Daily US Opening News And Market Re-Cap: November 21
- No decision at Eurogroup finance ministers meeting on Greece with another meeting to take place on Monday 26th November
- German Chancellor Merkel softens stance on relaxing terms of Greek budgetary measures according to sources
An initial lower open in major European cash bourses has been pared despite concern over Greek and a lack of any progress in agreement between Eurozone officials and the IMF. Source comments early on in European trade helped provide renewed optimism that a plan for Greece is edging closer after it was reported that the German Chancellor Merkel told lawmakers Greece's financing hole through 2016 can be filled with combination of lower rates and increased EFSF. The FTSE is under-performing its European peers at the mid-point of trade today as several large cap stocks go ex-dividend, although strength has been seen following the latest Bank of England minutes which showed a less dovish than expected 8-1 vote split to hold fire on QE between the MPC meetings. Following the release of the minutes, a now reduced expectation for asset buys at the December meeting saw upside in GBP/USD in a move away from the 1.5900 handle, and Gilt under pressure, although short-sterling shrugged off the comment that the central bank is unlikely to cut bank rate in foreseeable future.
Heading into the North American session markets await several early data releases, scheduled for today due to the Thanksgiving holiday on Thursday. Initial Jobless Claims is due today at 1330GMT (0730CST), DoE inventories at 1530GMT (0930CST) and EIA natural gas storage change also at 1530GMT (0930CST). Any further commentary on discussion surrounding Greek budgetary and aid talks will also be key heading into the US holiday, and markets could also demonstrate choppy price action as market participants adjust positions before heading away from their desks for a long weekend.
Fed chairman Bernanke has suggested that the central bank will keep trying to push down long-term interest rates in 2013 as federal tax and spending policies become a more substantial headwind to the US economy.
EU & UK Headlines
Germany's finance minister Schaeuble says there is no agreement among Eurozone finance ministers on Greece and a further meeting will take on Monday. The announcement prompted a risk off move across asset classes as ministers had extended discussions on potential options for Greece but reached no agreement, deciding to instead kick the can down the road once again. However it was announced the Eurozone Finance ministers expect to reach an agreement at the next meeting on Monday 26th November. The Spanish 10-year yield has trended lower throughout European trade as renewed optimism has meant buying of Spanish paper.
According to sources, German Chancellor Merkel tells lawmakers Greece's financing hole through 2016 can be filled with lower
rates and the finance minister Schaeuble told lawmakers the ECB believes Greece can raise EUR 9bln through T-bill issues.
The Bank of England released their minutes early this morning and BoE's MPC voted 9-0 to hold benchmark interest rate at 0.5%
in October and voted 8-1 to keep the asset purchase facility unchanged at GBP 375bln. They also confirmed they are unlikely to cut
the bank rate in foreseeable future. In reaction to the less dovish than expected vote split immediate strength was seen in GBP.
European cash equity markets opened lower today after the news from the Eurogroup meeting that no agreement has been reached on Greece and the next tranche of aid the country needs. Early losses were pared after source comments from German Chancellor Merkel stated that EFSF guarantees could be increased by EUR 10bln and Germany would assume its share. Optimism was seen as Merkel, who is often opposed to looser rules for Greece appears to be softening her stance.
The FTSE has underperformed against other European bourses as many large-cap stocks are going ex-dividend today, including Vodafone.
Despite this, strength has been seen following the more dovish than expected vote on further asset purchases when the BoE released their minutes earlier this morning. In individual stocks news, according to sources, EU antitrust authority is set to clear Glencore and Xstrata merger, with the EU decision expected tomorrow.
EUR/USD weakened overnight on news that no agreement on Greek aid disbursement had been reached and another Eurogroup meeting will have to take place next Monday. According to EU's Juncker, a deal may be close and this has seen support in the pair added to the expectation that volumes will be light ahead of the US Thanksgiving Holiday.
USD/JPY has traded higher as the JPY has been under pressure as the likelihood of further monetary easing from the BoJ remains high. The move higher comes as the JPY has continued to weaken throughout the last two weeks on the expectation that the current ruling party will lose power at the election in December.
GBP/USD moved higher after the BoE's minutes announced the monetary policy committee voted 8-1 to keep their asset purchase facility unchanged. The less dovish than expected vote split, Miles the only dissenter, caused GBP/USD to move 20 pips to the upside to 1.5927 inan immediate reaction.
WTI crude futures are trading higher than yesterday's close due to supply worries following further unrest in Israel and Gaza. A push for a truce in the Israel/Gaza conflict continues with US secretary of state Clinton visiting Israeli PM Netanyahu in Cairo. Reports of an explosion on a bus in Tel Aviv saw crude futures move to the upside in immediate reaction after losses were seen overnight from negative news out of the Eurogroup meeting on Greece and from Fed's Bernanke on the fiscal cliff. As a reminder the DoE weekly inventories (1530GMT/0930CST) data and EIA Natural Gas Storage Change (1700GMT/1100CST) will be released later on today.