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DAILY US OPENING NEWS - 24/09/10

 

  • Japanese government and the BOJ declined to comment on FX intervention overnight

 

  • BOJ Shirakawa refuted market talk that he will resign from the BOJ governor post

 

  • German IFO data came out better than expected, however IFO said that the economy is now entering a different phase of upswing, losing some pace

 

  • Goldman Sachs said that it is very unlikely that Ireland will have a crisis similar to Greece

 

  • Portuguese/German 10-year bond yield spread touched record highs on the back of political uncertainty and budget deficit concerns

 

 

Overnight News

 

ASIA

 

Chinese market holiday.

 

JGBs rose overnight, with futures moving back towards a seven-year peak, as Tokyo stocks extended losses with support abating from Japan’s JPY-selling intervention last week. Nikkei turned briefly positive on Friday after the USD jumped sharply against the JPY on talks that Japanese authorities had intervened in currency markets but soon fell back when no confirmation emerged. Nikkei closed down 1%. (RTRS)

 

Japanese economics minister Kaieda said that a row with China over disputed islands that has affected bilateral trades poses a downside risk to the Japanese economy. (RTRS)

 

US

 

White House Chief of Staff Rahm Emanuel is likely to resign in a matter of weeks, hastening a remake of the Obama White House that could lead to a lower-key, more cooperative approach after the November midterm elections. (WSJ)

 

In other news, foreign central banks’ holdings of US Treasuries and agency securities at the Federal Reserve grew USD 32.27bln in the week ended September 15, to stand at USD 3.229trl, according to the Fed. (RTRS)

 

Bonds

 

EUROPEAN GOVERNMENT BONDS

 

Bund futures traded in minor negative territory in early European trade, with European peripheral 10-year government bond yield spreads lacking any clear direction, with the exception of the Portuguese/German spread, which widened to touch all time highs, on growing political uncertainty after Portuguese opposition refused to support the government’s 2011 budget, re-igniting concerns over country’s ability to reduce its budget deficit. However, as the session progressed, bund futures moved into positive territory, with peripheral European spreads widening across the board, and Irish/German spread touching an all time high. Belgian/German spread also widened ahead of bond auctions from Belgium on Monday next week. Comments from German IFO that the economy is now entering a different phase of upswing, losing some pace, also underpinned the rise. Moving into the North American open, bunds have come off their best levels following comments from Goldman Sachs that it is very unlikely that Ireland will have a crisis similar to Greece.

 

It is also worth noting that according to a SocGen note, Ireland and Portugal need to raise EUR 150bln between them from the European Financial Stability Fund to shore up their public finances. (Times)

 

In other news, members of the Eurozone would be forced to pay punitive fines equivalent to 0.2% of GDP, if they did not keep their public finances under control, according to official proposals to be presented on Wednesday by Olli Rehn, the European Commissioner for economic monetary affairs. (NYSE:FT)

 

·   German IFO - Business Climate (Sep) M/M 106.8 vs. Exp. 106.4 (Prev. 106.7)

·   German IFO - Current Assessment (Sep) M/M 109.7 vs. Exp. 108.7 (Prev. 108.2)

·   German IFO - Expectations (Sep) M/M 103.9 vs. Exp. 104.0 (Prev. 105.2) (RTRS)

 

Maturity

2

5

10

30

Bund (Dec 10)

Level

0.690

1.437

2.274

2.890

131.48

Change (bps)

-0.153

-0.056

-0.930

-1.834

0.09

 

 

GILTS

 

NYSE LIFFE Gilt futures traded lower for the entire European session, and moving into the North American open, prices have come off their worst levels, however still trading in negative territory.

 

Maturity

2.000

5.000

10.000

30.000

Gilt (Dec 10)

Level

0.636

1.638

2.978

3.974

123.98

Change (bps)

1.373

1.510

2.821

1.043

-0.26

 

 

EQUITIES

 

European bourses traded in negative territory for most of the European session, despite getting some support after a better than expected IFO data from Germany. Basic materials were under pressure today due to UBS downgrading miners of the likes of Anglo American and Antofagasta. In equity specific news, Merck shares, in DAX, fell 7.4% in early trade following negative opinion from the EU on its multiple-sclerosis drug Cladribine. Moving into the North American open, equities have maintained weakness with basic materials and utilities as worst performing sectors.

 

Index

DAX

CAC

FTSE

EUROSTOXX

SMI

Level

6177.39

3707.62

5538.42

2734.75

6288.96

Change (ticks)

-7.32

-2.99

-8.66

-3.86

-14.24

 

 

FX

 

The Kyodo newswires has reported that Japan intervened in the JPY following an initial 50+ pip spike higher in USD/JPY from the 84.50 level to above 85.00 this morning. However, the Japanese government and BOJ officials declined to comment on intervention. There has also been market talk that the BOJ Governor Shirakawa may resign, which encouraged USD purchases from speculative funds, however Shirakawa said he has no plans to resign. Moving into the North American open, USD/JPY has retraced all of the earlier gains and is trading near unchanged. (RTRS/Kyodo)

 

In other news, EUR gained across the board following a better than expected IFO data from Germany, which observed EUR/USD jump up more than 40 pips. Allied to this, market talk of a Swiss bank, a western European name, and an Asian sovereign buying in EUR/USD provided further strength to the pair.

 

Currency

EURUSD

GBPUSD

USDJPY

Level

1.3409

1.5714

84.38

Change (pips)

0.0095

0.0030

0.0000

 

COMMMODITIES

 

WTI Crude futures moved into positive territory during the European session, buoyed by a weaker USD and fears of threats to the Gulf of Mexico’s oil interests from Tropical Storm Matthew.

 

Oil & Gas News:

  • JP Morgan have raised their oil price forecast by 4% to an average of USD 82.50 next year. Global oil demand will grow by 2.2mln BPD in 2010 to 87.2mln BPD.

 

Geopolitical News:

  • Iran has criticised Russia for banning the delivery of the S-300 air defence missile system to Iran.

 

Commodity

WTI Nymex

OTC Spot Gold

Level

75.31

1299.15

Change (NYSEARCA:USD)

0.13

6.70


LOOKING AHEAD

 

Economic Releases

   CDT    BST                                                                     EXP.       PREV.

0730

1330

US    Durable Goods Orders M/M (Aug)

-0.1%

0.3%

0730

1330

US    Durable ex. Transportation M/M (Aug)

1.0%

-3.8%

0730

1330

US    Non-def Cap ex. Aircraft M/M (Aug)

2.0%

-7.2%

0900

1500

US    New Home Sales M/M (Aug)

295K

276K

0900

1500

US    New Home Sales M/M (Aug)

6.9%

-12.4%

0930

1530

US    ECRI Weekly W/W (Sep 24)

 

122.60

0930

1530

US    ECRI Weekly Annualised (Sep 24) Y/Y

 

-9.2%

1000

1600

CA    Canadian Budget Balance (Jul) M/M

 

-2.80B

1000

1600

CA    Canadian Budget, year-to-date Y/Y (Jul)

 

-7.23B

1100

1700

FR    Jobseekers - Net Change M/M (Aug)

-5.0

-14.4

1100

1700

FR    Total Jobseekers M/M (Aug)

 

2676.6

1200

1800

US    Baker Hughes Rig Count W/W (Sep 24)

 

1661

 

Speakers

   CDT     BST

0630

1230

EU    ECB's Orphanides

0800

1400

US    Fed's Duke

0815

1415

US    Fed's Cumming

1200

1800

US    Fed's Lacker

1200

1800

US    Fed's Plosser

1530

2130

US    Fed's Bernanke

N/A

N/A

JN     Finance Minister Noda

 

Auction

  CDT      BST

1000

1600

US    Fed's Outright Treasury Coup. Purchase Sep 2014 - Aug 2016

 

**Notes:

Chinese Market Holiday

UST Oct. options expiry

 

Prices taken at 1214BST

 

 



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