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Daily US Opening News And Market Re-Cap: August 9

Submitted by Tyler Durden on 08/09/2011 08:04 -0400

Volatility has been observed in the European equity market with sharp losses seen in early trade reflecting losses in the US and Asian bourses yesterday
The FTSE-100 index breached the key 5000 level to the downside, and registered a 20% drop since Feb’10, as it entered a bear market
Spot Gold printed a record high at USD 1780.10 per ounce as investors opted for safety of a more tangible asset
Fresh all time lows were observed in USD/CHF and EUR/CHF at 0.7383 and 1.0480
Renewed market talk of the ECB buying in the Italian and Spanish debt observed narrowing of the Italian/German and Spanish/German 10-year government bond yield spreads
Markets look forward to the FOMC rate-decision later in the session to see if the Fed delivers a verdict of further monetary easing

Market Re-Cap

Markets witnessed a mood of risk-aversion today on the back of growing concerns about a global economic slowdown on the back of a recent US sovereign downgrade, together with ongoing contagion fears in the Eurozone. European equities traded lower during the session, following lower closes to the US and Asian bourses, which triggered market talk of a Euro-wide ban on short selling. The FTSE-100 index breached the key 5000 level to the downside, and registered a 20% drop since Feb’10, as it entered a bear market. Meanwhile, Spot Gold printed a record high at USD 1780.10 per ounce as investors opted for safety of a more tangible asset. Elsewhere, the USD-Index weakened ahead of the FOMC rate-decision later in the session, weighed upon by prospects for further monetary easing by the central bank. Fresh all time lows were observed in USD/CHF and EUR/CHF at 0.7383 and 1.0480, respectively, whereas USD/JPY tested a key level of 76.96, which saw the previous intervention by the BoJ. Weakness in the USD-Index helped EUR/USD and GBP/USD to print session highs, however GBP/USD came under pressure following weaker than expected industrial/manufacturing production data from the UK. In fixed income, the Eurozone 10-year government bond yield spreads observed tightening across the board on renewed market talk of the ECB buying in the Italian and Spanish bonds, which also weighed on Bunds.

Moving into the North American open, the focus remains on the FOMC rate-decision to see if the Fed delivers a verdict of further monetary easing owing to the recent S&P rating action on the US, together with low growth prospects in the country. In fixed income, USD 32bln 3-year Note auction is also scheduled for later in the session.

Asia Headlines:

One BoJ board member said the potential need for additional monetary easing has not decreased, with few prospects for Japan achieving stable price growth, minutes of the BoJ’s 11th-12th meeting showed today. Another board member also said there was a need for further monetary easing, although a final decision should be made after seeing additional data. However, many members said it was appropriate to continue examining the impact on the economy of the central bank’s existing asset purchases. (RTRS)

In other news, Japanese finance minister Noda postponed a reported plan to announce today his bid to replace unpopular PM Naoto Kan, saying he would focus on confronting global financial market turmoil. (RTRS)

•    Chinese CPI (Jul) Y/Y 6.5% vs. Exp. 6.4% (Prev. 6.4%)
•    Chinese PPI (Jul) Y/Y 7.5% vs. Exp. 7.5% (Prev. 7.1%)
•    Chinese Industrial Production (Jul) Y/Y 14.0% vs. Exp. 14.6% (Prev. 15.1%)
•    Chinese Retail Sales (Jul) Y/Y 17.2% vs. Exp. 17.7% (Prev. 17.7%) (RTRS)

US Headlines

S&P said that some US state and local government obligors can maintain or achieve ratings above that of the sovereign. S&P notes that many US state and local government function with a high level of revenue, treasury, finance and debt management independence compared to their global counterparts. In related news, the US Senate Banking Committee has begun probing last week’s decision by S&P to downgrade the US credit rating, a committee aide said. The aide said the panel was gathering information about the S&P move but no decision had been made on whether it will hold hearings into the downgrade. Meanwhile, S&P’s president Sharma again defended his firm’s downgrade of the US credit rating, the decision was driven by sound analysis and concerns that political infighting could threaten efforts to address the nation’s fiscal challenges he said. Sharma praised Obama’s remarks as encouraging because they provide a bit of renewed sense of urgency in addressing the US deficit. (RTRS)

Elsewhere, President Obama spoke with Spanish counterpart Zapatero and Italian PM Berlusconi on Eurozone crisis and welcomed measures by Spain and Italy aimed at addressing their economic crisis, the White House said. (RTRS)

•    US NIFB Small Business Optimism (Jul) M/M 89.9 vs. Exp. 89.9 (Prev. 90.8) (RTRS)

EU and UK Headlines:

Moritz Kraemer, the head of European sovereign ratings at S&P said the rating outlook for the UK and France is stable and the firm doesn’t expect to downgrade the two countries within the next two years. S&P president Sharma said France’s fiscal reforms and declining debt levels drive a higher rating then that of the US. (Handelsblatt/CNBC)

•    UK Industrial Production (Jun) M/M 0.0% vs. Exp. 0.4% (Prev. 0.9%, Rev. to 0.8%)
•    UK Industrial Production (Jun) Y/Y -0.3% vs. Exp. 0.2% (Prev. -0.8%, Rev. to -0.9%)
•    UK Manufacturing Production (Jun) M/M -0.4% vs. Exp. 0.2% (Prev. 1.8%)
•    UK Manufacturing Production (Jun) M/M 2.1% vs. Exp. 2.8% (Prev. 2.8%)
•    UK Visible Trade Balance (GBP/mln) (Jun) M/M -8873 vs. Exp. -8100 (Prev. -8478, Rev. to -8467)
•    UK BRC Like-for-Like Sales (Jul) Y/Y 0.6% vs. Exp. -0.5% (Prev. -0.6%)
•    UK RICS House Price Balance (Jul) M/M -22% vs. Exp. -28% (Prev. -27% Rev. to -26%) (RTRS)

•    Greece 26-Week T-Bill auction for EUR 812.5bln (incl. EUR 187.5mln non-competitive bids), bid/cover 3.06 vs. Prev. 2.88, yield 4.85% vs. Prev. 4.900% (RTRS)

EQUITIES

European equities traded lower during the session, following lower closes to the US and Asian bourses, which triggered market talk of a Euro-wide ban on short selling. The FTSE-100 index breached the key 5000 level to the downside, and registered a 20% drop since Feb’10, as it entered a bear market. Moving into the North American open, equities are trading mixed, with utilities and telecommunications as the worst performing sectors.

In other news, BlackRock will use profits it is making in Gold and bond markets to seek out bargains in falling global equity markets, according to co.’s analyst, James Holt. Holt said co. still likes equities but favours those exposed to Chinese growth, adding that telecommunications, healthcare and energy being the preferred sectors.

FX

The USD-Index weakened ahead of the FOMC rate-decision later in the session, weighed upon by prospects for further monetary easing by the central bank. Fresh all time lows were observed in USD/CHF and EUR/CHF at 0.7383 and 1.0480, respectively, whereas USD/JPY tested a key level of 76.96, which saw the previous intervention by the BoJ. Weakness in the USD-Index helped EUR/USD and GBP/USD to print session highs, however GBP/USD came under pressure following weaker than expected industrial/manufacturing production data from the UK.

COMMODITIES

WTI and Brent crude futures traded lower during the European session weighed upon by yet another increase in CPI reading from China, which intensified fears of further monetary tightening by the PBOC, together with growing concerns of a global economic slowdown following a sovereign downgrade of the US.

Oil & Gas News:

•    According to its monthly report OPEC cut their 2011 global oil demand growth forecast by 150,000 BPD to 1.21 MBPD, citing a weakening economy. OPEC added that economic worries and high oil prices have cut demand in OECD countries. OPEC went on to add that its July oil output rose by 405,000 BPD to 30.07 MBPD. OPEC said they are monitoring the market with extra vigilance as ‘dark clouds’ gather over economy and have no plans for an emergency meeting so far.
•    Saudi Arabia output rises to 9.8 MBPD in June, less than in July according to an official. Saudi Arabia will supply as much oil as customers need and their policy is to meet oil demand said an official. In related news, Saudi oil allocations to Europe are seen unchanged in September despite the oil price plunge according to trade sources.
•    China’s July crude oil output was 17.3mln tonnes, up 0.4% on the year. July gasoline output was 6.54mln tonnes, up 3.4% on the year and July diesel output was 13.99mln tonnes, up 4.3% on the year.

Geopolitical News:

• The US and Saudi Arabia pressured Yemen’s president to stay in Saudi Arabia after he was released from a lengthy hospital stay to treat wounds suffered in an assassination attempt, Yemeni officials said.
• More deaths were reported in Syria on Tuesday as Turkish foreign minister arrived in Damascus and as Washington said that it was “encouraged” by the tougher stand from Arab countries towards Syria.

Full release:

Daily Us Opening News