Daily US Opening News And Market Re-Cap: August 22
- Market focus remains on the release of the FOMC minutes following a very quiet European morning session
- EU's Juncker visits Athens to discuss Greece's budget reform programme with Greek PM Samaras
- The German 0% Sep14 Schatz auction is poorly received, with a higher yield and softer bid/cover
European bourses are down at the North American crossover, all ten sectors in the red, on thin volumes and a distinct lack of data and news flow from the EU and the UK. The risk-off tone in part attributed to the much wider than expected Japanese trade deficit for July, whose exports also fell the most in six months, raising investor concern once again that Asian economy as a whole is stalling.
Elsewhere, investor caution over the Greek debt crisis is once again mounting, as EU’s Juncker visits Athens today to meet with the Greek PM Samaras. Overnight it was reported that Greece would present EUR 13.5bln in budget cuts today, higher than the previous EUR 11.5bln, and whilst the country is not asking for more money, Samaras might request more time to implement them. Lawmakers in Netherlands remain critical of providing more aid for the country and continue to push for more reforms, such as spending cuts and privatization, with the Dutch Finance Minister de Jaeger commenting earlier that it is not a good idea for Greece to get more time.
The German Sep’14 Schatz auction was disappointing, with a softer bid/cover and higher yields when comparing the line to the last Jun’14 auction in June. Having traded at 0.0098% at the bidding deadline, yield on Sep'14 bond rose to 0.0147% in the grey market.
The highlight of the rest of the day is the release of the FOMC minutes at 1900BST/1300CDT, where investors will find out how eager, if at all, Fed officials are for QE3 in the near future. Prior to that sees the release of US existing home sales for July at 1500BST/0900CDT, followed by the weekly US DoE inventories at 1530BST/0930CDT.
S&P said China could afford another big stimulus package, and this remains an option if conditions sharply deteriorate as the country has spare capacity. S&P currently sees Chinese growth at 8% in 2012, and 8.2% in 2013.
The People's Bank of China (PBOC) Governor said all tools must be made available when managing monetary policy, though speculation overnight that the government might expand a property tax instead of stimulating the economy further, weighed on the Shanghai Comp.
Japanese Merchandise Trade Balance Total (JPY) (Jul) M/M -517.4bln vs. Exp. -270.0bln (Prev. 61.7bln, Rev. 60.3bln)
Japanese Merchandise Trade Exports (Jul) Y/Y -8.1% vs. Exp. -2.9% (Prev. -2.3%)
Japanese Merchandise Trade Imports (Jul) Y/Y 2.1% vs. Exp. 3.0% (Prev. -2.2%). (Newswires)
US MBA Mortgage Applications (Aug 17) W/W -7.4% vs. Prev. -4.5%
EU & UK Headlines
BoE's Posen said a Euro-area breakup would overwhelm the UK economy, and also urged the ECB to intervene on Spanish and Italian borrowing costs. (Newswires)
UK Companies are delaying investment decisions amid widespread fears that the UK will not emerge from recession later this year, according to the Institute of Directors (IoD). Survey respondents said they thought there was a low or zero probability of the country shaking off the downturn in 2012 compared with 7% who thought it was very likely. However, the report also noted comments from the IoD chief economist, who suggested the concerns appear to be as much over Eurozone worries than domestic issues. (Newswires)
BHP Billiton beat analyst expectations for its full year net this morning, but reported its FY underlying EBIT was down 15% at USD 27.2bln. The co. also announced it is investigating a a less capital-intensive design for its Olympic dam expansion as it is a resource of enormous potential, but it will not be ready to approve the expansion before the December 15th deadline, and now it does not expect additional major project approvals in FY 2013. Shares dropped following the cash open, and is currently down 1.67% at GBP 19.47.
Nokia shares are outperforming the market today, one of the few Eurostoxx in the green, currently up 2.37% at EUR 2.33, following reports that Verizon plans to sell a new Nokia phone with Microsoft's Window's software this year, which would mark the first time Nokia has released a Windows device since May 2011. Microsoft and Nokia are set to hold a press conference on September 5th.
Even though there is plenty of evidence to suggest that short-covering will continue to lift EUR/USD, today’s market talk of large offers from the SNB prevented the pair from climbing above the key level. Also, offers from Dutch, as well as semi-official names slowed the advance. Looking elsewhere, GBP/USD is seen flat as we enter the North American cross over, talk of stops at 1.5830, followed by large offers at 1.5850. Less than impressive Japanese trade balance data weighed on AUD and NZD overnight.
A French government spokesman said there have been no talks concerning the use of strategic oil reserves, despite comments from the White House last Friday that this is still an option.
WTI crude futures have sold off in tandem with other risk assets and are trading in negative territory ahead of the NYMEX pit open. Last night saw the release of the API inventories, which reported a large draw down of more than 6mln barrels for the week ended August 17th. Later sees the release of the weekly DoE inventories, where a draw down is also expected, though only -250K barrels.