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Daily US Opening News And Market Re-Cap: April 18

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From RanSquawk

 

  • BoE voted 8-1 to keep the APF unchanged at GBP 325bln in their April rate-setting meeting; analysts were expecting a 7-2 vote split.
  • Spanish Banks’ bad loan ratio was 8.16% in February, up from 7.91% in January.
  • European equity markets trading lower, with underperformance observed in the peripheral indices. 

Market Re-Cap
 
As Europe approaches the halfway point of the week, equities are suffering losses on the day as North America comes to market, with underperformance observed in the CAC and peripheral bourses.  Markets have been weighed down upon from the open with commentary from the Portuguese PM garnering attention in the press, saying that there are ‘no guarantees’ that Portugal will return to the financial markets as planned. A Bank of Spain release has shown the bad loan ratio for the country’s banks has increased to 8.16%, further weighing on sentiment. There was also market talk of stop-loss buying of German Bunds at the cash open, the security had sold off since then but safe haven flows have kept the Bund in positive territory.
 
The BoE surprised markets in the publication of the minutes from their April rate-setting meeting, with Dove Posen surprisingly opting for leaving the APF unchanged as opposed to his normal tact of voting for an increase. As such, the 8-1 APF vote split led a relatively hawkish set of minutes with members concerned on the inflationary outlook for the UK. Board member Tucker earlier commented that UK inflation is ‘uncomfortably above target’, and is forecasted to stay above 3% going into the second half of the year. Following the release, GBP saw strength across the board, with GBP/USD rising around 65pips and the UK gilt moving around 70ticks lower in the minutes following the release.
 
Looking ahead in the session, participants await any commentary from the IMF at their Spring meeting as well as the inventory figures from the DOE.
 
Global Headlines
 
Australian Treasurer Swan has said he backs increased resources for the IMF, but needs to see European commitment. (Sources)
 
Asian Headlines
 
BoJ’s Nishimura has said the BoJ will pursue powerful easing while aiming to meet their 1% price inflation goal. Nishimura added that there are uncertainties over the Japanese economy but positive signs are seen. (Sources)
 
US Headlines
           
US MBA Mortgage Applications (Apr 13) W/W 6.9% vs. Prev. -2.4% (Sources)
 
EU and UK Headlines
 
The release of the BoE’s minutes from its April rate-setting meeting surprised markets with Dove Posen unexpectedly voting for the APF to be held at GBP 325bln, a change for the member who has been voting for an increase to GBP 350bln for the past few months. Following the less-than-dovish release, the UK gilt moved lower by around 70ticks initially. In recent trade, it has recapped some of its losses but still remains in firm negative territory.
BoE minutes voted 8-1 to keep QE total at GBP 325bln in April; Miles voted for an increase to GBP 350bln
BoE minutes voted 9-0 to keep interest rates at 0.5%     
ILO Unemployment Rate (Feb) M/M 8.3% vs. Exp. 8.4% (Prev. 8.4%)
UK Jobless Claims Change (Mar) M/M 3.6k vs. Exp. 6.0k (Prev. 7.2k, Rev. 4.5k)  
UK Claimant Count Rate (Mar) M/M 4.9% vs. Exp. 5.0% (Prev. 5.0%, Rev. 4.9%)
 
The Portuguese PM Coelho has said there are 'no guarantees' that Portugal will return to the financial markets as planned, but vows to prove doubters wrong. (Guardian)
 
ECB’s Weidmann has said the limits of ECB bond-buying are clear, but the operation has not come to an end as yet. Weidmann added that he sees no reason for discussion of a third LTRO and talks about a Eurozone breakup are ‘absurd’. (Sources)
                                                    
German Bundesbank sells EUR 4.206bln of the 0.25% Mar'14 Schatz, B/C 1.8 (Prev. 1.8), yield 0.14% (Prev. 0.310%), Retention 15.8% (Prev. 17.84%). The German finance agency commented on the auction results, saying they were “very good”. (Sources)
 
The Euroarea’s debt crisis is reigniting and may cause more turmoil this year than in 2011, according to Lars Feld, a member of Chancellor Merkel’s council of economic advisers. (Bild) Feld goes on to say that the ECB’s efforts to stem the crisis are only having a short-term effect and the French Presidential election is causing uncertainty.
 
London will step up its pursuit of the international CNY market today as the UK Chancellor Osborne launches a city initiative to drive the currency’s use in the UK capital. (FT-More) The initiative springs from awareness that Hong Kong and Shanghai will also benefit substantially from the CNY’s probable rise as an international currency. The initiative puts the total value of London’s CNY deposits in 2011 at more than CNY 109bln.
 
EQUITIES
 
European equity markets are being weighed upon by some risk sentiment carried over from yesterday’s comments from the Portuguese PM, saying that there are no guarantees that Portugal will return to financial markets as planned. Spanish banks have also had further bad news, with Bank of Spain data showing that Spanish Banks’ bad loan ratio in February was 8.16%, higher than the 7.91% reading in January. French banks are also underperforming, being weighed upon by Eurozone concerns as well as political uncertainty worrying investors, due to the upcoming French elections this weekend.
 
In individual stocks news, BHP Billiton are performing strongly following the release output figures, with alumina output in Q3 10% higher and forecasting their aluminium operations to return to full capacity over the next year. As such, BHP Billiton shares now trade higher by 1.48%.
 
Among the European banks in the top losers list, Spanish stock Iberdrola is performing particularly poorly as major shareholder ACS divested their 3.69% stake in the company. This has caused the stock to underperform the already weak Spanish IBEX, shares currently trade lower by 7.3%.
 
Top performing sectors in the BE500: Health Care (-0.07%), Consumer Goods (-0.29%), Technology (-0.57%)
Worst performing sectors in the BE500: Utilities (-2.06%), Financials (-1.77%), Industrials (-1.61%)

FX
 
GBP strength is observed across the board in the session as the release of the BoE minutes show an 8-1 vote split to hold the APF at GBP 325bln, against analyst’s expectations of a 7-2 split. The relatively hawkish minutes provided support for GBP and EUR/GBP reached multi-month lows as GBP/USD climbed around 65pips following the release.
 
GBP has decoupled from the EUR, with Eurozone woes continuing to weigh on the currency, pushing EUR/USD into negative territory throughout the session. The pair has been assisted moving through 1.3100 to the downside amid unconfirmed market talk of offers in the pair at EUR/USD 1.3120.
 
The unchanged rate decision from the Riksbank provided some movement in EUR/SEK, with relatively hawkish commentary following the decision spiking the high-beta cross lower by around 400pips.

COMMODITIES
 
WTI and Brent crude futures are trading lower, with Eurozone growth concerns weighing slightly more heavily on the Brent complex. Energy market participants look forward to DOE inventory figures due at 1530BST/0930CDT.
 
Oil & Gas News:

•   Iraq’s deputy Prime Minister has said his country targets oil production of 5-6MBPD and an export capacity of 6-8MBPD by 2015.
•   The Venezuelan Energy Minister has said his country is concerned with global oil market stability and that OPEC should aim for a minimum price of USD 100/BBL. The minister disagrees with the decision of some members to increase production.
•   The White House has renewed its threat to veto legislation to fund US transportation projects responsible for millions of jobs if it includes the politically charged Keystone-XL pipeline. The house is expected to vote on the legislation today.
•   Oil revenues for Saudi Arabia and the five other Gulf Cooperation Council states will reach a new record high of USD 572bln this year due to higher oil prices and increased output due to Iranian sanctions, according to the IIF.
•   Oman’s 85,000BPD Mina al Fahal refinery is restarting following a month-long shutdown for scheduled maintenance work, according to three sources familiar with the operations.
 
Commodities News:

•  Citigroup have raised their 2012 forecasts for most precious metals and base metals. The bank has raised its 2012 gold, platinum and palladium price forecasts but cut their 2013 outlook for gold.
 
Geopolitical News:

•   US Senate majority leader Reid has said that Congress should pass a proposed package of new oil- and banking-related sanctions in order to keep up the pressure on Iran to abandon its nuclear program.
•   Iran’s Defense Minister Vahidi has said Iran has made satisfactory achievements in the production and development of an indigenous air defense missile system as a substitute for the Russian-made S-300.
•   Sudan and South Sudan are “locked in a logic of war” but an agreement over oil revenue sharing could still be reached through mediation, according to a UN Security Council report.

 


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