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DAILY US OPENING NEWS - 11/05/12

· PASOK leader Venizelos continues to try and form a stable coalition; New Democracy's Samaras says there is still hope.

· EU Commission raises 2012 GDP growth forecast for Germany and France, but the periphery continues to drag, and have their estimates revised lower.

· The EU forecast further austerity measures for Portugal; PM Coelho denies the need for more cuts.

· Chinese Industrial Production and Retail Sales come in below expectations, weighing on commodities.

· RANsquawk European Morning Briefing Video: www.youtube.com/watch?v=zS61mEQM9LE

Market Re-Cap

All major bourses are seen lower at the halfway point in Europe after briefly breaking into positive territory at the midpoint of the morning. The EU Commission have released their latest growth forecasts for the Euroarea and look more optimistically towards France and Germany in terms of GDP growth, however the periphery continues to drag, as their GDP forecasts are revised downwards for 2012.

All eyes remain on Greece as the PASOK leader Venizelos continues to attempt to form a stable coalition government in the Hellenic Republic. Some tentatively positive remarks have emerged from the leader of New Democracy party Samaras, who has commented that the Democratic Left's proposal of a national unity government is close to his party's position.

Looking ahead in the session, participants will be looking out for how JP Morgan shares perform in the US, as overnight reports of a heavy loss in their CIO unit took their toll on shares in after-market trade yesterday. Elsewhere, the University of Michigan confidence data is due at 1455BST/0855CDT.

Asian Headlines

Chinese CPI (Apr) Y/Y 3.4% vs. Exp. 3.4% (Prev. 3.6%)

Chinese PPI (Apr) Y/Y -0.7% vs. Exp. -0.5% (Prev. -0.3%)

Chinese Industrial Production YTD (Apr) Y/Y 11.0% vs. Exp. 11.7% (Prev. 11.6%)

Chinese Industrial Production (Apr) Y/Y 9.3% vs. Exp. 12.2% (Prev. 11.9%)

Chinese Retail Sales YTD (Apr) Y/Y 14.7% vs. Exp. 14.9% (Prev. 14.8%)

Chinese Retail Sales (Apr) Y/Y 14.1% vs. Exp. 15.1% (Prev. 15.2%) (Sources)

Chinese New Yuan Loans (Apr) M/M 681.8bln vs. Exp. 780.0bln (Prev. 1010.0bln)

The poor Chinese data has been echoed across the BRICs, with India and Brazil posting disappointing industrial production figures also. (Sources)

Bank of America has cut their China Q2 growth estimate to 7.6% from 8.5%, but say it may rebound to 8% in Q3. (Sources)

The BoJ has revised its rules on its foreign asset management, placing more emphasis on safety and liquidity. The BoJ are now to hold foreign assets mainly in deposits with foreign central banks and government securities with high liquidity that are issued by the US and major European nations. (Sources)

US Headlines

JP Morgan have reported that its CIO unit has had significant mark-to-market losses, adding that it would need USD 1.7bln in added collateral if their rating was cut by two notches. JP Morgan also see up to USD 2bln in mortgage costs beyond accruals as of March 31st. (Sources)

EU and UK Headlines

Greek New Democracy leader Samaras has Greece is still working to form a new government and there is still hope, adding that they must rule out any Greek exit from the Eurozone in their plans. Samaras added that the Democratic Left's proposal of a national unity government is very close to his own party's position. (Sources)

The EU Commission have released their latest economic forecasts and have revised upwards their estimates for German and French growth but see continuing troubles in the periphery, as Italian, Spanish and Greek forecasts are revised lower:

EU Commission forecasts 2012 Eurozone GDP growth at 0.0% vs. Prev. 0.0%

-2012 German GDP growth at 0.7% vs. Prev. 0.6%

-2012 French GDP growth at 0.5% vs. Prev. 0.4%

- 2012 Italian GDP growth at -1.4% vs. Prev. -1.3%

- 2012 Spanish GDP growth at -1.8% vs. Prev. -1.0%

- 2012 Greek GDP growth at -4.7% vs. Prev. -4.4%

- 2012 Portuguese GDP growth at -3.3% vs. Prev. -3.3% (Sources)

The EU Commission have also revised their estimates for Euroarea budget deficits:

EU sees Spain's budget deficit at 6.4% in 2012, missing their 5.3% goal

- Eurozone budget deficit at 3.2% of GDP, 3.4% previously

- German budget deficit at 0.9% of GDP, 1.0% previously

- French budget deficit at 4.5% of GDP, 5.3% previously

- Italian budget deficit at 2.0% of GDP, 2.3% previously

- Greek budget deficit at 7.3% of GDP, 7.0% previously

- Irish budget deficit at 8.3% of GDP, 8.6% previously (Sources)

The EU Commission have also released some pessimistic forecasts for the UK, revising down their estimate for 2012 GDP growth:

-cuts UK 2012 economic growth forecast to 0.5% from 0.6%

-raises 2013 economic growth forecast to 1.7% from 1.5%

-cuts UK 2012 budget gap forecast to 6.7% of GDP from 7.8% of GDP

-cuts UK 2013 budget deficit forecast to 6.5% of GDP from 5.8%

German finance minister Schaeuble has said the Eurozone has become more robust over the past two years and could handle a Greek exit, as contagion risk has reduced significantly and the overall Euroarea has become more resistant. (Rheinische Post)

ECB's Weidmann has hit back at reports that the Bundesbank is prepared to accept elevated inflation rates, commenting that the reports are an absurd discussion, and there is no danger as long as the ECB keeps the Euroarea average at just below 2%. (Sueddeutsche Zeitung)

EQUITIES

European equities are trading lower across the board, with all major bourses looking for a sharply lower close on the week, in particular, the FTSE-100 is seen lower by over 4.5% since Monday's open. The lack of relief from the ongoing concern of Greece remains to be the theme of the week, as markets seek any signs of hope from Athens.

In individual equities news, Vallourec, a pipeline producer for the oil and gas sector are experiencing their heaviest losses for two decades. The moves lower follow the release of their latest forecasts, cutting its sales growth estimates by half for 2012 as demand from industrial customers fell much lower than previously estimated. On top of this, Vallourec have also reported below-expected profit figures for the first quarter. Vallourec shares now trade lower by around 20% since the European open.

Elsewhere, FTSE-listed Man Group have bucked the trend of their recent moves over the past few weeks following an analyst report upgrading the company to overweigh. HSBC have highlighted that the company have strong potential to reduce their cost base by at least USD 250mln, and thus, boost their share price. Following the reports, Man Group trade higher by over 4%.

 

 

Index

DAX

CAC

FTSE

EUROSTOXX

SMI

Level

6480.76

3098.68

5508.21

2229.89

5894.91

Change (ticks)

-37.24

-31.49

-35.74

-17.49

-31.69

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

FX

EUR/USD printed fresh lows of 1.2905 overnight and now trades in the middle of a relatively tight range between 1.2900 and 1.2950, which are both touted option expiries for the 10am NY cut (1500BST). The pair has held about 1.2930 for much of the European morning and now trades roughly flat, despite unconfirmed market talk of offers in the pair at that level.

USD/JPY trades within a very tight range, briefly breaking about the 80.00 level to session highs, but failing to stay over the handle, with unconfirmed market talk of large offers in the pair above that mark. The pair now trades in close proximity to its 100DMA line of 79.74, and trades in very modest positive territory after the European morning.

Commodity-linked currencies are seen lower following lower-than expected Chinese industrial data overnight. As such, AUD/USD is seen markedly lower as North America comes to market, however unconfirmed market talk of bids at parity may prevent any steep losses in the pair.

Currency

EURUSD

GBPUSD

USDJPY

Level

1.2933

1.6095

79.93

Change (pips)

-0.0003

-0.0051

0.0000

COMMODITIES

WTI and Brent crude futures continue their decline as Chinese industrial production figures disappoint and the European crisis continues to weigh on future crude prices.

Oil & Gas News:

· The IEA's monthly oil report has said that global oil consumption is set to rise by 0.8MBPD, 0.9% across 2012. The IEA have said that after posting near-zero annual growth in Q4 2011, global demand growth is forecast to gradually accelerate throughout 2012, culminating in an expansion of 1.2/MBPD by Q4. The IEA adds that the oil market is still able to absorb cuts in Iranian exports and their call on OPEC crude and stock change for 2012 has been raised by 200,000BPD to 30.3MBPD.

· JP Morgan have raised their Brent oil forecasts for this year from USD 95/BBL to USD 110/BBL. An analyst commented that this is still below the sell-side median of USD 118/BBL.

· Iraq have upped their June Basra Oil Selling Price to the US and Europe, and have cut the rates for Asia, according to the State Oil Ministry.

· China's April crude oil output has fallen by 0.4% on the year, according to the state statistics bureau.

Geopolitical News:

· Iran is pursuing work on a nuclear warhead, according to reports from the People's Mujahadeen. The group said that scientists are carrying out research at the Parchin site.

· Satellite photos published by a Washington think tank appear to back UN inspector's concerns that Iran has been seeking to cleanse a military site south of Tehran suspected of being used for nuclear weapons research.

· US and UK officials are seeking stronger action against North Korean arms sales in the Middle East and Africa, amid fears that the country could look to sell nuclear technology in the region. NK has used the arms sales as a source of funding for its nuclear weapons programmes, despite sanctions.

Commodity

WTI Nymex

OTC Spot Gold

 

Level

95.94

1580.85

 

Change (NYSEARCA:USD)

-1.14

-13.18

 

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

LOOKING AHEAD

Economic Releases

CDT

BST

 

DATA

EXP

PREV

0730

1330

US

PPI M/M (Apr)

0.0%

0.0%

0730

1330

US

PPI Y/Y (Apr)

2.1%

2.8%

0730

1330

US

PPI Ex Food & Energy M/M (Apr)

0.2%

0.3%

0730

1330

US

PPI Ex Food & Energy Y/Y (Apr)

2.8%

2.9%

0730

1330

CA

Unemployment Rate M/M (Apr)

7.3%

7.2%

0730

1330

CA

Net Change in Employment M/M (Apr)

10.0K

82.3K

0855

1455

US

Univ. of Michigan Confidence M/M (May P)

76.0

76.4

0900

1500

US

Survey of Professional Forecasters

   

0930

1530

US

ECRI Weekly Index W/W (May 4)

 

124.7

0930

1530

US

ECRI Weekly Index Annual. Y/Y (May 4)

 

0.0%

1200

1800

US

Baker Hughes Rig Count W/W (May 11)

 

1965

 

Speakers

0815

1415

US

Fed's Fisher speaks on too-big-to-fail banks in Texas

1000

1600

GE

German Chancellor Merkel holds election rally

N/A

N/A

EU

EU's Van Rompuy makes official visit to Denmark

 

Auctions

1000

1600

US

Fed's Trea. Coup. Purch. Feb'36-Feb'42 (USD 1.50-2.00bln)

 

Earnings

UK

N/A

EU

N/A

SZ

N/A

US

N/A

Prices taken at 1212BST

**Note:

Brent Crude June options expiry (1930BST/1330CDT)

**'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.