- Standard Chartered is down about 23% on the day after they become under investigation for breaking Us regulations.
- UK Industrial Production beats expectations, and prompts the ONS to say the expect a 0.07 percentage point upward revision to UK GDP.
- Spanish short end underperforms in a reversal of the trends observed since the ECB press conference. RANsquawk European
European equities are seen in decent positive territory heading into the Wall Street bell, though a clear lack of direction has been observed as well a thin summer volumes . The FTSE-100 is the day's underperformer following last night's allegations made by the State of New York against UK bank Standard Chartered that the company violated US sanctions by making secret transactions to the tune of USD 250bln with Iran.
The Spanish 10-year yield has held below the key 7.00% level, though higher than yesterday's close at 6.76 with the spread over the benchmark Bund is slightly wider by 1.2bps. Steepening seen in the Spanish 2-year over the last couple of days as ECB's Draghi commented that any periphery bond-buying programme would be in the short end has halted and is now wider by 13bps. The Italian 10-year yield briefly traded above the 6.00% level though has since pulled back to lows printed earlier, currently standing at 5.91%, its spread tighter by 10.4bps on the session.
AUD strengthened overnight as Reserve Bank of Australia (RBA) left rates unchanged at 3.50%, AUD/USD testing and breaching 1.0600 to the upside for the first time since March. Elsewhere, GBP strength following the better than expected UK industrial and manufacturing production has taken GBP/USD back above 1.5600. WTI crude futures have also benefited from USD weakness, currently trading above USD 92.50, ahead of tonight's US API crude inventories data.
The US session is once again light in the way of economic data, with only the US JOLTs Job Openings and US Consumer Credit for June scheduled to be released at 1500BST/0900CDT and 2000BST/1400CDT respectively, as well as a USD 32bln 3-year note auction, with results expected shortly after 1800BST/1200CDT. Fed's Rosengren will be speaking on CNBC at 1330BST/0730CDT, and Fed's Bernanke is also scheduled to speak at 1930BST/1330CDT on Financial Education.
US ICSC Chain Store Sales (Aug 3) W/W 0.0% vs. Prev. -1.7%
US ICSC Chain Store Sales (Aug 3) Y/Y 2.4% vs. Prev. 1.%.(Newswires)
EU & UK Headlines
Germany's opposition Social Democratic party has thrown its weight behind calls for change in the German constitution, to be ratified in a referendum, in order to clear the way for jointly-guaranteed Eurozone bonds combined with a European fiscal union to underpin the common currency. (FT - More) This is a change in the SDP's stance on Eurobonds, and helped boost risk appetite in the EU morning session.
The ONS said it was difficult to know what effect the extra public holidays had on industrial output, and the better than forecast manufacturing and industrial production data could boost the initial GDP reading by 0.07 percentage points. (Newswires) The Q2 A reading for UK GDP came in at -0.7%, much lower than the expected -0.2%.
German Factory Orders SA (Jun) M/M -1.7% vs. Exp. -0.8% (Prev. 0.6%, Rev. 0.7%)
German Factory Orders NSA (Jun) Y/Y -7.8% vs. Exp. -7.0% (Prev. -5.4%, Rev. -5.3%)
The major European bourses are trading in positive territory ahead of the Wall St. bell, with the exception of the FTSE-100 which is flat, underperforming because of Standard Chartered whose shares are currently seen down 23.64% at GBP 11.22. As such, the Financials are the worst performing sector, down around 0.90%. The Oil & Gas sector is outperforming, in line with WTI crude futures.
New York has alleged several violations against Standard Chartered, including 60,000 secret transactions valued at USD 250bln with Iran as well as "stripping information from wire transfers". In response, a spokesman for the bank said a thorough review of its historical US sanctions compliance is being conducted, but the group strongly rejects the position or portrayal of facts as set out in the order issued by the DFS, adding that the order does not present a full and accurate picture of the facts. (Newswires)
Choppy and thin volume trade has been definitive of price action in the FX markets today, as the major pairs remain volatile. EUR/USD is seen higher heading into the North American crossover in a relatively tight range, as the USD index remains in negative territory for much of the European session today, with a large vanilla option expiry at the 1.2400 handle defining trade heading into the 10am (1500BST) NY cut.
The single currency saw a brief spell of weakness as German factory orders disappointed, but remains higher against the USD as the moves lower in the Italian 10yr yield provide support, moving back below the key psychological 6% mark.
GBP/USD is seen mirroring the moves in it's European counterpart, higher as the session progresses through into the North American crossover, and has moved through touted offers at the 1.5650 level. The pair saw some support as industrial and manufacturing production figures beat expectations, with participants eyeing tomorrow's Quarterly Inflation Report from the Bank of England as they next key risk event in the pair. Touted option expiries stand at the 1.5650 level for today's 10am NY cut, which may prove magnetic as the session advances.
WTI and Brent crude futures are seen making progress ahead of the NYMEX pit open with the USD index in negative territory on the day; alleviating some of the pressure on commodities pricing. Market price action across the asset classes remains choppy among thin volumes, reflected in the energy complex today. Gold and silver spot pricing are seen moving in line with the broader commodity market, modestly higher at the North American crossover. Looking ahead in the session, Fed's Bernanke is due on the wires at 1930BST/1330CDT, however, he is unlikely to comment on the US economy or monetary policy so soon after the FOMC rate decision last week. Energy participants now look ahead to the weekly API crude oil inventory numbers due today at 2130BST/1530CDT.