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DAILY US OPENING NEWS - 23/09/10

 

  • The Irish finance minister and the Irish finance agency’s director of funding said that there are no guarantees of loss protection for Anglo-Irish subordinated bonds

 

  • Irish/German 10-year bond yield spread reached new Euro-lifetime highs at over 420 BPS

 

  • Weaker than expected Eurozone and German manufacturing PMIs fuelled risk-aversion

 

  • EU's Rehn said there will be no restructuring of Greek, Irish or other Euro country debt

 

 

Overnight News

 

ASIA

 

Japanese and Chinese market holidays.

 

 

US

 

Treasury Secretary Geithner said that US banks can meet new higher capital rules through profits without crimping lending and harming economic recovery. (RTRS)

 

In other news, former Fed governor Robert Heller said that Fed’s concern that inflation is too low is misplaced. (Sources)

 

Bonds

 

EUROPEAN GOVERNMENT BONDS

 

Bund futures traded lower in early European trade, with European peripheral 10-year bond yield spreads with respect to bunds tighter across the board. However, as the session progressed and risk-aversion gathered pace, bunds gained strength and moved into positive territory, with European peripheral spreads widening. Worse than expected Eurozone and German manufacturing PMI data, allied with the German finance agency cutting its fourth quarter 2010 debt issuance to EUR 60bln from EUR 89bln helped bunds. Also, comments from the Irish finance minister and Irish finance agency’s director of funding that there are no guarantees of loss protection for Anglo-Irish subordinated bonds strengthened the risk-aversion theme. It is worth noting that despite a well received T-Bill auction from Ireland, Irish/German spread widened more than 20 BPS on the day and touched Euro-lifetime record high. Moving into the North American open, bunds are trading sideways in positive territory as the market looks ahead to jobs and housing data from the US later in the session.

 

In other news, EU's Rehn said there will be no restructuring of Greek, Irish or other Euro country debt. Rehn added that fiscal consolidation alone is not sufficient to drive growth, and Eurozone will have to discuss a permanent rescue mechanism at a later date. (Sources)

 

·   Eurozone Manufacturing PMI (Sep A) 53.6 vs. Exp. 54.5 (Prev. 55.1), lowest since January

·   Eurozone Services PMI (Sep A) 53.6 vs. Exp. 55.5 (Prev. 55.9), lowest since February

·   German Manufacturing PMI (Sep) M/M 55.3 vs. Exp. 57.6 (Prev. 58.2)

·   German Services PMI (Sep) M/M 54.6 vs. Exp. 57.0 (Prev. 57.2)

·   French Manufacturing PMI (Sep) M/M 55.4 vs. Exp. 55.0 (Prev. 55.1), Highest since May

·   French Services PMI (Sep) M/M 58.8 vs. Exp. 60.0 (60.4), Lowest since March (RTRS)

 

·   Irish 14-Feb-11 T-Bill auction for EUR 0.3bln, bid/cover 4.1 vs. Prev. 9.4 (yield 1.907% vs. Prev. 1.925%)

·   Irish 18-Apr-11 T-Bill auction for EUR 0.1bln, bid/cover 11.7 vs. Prev. 5.4 (yield 2.231% vs. Prev. 2.19%) (RTRS)

 

Maturity

2

5

10

30

Bund (Dec 10)

Level

0.706

1.452

2.292

2.912

131.27

Change (bps)

-4.111

-5.739

-5.520

-4.642

0.52

 

GILTS

 

NYSE LIFFE Gilt futures traded in tandem with bunds for most of the European session amid risk-averse trade and weakness in equities. Comments from BOE’s Dale that UK faces substantial headwinds from fiscal tightening and lack of bank lending also helped Gilts, and moving into the North American open prices are trading sideways in positive territory.

 

·   BBA Loans for House Purchases (Aug) M/M 31767 vs. Exp. 34000 (Prev. 33698, Rev. to 34219) (RTRS)

 

·   UK 1.25% Index Linked Treasury Gilt 2027 for GBP 0.55bln, bid/cover 2.23 vs. Prev. 1.94 (RTRS)

 

Maturity

2.000

5.000

10.000

30.000

Gilt (Dec 10)

Level

0.614

1.622

2.946

3.971

124.28

Change (bps)

-2.323

-3.613

-2.441

-2.764

0.25

 

EQUITIES

 

Following a positive start, European bourses soon ventured in negative territory as risk-aversion dominated market sentiment. Weaker Eurozone and German manufacturing PMIs, allied with concerns surrounding potential losses on subordinated bonds of Anglo-Irish bank weighed on stocks, affecting adversely the financial sector in particular. In equity specific news, Vodafone and AstraZeneca traded lower on the back of a broker downgrade. Strength in the USD index weighed upon commodities, which in turn pressured the basic materials sector. Moving into the North American open, equities are trading lower with financials and basic materials as worst performing sectors.

 

Index

DAX

CAC

FTSE

EUROSTOXX

SMI

Level

6157.12

3688.14

5504.3

2726.12

6293.34

Change (ticks)

-51.21

-46.91

-47.61

-26.65

-51.54

 

FX

 

EUR came under pressure across the board following worse than expected Eurozone and German manufacturing PMIs, along with concerns surrounding potential losses on subordinated bonds of Anglo-Irish bank. Market talk of Eastern European names selling in EUR/USD weighed upon the pair, whereas EUR/GBP came under pressure following market talk of a UK clearer and a big German bank selling in the pair.

 

In other news, NZD demonstrated weakness across the board after a much weaker than expected GDP from New Zealand.

·   New Zealand GDP (Q2) Q/Q 0.2% vs. Exp. 0.7% (Prev. 0.6%, Rev. to 0.5%)

·   New Zealand GDP (Q2) Y/Y 1.9% vs. Exp. 2.5% (Prev. 1.9%) (RTRS)

 

Elsewhere, Chinese Premier Wen Jiabao said that if CNY rises 20% that would cause major social upheaval, adding that there exists no relationship between exchange rate and trade surplus. He further said that China is looking to increase imports from the US, however the US needs to end restrictions on exports to China. He added that US unemployment is not a consequence of Chinese exports. (Sources)

 

Currency

EURUSD

GBPUSD

USDJPY

Level

1.3325

1.5672

84.46

Change (pips)

-0.0081

0.0007

-0.0400

 

COMMMODITIES

 

It is quiet today in terms of news flow. WTI Crude futures have been under pressure throughout the European session from a strengthened USD following weaker Eurozone PMI data and reports that subordinated debt holders in Anglo-Irish bank may not get all their money back.

 

Oil & Gas News:

  • US regulators have approved a gradual restart of the 290,000 BPD Enbridge Line 6B oil pipeline that ruptured more than eight weeks ago.

 

Geopolitical News:

  • A senior Obama administration official said yesterday that Al-Qaeda and its allies are likely to attempt small-scale, less sophisticated terrorist attacks in the US, which are extremely difficult to detect.

 

Commodity

WTI Nymex

OTC Spot Gold

Level

73.52

1292.25

Change (NYSEARCA:USD)

-1.34

0.90


LOOKING AHEAD

 

Economic Releases

CDT BST                                                     EXP.     PREV.

0730

1330

US    Initial Jobless Claims W/W (Sep 18)

450K

450K

0730

1330

US    Continuing Claims W/W (Sep 11)

4473K

4485K

0900

1500

US    Existing Home Sales M/M (Aug)

4.10M

3.83M

0900

1500

US    Existing Home Sales M/M (Aug)

7.1%

-27.2%

0900

1500

US    Leading Indicators M/M (Aug)

0.1%

0.1%

0930

1530

US    EIA Natgas Sto. Chng. W/W (Sep 17)

80

103

1500

2100

US    RPX Composite 28-day Y/Y (Jul)

 

0.16%

1500

2100

US    RPX Composite 28-day Index Y/Y (Jul)

 

197.09

 

Speakers

 CDT    BST

0700

1300

US    Treasury's Barr

0730

1330

US    Fed's Evans

0730

1330

US    Treasury's Geithner

0940

1540

US    Fed's Evans

1200

1800

US    Former Fed Volcker

 

Auction

 CDT     BST

1000

1600

US    2y-5y-7y Note Refunding Announcement

 

US Earnings: Nike

 

**Notes:

Japanese and Chinese Market Holiday

Long Gilt Oct. options expiry

 

 

Prices taken at 1218BST

 

 



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