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DAILY US OPENING NEWS - 16/12/11

 

·      Fitch downgraded the long-term IDR ratings of seven major banks, including, Bank of America, Goldman Sachs, Citigroup, Barclays, BNP Paribas, Credit Suisse and Deutsche Bank

 

·      Market talk that S&P may downgrade sovereign ratings of Spain and Italy today, however the talk remains unconfirmed

 

·      Eurozone 10-year government bond yield spreads tightened across the board, with particular narrowing observed in the Spanish/German and Italian/German spreads

 

·      According to a senior Troika official, the aim of Greek talks is a voluntary debt swap, however there are no guarantees of success, adding that the Greek 2011 deficit is likely to be higher than the 9% of GDP target

 

·      German FDP party approved the set-up of ESM

 

·      RANsquawk European Morning Briefing Video: http://www.youtube.com/watch?v=SV4EeYz8BRM

 

Market Re-Cap

 

Following a higher open, European equities gradually came off their best levels as the session progressed, weighed upon by market talk that S&P may downgrade sovereign ratings of Spain and Italy today, together with a downgrade of seven large banks based in Europe and the US by Fitch. Underperformance was observed in the technology sector after Research in Motion provided a downbeat earnings outlook. Meanwhile, option expiries in various European indices today also resulted in some volatility. In fixed income, the Eurozone 10-year government bond yield spreads tightened across the board, with particular narrowing observed in the Spanish/German and Italian/German spreads, which traders attributed to Asian Central Banks buying in Spanish and Italian government paper. In the forex market, the USD-Index lacked any real direction during the European session, however strength was observed in commodity-linked currencies as both Gold and Silver traded over 1% overnight.

 

Moving into the North American open, the economic calendar remains thin, however markets look ahead to CPI data from the US later in the session. In fixed income, Fed's Outright Treasury Coupon Purchase operations in the maturity ranges of Feb'36-Nov'41 and Feb'20-Nov'21, with respective purchase targets of USD 2.25-2.75bln and USD 4.25-5bln are also scheduled for later.

 

Asian Headlines:

 

China may target growth of 10% for foreign trade next year according to people familiar with the matter. (21st Century Business)

 

US Headlines

 

Fed’s Dudley said if the Europe situation deteriorates it would have a negative impact on the US economy and possibly banking system and financial markets. US financial institutions do not face difficulty obtaining liquidity in short-term funding markets, and Dudley said if conditions were to deteriorate the Fed has a range of tools to provide effective liquidity backstops for US institutions; prepared to use as needed. (RTRS)

 

In other news, the chairman of the Senate Appropriation Committee said that he had formally signed off a bipartisan agreement that would fund the government for the remainder of the 2012 fiscal year. (Sources)

 

Elsewhere, US Fed balance sheet liabilities were USD 2.885trl Dec 14th vs. USD 2.803trl the prior week, Fed holdings of treasuries totalled USD 1.673trl as of Dec 14 vs. USD 1.675trl the prev. week, Fed discount primary borrowing averaged USD 393mln/day week vs. USD 13mln/day the prev. week, Fed holdings of agency debt total USD 105.9bln as of Dec 14, unchanged from the prev. week and Fed holdings of MBS totalled USD 858.08bln vs. USD 827.05bln the prev. week (RTRS)

 

EU and UK Headlines

 

A draft prospectus prepared for the latest Eurozone bail-out instruments includes explicit warnings to investors that the euro could break apart or even cease to be a “lawful currency” entirely. The EFSF is debating whether the “risk factors” should be included in the final version. (FT-More)

 

EQUITIES

 

Following a higher open, European equities gradually came off their best levels as the session progressed, weighed upon by market talk that S&P may downgrade sovereign ratings of Spain and Italy today, together with a downgrade of seven large banks based in Europe and the US by Fitch. Underperformance was observed in the technology sector after Research in Motion provided a downbeat earnings outlook. Meanwhile, option expiries in various European indices today also resulted in some volatility. Moving into the North American open, European equities are trading mixed, with basic materials and telecommunications as the best 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

5727.25

2998.71

5427.43

2222.01

5757.14

Change (ticks)

-3.37

-0.02

26.58

-2.88

-27

 

FX

 

The USD-Index lacked any real direction during the European session, however strength was observed in commodity-linked currencies as both Gold and Silver traded over 1% overnight.

 

Currency

EURUSD

GBPUSD

USDJPY

Level

1.3029

1.5526

77.90

Change (pips)

0.0013

0.0012

0.0400

 

COMMMODITIES

 

WTI and Brent crude futures have tracked equity markets to trade flat in a mixed European session which has seen a dearth of liquidity and a range-bound USD-index. 

 

Oil & Gas News:

·  In their latest forecast Bank of America says that WTI crude is unlikely to rise above USD 101 per barrel in 2012 with Brent crude also unlikely to break above USD 108 per barrel next year.

·  China will announce a revamp of domestic fuel pricing at an “appropriate time” in 2012 and will also launch a trial reform of natural gas pricing according to top government officials.

·  South Korea extended its Iranian sanctions by banning fresh investment into its oil and gas sectors, however the measures seem to fall short of the sanctions demanded by the US. 

 

Geopolitical News:

·  Russia has proposed a draft resolution on the violence in Syria to the UN Security Council, strongly condemning violence by "all parties, including disproportionate use of force by Syrian authorities". Western members of the council welcomed the move, but said it did not go far enough.

 

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

 

Commodity

WTI Nymex

OTC Spot Gold

Level

93.77

1592.78

Change (NYSEARCA:USD)

-0.10

22.25

 

LOOKING AHEAD

 

Economic Releases

 

CST

GMT

 

DATA

EXP

PREV

0730

1330

US

CPI M/M (Nov)

0.1%

-0.1%

0730

1330

US

CPI Y/Y (Nov)

3.5%

3.5%

0730

1330

US

CPI ex-Food & Energy M/M (Nov)

0.1%

0.1%

0730

1330

US

CPI ex-Food & Energy Y/Y (Nov)

2.1%

2.1%

0730

1330

US

CPI Core Index SA M/M (Nov)

 

226.444

0730

1330

US

Consumer Price Index NSA Y/Y (Nov)

226.241

226.421

0730

1330

CA

International Securities Transactions M/M (Oct)

7.25B

7.35B

0930

1530

US

ECRI Weekly Index W/W (Dec 16)

 

122.5

0930

1530

US

ECRI Weekly Annualised Y/Y (Dec 16)

 

-7.6%

1200

1800

US

Baker Hughes Rig Count W/W (Dec 16)

 

1987

 

Speakers

0930

1530

EU

ECB’s Bini Smaghi

0930

1530

WLD

IMF’s Deputy Managing Director Lipsky

1000

1600

WLD

World Bank President Zoellick

1015

1615

US

Fed’s Evans (Voting Member)

1100

1700

US

Fed’s Fisher (Voting Member)

1200

1800

IT

Italian Lower House to Vote on Budget plan

 

Auctions

1000

1600

US

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

1300

1900

US

Fed’s Outright Trea. Coup.  Purch. Feb’20-Nov’21 (USD 4.25-5bln)

 

**Note:

E-mini DOW/NASDAQ 100/S&P 500 December options and futures expiry (0830CST 1430GMT)

Regular DOW December options and futures expiry (1515CST/2115GMT)

CAC 40 December options & futures expiry (0900CST/1500GMT)

 

Prices taken at 1145GMT

 

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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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