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DAILY US OPENING NEWS - 04/10/10

 

  • According to reports, Irish finance minister faces a no-confidence motion

 

  • Business leaders and economists have called for the Bank of England to embark on a second round of quantitative easing to stave off a double-dip recession

 

  • Chinese Premier Wen Jiabao said that China will buy Greek government bonds once the country returns to markets

 

 

Overnight News

 

ASIA

 

Ten year Japanese government bonds firmed a bit overnight, regaining some ground after falling last week, with JGBs supported as investors waited for a Bank of Japan policy decision on Tuesday. Nikkei fell 0.3% in choppy trade, taking its cues from the currency markets ahead of a Bank of Japan policy decision the next day with the market expecting further easing, albeit a minor move. (RTRS)

 

In other news, Japan is considering an JPY 4.8trl economic stimulus as part of a extra budget for the fiscal year, and will propose to package to opposite parties next week. (Nikkei)

 

Elsewhere, China's GDP is forecast to rise 9.5 percent in 2010, accelerating from 9.1% in 2009 according to a government official. (RTRS)

 

·   China Non-manufacturing PMI (Sep) 61.7 vs. Prev. 60.1 (RTRS)

 

US

 

·   Total Vehicle Sales Y/Y (Sep) 11.73 vs. Exp. 11.50mln (Prev. 11.46mln)

·   Domestic Vehicle Sales Y/Y (Sep) 8.82mln vs. Exp. 8.65mln (Prev. 8.66mln) (RTRS)

 

Bonds

 

EUROPEAN GOVERNMENT BONDS

 

Bund futures traded higher throughout the European session on the back of weakness in equities and risk-averse trade, with European peripheral 10-year bond yield spreads with respect to bunds generally wider across the board. An article in the FT, saying that the Irish budget deficit, due out today, will be 11.9% of national income as opposed to 11.6% previously forecast, allied with news that Irish finance minister Lenihan is facing a no confidence vote, further exacerbated risk-aversion in the early European trade. However, later in the European session, the Irish central bank said that Ireland’s underlying deficit is likely to be around 11.6% of GDP in 2010, which saw tightening of Irish/German spread from its earlier highs. Also, the Greek/German spread narrowed following assurance from the Chinese Premier Wen Jiabao that China will buy Greek government bonds once the country returns to markets. Moving into the North American open, bunds are trading in positive territory, with most European peripheral spreads still widen.

 

·   Eurozone Sentix Investor Confidence (Oct) M/M 8.8 vs. Exp. 8.0 (Prev. 7.6) (RTRS)

 

Maturity

2

5

10

30

Bund (Dec 10)

Level

0.815

1.457

2.254

2.826

131.67

Change (bps)

-3.584

-4.700

-3.090

-3.452

0.36

 

GILTS

 

NYSE LIFFE Gilt futures traded in tandem with bunds, and moving into the North American open prices are trading sideways in positive territory.

 

In other news, the Times shadow MPC, which meets under the auspices of the Institute of Economic Affairs, has voted 6-3 to keep rates on hold. Most members of the shadow MPC, favour more asset purchases by the Bank, with the consensus being about GBP 50bln on top of the existing GBP 200bln. (Sunday Times)

Also, business leaders and economists have called for the Bank of England to embark on a second round of quantitative easing to stave off a double-dip recession. The British Chambers of Commerce (NYSE:BCC) and the Institute of Directors are calling for the Bank’s monetary policy committee to increase its asset-purchase scheme by a further GBP 50bln to GBP 250bln by the end of the year. Although fears persist that quantitative easing will cause inflation, both business groups believe an urgent increase in money supply is needed ahead of tax rises and public spending cuts next year. (Sunday Times)

 

·   Construction PMI (Sep) M/M 53.8 vs. Exp. 51.4 (Prev. 52.1) (RTRS)

 

Maturity

2.000

5.000

10.000

30.000

Gilt (Dec 10)

Level

0.619

1.574

2.923

3.892

124.69

Change (bps)

-1.377

-3.973

-4.555

-2.180

0.53

 

EQUITIES

 

European bourses traded lower during the European session on the back of weakness in Asian equities as well as general risk-aversion. Comments from the IMF that tougher bank capital and liquidity standards negotiated by bank supervisors aren’t sufficient to ward off another financial crisis, as well as warning from city investment groups and hedge funds that they may not lend to Irish banks in the future if Dublin pushes ahead with plans to bail out its banking sector, dented risk-appetite further. Elsewhere, European automakers traded under pressure after German new car sales were down 18% in September. In equity specific news, Sanofi-Aventis CEO said that Genzyme shareholders have backed co.’s hostile USD 69 per share cash offer, totalling USD 18.5bln. Moving into the North American open, equities have maintained weakness and are trading in negative territory.

 

Index

DAX

CAC

FTSE

EUROSTOXX

SMI

Level

6149

3652.96

5568.18

2707.11

6257.57

Change (ticks)

-62.34

-39.13

-24.72

-25.80

-26.6

 

FX

 

The USD index traded in positive territory for the entire European session, being a beneficiary of risk-aversion, which in turn exerted pressure on GBP/USD and EUR/USD. However, GBP/USD briefly gained following a better than expected construction PMI data from the UK. Also, EUR came under pressure following news of a USD 18.5bln hostile bid by Sanofi-Aventis for Genzyme.

 

In other news, Chinese Premier Wen Jiabao said that China supports a stable EUR and will not reduce its holdings of European bonds. (RTRS)

 

Currency

EURUSD

GBPUSD

USDJPY

Level

1.3691

1.5832

83.31

Change (pips)

-0.0100

0.0008

0.0900

 

COMMMODITIES

 

WTI Crude futures traded lower during the European session, following equity markets lower as the market continued to worry over the state of Eurozone finances, and as the USD Index strengthened (+0.50%)

 

Oil & Gas News:

  • Iraq raised its proven oil reserves figure by a quarter today to 143.1bln barrels in a bid to match the clout of leading producer Saudi Arabia and strengthen its case for OPEC to grant it a higher output quota. It is now the 4th largest holder of crude, overtaking Iran.
  • Indonesia's crude oil production has been cut by 150,000 barrels per day after a gas pipeline leakage that will take three days to fix, cutting output from Chevron's Minas and Duri fields, officials said today.
  • Russian oil output hit a new record of 10.16 million barrels per day in September as fields returned from maintenance, beating the last all-time high in July.
  • A French port strike at the Fos-Lavera oil hub is continuing for a 8th day today, with 14 crude oil tankers and 13 refined product vessels now being blocked. A union official said he is not optimistic about resolving the conflict, and Total’s La Mede refinery only has five days left of crude reserves before it will have to halt operations.

 

Geopolitical News:

  • The US and Japan have issued a warning to its citizens travelling in Europe to be vigilant following an increased threat of an attack from al-Qaeda terrorists.

 

Commodity

WTI Nymex

OTC Spot Gold

Level

81.14

1316.25

Change (NYSEARCA:USD)

-0.44

-2.85

 

LOOKING AHEAD

 

Economic Releases

  CDT     BST                                                         EXP.     PREV.

0900

1500

US    Factory Orders M/M (Aug)

-0.4%

0.1%

0900

1500

US    Pending Home Sales M/M (Aug)

2.1%

5.2%

0900

1500

US    Pending Home Sales Y/Y (Aug)

 

-20.1%

 

Speakers

  CDT     BST

0525

1125

UK    BOE's Tucker

1030

1630

US    Fed's Sack

1400

2000

US    Fed's Bernanke

 

Auction

  CDT     BST

0800

1400

FR    EUR 8.5bln T-Bill Auction

 

**Notes:

Chinese Market Holiday

 

Prices taken at  1201BST

 

 

 

 



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