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DAILY US OPENING NEWS - 22/12/11

 

·      Volumes remained thin across various asset classes ahead of market holidays related to Christmas and the New Year

 

·      Fitch said high and rising US Federal and general government debt burden is not consistent with keeping its AAA rating

 

·      UK’s third quarter final GDP reading came out higher than expected Q/Q, however the third quarter current account registered the largest recorded deficit since records began in 1955

 

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

 

Market Re-Cap

 

European equities traded higher during the session amid thin trade and short covering following substantial sell-off yesterday, with support seen in financials. Elsewhere, thin volume and lack of supply resulted in Bund futures taking their cue from the equity market resulting in prices down around 40 ticks at the time of writing. In the forex market, EUR/USD, GBP/USD and commodity-linked currencies received support due to weakness in the USD-Index in early European trade, whereas EUR/USD strengthened further on market talk of Middle Eastern names buying in the pair. However, moving into the North American open, the USD-Index came off its worst levels.

 

Moving forward, markets look ahead to economic data from the US in the form of jobless claims, final reading on the third quarter GDP, Chicago Fed National Activity index, University of Michigan confidence, leading indicators and house price index. In fixed income, another Fed's Outright Treasury Coupon Purchase operation in the maturity range of Feb'20-Nov'21, with a purchase target of USD 4.25-5bln is also scheduled for later.

 

Asian Headlines:

 

Japan’s economy will expand 2.2% in the 2012/13 fiscal year according to the Japanese government; fiscal 2011/12 real GDP forecast at -0.1% and they expect the BoJ to work with the government and take appropriate steps to end deflation. (RTRS)

 

US Headlines

 

Fitch said high and rising US Federal and general government debt burden is not consistent with keeping its AAA rating. Fitch said the key task for the incoming congress and administration in 2013 is to formulate a credible plan to reduce the budget deficit and stabilise the federal debt burden. Without such a strategy the sovereign rating will likely be lowered by end of 2013. (RTRS)

 

BarCap US Treasury month end extension seen at +0.03yrs.

 

EU and UK Headlines

 

S&P's sovereign ratings director Cullinan said the Euro rescue fund may shrink on France being downgraded and the EFSF lending capacity may drop to EUR 293bln. (Sources) Also, there was renewed market talk that France’s sovereign rating may be downgraded, however the talk remains unconfirmed.

 

·  UK GDP (Q3 F) Q/Q 0.6% vs. Exp. 0.5% (Prev. 0.5%)

·  UK Current Account (GBP) (Q3) Q/Q -15.2bln vs. Exp. -6.1bln (Prev. -2.0bln, Rev. to -7.4bln), largest deficit since records began in 1955

·  UK Total Business Investment (Q3 F) Q/Q 0.3% vs. Exp. -1.4% (Prev. -1.4%)

·  UK Total Business Investment (Q3 F) Y/Y 4.3% vs. Exp. 0.3% (Prev. 0.3%) (RTRS)

 

EQUITIES

 

European equities traded higher during the session amid thin trade and short covering following substantial sell-off yesterday, with support seen in financials. Elsewhere, weakness in the USD-Index provided support to oil & gas and basic materials sectors. Moving into the North American open, European equities continue to trade higher, with oil & gas and utilities 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

5863.23

3074.05

5453.26

2275.45

5833.49

Change (ticks)

71.70

43.58

63.52

31.10

28.72

 

FX

 

EUR/USD, GBP/USD and commodity-linked currencies received support due to weakness in the USD-Index in early European trade, whereas EUR/USD strengthened further on market talk of Middle Eastern names buying in the pair. However, moving into the North American open, the USD-Index came off its worst levels.

 

Currency

EURUSD

GBPUSD

USDJPY

Level

1.3069

1.5698

78.09

Change (pips)

0.0022

0.0022

0.0300

 

COMMMODITIES

 

WTI and Brent crude futures have moved in tandem with equity markets in the European session amid thin liquidity to trade broadly unchanged heading into the North American session.

 

Oil & Gas News:

·  China's oil demand in November rose 2.6% which is the second-highest daily rate recorded this year, equivalent to 9.54MBPD.

 

Geopolitical News:

·  According to American sources Iran has embarked on "activities related to possible weaponisation” which is the reason for the Obama administration's reversal on its wait-and-see attitude on attacking Iran. Additionally, the state run FARS news agency said that Iran will hold navy manoeuvres east of the Strait of Hormuz for 10 days from December 24.

·  A team of senior UN nuclear officials could visit Iran in January with the country ready to discuss the country’s nuclear programme, according to Iran's ambassador to the IAEA

 

Corporate News:

·  Brazil’s Federal Police are asking a federal prosecutor to indict Chevron and Transocean employees for their roles in an oil spill last month.

 

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

 

Commodity

WTI Nymex

OTC Spot Gold

Level

99

1610.84

Change (NYSEARCA:USD)

0.33

-4.38

 

LOOKING AHEAD

 

Economic Releases

 

CST

GMT

 

DATA

EXP

PREV

0730

1330

US

Initial Jobless Claims W/W (Dec 17)

380K

366K

0730

1330

US

Continuing Claims W/W (Dec 10)

3600K

3603K

0730

1330

US

Chicago Fed Nat. Activity Index M/M (Nov)

-0.17

-0.13

0730

1330

US

GDP (Annualised) Q/Q (Q3 T)

2.0%

2.0%

0730

1330

US

GDP Price Index Q/Q (Q3 T)

2.5%

2.5%

0730

1330

US

Personal Consumption Q/Q (Q3 T)

2.3%

2.3%

0730

1330

US

Core PCE Q/Q (Q3 T)

2.0%

2.0%

0855

1455

US

University of Michigan Confidence M/M (Dec F)

68.0

67.7

0900

1500

US

Leading Indicators M/M (Nov)

0.3%

0.9%

0900

1500

US

House Price Index M/M (Oct)

0.2%

0.9%

0900

1500

US

House Price Index Y/Y (Oct)

 

-2.2%

0900

1500

US

House Price Index M/M (Oct)

 

184.4

0930

1530

US

EIA Natural Gas Storage Change W/W (Dec 16)

-105

-102

 

Speakers

0715

1315

IT

Italian Government Holds A Confidence Vote on Austerity in Senate

1000

1600

EU

ECB’s Draghi at European Systemic Risk Board Briefing

1000

1600

UK

BoE’s King at European Systemic Risk Board Briefing

 

Auctions

1000

1600

US

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

1000

1600

US

USD 56bln (Expected) 3- & 6-month T-Bill Announcement

 

Prices taken at 1224GMT

 

 

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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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