Daily US Opening News And Market Re-Cap: August 30

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Submitted by RanSquawk

  • German Chancellor Angela Merkel faces growing resistance within her ruling coalition over expanding the powers of the EFSF, according to WSJ. Meanwhile, a senior German government lawmaker insisted that the parliament should have a greater say in future Eurozone bailouts
  • According to S&P, slow growth increases risk of a double-dip recession in Europe
  • The appetite for risk was dented further after a 10-year BTP auction from Italy registered above 5% average yield
  • The International Accounting Standards Board criticised the inconsistent way in which banks and insurers have been writing down the value of their Greek sovereign debt
  • Strength was observed in USD and JPY amid risk-averse trade

Market Re-Cap
 
Risk-aversion remained the predominant theme during the European session today as chances of a Greek collateral agreement looked remote and as potential hurdles in implementing changes to the EFSF continued to weigh upon sentiment. The position of German Chancellor Merkel was also brought under question after a senior German government lawmaker insisted that the parliament should have a greater say in future Eurozone bailouts. The appetite for risk was dented further after a 10-year BTP auction from Italy registered above 5% average yield, which also led to a widening of the Italian/German 10-year government bond yield spread following the auction. However, as the session progressed, the Italian/German spread narrowed as traders noted that the ECB is seen buying significant amount of the Italian 10-year maturity. Elsewhere, European equities traded lower during the session amid risk-aversion together with comments from the IASB, which criticised the inconsistent way in which banks and insurers have been writing down the value of their Greek sovereign debt. In forex market, USD and JPY remained the major beneficiaries of risk-aversion, which in turn weighed upon EUR/USD, GBP/USD and commodity-linked currencies. However, CHF weakened, as the European session progressed, amid fear that the Swiss government may announce further monetary easing measures after their regular meeting tomorrow to rein in CHF's strength.
 
Moving into the North American open, markets look ahead to the consumer confidence report from the US together with the FOMC minutes. It is also worth noting that the API inventories report is due for release after the US cash close.
 
Asian Headlines:
 
Japan’s next Prime Minister, Noda, said that he is aware of the problems of the strong JPY and deflation, but at the same time, we need to maintain fiscal discipline. (RTRS)
 
Elsewhere, according to a Chinese researcher, Ba Shusong, expectations of an upcoming “turning point”, or easing, in China’s monetary policy were misplaced. In other news, according to HSBC, China won’t increase RRR any more after boosting the reserves on banks’ margin deposits. However, according to the Oriental Morning Post, the PBOC may lower RRR for banks in the fourth quarter. (People’s Daily/Sources/Securities Times/Oriental Morning Post)
 
•    Japan Jobless Rate (Jul) M/M 4.7% vs. Exp. 4.6% (Prev. 4.6%) (RTRS)
 
US Headlines:
 
Bill Gross, manager of the world’s largest bond fund for Pimco, has admitted that it was a mistake to bet so heavily against the price of US government debt. Mr Gross emptied his USD 244bln Total Return Fund of US government-related securities earlier this year in a high-profile call that has backfired as the bond market has rallied. (FT-More)
 
Barcap US Treasury month end extension: +0.13yrs
 
EU and UK Headlines:
 
German Chancellor Angela Merkel faces growing resistance within her ruling coalition over expanding the powers of the EFSF, forcing a domestic political debate she will have to win to preserve confidence in her leadership. More dissenters have emerged from the coalition, now putting a sure victory in doubt. Germany's main opposition parties have vowed to support the measures, ensuring their passage, yet a failure by Merkel to win enough support to carry the measures from within her own base would likely cripple her politically. (FrontPage WSJ)
 
Barcap Pan Europe Aggregate month end extension: +0.01yrs
 
EQUITIES
 
European equities traded lower during the session amid risk-aversion together with comments from the IASB, which criticised the inconsistent way in which banks and insurers have been writing down the value of their Greek sovereign debt. However, the FTSE-100 index outperformed its European peers, helped by the strength in Barclays shares on the back of a broker upgrade, together with strong mining shares. Moving into the North American open, European equities are trading mixed with technology and utilities being the worst performing sectors.
 
FX
 
USD and JPY remained the major beneficiaries of risk-aversion, which in turn weighed upon EUR/USD, GBP/USD and commodity-linked currencies. However, CHF weakened, as the European session progressed, amid fear that the Swiss government may announce further monetary easing measures after their regular meeting tomorrow to rein in CHF's strength. In other news, NZD received support overnight following a sharp increase in building permits from New Zealand.

COMMODITIES
 
WTI crude futures lacked direction during the European session, and moving into the North American open, prices are trading in negative territory weighed upon by strength in the USD-Index.
 
Oil & Gas News:
•    Qatar, one of OPEC’s smallest producers, has notified at least one Asian buyer that it will supply Marine and Land crude at full contracted volumes for October, unchanged from September levels according to a trade source.
 
Geopolitical News:
•    The wife of Gaddafi and three of his children took refuge in Algeria, according to Algeria’s foreign ministry. Meanwhile, Libya’s National Transitional Council accused Algeria of an act of aggression and the council would seek to extradite the Gaddafis.
•    Libyan interim leader has given pro-Gaddafi forces in Sirte and other towns until Saturday to surrender or face military force.
•    An armoured Syrian force surrounded a town near the city of Homs on Monday and fired heavy machineguns after the defection of tens of soldiers in the area, according to activists and residents.
DAILY US OPENING NEWS