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DAILY US OPENING NEWS - 08/02/12

· Greek PM Papademos and party leaders to meet at 1300GMT, according to sources.

· Reports that the ECB are willing to exchange Greek bonds with the EFSF have prompted risk appetite.

· RANsquawk European Morning Briefing Video: http://youtu.be/U2qxVkYC7xM

Market Re-Cap

European stocks advanced today following reports that the ECB is said to be willing to exchange Greek bonds with EFSF. In addition to that, although a vast majority of officials remain adamant that no haircuts will be applied, WSJ report indicated that the concession by the ECB will contribute to the Greek debt reduction, and the concession depends on the overall debt agreement being set. However it remains to be seen what effect using the EFSF for such spurious purposes will have on the demand for EFSF issued bonds in the future.

Still, the renewed sense of optimism that debt swap talks are nearing an end depressed investor appetite for fixed income securities, which in turn resulted in further tightening of peripheral bond yield spreads. The stand out was the 10-year Spanish bond, amid a syndicated issuance from the Treasury. Going forward, Greek PM is scheduled to meet party leaders on a loan deal at 1300GMT, while other reports have suggested that the Troika is keen on meeting Greek parties individually. There is little in terms of macro-economic data releases today, however the US Treasury is due to sell USD 24bln in 10y notes.

US Headlines

The only data from the US today came in the form of mortgage applications, showing a week-on-week rise of 7.5%.

US MBA Mortgage Applications (Feb 3) W/W 7.5% vs. (Prev. -2.9%) (Sources)

Asian Headlines

China may implement new bank capital rules on July 1st, including allowing the institutions to lower risk weightings on individual business loans to 75% from 100%. (21st Century Business Herald)

A Fitch analyst has said to expect Chinese property construction to slow amid government tightening, and this will have an adverse effect on economic growth. As a result, Chinese banks are to face a decline in asset quality. The analyst further commented that he does not expect China to provide a significant sum of money to the Euro bailout fund, however the country may suffer a loss on investment if the Euro bailout fund is downgraded. (Sources)

EU and UK Headlines

Greece yesterday missed another deadline to approve conditions for a second bailout following the postponement of a Greek party leaders meeting over last minute haggling with international lenders over emergency spending cuts. (FT-More) Greek PM Papademos will now be meeting the Greek party chiefs today at 1300GMT.

The ECB said it is willing to exchange Greek bonds with EFSF, but that they won't take losses on the Greek bond exchange, according to sources, who also added that an ECB concession will contribute to the Greek debt reduction, and the concession depends on the overall debt agreement being set. Furthermore, national central banks' investment portfolios will not contribute to the PSI deal. (WSJ)

UK Shop Price Index figures released today show how retailers are holding down prices for customers despite a range of upward pressures. A further fall in inflation expected in the coming months should help improve consumer confidence, according to the BRC Director-General.

UK BRC Shop Price Index (Jan) Y/Y 1.4% (Prev. 1.7%) (Sources)

Germany posted a below expected fall in their trade surplus for December of last year, with some analysts noting that this could point towards a slowdown in GDP growth for the country over the last month of the year. (Sources)

EQUITIES

European indices are trading in positive territory ahead of the North American open, following news that the ECB is willing to exchange bonds with the EFSF. This has stimulated risk appetite in the European markets, with participants moving towards the cheaper Financial stocks. As such, UniCredit (5%) and Commerzbank (8%) are trading strongly at this point in the European session.

European corporate earnings today been mixed. From the consumer goods sector, Reckitt Benckiser have outperformed expectations in their corporate earnings report before the European open, with a positive outlook for the rest of the year. Company shares have been trading strongly throughout the session, currently up 3.4%. (Sources)

International Power have suffered losses this morning following the group expecting growth in 2012 to be impacted by contracts rolling off in North America. Subsequently, company shares experiencing losses, currently trading down 3%. (Sources)

Top performing sectors in the BE500: Financials (+1.34%), Basic Materials (+0.85%), Oil & Gas (+0.36%)

Worst performing sectors in the BE500: Health Care (-0.31%), Consumer Services (0.00%), Technology (+0.05%)

 

 

Index

DAX

CAC

FTSE

EUROSTOXX

SMI

Level

6796.35

3423.58

5890.4

2526.67

6179.66

Change (ticks)

42.15

12.04

0.14

12.55

22.07

**Note: For US equity news in detail, kindly refer to the RANsquawk Daily US Equity Opening News report.

FX

Swiss Unemployment Rate (Jan) M/M 3.4% vs. Exp. 3.5% (Prev. 3.3%)

Swiss Unemployment Rate SA (Jan) M/M 3.1% vs. Exp. 3.1% (Prev. 3.1%) (Sources)

GBP has experienced weaknesses during morning trade, with market talk of a right hand side fix in EUR/GBP, however this remains unconfirmed.

USD/JPY has experienced volatility in the first half of the European session, pushing the currency pair downwards. Despite further promises of action from the Japanese Finance Minister Azumi, the JPY continues to strengthen, with no intervention seen from the Japanese government to weaken the JPY. (Sources)

Currency

EURUSD

GBPUSD

USDJPY

Level

1.3273

1.5895

76.76

Change (pips)

0.0012

-0.0001

0.0000

COMMODITIES

Heading into the North American open, WTI crude futures are trading higher following the release of bullish crude oil inventories data last night.

Oil & Gas News:

  • Plains All American has said it will build a new 170-mile crude oil pipeline to ship Mississippian Lime crude oil production from Alva, Oklahoma, to Cushing. The Mississippian Lime pipeline is expected to ship 175,000BPD of light sweet crude and is to be completed in mid-2013, the company said in a statement. It did not provide a cost estimate for the pipeline.
  • The US Department of Energy is going to make a suite of changes to its rules to modernize the permitting process for liquefied natural gas exports, a top DoE official told state regulators Tuesday.
  • Saudi Arabia has given South Korea an assurance that it will "actively consider" providing additional crude supplies to the major gas imported if requested.
  • China has moved to buy Saudi Arabian and Russian oil in order to put further pressure on Iran over a price dispute between the two countries.

Geopolitical News:

  • Iran's Supreme Leader wants to ultimately shut Iran's oil wells and turn the country into a non-oil economy, although the leader further commented that this vision may not be realized anytime soon.

Commodity

WTI Nymex

OTC Spot Gold

Level

99.29

1745.9

Change (NYSEARCA:USD)

0.88

0.43

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

LOOKING AHEAD

Economic Releases

CST

GMT

 

DATA

EXP

PREV

0715

1315

CA

Housing Starts (Jan) M/M

195.0K

199.9K

0930

1530

US

DoE Crude Oil Inventories (Feb 3) W/W

2500K

4175K

0930

1530

US

DoE Gasoline Inventories (Feb 3) W/W

500K

3017K

0930

1530

US

DoE Distillate Inventory (Feb 3) W/W

-1000K

-135K

0930

1530

US

DoE Refinery Utilization (Feb 3) W/W

-0.43%

-0.40%

0930

1530

US

DoE Cushing OK Crude Inventory (Feb 3) W/W

 

1476K

1545

2145

NZ

Unemployment Rate (Q4) Q/Q

6.5%

6.6%

1545

2145

NZ

Employment Change (Q4) Q/Q

0.4%

0.2%

1545

2145

NZ

Employment Change (Q4) Y/Y

1.9%

1.1%

1750

2350

JN

Machine Orders (Dec) M/M

-5.0%

14.8%

1750

2350

JN

Machine Orders (Dec) Y/Y

8.5%

12.5%

N/A

N/A

EU

First Alert Mechanism report on Macro-Imbalances

   

0715

1315

CA

Housing Starts (Jan) M/M

195.0K

199.9K

 

Speakers

0940

1540

US

Fed's Williams on Economic Recovery (Non-Voter)

 

Auctions

1000

1600

US

Fed's Outright Trea. Coup. Purch. Feb'36-Nov'41 (USD 1.5-2.0bln)

1200

1800

US

USD 24bln 10-yr Note Auction

1300

1900

US

Fed's Outright Trea. Coup. Sales Jun'13-Nov'13 (USD 8.0-8.75bln)

 

Earnings

UK

N/A

EU

N/A

SZ

N/A

US

Cisco Corp, Prudential, Ralph Lauren, Visa

                 

Prices taken at 1232GMT

'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.