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DAILY US OPENING NEWS - 07/10/10

 

  • AUD gained strength after an unexpected jump in the Australian employment change

 

  • The USD index traded lower on persistent worries regarding further monetary easing by the Fed

 

  • Well received Spanish and French auctions, allied with better than expected industrial and manufacturing figures from UK and Germany helped risk appetite

 

 

Overnight News

 

ASIA

 

10-year Japanese Government Bonds traded lower throughout the session and at 0616 BST were trading at 143.86 (-0.29). The Nikkei lacked any firm direction overnight in Asian trade eventually closing the session down 0.07%. (RANsquawk)

 

·   Leading Index (Aug P) M/M 99.1 vs. Exp. 99.1 (Prev. 100.0)

·   Coincident Index (Aug P) M/M 103.5 vs. Exp. 103.5 (Prev. 103.0) (RTRS)

 

GLOBAL

 

Emerging economies should consider steps to contain fund flows that could cause currency rallies and asset bubbles, the World Bank Chief was quoted as saying, but the IMF called such action undesirable. The contrasting views over capital controls come amid rising tension between emerging and developed economies over exchange rates, which is expected to be a hot topic at Group of Seven and IMF meeting starting on Friday. (RTRS)

 

US

 

Former Fed Volcker said that he doesn’t expect consumer spending to spur growth, and the US and other developed nations face the prospect of protected joblessness. (Sources)

 

In other news, Pimco's El-Erian said that he sees several rounds of quantitative easing starting in November. (NASDAQ:CNBC)

 

Bonds

 

EUROPEAN GOVERNMENT BONDS

 

Bunds traded lower during the European session due to weakness in JGBs, well received auctions from Spain and France, as well as better than expected German industrial production figures, with European peripheral 10-year bond yield spreads generally tightened across the board. Moving into the North American open, prices have maintained weakness and are trading in negative territory.

 

In other news, the ECB left its benchmark interest rate unchanged at1.00% as expected.

 

·   German Industrial Production M/M 1.7% vs. Exp. 0.5% (Prev. 0.1%)

·   German Industrial Production Y/Y 10.7% vs. Exp. 9.8% (Prev. 10.9%) (RTRS)

 

·   Spanish bond auction for EUR 3.217bln, 2.50% 31-Oct-13, bid/cover 2.2 vs. Prev. 1.89 (yield 2.527% vs. Prev. 2.276%)

·   French OAT auction for EUR 5.075bln, 2.5% 12-Oct-20, bid/cover 1.78 (yield 2.68%)

·   French OAT auction for EUR 2.29bln, 3.5% 25-Apr-26, bid/cover 1.76 vs. Prev. 1.28 (yield 3.07% vs. Prev. 3.00%)

·   French OAT auction for EUR 1.125bln, 5.5% 25-Apr-29, bid/cover 2.8 vs. Prev. 2.43 (yield 3.15% vs. Prev. 3.65%) (RTRS)

 

Maturity

2

5

10

30

Bund (Dec 10)

Level

0.805

1.454

2.260

2.859

131.65

Change (bps)

3.657

4.327

3.835

4.368

-0.37

 

GILTS

 

NYSE LIFFE Gilt futures traded in tandem with bunds and came under further pressure following better than expected industrial and manufacturing production data from the UK. Moving into the North American open, Gilts remain lower after the BOE refrained from easing policy further. It is worth noting that the Bank of England keeps its benchmark interest rate unchanged at 0.50% and asset purchase target unchanged at GBP 200bln as expected.

 

In other news, Britain’s coalition government could delay some of its planned public spending cuts until later in its five-year parliamentary term. Citing senior government officials, the Treasury is working on plans to “reprofile” spending cuts, to spread the pain of deficit reduction more evenly over the next few years. However, the FT added that a decision on delaying cuts has not yet been taken. (NYSE:FT)

 

Elsewhere, the head of the World Bank has praised the Government’s determination to cut Britain’s huge debt, saying that its actions are “courageous and wise”. Robert Zoellick said that the debts carried by many countries after the economic crisis would potentially sow the seeds of a future crisis. (Times)

 

·   Industrial Production (Aug) M/M 0.3% vs. Exp. 0.2% (Prev. 0.3%)

·   Industrial Production (Aug) Y/Y 4.2% vs. Exp. 4.1% (Prev. 1.9%, Rev. to 2.0%)

·   Manufacturing Production (Aug) M/M 0.3% vs. Exp. 0.2% (Prev. 0.3%, Rev. to 0.4%)

·   Manufacturing Production (Aug) Y/Y 6.0% vs. Exp. 5.8% (Prev. 4.9%, Rev. to 5.0%)

·   Halifax House Prices SA (Sep) M/M -3.6% vs. Exp. -0.2% (Prev. 0.2%)

·   Halifax House Prices (Sep) 3M/Y 2.6% vs. Exp. 3.9% (Prev. 4.6%) (RTRS)

 

Maturity

2.000

5.000

10.000

30.000

Gilt (Dec 10)

Level

0.642

1.589

2.923

3.965

124.71

Change (bps)

3.192

2.612

3.145

2.801

-0.26

 

EQUITIES

 

Following a lower start, European bourses soon gained strength after well received auctions from Spain and France, allied with better than expected industrial and manufacturing production figures from the UK, and an increase in the industrial production from Germany. Spanish IBEX 35 index outperformed on the back of decent auction results from Spain. However, the basic materials sector underperformed, despite weakness in the USD index, partly due to comments from the Australian government saying that it was committed to its planned resource tax. In equity specific news, Man Group, in FTSE 100 index, continued to trade higher on bid interest from a US party. Moving into the North American open, equities are trading in minor positive territory with utilities and healthcare as the best performing sectors.

 

Index

DAX

CAC

FTSE

EUROSTOXX

SMI

Level

6281.36

3774.29

5686.05

2788.75

6382

Change (ticks)

10.63

9.38

4.66

8.75

30.99

 

 

FX

 

The USD index traded lower throughout the European session on persistent worries regarding potential for further monetary easing by the Fed, which in turn helped EUR/USD and GBP/USD, with EUR/USD reaching an 8 month high. In other news, GBP lost strength briefly following a sharp drop in Halifax House Prices from the UK, however soon pared back those losses and continued its upward trend helped by better than expected industrial and manufacturing production figures from the UK.

 

Elsewhere, the AUD gained strength across the board after an unexpected jump in Australian employment change, which helped AUD/USD to reach the highest levels since the AUD become a freely floating currency.

·   Australian Employment Change (Sep) M/M 49.5K vs. Exp. 20.0K (Prev. 30.9K, Rev. to 31.6K)

·   Australian Unemployment Rate (Sep) M/M 5.1% vs. Exp. 5.1% (Prev. 5.1%) (RTRS)

 

Also, JPY has continued to strengthen, again passing through the 82.87 level where the BOJ previously intervened, moving lower towards the 82.00 level.

 

Currency

EURUSD

GBPUSD

USDJPY

Level

1.3984

1.6006

82.32

Change (pips)

0.0054

0.0116

-0.6100

 

COMMMODITIES

 

WTI Crude has continued to trade higher today, supported by a weaker USD Index (-0.4%) and expectations of further quantitative easing.

 

Oil & Gas News:

  • An OPEC delegate has said that the Oil market is over supplied and OPEC needs to adopt a ‘wait and see’ stance.
  • According to a draft document, the EU energy chief is to reiterate his call for a temporary ban on deepwater oil and gas drilling.
  • The Turkish Energy Minister has said he supports merging the Nabucco and Itgi European gas pipeline projects, and would like to take part in a possible oil pipeline from Iraq to Turkey.
  • A French port strike at the Fos-Lavera oil hub is continuing for a 11th day today, with 13 crude oil tankers and 15 refined product vessels now being blocked. Strikes have also blocked the access road at the oil depot to prevent trucks from loading oil. 8 crude oil vessels have now been transferred away from the main port. There is no meeting planned for today between the strikers and port management, and some units at Total’s La Mede refinery have had to stop.

 

Commodity

WTI Nymex

OTC Spot Gold

Level

83.64

1360.28

Change (NYSEARCA:USD)

0.41

11.22


LOOKING AHEAD

 

Economic Releases

 CDT    BST                                                           EXP.     PREV.

0730

1330

US    Initial Jobless Claims W/W (Oct 2)

455K

453K

0730

1330

US    Continuing Claims W/W (Sep 25)

4450K

4457K

0730

1330

CA    Building Permits M/M (Aug)

-2.0%

-3.3%

0900

1500

UK    NIESR GDP Estimate M/M (Sep)

 

0.7%

0930

1530

US    EIA Natgas Sto. Chng. W/W (Oct 1)

77

74

0930

1530

US    ICSC Chain Store Sales Y/Y (Sep)

3.0%

3.2%

1400

2000

US    Consumer Credit M/M (Aug)

-$3.5B

-$3.6B

 

Speakers

  CDT    BST

0730

1330

EU    ECB's Press Conference Following Rate Announce.

0745

1345

WLD IMF's Strauss-Kahn

0800

1400

SW   Riksbank's First Deputy Governor Oberg

0830

1430

WLD World Bank President Zoellick

1200

1800

US    Fed's Fisher

1230

1830

US    Fed's Hoenig

 

 

Auction

 CDT     BST

1000

1600

US    3y-10y-30y Note Refunding Announcement

 

US Earnings: Alcoa, Micron Technology

 

**Notes:

Chinese Market Holiday

 

 

Prices taken at  1244BST

 

 

 

 



Disclosure: No Position