Daily US Opening News And Market Re-Cap: November 9
- European markets receive a swift reminder that a Greek resolution is not on the horizon, as EU sources say Greece are considering rolling over T-bills on November 16th due to a possible delay in the release of aid.
- Moody's will communicate their view on France within a few weeks, bringing the state into focus.
- Focus for the US session on University of Michigan confidence, and Obama due to speak on the economy.
Another day another sell-off…with equity markets in Europe trending steadily lower after it was reported that the decision on Greek aid will not be taken during the Eurogroup meeting scheduled for November 12. Still, EU official said that there will be no Greek default on November 16th (EUR 4.1bln redemptions) and that this redemption is to be "factored in" decision on disbursement. Separately, analysts at Fitch rating agency noted that while current Spain’s rating is appropriate, further action would more likely than not be to sub-investment grade. Moody’s also commented on the never-ending sovereign debt crisis today, stating that actions taken by the ECB only buying time for Euro region and that a decision on France will be communicated within a few weeks. As a result, bond and credit spreads widen further today, with SP/GE 10s spread at 450 level, which is of particular importance given that this is the level at which the LCH begins to review bonds for margin requirements. Deterioration in Italian paper was linked to next week’s supply. In turn, EUR/USD and GBP/USD trended lower, with the USD index up 0.12% at last check. Going forward, market participants will get to digest the release of the latest U. Michigan Survey (Nov P), as well as macro forecasts from Philadelphia Fed.
Asian equities continued the risk-off theme overnight, with the Nikkei 225, Shanghai Composite and Hang Seng Index all booking losses on both the day and the week. Chinese data failed to stir sentiment, despite CPI coming in below forecast, suggesting the central bank has room to ease monetary policy. The Asian bourses remain focused on the US equity markets, which suffered yesterday under the strain of fiscal cliff concerns. Retail sales numbers from China came in broadly inline with consensus at 14.5% Y/Y, and industrial production came in above estimates at 9.6% Y/Y.
EU & UK Headlines
Greece is considering rolling over up to EUR 5bln in T-bills on November 16th due to possible delay in release of aid tranche, according to Eurozone officials. (Newswires) Greece have a redemption due on November 16th for EUR 4.1bln which they will be unable to pay without financial assistance. This comment suggests that Greece will roll over the debt so they are not required to pay the redemption in full on this date. Elsewhere, an EU source has said Greece has a margin for manoeuvre until the end of 2012, and has various ways of covering funding needs up to the end of December - further delaying expectations for the need of another tranche of aid in Greece.
The UK's trade deficit narrowed beyond expectations: UK Visible Trade Balance (GBP) (Sep) M/M -8.368bln vs. Exp. -8.900bln (Prev.
-9.844bln, Rev. -9.984bln). Alongside the trade balance release, the ONS released revisions to Q3 construction data, showing a steeper fall than expected, however they do not expect an impact on GDP revisions.
French Industrial Production (Sep) M/M -2.7% vs. Exp. -1.0% (Prev. 1.5%)
French Industrial Production (Sep) Y/Y -2.5% vs. Exp. -0.1% (Prev. -0.9%)
Moody's says ECB action only buying time for Euro region, Greece exit remains a risk for Europe and will communicate their view on France within a few weeks. Moody's added that Spain's growth outlook is key to their credit rating. (Newswires)
European equities have slumped from the open, with the IBEX-35 leading the losses, accompanied by the DAX. Financials are the worst performing sector of the day, as the fall in peripheral bonds drags the riskier sector downwards, with flight to defensive healthcare and consumer goods sectors pushing them into positive territory. US stock futures trade in line with their European counterparts, indicating a lower open on Wall Street today.
In individual equity news, French bank Credit Agricole are one of the worst performers in Europe today, as the bank outline the messy exit of their Emporiki Greek unit in earnings pre-market. The bank booked a loss of EUR 2.85bln vs. Exp. loss EUR 1.88bln for Q3. Much of the dampener on earnings came from the EUR 1.96bln net charge taken from the Emporiki sale, but a 15% fall in Q3 CIB profit also turned investors away from the stock. Credit Agricole shares trade lower by over 7% at the midpoint of the European session.
Greek saga concerns have weighed on the EUR from the open this morning, with a lot of weight going through in the EUR/JPY cross, as the JPY benefits strongly from safe haven flows. The softening in European assets has dragged EUR/USD underneath yesterday’s low print to mark a two-month low in the pair at 1.2707.
GBP is moving alongside its EUR counterpart, with some desks noting the significant Diageo bid for a majority stake in India’s United Spirits to the tune of GBP 650mln behind some of the early legs lower in the GBP/USD pair. Bids touted at 1.5930 could keep any further downside in the pair limited, however if the EUR continues its downward trajectory, further losses could be inevitable.
Commodities are broadly weaker, as USD strength brings WTI and Brent crude futures into negative territory ahead of the NYMEX pit open, with WTI below the USD 85.00 mark, and Brent below USD 107.00 at the midpoint of European trade. The European concerns have contributed to the moves, bringing riskier assets lower this morning. Spot gold however, is retaining some value, but trades only just above unchanged. Market focus looks ahead to the University of Michigan Confidence survey at 1455GMT/0855CST.