Daily US Opening News And Market Re-Cap: August 19

Tyler Durden's picture

From RanSquawk:

  • European equities remained under pressure during the session weighed upon by growing signs of a faltering global economic growth together with August options expiry in the European indices
  • CHF and JPY remained the major beneficiaries of risk-aversion, whereas commodity-linked currencies generally traded lower
  • After breaching the key USD 1,800 per ounce level yesterday, spot Gold continued its ascent towards the USD 1,900 technical level amid risk-aversion
  • EU's Rehn said the EU may draft legislation for joint Eurobonds, however gave no timetable for the draft legislation
  • EU Commission said collateral agreement between Finland and Greece is being examined by the Eurozone, adding that Finland is the only country to request Greece collateral. Meanwhile, Austrian finance minister said the Finnish deal to get a 20% cash collateral on Greek loans is unacceptable

Market Re-Cap
 
European equities remained under pressure during the session weighed upon by growing signs of a faltering global economic growth together with August options expiry in the European indices. The Eurozone 10-year government bond yield spreads widened across the board in early trade, however as the session progressed the Italian/German and Spanish/German spreads narrowed partly on the back of market talk of the ECB buying in the Italian and Spanish government bonds. Elsewhere, the USD-Index lacked any firm direction, however it did trade in negative territory for a vast majority of the session, which in turn provided support to EUR/USD and GBP/USD. EUR/USD received further strength following comments from EU’s Rehn that the EU may draft legislation for joint Eurobonds. In other forex news, CHF and JPY remained the major beneficiaries of risk-aversion, whereas commodity-linked currencies generally traded lower. In other news, WTI and Brent crude futures remained in negative territory over demand concerns emerging from fragile economic growth outlook for top energy consumers. Also, after breaching the key USD 1,800 per ounce level yesterday, spot Gold continued its ascent towards the USD 1,900 technical level amid risk-aversion.
 
Moving into the North American open, the economic calendar remains thin, however markets will watch carefully any comments on monetary policy from Fed’s Dudley and Pianalto later in the session.
 
Asia Headlines:
 
According to Chinese vice president, Xi, Chinese economy will not have a hard landing, and reiterated that Beijing will pursue proactive fiscal policy, and prudent monetary policy. Meanwhile, according to a Chinese researcher, Liu Yuhui, China could see some structural adjustment in the monetary tightening measures in the current half of the year, including selective easing. In other news, according to a PBOC adviser, Li Daokui, China should be prepared for more hot-money flows and greater inflationary pressures which may result from a third round of US quantitative easing. (RTRS/Shanghai Securities News/National Business Daily)
 
US Headlines
 
Fed’s Fisher said he still sees positive momentum in the US economy but recovery is a “slow slog”. Fisher expects positive growth in the US economy in the third quarter, adding that Fed policymakers pay no attention to political attacks on the central bank. (RTRS)
 
In other news, Citigroup cut its 2011 US GDP growth forecast to 1.6% from 1.7%. Also, JPMorgan cut its Q4 US GDP estimate to 1.0% from 2.5%, and cut its Q1 2012 GDP estimate to 0.5% from 1.5%. (Sources)
 
Elsewhere, Fed’s balance sheet shrank to USD 2.842trl in the week ended August 17th from USD 2.856trl in the week ended August 10th. Meanwhile, Fed’s overall holdings of US marketable securities kept for overseas central banks rose by USD 8.825bln in the week ended August 17th, to stand at USD 3.485trl. (RTRS)
 
EU and UK Headlines:
 
ECB’s Stark said Eurobonds are a false solution, adding that it would provide wrong incentives. He also said Eurobonds would treat the symptoms but not address the cause of crisis. Stark said neither doubling the EFSF funds, nor the ECB pumping more money into the system would work. He further said that size and speed of ECB’s bond purchases will depend on how long market tensions continue. Stark finally said that Eurobonds “are the transfer union”. (RTRS)
 
In other news, S&P's Hinrichs sees no German rating change in the next two years. (WAZ) Elsewhere, Spain will announce further austerity measures today aimed at fending off debt market attacks while avoiding drastic cuts which may damage the ruling Socialists’ chances in November’s general election. (RTRS)
 
•    UK Public Finances (PSNCR) (Jul) M/M -5.6bln vs. Exp. -8.0bln (Prev. 21.0bln, Rev. to 20.4bln)
•    UK Public Sector Net Borrowing (Jul) M/M -2.0bln vs. Exp. 0.2bln (Prev. 12.0bln, Rev. to 12.4bln) (RTRS)
 
EQUITIES
 
European equities remained under pressure during the session weighed upon by growing signs of a faltering global economic growth together with August options expiry in the European indices. In equity specific news, Barclays shares came under pressure following market talk that co. might be poised to launch a rights issue. Moving into the North American open, equities continue to trade in negative territory, with basic materials and financials as the worst performing sectors.
 
FX
 
The USD-Index lacked any firm direction, however it did trade in negative territory for a vast majority of the session, which in turn provided support to EUR/USD and GBP/USD. EUR/USD received further strength following comments from EU’s Rehn that the EU may draft legislation for joint Eurobonds. In other forex news, CHF and JPY remained the major beneficiaries of risk-aversion, whereas commodity-linked currencies generally traded lower.
 
Elsewhere, according to the New York Fed, the SNB tapped the Fed for extra USD as it drew down on its special swap lines for foreign central banks. The USD 200mln transaction was the first time the SNB has used the swap lines since they were reopened in May 2010. (RTRS)
 
COMMODITIES
 
WTI and Brent crude futures traded lower with risk-off trade following lacklustre US economic data adding to concerns surrounding global growth, allied with continued Eurozone debt worries.
 
Oil & Gas News:

•    Libyan rebels seized an oil refinery in the city of Zawiyah and took control of Sabratha further west on the main highway from Tripoli to Tunisia as NATO aircraft struck targets in the capital.
•    Iran resumed natural gas exports to Turkey after a week-long halt following an explosion on the pipeline, the Iranian Oil Ministry's website, reported today.
•    The EU could decide to toughen sanctions against Syrian President Al-Assad’s government today imposing a ban on oil imports from the country and banning business with major companies, EU diplomats said.
•    MF Global said the Brent/WTI oil spread is seen narrowing in the weeks ahead as Libyan rebels make progress in advances on Tripoli, indicating the end could be near for Gaddafi’s regime.
 
Geopolitical News:

•    Syrian UN envoy confirmed that Syria has stopped all military and police operations against protesters.
•    Britain, France, Germany, and Portugal said that they will seek a UN Security Council resolution ordering sanctions against Syria over its deadly crackdown on protests. In related news, the US is waging a diplomatic and humanitarian war against Syria along with some other U.N. Security Council members, Syria’s U.N. envoy said.