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DAILY US OPENING NEWS - 12/08/10

 

·   Japanese finance minister declined to comment on potential forex intervention

 

·   Bailout of Germany's banking sector may swell the country's public debt rate to 90% of GDP: WSJ

 

·   ECB’s Gonzalez-Paramo said Spanish government must not be over optimistic in estimating growth

 

·   RANsquawk daily market video: http://www.youtube.com/watch?v=wuSKeY1p8Ic

 

Overnight News

 

ASIA

 

The benchmark JGB yield broke out of its recent range to hit a fresh seven-year low overnight, as the JPY rose to a 15-year high against the USD, hurting Tokyo stocks, clouding the economic outlook and stoking deflation. Nikkei fell 0.9% overnight, after hitting its lowest in 13 months, battered after fears about a slowdown in the global economy pushed the USD to its weakest in 15-years against the JPY. The Nikkei pared losses in mid-afternoon, helped by the USD’s jump against the JPY after the Jiji news agency quoted Japanese PM Kan as saying forex moves are rough, prompting speculators to cover short USD positions. (RTRS)

 

In other news, China ordered its banks to put billions of dollars in repackaged loans back onto their balance sheets, terminating a practise that had the potential to conceal credit risks and enabled banks to lend more. (WSJ)

 

·   Japan Industrial Production (Jun F) M/M -1.1% vs. Prev. -1.5%;

·   Japan Industrial Production (Jun F) Y/Y 17.3% vs. Prev. 17.0%

·   Japan Consumer Confidence (Jul) M/M 43.4 vs. Exp. 43.9 (Prev. 43.6) (RTRS)

 

 

US

 

Pessimism over the economy is rising and the grim mood could hurt both parties in the November 2 congressional elections, according to an NBC News/Wall Street Journal poll released on Wednesday Almost two-thirds of Americans believe the economy will worsen before it gets better, up from 53 percent who felt that way in January, the poll found. Nearly six in 10 of those surveyed said the country is headed in the wrong direction, a percentage that has held steady in NBC/WSJ polling throughout the year. (RTRS)

 

In other news, more Americans fell into foreclosure in July as a sour job market kept them from making payments, and banks took over homes at a near record pace, according to real estate data company RealtyTrac. Banks repossessed the second highest monthly number of homes ever last month, working through distressed loans already on their books rather than sharply stepping up new default notices, RealtyTrac said. (RTRS)

 

Bonds

 

EUROPEAN GOVERNMENT BONDS

 

Bund futures traded in minor negative territory for most of the European session, due to weakness in US Treasuries on the back of profit taking. Moving into the North American open, prices are trading sideways near unchanged.

 

It is worth noting that the latest Euribor fixes showed easing across the 6, 3 month and 1 week maturities prompting a lift to session highs in front month Euribor futures. The Libor fixings also followed suit with easing seen across EUR, USD and GBP rates. Elsewhere, tightening of the Irish/Bund 10yr bond yield spread has been observed on the back of well bid 6 & 9 month t-bill auctions which comes in the wake of recent concerns of the capital levels of Irish banks.

 

 

In other news, the bailout of Germany's banking sector may swell the country's public debt rate to 90% of gross domestic product, Die Zeit weekly newspaper reports Wednesday. The weekly based this estimate on a recent decision by Eurostat requiring Germany to include the balance sheets of public-owned bad banks -set up to help financial institutions offload toxic and non-strategic assets -into its overall debt ratio. (WSJ)

 

Elsewhere, ECB’s Gonzalez-Paramo said Spain must take more budgetary steps to cut deficit in 2011 and after, adding that Spanish government must not be over optimistic in estimating growth. (RTRS)

Maturity

2

5

10

30

Bund (Sep 10)

Level

0.660

1.378

2.427

3.169

131.1

Change (bps)

-2.830

0.135

0.024

0.027

-0.04

 

GILTS

 

NYSE LIFFE Gilt futures traded in tandem with Bunds for most of the European session, however moving into the North American open prices are trading in positive territory.

 

·   Conventional Tap for GBP 3bln, 4.00% 2022, bid/cover 1.72 vs. Prev. 2.01 (RTRS)

 

Maturity

2.000

5.000

10.000

30.000

Gilt (Sep10)

Level

0.680

1.796

3.128

4.206

123.65

Change (bps)

-3.673

-5.012

-1.215

-1.205

0.17

 

EQUITIES

 

Having opened in negative territory, European bourses came off their worst levels as session progressed, however they lacked any direction. On a sector basis, strength in the USD index weighed upon commodities that in turn led the basic materials sectors underperform.

 

Index

DAX

CAC

FTSE

EUROSTOXX

SMI

Level

6151.44

3627

5271.39

2729.2

6292.43

Change (ticks)

-2.63

-1.29

26.18

5.04

26.59

 

FX

 

Overnight in Asia USD/JPY continued its recent trend and moved below the 85.00 handle. However the pair staged a strong recovery into the European open on reports that the Japanese Finance Ministry and BoJ had met and checked rates overnight followed by a headline that the finance minister Noda was to hold a press conference on the situation, which in turn spurred speculation that Japan may well step up its verbal intervention threats. The expectations eventually proved to be unfounded as Noda delivered a near identical speech to previous days and made no comment on FX intervention. Consequently, USD/JPY fell from its highs to trade broadly flat heading into the North American open.

 

In other news, after initial gains, GBP/USD and EUR/USD moved into negative territory as the USD index gained strength. EUR/USD was also negatively impacted following market talk of Swiss names selling in the pair, whereas GBP/USD got affected on market talk of a UK clearer selling in the currency.

 

Currency

EURUSD

GBPUSD

USDJPY

Level

1.2823

1.5593

85.43

Change (pips)

-0.0040

-0.0066

0.1100

 

COMMMODITIES

 

WTI Crude futures have traded lower throughout the European morning session, weighed down by a strengthening USD Index. (+0.2%)

           

Oil News:

  • PetroChina has announced it will shut its 120,000 barrel a day refinery in Daqing for around 40 days of planned maintenance, from the 17th August.

 

Geopolitical News:

  • The US has enough ‘wiggle room’ to give sanctions time to work against Iran, before turning to other ways to prevent it from developing nuclear weapons, a top White House adviser said yesterday.

 

Commodity

WTI Nymex

OTC Spot Gold

Level

77.23

1207.03

Change (NYSEARCA:USD)

-0.79

8.93

 

LOOKING AHEAD

 

Economic Releases

  CDT    BST                                                                   EXP.      PREV.

0730

1330

US    Initial Jobless Claims W/W (Aug 7)

465K

479K

0730

1330

US    Continuing Claims W/W (Jul 31)

4535K

4537K

0730

1330

US    Import Price Index M/M (Jul)

0.3%

-1.3%

0730

1330

US    Import Price Index Y/Y (Jul)

5.4%

4.5%

0930

1530

US    EIA Natgas Sto. Chng. W/W (Aug 6)

36

29

1745

2345

NZ    Retail Sales M/M (Jun)

0.5%

0.4%

 

Speaker

  CDT       BST

0900

1500

US    Fed's Duke

 

Auction

  CDT       BST

1200

1800

US    USD 16bln (Act) 30y Note Auction

 

US Earnings: Nvidia

 

Prices taken at 1224BST



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