. Also, GBP/USD gained strength on market talk of a UK clearer buying in the pair, together with an unexpected decline in jobless claims change data from the UK. However, as the session progressed, EUR/USD and GBP/USD weakened as the USD-Index came off its earlier lows. Elsewhere, AUD came under some pressure overnight on the back of a lacklustre consumer confidence report from Australia.

 

Moving into the North American open, markets look ahead to economic data from the US in the form of import price index as well as the DOE oil inventories report. In fixed income, USD 13bln 30-year Note auction, together with Fed's Outright Treasury Coupon sales operation in the maturity range of Oct'12-May'13, with a sale target of USD 8-8.75bln, and BoE's Gilt purchase operation in the maturity range of 2025-2036 are also scheduled for later.

 

Asian Headlines:

 

China’s policy-setting economic work conference pledged to continue fine-tuning monetary policy to keep reasonable growth in money and credit supply. China’s growth faces downward pressure and China will maintain prudent monetary and proactive fiscal policies in 2012. (Xinhua)

 

·       Japanese Industrial Production (Oct F) M/M 2.2% vs. Prev. 2.4%

·       Japanese Industrial Production (Oct F) Y/Y 0.1% vs. Prev. 0.4%

·       Japanese Capacity Utilization (Oct F) M/M 4.1% vs. Prev. -3.6% (RTRS)

 

US Headlines

 

The US House passed a Republican bill to extend the payroll-tax break next year, approved by 234 votes to 193. (Sources)

 

·       US MBA Mortgage Applications (Dec 9) M/M 4.1% vs. Prev. 12.8% (RTRS)

 

EU and UK Headlines

 

According to a German draft law, resurrected bank rescue fund Soffin II will have same instruments as Soffin I and will be limited until the end of 2012, adding that Soffin II will have guarantee framework of EUR 400bln, and power of attorney to grant loans of EUR 80bln. It further said that liquidity guarantees will generally be possible for 5 years, and 7 years in case of covered bonds. It also said that BAFIN will be able to intervene with existing measures in a bank already when financial stability is in danger. (RTRS)

 

·       Eurozone Industrial Production SA (Oct) M/M -0.1% vs. Exp. 0.0% (Prev. -2.0%)

·       Eurozone Industrial Production WDA (Oct) Y/Y 1.3% vs. Exp. 2.1% (Prev. 2.2%)

·       UK Jobless Claims Change (Nov) M/M 3K vs. Exp. 13.7K (Prev. 5.3K, Rev. to 2.5K)

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

·       UK ILO Unemployment Rate (Oct) 3M/Y 8.3% vs. Exp. 8.3% (Prev. 8.3%) (RTRS)

 

·       German Schatz auction for EUR 4.18bln, 0.25% Dec'13, bid/cover 1.4 vs. Prev. 1.1 (yield 0.290% vs. Prev. 0.390%, retention 16.4% vs. Prev. 19.75%)

·       Italian BTP auction for EUR 3bln, 4.75% Sep'16, bid/cover 1.417 vs. Prev. 1.470 (yield 6.470% vs. Prev. 6.290%) (RTRS)

 

EQUITIES

 

Last night the FOMC refrained from additional monetary easing, while a potential sovereign downgrade of various Eurozone countries after S&P placed them on credit watch negative recently weighed on European equities. Elsewhere, basic materials and oil & gas sectors came under pressure as the USD-Index regained strength during the European session. Moving into the North American open, equities continue to trade lower, with industrials 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.

 

Maturity

2.000

5.000

10.000

30.000

Gilt (Dec 11)

Level

0.344

1.081

2.110

3.170

132.34

Change (bps)

-2.313

1.056

-1.361

-2.856

0.01

 

FX

 

EUR/USD received support in early trade on the back of market talk of Japanese names bidding in the pair. Also, GBP/USD gained strength on market talk of a UK clearer buying in the pair, together with an unexpected decline in jobless claims change data from the UK. However, as the session progressed, EUR/USD and GBP/USD weakened as the USD-Index came off its earlier lows. Elsewhere, AUD came under some pressure overnight on the back of a lacklustre consumer confidence report from Australia.

 

·       Australian Westpac Consumer Confidence SA (Dec) M/M -8.3% vs. Prev. 6.3%

·       Australian Westpac Consumer Confidence Index (Dec) M/M 94.7 vs. Prev. 103.4 (RTRS)

 

Currency

EURUSD

GBPUSD

USDJPY

Level

1.2986

1.5498

78.05

Change (pips)

-0.0051

0.0019

0.0500

 

COMMMODITIES

 

WTI & Brent crude futures trade lower during the European session ahead of the DOE inventory numbers later on and as OPEC meet in Vienna today.

 

Comments from today’s OPEC meeting:

·       Members of OPEC agreed the group should set a production ceiling of 30 MBPD.

·       OPEC president said group is concerned about low economic growth.

·       Libya oil minister said Libya expects to reach 1.7 MBPD in H2 2012.

·       Iraqi oil minister said aims for 2012 oil exports at 2.6 MBPD and Iraq is exporting oil normally after pipeline bombing.

·       Iranian oil minister said the Saudi oil minister told him that Saudi Arabia would not replace Iranian crude if it were embargoed; Saudi oil minister declined to comment.

 

Geopolitical News:

·       Closing the Strait of Hormuz to shipping is not on Iran’s agenda according to the Iranian foreign minister. Iran may also move nuclear enrichment operations to safer sites if necessary according to a Revolutionary Guards commander.

 

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

 

Commodity

WTI Nymex

OTC Spot Gold

Level

98.49

1626.05

Change (NYSEARCA:USD)

-1.65

-5.53

 

LOOKING AHEAD

 

Economic Releases

 

CST

GMT

 

DATA

EXP

PREV

0700

1300

NO

Norwegian Deposit Rates M/M (Dec)

2.00%

2.25%

0730

1330

US

Import Price Index M/M (Nov)

1.0%

-0.6%

0730

1330

US

Import Price Index Y/Y (Nov)

10.1%

11.0%

0730

1330

CA

Leading Indicators M/M (Nov)

0.3%

0.2%

0730

1330

CA

Manufacturing Sales M/M (Oct)

-0.6%

2.6%

0930

1530

US

DOE Crude Oil Inventories W/W (Dec 9)

-2500K

1336K

0930

1530

US

DOE Gasoline Inventories W/W (Dec 9)

1000K

5147K

0930

1530

US

DOE Distillate Inventory W/W (Dec 9)

1000K

2533K

0930

1530

US

DOE Cushing Crude Inventory W/W (Dec 9)

 

-196K

0930

1530

US

DOE Refinery Utilisation W/W (Dec 9)

0.00%

3.10%

1530

2130

NZ

Business PMI M/M (Nov)

 

46.5

1730

2330

AU

Consumer Inflation Expectations M/M (Dec)

 

2.5%

1750

2350

JN

Tankan Large Manufacturing Index Q/Q (Q4)

-2

2

 

Speaker

0700

1300

GE

Finance Minister Schaeuble

0700

1300

EU

ECB’s Weidmann

0700

1300

WLD

IMF’s Blanchard

0700

1300

WLD

Moody’s Chief Economist Zandi

0715

1315

EU

EU’s Van Rompuy

0730

1330

US

Fed’s Lockhart (Non Voting Member)

1145

1745

WLD

World Bank President Zoellick

1330

1930

WLD

IMF Deputy Managing Director Zhu

 

Auctions

0845

1445

UK

BoE Asset Purchase Facility GBP 1.7bln 2025-2036 Gilt Purchases

1000

1600

US

Fed’s Outright Trea. Coup. Sales Oct’12-May’13 (USD 8-8.75bln)

1200

1800

US

USD 13bln 30y Note Auction

 

Prices taken at 1233GMT

 

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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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