Daily US Opening News And Market Re-Cap: October 25
- UK GDP (Q3 A) Q/Q 1.0% vs. Exp. 0.6% (Prev. -0.4%) - the strongest quarterly growth since Q3 2007, lifted 0.2 percentage points
- by Olympic ticket sales.
- Deposits at Spanish banks rise for the first time in six months over September.
- Market attention looks ahead to weekly jobs numbers, durable goods orders, and Apple Q3 earnings due after the Wall Street close.
Heading into the North American open, equities in Europe are seen higher, supported by financials and basic material stocks. With banks benefiting from improved credit spreads in Europe, while reports from the Chinese industry ministry saying that China’s industrial output may be faster in Q4 than in Q3 underpinned the strength by basic material sector. In terms of EU related commentary, the Spanish treasury chief has said that Spain is almost fully funded until year end and can start funding itself for 2013 adding that the ECB has already been very explicit about details of a potential bond-buying plan for Spain. He added that Spain's central government funding program for 2013 will also cover regions' financial needs. In turn, spreads tightened, with SP/GE below the 400bps level, with cash inflows via looming redemption/coupon payments also weighing on German Bunds. However the focus has been on the latest UK GDP print, which came in much higher than the median estimate and also above the upper est. GBP/USD continued to advance, with EUR/GBP on path to make a test on 0.8000 to the downside. Going forward, the second half of the session sees the release of the latest weekly jobs and durables reports.
The Nikkei 225 closed at its highest level since late September, buoyed by the renewed JPY weakness, following reports that the Japanese cabinet are to endorse a JPY 700bln stimulus package as soon as tomorrow, alongside reports that the BoJ could ease further at October 30th's meeting. As such, the Nikkei 225 did close higher by 1.13% at 9,055. Chinese and Hong Kong stocks saw a mixed performance, with the Shanghai Composite closing down 0.68% at 2,101 and the Hang Seng gaining 0.2% at the close at 21,810 - a new 2012 high for the index.
US foreclosure filings have fallen in three-fifths of US metro areas, according to Realtytrac. However, New York had a 69% gain in filings in Q3. (Newswires) BarCap US Treasury month-end extension seen at +0.02yrs.
EU & UK Headlines
The Spanish treasury chief has said that Spain is almost fully funded until year end and can start funding itself for 2013 adding that the ECB has already been very explicit about details of a potential bond-buying plan for Spain. (Newswires) He added that Spain's central government funding program for 2013 will also cover regions' financial needs.
ECB says Spanish bank deposits rise for first time in 6-months and Greek bank deposits up 1% in September.
UK GDP (Q3 A) Q/Q 1.0% vs. Exp. 0.6% (Prev. -0.4%); strongest quarterly gain since Q3 2007
- UK GDP (Q3 A) Y/Y 0.0% vs. Exp. -0.5% (Prev. -0.5%)
- The release is not only above the median estimate, but also higher than the upper estimated range which was at 0.8%. Given the
much better than expected data, markets will now likely begin to question the need for the BoE to raise the APF in November, or at least whether there is a chance that the BoE may announce a smaller program of GBP 25bln instead of GBP 50bln. Following the release, Barclays revised their BoE QE forecast, now sees no stimulus in November after previously seeing GBP 50bln expansion
This follows Nomura's decision to delay their prediction for further QE back from November and into February 2013.
BarCap Pan Euro agg month-end extension seen at +0.09yrs.
BarCap UK agg month-end extension seen at +0.01yrs.
European equities are trading higher ahead of the Wall Street open as sentiment lifts towards the Eurozone, with the Spanish Treasury Chief renewing expectations that a bailout for the country could be imminent. Additionally, the news from the ECB that deposits at Spanish banks had risen for the first time in six months has lifted pressure of the country's financial system. Financials are leading the way higher, with noted strength in the core banks, as the peripheral firms continue to struggle. Elsewhere, reports from the Chinese industry ministry saying that China’s industrial output may be faster in Q4 than in Q3 underpinned the strength by basic material sector. US stock futures are in the green, as earnings season continues, with the releases so far coming in modestly above expectations. In individual equities news, global carmakers remain under pressure, as Daimler is forced to cut its 2013 forecast for returns, despite beating expectations for Q3 revenues and EBIT. Despite the lagging performance for the German firm, the CFO has said the Co. is still capable of paying a dividend, and aims to increase profit margins in 2013. The earnings season in the US continues, with larger names Apple and ConocoPhillips due to report today.
GBP/USD continued to trend higher today, underpinned by the advanced GDP report, which came in much higher than the consensus estimates but was littered with various special factors which boosted the initial estimate from the ONS. EUR/USD is also seen higher, consolidating around the 1.3000 level, also touted intraday option expiry level for the NY cut at 10am ET as impl vols fall to levels not seen since mid 2008.
WTI and Brent crude futures trade higher, as the risk appetite in Europe moves the USD-index lower, taking pressure off energy pricing. Gold and silver spot prices are also benefiting from the USD-weakness, trading positively ahead of the COMEX open. Market direction for the commodities market will likely be dominated by the high volume of US data due today, however any stand outs from expectations in ConocoPhillip's earnings release could grab attention.