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Daily US Opening News And Market Re-Cap: August 24

Tyler Durden's picture




 

From RanSqauwk:

  • Moody's downgraded Japan's long-term sovereign rating by one notch to Aa3, with a stable outlook
  • Financials came under pressure during the early European session after figures from the ECB revealed a sharp jump in lending to banks, re-igniting funding concerns
  • The Greek/German spread widened partly on news that Troika has warned Greece on public payroll and public mergers
  • The German IFO report was not as bad as some analysts expected, which provided appetite for risk

Market Re-Cap
 
Overnight Moody's downgraded Japan's long-term sovereign rating by one notch to Aa3, with a stable outlook, which weighed upon the Nikkei (-1.07%). However, European equities traded in positive territory for a vast majority of the session, with strength seen in the basic materials sector on the back of a weakening USD-Index, together with the German IFO data that was not as bad as many analysts expected. Financials did come under pressure after figures from the ECB revealed a sharp jump in lending to banks, re-igniting funding concerns. However, later in the European session some support came after no allotment was made by the ECB in its 7-day USD operation, which also observed a sharp uptick in the Eurodollar futures. Elsewhere, weakness in the USD-Index helped EUR/USD, and GBP/USD, whereas EUR/USD received further strength following market talk of Chinese names bidding in the pair. Strength was observed in CHF as well, which some analysts attributed to a lack of further action from the SNB today. In other news, the Eurozone 10-year government bond yield spreads narrowed across the board, with the exception of the Greek/German spread, which widened partly on news that Troika has warned Greece on public payroll and public mergers. Uncertainty surrounding the issue of collateral in a Greek bailout helped the widening further resulting in the Greek/German spread to widen over 45 BPS on the day.
 
Moving into the North American open, markets look ahead to durable goods, house price, and DOE inventories reports from the US later, together with details on the deficit-cutting measures from France. In fixed income, USD 35bln 5-year Note auction is also scheduled for later.
 
Asian Headlines:
 
Moody’s cut the rating on Japan’s government debt by a notch to Aa3, blaming larger budget deficits and the build-up of debt since the 2009 global recession. Still the rating agency said the outlook was now stable given the undiminished home bias of Japanese investors and their preference for government bonds. Moody’s further said that Japan needs to achieve 3% nominal GDP growth to get deficit under control, and does not expect to change sovereign ratings for 12 to 18 months. Meanwhile, Japanese PM Kan said that the downgrade was regrettable, whereas country’s chief cabinet secretary, Edano, said Japan’s fiscal situation is in severe condition. (RTRS/Jiji)
 
In other news, Japan unveiled a USD 100bln credit line to facilitate companies’ acquisition of overseas firms and their procurement of energy and resources from abroad. The credit facility will remain in place for one year and will make use of USD funds in the government’s foreign exchange accounts. (RTRS)
 
US Headlines:
 
Those expecting that Bernanke will unveil any big plans are likely getting ahead of themselves. He and other Fed leaders view the current signs of economic weakness differently from how they viewed the economy this time a year ago and want to see more evidence before making their next move. (Washington Post)
 
In other news, according to Moody’s vice president, Hess, a so called QE3 new round of quantitative easing is unlikely to be enough to revive the economy, adding that US fiscal cuts are needed to avoid a downgrade. (Sources)
 
US MBA Mortgage Applications (Aug 19) W/W -2.4% vs. Prev. 4.1% (RTRS)
 
EU and UK Headlines:
 
IFO's Abberger said he would not yet talk of a recession but the economy is slowing down very significant. He also said that the situation with interest rates is very fragile, and the ECB must take a break in hiking rates. (RTRS)
 
•    German IFO - Business Climate (Aug) M/M 108.7 vs. Exp. 111.0 (Prev. 112.9)
•    German IFO - Current Assessment (Aug) M/M 118.1 vs. Exp. 119.8 (Prev. 121.4)
•    German IFO - Expectations (Aug) M/M 100.1 vs. Exp. 102.8 (Prev. 105.0) (RTRS)
 
•    German Bund auction for EUR 4.858bln, 2.25% 04-Sep-21, bid/cover 1.4 (yield 2.15%, retention 19%) (RTRS)
 
EQUITIES
 
Overnight Moody's downgraded Japan's long-term sovereign rating by one notch to Aa3, with a stable outlook, which weighed upon the Nikkei (-1.07%). However, European equities traded in positive territory for a vast majority of the session, with strength seen in the basic materials sector on the back of a weakening USD-Index, together with the German IFO data that was not as bad as many analysts expected. Financials did come under pressure after figures from the ECB revealed a sharp jump in lending to banks, re-igniting funding concerns. However, later in the European session some support came after no allotment was made by the ECB in its 7-day USD operation. Moving into the North American open, equities continue to trade higher, with technology and basic materials being the best performing sectors.

FX
 
JPY has strengthened in the European session as the USD 100bln credit facility announced by the Japanese finance minister did not have the desired effect of weakening the currency; this also came alongside the downgrading of Japan's sovereign rating to 'Aa3' by Moody's. Elsewhere, weakness in the USD-Index helped EUR/USD, and GBP/USD, with EUR/USD receiving further strength following market talk of Chinese names bidding in the pair.  Strength was observed in CHF as well, which some analysts attributed to a lack of further action from the SNB today, after they had been active on the last three Wednesday's.

COMMODITIES
 
WTI and Brent crude futures lacked any firm direction in early European trade following a fluctuating USD-Index allied with apprehension over crude stockpiles heading into today’s DOE release.
 
Oil & Gas News:

•    A Libyan rebel government would honour all the oil contracts granted during the Gaddafi era, including those of Chinese companies, Ahmed Jehani, a senior representative for reconstruction said.
•    Libyan rebels will resume oil production soon however it may take a year to reach 1.5 MBPD, according to an envoy. In related news, Libyan rebel ambassador to the UAE said the refinery in Libya's Zawiya is not severely damaged.
•    Iran expects to find four new gas fields before the end of March 2012 following exploration now being carried out, citing National Iranian Oil Co’s director for exploration.
•    EU governments are likely to adopt an embargo against imports of Syrian oil by end of next week, as they move to ratchet up pressure on President Al-Assad, an EU diplomat said. 
 
Geopolitical News:

•    North Korean leader Kim Jong-il said his country was willing to discuss suspending nuclear weapons testing and production if six-nation talks on its nuclear programme are revived, Russian President Medvedev’s spokesman said.
•    Russian President Medvedev has called on Gaddafi and Libya’s rebels to stop fighting and sit down for talks. Medvedev added Gaddafi still has some influence, and military potential despite successes by Rebels.

Daily Us Opening News

 

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Wed, 08/24/2011 - 08:18 | 1594458 cossack55
cossack55's picture

Does Ransquak ever read ZH?

Wed, 08/24/2011 - 08:24 | 1594470 buzzsaw99
buzzsaw99's picture

that wapo piece is definitely a plant story designed to negatively impact markets for nefarious purposes.

Wed, 08/24/2011 - 08:25 | 1594472 snowball777
snowball777's picture

Lil Kim Jong Il, the world's least favorite crackhead panhandler, is back at it again...from "missilie tests" to "please come back" in less than six months.

What's the matter, punk? Runnin' low on cognac?!

 

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