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DAILY US OPENING NEWS - 14/09/10

 

  • Sharp decline in German and Eurozone ZEW economic sentiment promoted risk-aversion

 

  • USD/JPY fell to new 15-year low at 83.09 after Japanese PM Kan won ruling Democratic Party leadership election

 

  • Higher than expected CPI figures from the UK provided some strength to GBP

 

 

Overnight News

 

ASIA

 

JGBs traded higher overnight on the back of solid 20-year JGB auction results as well as uncertainties surrounding Japanese leadership prompted investors to take the shelter of safe-haven assets. Nikkei fell 0.2% after the JPY hit a fresh 15-year high against the USD, knocking the stock benchmark from a three-week closing peak logged the day before. Caution ahead of the results from Japan’s ruling party leadership vote also weighed on Nikkei. (RTRS)

 

Naoto Kan won the DPJ leadership election to head Japan's ruling party and remain as prime minister. Kan received 721 points in the DPJ leadership race, whereas Ozawa managed only 491 points. In related news, S&P said that Japan’s DPJ election result are not credit positive, and it is unthinkable to hike Japan’s credit outlook to stable now. However, Fitch said Japan’s rating remain on stable outlook, adding that a DPJ spilt would be negative for Japanese rating. (Sources)

 

·   Japanese Industrial Production (Jul F) M/M -0.2% vs. Prev. 0.3%

·   Japanese Industrial Production (Jul F) Y/Y 14.2% vs. Prev. 14.8% (RTRS)

 

 

US

 

Treasury secretary Geithner said the US economy was recovering but not fast enough and Washington needed to do more to boost growth and create jobs. (RTRS)

 

·   NFIB Small Business Optimism (Aug) M/M 88.8 vs. Exp. 89.0 (Prev. 88.1) (RTRS)

 

Bonds

 

EUROPEAN GOVERNMENT BONDS

 

Bund futures traded higher throughout the European session amid technical buying, risk-averse trade and weakness in equities. A number of factors contributed towards risk-aversion including a sharp decline in German and Eurozone ZEW economic sentiment, drop in Eurozone industrial production figures, as well as yet another increase in yield of the 26-week T-Bill auction from Greece. European peripheral 10-year bond yield spreads with respect to bunds widened across the board. In particular, Greek/German spread widened slightly following an increase in yield of the T-Bill auction from Greece. Moving into the North American open, prices are trading in positive territory.

 

·   Greek 26-week T-Bill auction for EUR 1.17bln (incl. EUR 0.270bln in non-competitive bids), bid/cover 4.5 vs. Prev. 3.64 (yield 4.82% vs. Prev. 4.65%) (RTRS)

 

In other news, Zew said that the sentiment indicator may not indicate a temporary slowdown, but could be the first sign of flattering economic activity, adding that expiring economic stimulus may be the reason for lowered expectations. Zew also said that risk of a double-dip in Germany remains low. (RTRS)

 

·   German ZEW Survey (Economic Sentiment) (Sep) M/M -4.3 vs. Exp. 10.0 (Prev. 14.0)

·   German ZEW Survey (Current Situation) (Sep) M/M 59.9 vs. Exp. 50.0 (Prev. 44.3)

·   Eurozone ZEW Survey (Economic Sentiment) (Sep) M/M 4.4 vs. Exp. 14.5 (Prev. 15.8)

·   Eurozone Industrial Production SA (Jul) M/M 0.0% vs. Exp. 0.1% (Prev. -0.1%, Rev. to -0.2%)

·   Eurozone Industrial Production WDA (Jul) Y/Y 7.1% vs. Exp. 8.0% (Prev. 8.2%, Rev. to 8.3%) (RTRS)

 

Maturity

2

5

10

30

Bund (Dec 10)

Level

0.702

1.338

2.367

2.955

130.56

Change (bps)

-4.077

-4.522

-5.796

-6.810

0.64

 

GILTS

 

NYSE LIFFE Gilt futures traded in tandem with bunds in positive territory during the European session. General risk-averse trade allied with weakness in equities and a record drop in RICS house price balance all worked in favour of Gilts. However, prices did come under some pressure following an increase in CPI and RPI figures from the UK. Moving into the North American open, Gilts are trading sideways in positive territory.

 

·   CPI (Aug) M/M 0.5% vs. Exp. 0.3% (Prev. -0.2%)

·   CPI (Aug) Y/Y 3.1% vs. Exp. 3.0% (Prev. 3.1%)

·   Core CPI (Aug) 2.8% vs. Exp. 2.5% (Prev. 2.6%)

·   RPI (Aug) M/M 0.4% vs. Exp. 0.3% (Prev. -0.2%)

·   RPI (Aug) Y/Y 4.7% vs. Exp. 4.6% (Prev. 4.8%)

·   RICS House Price Balance (Aug) M/M -32% vs. Exp. -12% (Prev. -8%)

·   Nationwide Consumer Confidence (Aug) M/M 61 vs. Exp. 60 (Prev. 56)

·   DCLG House Prices (Jul) Y/Y 8.4% vs. Exp. 8.4% (Prev. 9.9%) (RTRS)

 

Maturity

2.000

5.000

10.000

30.000

Gilt (Dec 10)

Level

0.658

1.740

3.053

4.086

123.16

Change (bps)

-5.370

-7.324

-6.100

-2.458

0.57

 

EQUITIES

 

European bourses traded in negative territory for most of the European session, despite opening higher, as risk-aversion persisted. Drop in German and Eurozone ZEW data, worse than expected Eurozone industrial production, as well as a record fall in RICS house price balance from the UK promoted risk-aversion. Another increase in the yield of the 26-week T-Bill auction from Greece sapped risk-appetite further. Bucking the trend was the basic materials sector, which got benefited due to weakness in the USD index for most of the European session. Moving into the North American open, equities have maintained weakness with industrials and utilities as the worst performing sector.

 

Index

DAX

CAC

FTSE

EUROSTOXX

SMI

Level

6248.07

3756.86

5555.48

2794.58

6450.55

Change (ticks)

-13.61

-10.29

-10.05

-10.48

-21.22

 

FX

 

After trading under pressure in early European trade, on the back of a sharp fall in UK RICS house price data, GBP gained strength across the board following a rise in CPI and RPI figures from the UK, which saw GBP/USD jump more than 20 pips. In other news, EUR observed weakness across the board following worse than expected German and Eurozone ZEW figures, together with a fall in Eurozone industrial production.

 

The USD index fell below its 200 day moving average in early European trade, however did recover and ventured into minor positive territory as the session progressed. In other news, USD/JPY traded near 15-year lows overnight following uncertainty surrounding Japan’s ruling Democratic Party leadership election, and further fell to new 15-year low at 83.09 after Naoto Kan won the contest. However, with the status quo resuming in Japan, the pair came off its worst levels. Elsewhere, USD/CHF dipped below parity for the first time since December 2009.

 

·   Australia NAB Business Confidence (Aug) M/M 11 vs. Prev. 2

·   Australia NAB Business Conditions (Aug) M/M 5 vs. Prev. 5

·   New Zealand Retail Sales (Jul) M/M -0.4% vs. Exp. 0.0% (Prev. 0.9%, Rev. to 1.0%) (RTRS)

 

Currency

EURUSD

GBPUSD

USDJPY

Level

1.2840

1.5403

83.23

Change (pips)

-0.0043

-0.0026

-0.4800

 

COMMMODITIES

 

WTI Crude futures moved lower during the European session, on technical selling and as the USD rebounded.

 

Oil & Gas News:

  • Saudi Aramco's boss Khalid al-Falih today said the kingdom's large reserves of unconventional gas could help it meet burgeoning domestic demand and free up more crude for export. Falih told the Financial Times that the kingdom could hold hundreds of trillions of cubic feet of unconventional resources including shale gas, more than doubling its proved reserves tally of 280 trillion cubic feet.
  • Brazil’s deep-water Libra field may hold as much as 8bln barrels of oil, rivalling nearby Tupi as the Americas’ biggest crude discovery in three decades, according to an official of the country’s energy ministry.
  • Royal Dutch Shell today said that prolonging the US government's freeze on new deep-water oil drilling in the aftermath of the BP spill in the Gulf of Mexico could dent global oil supplies as early as 2015,
  • A small oil spill on has forced Enbridge to close the Line 10 pipeline in New York State. This is the third Enbridge pipeline to be closed, and now 930,000 bpd of Enbridge's capacity is unavailable. That is equivalent to around half the volume of Canadian oil shipped daily to the United States.

 

Commodity

WTI Nymex

OTC Spot Gold

Level

76.66

1256.5

Change (NYSEARCA:USD)

-0.53

10.90

 

LOOKING AHEAD

 

Economic Releases

CDT BST                                                        EXP.    PREV.

0645

1245

US    ICSC Chain Stores W/W (Sep 14)

 

-0.4%

0645

1245

US    ICSC Chain Stores Y/Y (Sep 14)

 

1.8%

0730

1330

US    Advance Retail Sales M/M (Aug)

0.3%

0.4%

0730

1330

US    Retail Sales M/M (Aug)

0.3%

0.2%

0730

1330

US    Retail Sales ex.Auto&Gas M/M(Aug)

0.4%

-0.1%

0730

1330

CA    New Motor Vehicle Sales M/M (Jul)

1.0%

2.5%

0730

1330

CA    Capacity Utilisation Rate Q/Q (Q2)

75.5%

74.2%

0730

1330

CA    Labour Productivity Q/Q (Q2)

-0.5%

0.7%

0755

1355

US    Redbook M/M (Sep 14)

 

-0.1%

0755

1355

US    Redbook Y/Y (Sep 14)

 

3.0%

0900

1500

US    IBD/TIPP Eco. Optimism M/M (Aug)

44.0

43.6

0900

1500

US    Bus. Inventories M/M (Jul)

0.7%

0.3%

1530

2130

US    API Crude Oil Invent. W/W (Sep 10)

 

-7308K

1530

2130

US    API Gasoline Invent. W/W (Sep 10)

 

654K

1530

2130

US    API Distillate Invent. W/W (Sep 10)

 

1288K

1530

2130

US    API Cushing Crude Invent. W/W (Sep 10)

 

-40K

1600

2200

US    ABC Consumer Confid. W/W (Sep 12)

 

-43

 

Speakers

  CDT    BST

1000

1600

EU    ECB's Weber

 

US Earnings: Best Buy, Kroger

 

Prices taken at 1238BST

 

 



Disclosure: No Position