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DAILY US OPENING NEWS - 17/09/10

 

  • Good earnings from Oracle and Research in Motion promoted risk appetite in early European trade

 

  • A Barclays report said that Ireland could need Eurozone or IMF help if situation worsens

 

  • The Irish Independent commented that Ireland is 'perilously close to calling in the IMF'

 

 

Overnight News

 

ASIA

 

Long-dated JGBs dipped overnight as Tokyo stocks advanced, while the yield curve steepened as Japan’s currency market intervention this week bolstered the prospects for an easier policy stance by the BOJ. Nikkei rose 1.2% to a six-week closing high, helped by a weaker JPY and Japan’s massive JPY-selling this week, leading the benchmark to book its best weekly performance this year. (RTRS)

 

In other news, Japanese PM Kan kept political allies in key posts in a cabinet reshuffle on Friday, signalling he plans to try to press ahead with efforts to curb the country’s huge debt. Kan appointed finance minister Noda to keep his post. (RTRS)

 

Also, Moody’s said that extra stimulus wouldn't necessarily hurt Japanese rating, and intervention is credit neutral for Japan, however deflation could be credit negative for the country if it deepens. (Sources)

 

Elsewhere, in its financial stability report for 2010, the PBOC said that loan losses at Chinese banks could mount as the country’s structural reforms accelerate. PBOC also warned of a growing risk of asset bubbles and inflation. It also said that the Chinese economic growth will be relatively fast and will remain stable, however country’s economic rebound momentum is insufficient. The bank reaffirmed its appropriately loose monetary policy stance and said it would deploy various fiscal and monetary tools to manage inflationary expectations. It also said that China will have strict control of credit for industries that have an overcapacity. The report also warned of a potential sovereign debt crisis if major economies did not bring their budget deficits under control. (RTRS/Sources)

 

US

 

The US Federal Reserve’s balance sheet contracted to USD 2.279trl in the week ended September 15 from USD 2.288trl the previous week. Also the Fed’s holdings of Treasury and agency debt kept for overseas central banks fell USD 17.81bln in the week ended September 15, to stand at USD 3.196trl. (RTRS)

 

Bonds

 

EUROPEAN GOVERNMENT BONDS

 

Bund futures traded lower in early European trade on the back of strength in Asian and European equities, with European peripheral 10-year government bond yield spreads with respect to bunds observed general tightening. However, following a Barclays report saying that Ireland could need Eurozone or IMF help if situation worsens as well as comments in the Irish Independent that Ireland is 'perilously close to calling in the IMF', bunds came off their worst level and ventured into positive territory. Moving into the North American open, prices are trading in positive territory, with peripheral spreads widening across the board.

 

In other news, ECB’s Nowotny said that ECB’s priority is to unwind emergency tools first, and rate increases will be discussed at a later stage, adding that there are no pre-commitments on future exit steps. (Sources)

 

·   Eurozone Current Account SA (Jul) M/M -3.8bln vs. (Prev. -4.6bln, Rev. to -3.8bln)

·   Eurozone Current Account NSA (Jul) Y/Y 3.7bln vs. (Prev. 1.0bln, Rev. to 1.8bln)

·   Eurozone Construction Output SA (Jul) M/M -3.1% (Prev. 2.7%, Rev. to 1.8%)

·   Eurozone Construction Output WDA (Jul) Y/Y -7.5% (Prev. 3.1%, Rev. to 1.9%) (RTRS)

 

Maturity

2

5

10

30

Bund (Dec 10)

Level

0.778

1.447

2.437

3.086

129.76

Change (bps)

-3.015

-2.801

-3.995

-3.464

0.38

 

GILTS

 

NYSE LIFFE Gilt futures traded in negative territory for most of the European session due to strength in equities, however moving into the North American open as bund futures moved into positive territory, Gilts came off their worst levels to trade near unchanged.

 

In other news, BOE’s Posen said that BOE may need to opt for heavy-duty purchases of private assets in case of a faltering economy

 

Maturity

2.000

5.000

10.000

30.000

Gilt (Dec 10)

Level

0.692

1.788

3.124

4.126

122.42

Change (bps)

-1.685

-0.675

-1.618

-1.948

0.08

 

EQUITIES

 

European bourses traded in positive territory for the entire European session amid general risk-appetite as well as strength in Asian equities. Good earnings from Oracle and Research in Motion overnight further strengthened equities, especially the technology sector. Weakness in the USD index buoyed commodities, which in turn helped the basic materials sector. In equity specific news, Carrefour traded higher throughout the session following news that the company is considering selling its hard-discount unit Dia. Moving into the North American open, equities have come off their best levels but still trading in minor positive territory with Consumer Services and Industrials being the best performing sectors.

 

Index

DAX

CAC

FTSE

EUROSTOXX

SMI

Level

6263.07

3756.93

5563.23

2793

6437.9

Change (ticks)

13.42

20.63

23.09

8.39

13.74

 

FX

 

The USD index traded lower for the entire European trade amid general risk-appetite, which in turn buoyed both EUR/USD and GBP/USD. However, as the session progressed, EUR/USD came off its best levels following a Barclays report and comments in the Irish Independent that Ireland may need Eurozone or IMF help if the economic situation worsens. Market talk of Swiss and US banks selling in EUR/USD further pressured the pair. GBP/USD also came under pressure following market talk of Eastern European names selling in the pair.

 

In other news, Japan is considering the expansion of the fund set aside for JPY-selling intervention, according to a source familiar with the matter. The size of the fund currently is JPY 33trl. (Kyodo)

 

Also, Naoto Kan, Japan’s Prime Minister, warned that his government was ready to take further resolute action in currency markets, despite complaints from US and European politicians about Tokyo’s dramatic unilateral JPY-selling intervention. (NYSE:FT)

 

Currency

EURUSD

GBPUSD

USDJPY

Level

1.3094

1.5673

85.77

Change (pips)

0.0016

0.0048

-0.0100

 

COMMMODITIES

 

WTI crude futures traded higher in the European session, crossing back above the USD 75 level, supported by a weaker USD.

 

Oil & Gas News:

  • Algerian Oil minister Youcef Yousfi said that current oil prices could be better, and he will discuss a target price for oil at the next OPEC meeting.

 

Commodity

WTI Nymex

OTC Spot Gold

Level

75

1279.8

Change (NYSEARCA:USD)

0.43

4.55

 

LOOKING AHEAD

 

Economic Releases

 

CDT  BST                                                      EXP.      PREV.

0730

1330

US    CPI M/M (Aug)

0.3%

0.3%

0730

1330

US    CPI Y/Y (Aug)

1.1%

1.2%

0730

1330

US    CPI ex. Food & Energy M/M (Aug)

0.1%

0.1%

0730

1330

US    CPI ex. Food & Energy Y/Y (Aug)

1.0%

0.9%

0730

1330

US    CPI Core Index SA M/M (Aug)

 

221.676

0730

1330

US    CPI NSA Y/Y (Aug)

218.324

218.011

0855

1455

US    Uni. of Michigan Confid. M/M (Sep P)

70.0

68.9

0930

1530

US    ECRI Weekly W/W (Sep 17)

 

122.00

0930

1530

US    ECRI Weekly Annualised  Y/Y (Sep 17)

 

-10.1%

1000

1600

US    Cleveland Fed Median CPI M/M (Aug)

 

0.1%

1200

1800

US    Baker Hughes Rig Count W/W (Sep 17)

 

1654

 

** Notes:

Quadruple Witching Day:

DOW Sep. futures and options expiry

E-Mini S&P 500/ NASDAQ 100/ DOW Sep. futures & options expiry

CAC 40 Sep. futures & options expiry

 

Prices taken at 1240BST

 

 



Disclosure: No Position