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DAILY US OPENING NEWS - 15/09/10

 

  • Japanese intervention in the forex market observed USD/JPY, GBP/JPY and EUR/JPY all trading up more than 200 pips

 

  • A well received bund auction saw a minor uptick in bund futures, however a lacklustre Portuguese T-Bill auction had muted reaction

 

 

Overnight News

 

ASIA

 

JGBs rallied broadly overnight, as Prime Minister Kan’s win in a ruling party vote the previous day soothed worries that the government may head towards a more expansionary fiscal policy. Nikkei jumped 2.3% after Japan intervened to weaken the JPY, boosting shares of Toyota Motor Corp and other exporters. Japan intervened to sell JPY for the first time in six years, bringing the currency off 15-year highs against the USD. (RTRS)

 

**Japan finally intervened in the forex market unilaterally, after a gap of six years**

 

The main focus of the morning has been the overnight news that Japan stepped in and intervened in the currency market for the first time in 6 years, selling JPY. USD/JPY moved from the 83.00 level up 200 pips to around the 85.00 level. BOJ is leaving the intervention unsterlized, and the Nikkei newswire has reported that so far the BOJ has intervened to total of USD 17.5bln. This includes JPY 1trl overnight, and further, smaller chunks of intervention during the London session. If this is correct, it would be larger than the USD 15bln seen on the 9th January 2004, here we saw a 2% move in JPY, today we have seen a move close to 3%. Further market talk suggests that the BOJ has another JPY 10trl (USD 117bln) to back up today's intervention. We have also had confirmation from Japanese government officials that they did continue to intervene in the London session, and will intervene in the New York session if needed. (RTRS/Kyodo/Sources)

 

US

 

Fed’s Lacker said that the US economic recovery doses not need an additional boost from the Federal Reserve now and will not need one if it continues along the track expected by policymakers. He added that if inflation fell in a material way that suggested a risk of sustained declines in the price level, he would be willing to seriously consider further quantitative easing. (RTRS)

 

Federal Reserve officials differ on the question of how weak the economic outlook should get before they move to take major steps to boost growth, such as resuming purchases of long-term bonds. With no consensus on the threshold for action, officials are unlikely to launch any new bond-buying effort at their Sept. 21 meeting. (WSJ)

 

·   MBA Mortgage Applications (Sep ) W/W -8.9% vs. Prev. -1.5%

·   ABC Consumer Confidence (Sep 12) W/W -43 vs. Prev. -43 (RTRS)

 

Bonds

 

EUROPEAN GOVERNMENT BONDS

 

Bund futures traded lower for most of the European session, with European peripheral 10-year bond yield spreads lacking any clear direction. Some strength was observed in bunds following a well received auction from Germany, however a lacklustre T-Bill auction from Portugal had muted reaction. Moving into the North American open, prices are trading in negative territory.

 

·   German Bund auction for EUR 4.3953bln, 2.25% 04-Sep-20, bid/cover 1.8 vs. Prev. 1.6 (yield 2.39% vs. Prev. 2.37%), retention 12.1%

·   Portuguese 12-month T-Bill auction for EUR 0.75bln, bid/cover 1.6 vs. Prev. 2.1 (yield 3.369% vs. Prev. 2.756%)

 

In other news, according to an IMF staff report, Greece has made a strong start in implementing economic policies attached to an IMF loan, and must now improve tax collecting to limit revenue shortfalls as the economy contracts. The report also said that bank liquidity is an immediate challenge for Greece, and the Greek government will be tested by pervasive tax evasion. It further said that Greece will sell bills starting in September, however sees no plans by Greece to sell bonds anytime soon. The report also sees downside risks to Greece’s economic growth. (Sources)

 

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

·   Eurozone CPI (Aug) Y/Y 1.6% vs. Exp. 1.6% (Prev. 1.6%)

·   Eurozone Employment (Q2) Q/Q 0.0% vs. Prev. 0.0%

·   Eurozone Unemployment (Q2) Y/Y -0.6% vs. Prev. -1.2% (RTRS)

 

Maturity

2

5

10

30

Bund (Dec 10)

Level

0.737

1.368

2.385

2.998

130.29

Change (bps)

1.919

2.172

1.548

3.538

-0.22

 

GILTS

 

NYSE LIFFE Gilt futures traded in tandem with bunds during the European session, with a weak conventional Gilt auction exerting further pressure on prices, and moving into the North American open Gilts have maintained weakness and are trading in negative territory.

 

·   Conventional Gilt auction for GBP 2bln, 4.75% 2030, bid/cover 1.49 vs. Prev. 1.86

 

In other news, price pressures cause a headache for Mervyn King but all the signs are that the rest of the MPC think the weakness of the economy and the effect of the fiscal squeeze will see off the inflation threat. Nonetheless, one MPC member, Sentance, is already worried about inflation and has already voted to increase rates. (Times)

 

Elsewhere, a double dip recession has become more likely and the UK is facing at least two years of house price falls, according to a leading fund manager Neil Woodford. A combination of the Coalition’s planned austerity measures, muted private sector demand, and credit constraint contributed to the gloomy assessment of the UK’s prospects. (Telegraph)

 

·   Jobless Claims Change (Aug) M/M 2.3K vs. Exp. -3.0K (Prev. -3.8K,, Rev. to -1.0K)

·   Claimant Count Rate M/M (Aug) 4.5% Exp. 4.5% (Prev. 4.5%)

·   ILO Unemployment Rate 3M/Y (Jul) 7.8% vs. Exp. 7.8% (Prev. 7.8%) (RTRS)

 

Maturity

2.000

5.000

10.000

30.000

Gilt (Dec 10)

Level

0.683

1.751

3.079

4.095

123

Change (bps)

2.256

1.031

2.625

0.705

-0.22

 

EQUITIES

 

European bourses traded in negative territory throughout the European session, partly attributed to the Bank of America downgrading several European sectors including technology, construction, travel & leisure and personal & household. However, Peugeot shares bucked the trend and traded higher during the session after Morgan Stanley upgrade. Moving into the North American open, equities have maintained weakness and are trading in negative territory, with technology and oil & gas as worst performing sectors.

 

Index

DAX

CAC

FTSE

EUROSTOXX

SMI

Level

6256.56

3758.74

5555.91

2794.14

6436.79

Change (ticks)

-18.85

-15.66

-11.50

-12.33

-29.53

 

FX

 

JPY weakness has been observed throughout the European session following Japanese intervention in the forex market, with all the major crosses, i.e. USD/JPY, EUR/JPY and GBP/USD trading up more than 200pips. In other news, GBP came under pressure following an increase in jobless claims figure from the UK.

 

Elsewhere, it is unreasonable for the United States to level criticism at China’s exchange rate policy simply because of its trade surplus, according to a commerce ministry spokesman. It is worth noting that later in the day, the US Congress will launch two days of hearings about how to get China to let the CNY rise. (RTRS)

 

·   Australia Westpac Consumer Confidence SA (Sep) M/M -5.0% vs. Prev. 5.4%

·   Australia Westpac Consumer Confidence Index (Sep) M/M 113.2 vs. Prev. 119.2 (RTRS)

 

Currency

EURUSD

GBPUSD

USDJPY

Level

1.2969

1.5545

85.26

Change (pips)

-0.0029

0.0006

2.2200

 

COMMMODITIES

 

WTI Crude futures prices moved lower during European trade, after pipeline operator Enbridge prepares to re-open the Line 6A pipeline which transports one third of the crude oil between Canada and the US Midwest.

 

Oil & Gas News:

  • Enbridge Energy Partners, will be allowed to restart their key 670,000 BPD Line 6A oil pipeline by the end of the week following the repair of a rupture, according to a Federal official.
  • OPEC President Pastor, said that OPEC does not plan to change output quotas at its next meeting.
  • Iraqi Oil Minister Shahistani said he is not worried about global economic weakness and current oil prices were balanced and beneficial for both oil consuming and producing countries.

 

Commodity

WTI Nymex

OTC Spot Gold

Level

75.71

1269.05

Change (NYSEARCA:USD)

-1.09

0.90

 

LOOKING AHEAD

 

Economic Releases

   CDT    BST                                                                     EXP.       PREV.

0730

1330

US    Empire Manufacturing M/M (Sep)

8.00

7.10

0730

1330

US    Import Price Index M/M (Aug)

0.3%

0.2%

0730

1330

US    Import Price Index Y/Y (Aug)

3.8%

4.9%

0730

1330

CA    Manufacturing Sales M/M (Jul)

0.2%

0.1%

0815

1415

US    Industrial Production M/M (Aug)

0.2%

1.0%

0815

1415

US    Capacity Utilisation M/M (Aug)

75.0%

74.8%

0930

1530

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

-2500K

-1853K

0930

1530

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

-750K

-243K

0930

1530

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

500K

-388K

0930

1530

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

 

-218K

0930

1530

US    DOE Refinery Utilisation W/W (Sep 10)

-0.53%

1.20%

1600

2200

NZ    RBNZ Official Cash Rate M/M (Sep)

3.00%

3.00%

1730

2330

NZ    Business PMI M/M (Aug)

 

49.9

 

Speaker

  CDT     BST

0830

1430   

US    Treasury's Barr

 

Auction

  CDT     BST

1000

1600   

US    Fed's Outright Tre. Coup. Purch. Sep 2014 - Aug 2016

 

**Notes

Short Sterling Sep. futures and options expiry

 

Prices taken at 1235BST

 

 



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