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DAILY US OPENING NEWS - 03/09/10

 

  • Better than expected Eurozone retail sales, and Eurozone, French and Italian services PMIs supported risk-appetite as markets look ahead to the US nonfarm payrolls data

 

  • GBP lost steam following weak UK Services PMI and dovish comments from Markit on UK’s GDP

 

 

Overnight News

 

ASIA

 

JGB’s traded lower for the majority of the session on the back of minor strength in Nikkei and as the market looks ahead to key US jobs data later in the day. Nikkei crawled up 0.6% as more encouraging data reassured investors about the state of the global economic recovery and sparked short covering. But gains were capped by wariness ahead of closely-watched US August non-farm payrolls data later on Friday, as well as investor concern about whether the recent rush of upbeat indicators signals a true recovery or not. (RANsquawk)

 

In other news, the Bank of Japan is expected to hold off on easing monetary policy next week but is gearing up for further action in October as the strong JPY threatens to derail its forecast of a moderate economic recovery, according to sources. (RTRS)

 

Also, Japanese companies cut capital spending in April-June by a less than expected 1.7% from the same period last year, pointing to an upward revision of an anaemic preliminary reading for second-quarter GDP growth. (RTRS)

 

Elsewhere, China’s state owned banks reported an increase in “special-mention” loans in the second quarter, raising concerns over asset quality despite declining bad loan ratios. Special-mention loans, referring to debt that could potentially turn sour, rose by CNY 54bln in total during the April-June period at China’s top five state lenders, and account for 3.91% of their total loan assets. However, PBOC’s vice governor, Yi Gang, said that China’s banking system is health in terms of lenders’ liquidity adequacy ratios. (China Securities Journal/Sources)

 

·   China Non-Manufacturing PMI (Aug) M/M 60.1 vs. (Prev. 60.1)

·   China HSBC Services PMI (Aug) M/M 57.6 vs. Prev. 56.3 (RTRS)

 

US

 

The White House stressed that no second economic stimulus package is being considered as part of new measures under review by President Obama’s team. (RTRS)

 

Bonds

 

EUROPEAN GOVERNMENT BONDS

 

Bund futures traded in negative territory during the European session amid renewed risk-appetite. Also general tightening was observed in European peripheral 10-year bond yield spreads for the third consecutive day. Moving into the North American open, prices are trading in negative territory as the market looks ahead to key payrolls data from the US.

 

In other news, ECB's Nowotny said that the ECB exit will start with liquidity, followed by collateral quality, then interest rates. He also said that ECB members were unanimous on decisions to extend liquidity support, adding that inflation expectations on the market are low. He further said that the ECB has no goal for the forex rate, and sees no dramatic forex moves. He also said that the international role of EUR is increasing. (RTRS/Sources)

 

·   Eurozone Services PMI (Aug F) M/M 55.9 vs. Exp. 55.6 (Prev. 55.8)

·   German Services PMI (Aug F) M/M 57.2 vs. Exp. 58.5 (Prev. 56.5)

·   French Services PMI (Aug F) M/M 60.4 vs. Exp. 59.9 (Prev. 61.1)

·   Italian Services PMI (Aug) M/M 51.4 vs. Exp 49.50 (Prev. 49.6)

·   Eurozone Retail Sales (Jul) M/M 0.1% vs. Exp. 0.2% (Prev. 0.0%, Rev. to 0.2%)

·   Eurozone Retail Sales (Jul) Y/Y 1.1% vs. Exp. 0.6% (Prev. 0.4%, Rev. to 1.2%) (RTRS)

 

Maturity

2

5

10

30

Bund (Sep 10)

Level

0.617

1.297

2.294

2.895

132.51

Change (bps)

0.515

0.333

1.378

3.366

-0.21

 

GILTS

 

NYSE LIFFE Gilt futures traded in positive territory for most of the European session and moving into the North American open, prices have maintained strength ahead of nonfarm payrolls data from the US.

 

In other news, investors gave warning yesterday that the Bank of England might be forced to pump more money into the economy as fears grew of a double-dip recession. A string of weaker-than-expected figures, including Nationwide’s data on house prices yesterday and a survey of construction activity, has increased and possibility of a re-launch of quantitative easing. (NYSE:FT)

 

·   Services PMI (Aug) M/M 51.3 vs. Exp. 52.9 (Prev. 53.1), lowest since April 2009 (RTRS)

 

Maturity

2.000

5.000

10.000

30.000

Gilt (Sep10)

Level

0.688

1.694

2.952

3.979

125.29

Change (bps)

-1.043

-2.980

-0.731

0.912

-0.08

 

EQUITIES

 

European bourses traded higher throughout the session on the back of strength in Nikkei and general risk appetite. Basic materials remained a strong performer as weakness in the USD index buoyed commodities, which in turn helped the sector. A better than expected Eurozone retail sales data, allied with higher Eurozone, French and Italian services PMI figures also helped the market sentiment. Moving into the North American open, equities have maintained strength with technology and health care as best performing sectors.

 

Index

DAX

CAC

FTSE

EUROSTOXX

SMI

Level

6107.72

3655.71

5396.03

2731.43

6384.77

Change (ticks)

23.87

24.28

24.99

16.24

51.12

 

FX

 

Following its strength in early European session, GBP came under pressure across the board as services PMI from the UK disappointed, allied with comments from research group Markit saying that taking the manufacturing and services PMI together, the July and August print suggest that GDP growth will have slowed from the robust 1.2% pace in Q2 to around 0.5% in Q3. As a consequence, GBP/USD tumbled 40 pips and traded near unchanged.

 

In other news, Hungarian Forint (HUF) gained strength following comments from Hungary’s economic minister that the country will stick to its 3.8% of GDP budget deficit target, and doesn’t want a new IMF loan deal.

 

Elsewhere, China offered a rare glimpse into its foreign exchange reserve, confirming that they are overwhelmingly allocated in USD, while a central banker said the mountain of cash could face depreciation risks. The Chinese government’s currency reserves, the world’s largest such stockpile at USD 2.45trl, are held roughly in line with what was described as the global average: 65% in USD, 26% in EUR, 5% in GBP and 3% in JPY. (China Securities Journal)

 

Currency

EURUSD

GBPUSD

USDJPY

Level

1.2843

1.5398

84.47

Change (pips)

0.0018

-0.0003

0.1900

 

COMMMODITIES

 

WTI crude futures traded with no direction the European morning session, as the market waits for US Employment data later today.

 

Oil & Gas News:

  • Dependency on oil produced by OPEC countries is set to rise in the next 5 to 10 years as non-OPEC supplies are set to decline, Nobuo Tanaka, executive director of the International Energy Agency (NASDAQ:IEA), said today. The IEA added that global oil demand would rise by 1.8mln BPD year-on-year to 86.6mln BPD in 2010, which was 80,000 BPD higher than the forecast in its July report.
  • Tanaka also said that the global crude oil market is currently well-supplied, due to high stock levels in OPEC countries, and spare capacity from OPEC countries.
  • The Angolan deputy petroleum minister said that the country is producing around 1.9mlb BPD of oil, just below the maximum 2mlb BPD output. He said they will keep output levels here for the rest of the year.

 

Geopolitical News:

  • Japan imposed additional sanctions against Iran over its disputed nuclear programme today, following the lead of the US in putting pressure on Tehran despite Tokyo's reliance on oil imports from the country.
  • Venezuela has announced it has reduced oil exports to the US, and increased exports to China, as part of a bid to diversify its export market.

 

Commodity

WTI Nymex

OTC Spot Gold

Level

74.63

1252.75

Change (NYSEARCA:USD)

-0.39

1.80

 

 

LOOKING AHEAD

 

Economic Releases

CDT BST                                                      EXP.   PREV.

0730

1330

US    Change in Nonfarm Payrolls M/M (Aug)

-100K

-131K

0730

1330

US    Change in Manuf. Payrolls M/M (Aug)

10K

36K

0730

1330

US    Change in Private Payrolls M/M (Aug)

42K

71K

0730

1330

US    Unemployment Rate M/M (Aug)

9.6%

9.5%

0730

1330

US    Average Hourly Earnings M/M (Aug)

0.1%

0.2%

0730

1330

US    Average Hourly Earnings Y/Y (Aug)

1.6%

1.8%

0730

1330

US    Average Weekly Hours M/M (Aug)

34.2

34.2

0840

1440

US    ECRI Inflation Index M/M (Aug)

 

96.1

0840

1440

US    ECRI Monthly Annualised M/M (Aug)

 

0.8%

0900

1500

US    ISM Non-Manuf. Composite M/M (Aug)

53.2

54.3

0930

1530

US    ECRI Weekly W/W (Sep 3)

 

120.90

0930

1530

US    ECRI Weekly Annualised Y/Y (Sep 3)

 

-9.9%

1200

1800

US    Baker Hughes Rig Count W/W (Sep 3)

 

1656

N/A

N/A

UK    Halifax House Price 3M/Y (Aug)

4.4%

4.9%

N/A

N/A

UK    Halifax House Price SA M/M (Aug)

-0.4%

0.6%

 

Speakers

CDT    BST

0845

1445

US    Fed's Evans

0900

1500

US    Fed's Lockhart

N/A

N/A

EU    ECB's Gonzalez-Paramo

 

US Earnings: Campbell Soup Co.

 

**Notes:

USD Index Sep. options expiry

 

US Labour Day - RAN DESK HOURS: Normal Operating Hours

US Labour Day Schedule:

- Floor Trade: CME/CBOT (Regular Close), NYMEX (Regular close)

- Electronic Trade:

CME Globex - Equity (Regular Close), Interest Rate

Early close: 1515CT/2115BST), FX (Early close: 1515CT/2115BST),

 NYMEX (Early close: 1515CT/2115BST), NYSE (Regular close)

 

 

Prices taken at 1148BST



Disclosure: No Position