Daily US Opening News And Market Re-Cap: August 10
- China's trade balance surplus narrows to USD 25bln, well below analysts estimates of a USD 35bln surplus as export growth
sees a sharp slowdown to 1%.
- European equities trade lower heading into the end of the week after making solid 5-day gains.
- Price action looks likely to remain muted with a light US data calendar.
European markets opened lower as risk-off was observed across the asset classes as participants reacted to the disappointing data from China overnight. Continental equity futures have moved horizontally throughout the session so far with little newsflow or influential data to sway price action. Heading into the European open, little has changed as all European indices are in the red, being led lower by consumer goods and utilities.
China posted a sharp narrowing in their trade balance surplus to USD 25bln from USD 32bln in June, as the growth in exports slows across the month. As such, it is not a surprise to hear the usual market chatter of the Chinese central bank taking an imminent move to cut their Reserve Requirement Ratio today. However, as nothing has materialised, the riskier assets have not seen any significant lift from the talk.
Peripheral government bond yield spreads against the German benchmark are wider on the day as real money accounts buying German paper pushes Sep Bund futures well above yesterday’s high print, and the 10yr yield moves below 1.4%.
Heading into the end of the week, and with US import price index the only risk event on the horizon, volumes are inkeeping with this week’s thin volume trend as just over 200K Bund contracts change hands. As such, price action has been choppy among illiquid markets, a pattern set to continue following the Wall Street open today.
Chinese Trade Balance (USD) (Jul) M/M 25.1bln vs. Exp. 35.05bln (Prev. 31.72bln, Rev. 31.72bln)
Chinese Exports (Jul) Y/Y 1.0% vs. Exp. 8.0% (Prev. 11.3%)
Chinese Imports (Jul) Y/Y 4.7% vs. Exp. 7.0% (Prev. 6.3%). (Newswires)
The poor trade data prompted some market chatter that the People's Bank of China could move to cut their banks' Reserve Requirement Ratio, which is the usual routine after China posts disappointing figures. Historically, if the bank were to take action, it occurs at around 1100BST/0500CDT, and with this time period passing, a move looks increasingly unlikely today.
According to a survey of economists conducted by the WSJ, dithering in Washington over the 'fiscal cliff' of automatic tax increases and spending cuts set for year-end is already hindering US economic growth. Most of those surveyed do not believe Congress will reach an agreement before this November's elections. (WSJ)
EU & UK Headlines
Alongside the release of UK PPI data, which came in roughly in line with expectations, the ONS released analysis showing that UK
construction output fell 3.9% Q/Q in Q2, pointing to an upward revision of 0.1ppts to Q2 GDP growth data. (Newswires)
Bank of America have added to the Eurozone woes by cutting their Eurozone GDP growth forecasts to -0.4% for both Q3 and Q4 from their
previous estimates of -0.2% and -0.1%. (Newswires) Eurozone Q2 GDP estimates are due on Tuesday next week, with current estimates
standing at -0.2% for the quarterly reading. Elsewhere, Bank of America now forecast UK 2013 GDP growth lower at 1.0% from their
previous estimate of 1.5%, and anticipate a further GBP 50bln in QE this November.
European equities trade lower heading into the North American open, as investors look to take profits at the end of the week after registering solid gains across the past 5 days. Consumer goods are leading the way lower, closely followed by the technology sector. US stock futures are moving in line with their European counterparts, indicating a lower open on Wall Street today.
In individual equities news, steel giant ThyssenKrupp are performing very strongly after the release of their earnings report premarket today.
The company reported a Q3 net of EUR 238mln, up from prev. EUR 205mln and Q3 revenues of EUR 10.7bln vs. Exp. 10.6bln.
ThyssenKrupp also confirmed their forecast and remained upbeat on future unit disposals. Company shares are one of the strongest gainers in Europe today, trading higher by around 6% at the midpoint of the session.
After suffering heavy losses after their earnings yesterday, Commerzbank are seen on the decline once more, as their German banking peer Deutsche Bank cut their recommendation to hold from buy. Commerzbank shares trade lower by around 2.5% on the day and over 6.5% over the past two sessions.
Heading into the US session, EUR/USD has failed to recoup losses seen at the European open after seeing sustained weakness following the delayed reaction to disappointing Chinese figures. The pair printed lows at 1.2261 and remains at the bottom end of the range today.
Looking ahead in the session, datapoints remain light, so a touted option expiry in close proximity at 1.2275 for today's 10am (1500BST) NY cut could prove influential today.
GBP/USD mirrors the moves in its European counterpart even as ONS analysis shows that UK construction output fell 3.9% Q/Q in Q2, pointing to an upward revision of 0.1ppts to Q2 GDP growth data. The pair has reclaimed the 1.56 handle and remains just above this mark heading into the US open. Market talk of names selling in the pair at around its currently levels could keep a cap on price action as well as a touted option expiry at the 1.56 handle for today's 10am (1500BST) NY cut.
WTI and Brent crude futures are seen suffering from the poor Chinese trade data, starting on the back foot in Europe and continuing their decline throughout the session. Market chatter of Chinese monetary stimulus failed to provide any support and WTI futures make almost USD 1.50 losses ahead of the NYMEX pit open. Spot gold and silver prices are seen moving in line with the broader commodities markets, lower by around 0.5% and 1.0% respectively.