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Daily US Opening News And Market Re-Cap: August 13

Submitted by Tyler Durden on 08/13/2012 08:24 -0400

Japanese Q2 preliminary GDP is weaker than expected.
Greek advanced GDP showed the country's economy contracted at a slower pace in Q2

Market Re-Cap

European equities are trading flat to minor positive territory at the North American crossover having pared losses made following the weaker than expected Japanese Q2 preliminary GDP and reports from Chinese press that China's RRR cut might have been postponed as the People's Bank of China's reverse repo activity still satisfies liquidity needs. Elsewhere, Bank of America cut China's growth forecast from 7.7% to 8.0% for the year, commenting that the country's ability for monetary easing was constrained by house prices. Volumes have been particularly thin, however, and as there is no economic data scheduled for release from the US, it is likely to stay that way.

Greek Q2 advanced GDP surprised markets, contracting at a slower pace year-over-year than Q1 and than was expected, boosting risk appetite across the board. As such, Spanish and Italian spreads are seen tighter by 12.6bps and 9.1bps respectively, with the Spanish 10-year yield holding below the key 7% and the Italian's under 6% despite the Italian government debt coming in at a record high of EUR 1972.9bln.

Asian Headlines

Japanese GDP (Q2 P) Q/Q 0.3% vs. Exp. 0.6% (Prev. 1.2%) (Newswires)

Japanese GDP Annualized (Q2 P) Q/Q 1.4% vs. Exp. 2.3% (Prev. 4.7%)

Following last weeks speculation that China might cut its reserve ratio requirement due to a bout of weak data, Chinese press reported that such a cut may have been postponed as the People's Bank of China's reverse repo activity satisfies liquidity needs, according to reports in Chinese press. (Financial News)

Bank of America cut China's GDP forecast to 7.7% from 8.0%, adding that further monetary easing will difficult as the country's ability for monetary easing was constrained by house prices.

US Headlines

There is no US economic data scheduled for release today nor government or central bank speakers.

EU & UK Headlines

Greek Q2 A GDP came in at -6.2%, showing less of a contraction than the Q1 reading that was -6.5% and the expected -7.0%. Elsewhere, a German finance ministry spokesman stated that Germany has no knowledge that the Greek Troika report might be delayed. This follows reports from the German press over the weekend that Germany will veto any further EFSF aid to the country if it does not stick to its reform promises.

Italy's general government debt came in at a record high of EUR 1972.9bln. Italian economy minster Grilli attempted to reassure markets over the weekend that the country would not need to tap Euro-zone bailout funds as the reactivation of the ECB's SMP could substantially ease the pressure on the country's bond yields.

Equities

European equities are flat to minor positive territory, with underperformance observed in the FTSE 100 following a warning from Petrofac that its growth profit in the second half of the year will decline as projects are delayed. As such, the company's shares are currently trading down more than 5.0%.

European financials are outperforming, with particular strength seen in Italian banks following reports that many are seeking to have their stakes in the country's central bank revalued at their current values. UniCredit and Intesa Sanpaolo have been the biggest benefactors of this and are seen up 1.8% and 1.4% respectively at the half way point. The one outlier is Julius Baer, who confirmed its CHF 860mln acquisition of Merril Lynch's non-US based International Wealth Management business (IWM) pre-market, though does not see the acquisition adding to EPS for several years, and also announced the cancellation of its current share buy-back programme. Shares dropped 5.40% following the cast open to CHF 33.50.

EUR/USD has been trending higher throughout the morning to make session highs of 1.2360. The better than expected Greek GDP data boosted the pair, though the distinct lack of economic data or news on the rest of the day's calendar could see it drift.
GBP strength has also been observed throughout the session so far, with GBP/USD making highs of 1.5711, ahead of tomorrow's UK CPI data for July, currently expected at -0.1% month-over-month.

Commodities

WTI crude futures have been trending higher ahead of the NYMEX pit open, risk appetite boosted ahead of tomorrow's US retail sales report, which is currently expected to show growth of 0.3% for July which would be the first increase in four months. The increase in political tensions in the Middle East have also lifted the commodity following a series of leaks and anonymous briefings to the Israeli media over the last couple of days that suggested the Israeli PM and defence minister are advocating an attack on Iran before the US presidential election in November.