Daily US Opening News And Market Re-Cap: October 3

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From RanSquawk

  • Core Eurozone Services PMIs disappoint, however Italian and Eurozone numbers beat expectations.
  • Spanish economy minister says Spain are to consider all consequences before a bailout decision.
  • Markets lack firm direction as participants sit on the sidelines ahead of the key risk events of the week, with the ECB rate decision tomorrow, followed by the US nonfarm payroll report on Friday.

Market Re-Cap

Less than impressive PMIs from Europe, as well as China failed to depress the bullish sentiment as market participants remained hopeful that a full scale bailout of Spain will take place in the very near future. As a result, in spite of opening lower, equity markets in Europe have edged into positive territory, supported by utilities and telecommunication sectors. Banks also posted decent gains, after Spanish economy minister outlined the bad bank plan which is to be financed with senior debt and private investors to have majority stake in bad bank. The bank recap plan is expected to be running by start of December. Italian markets outperformed, largely due to the fact that today’s Italian Services PMI posted a minor improvement on the previous reading. Bond yield spreads continued to tighten, however flows remained light ahead of the ECB policy meeting tomorrow, as well as the latest round of issuance from Spain and France. Heading into the North American open, EUR/USD is trading little changed as demand from Middle Eastern, as well as EU semi-official accounts was offset by risk event (ECB, auctions) pre-positioning. Going forward, the second half of the session sees the release of the latest ADP Employment Report, ISM Non-Manufacturing and the weekly DoE inventory survey.

Asian Headlines

The Nikkei 225 continues to underperform in the absence of Chinese participants, as exporters remain weighed upon by dwindling export markets and the elevated JPY. Australia's ASX 200 continued to benefit from yesterday's rate cut by the RBA, closing at the index's highest level since August 2011. (RANsquawk)

Chinese Non-Manufacturing PMI (Sep) M/M 53.7 (Prev. 56.3)

EU & UK Headlines

The Spanish economy minister De Guindos has said Spain will continue to assess requesting a bailout, and will measure all consequences before making a decision. (Newswires)

The IMF are seeking more budget measures for Greece, however the Greek parliament are unlikely to approve the measures by the EU summit. (Newswires) This confirms overnight reports that the Greek finance minister said he was unsure that a budget agreement can be reached with the Troika by October 8th EU finance ministers meeting.

  • Spanish Services PMI (Sep) M/M 40.2 vs. Exp. 44.0 (Prev. 42.0)
  • Italian Services PMI (Sep) M/M 44.5 vs. Exp. 43.5 (Prev. 44.0 )
  • French Services PMI (Sep F) M/M 45.0 vs. Exp. 46.1 (Prev. 46.1)
  • German Services PMI (Sep F) M/M 49.7 vs. Exp. 50.6 (Prev. 50.6), lowest since March 2009
  • Eurozone Services PMI (Sep F) M/M 46.1 vs. Exp. 46.0 (Prev. 46.0)
  • UK Services PMI (Sep) M/M 52.2 vs. Exp. 53.0 (Prev. 53.7)

Equities

After opening lower in line with overnight Asian trade, European equities have recovered off their worst levels but trade mixed heading into the North American crossover, with outperformance noted in the Italian FTSE-MIB as Italian borrowing costs decline throughout the session and their services PMI number beats both the previous and expected readings. Additionally, the European sector breakdown appears mixed, with no clear direction observed as participants sit on the sidelines ahead of they key risk events of the week, with the ECB's rate decision tomorrow, followed by the US jobs report on Friday

FX

EUR/USD is trading little changed as demand from Middle
Eastern, as well as EU semi-official accounts was offset by risk event
(ECB, auctions) pre-positioning. Talk of large offers ahead of
1.2940/50. AUD is also softer, weighed on by the disappointing Chinese
data and a much larger than expected deficit in the August trade
balance in Australia coming in at AUD -2027mln vs Exp. AUD -685mln, with
exports declining for a third straight month.

Commodities

Both WTI and Brent crude futures trade in negative territory as last night's API crude oil inventories showed the fourth weekly build in reserves, and ahead of today's DOE numbers, which are also expected to show a build. Additionally, Chinese non-manufacturing PMIs signal a slowdown in growth for the sector, reigniting worries over the world's second largest economy. Spot gold and silver prices trade slightly higher ahead of the US open, as the USD-index spends much of the European morning in negative territory.