Daily US Opening News And Market Re-Cap: December 16

From RanSquawk

• Fitch downgraded the long-term IDR ratings of seven major banks, including, Bank of America, Goldman Sachs, Citigroup, Barclays, BNP Paribas, Credit Suisse and Deutsche Bank
• Market talk that S&P may downgrade sovereign ratings of Spain and Italy today, however the talk remains unconfirmed
• Eurozone 10-year government bond yield spreads tightened across the board, with particular narrowing observed in the Spanish/German and Italian/German spreads
• According to a senior Troika official, the aim of Greek talks is a voluntary debt swap, however there are no guarantees of success, adding that the Greek 2011 deficit is likely to be higher than the 9% of GDP target
• German FDP party approved the set-up of ESM

Market Re-Cap
 
Following a higher open, European equities gradually came off their best levels as the session progressed, weighed upon by market talk that S&P may downgrade sovereign ratings of Spain and Italy today, together with a downgrade of seven large banks based in Europe and the US by Fitch. Underperformance was observed in the technology sector after Research in Motion provided a downbeat earnings outlook. Meanwhile, option expiries in various European indices today also resulted in some volatility. In fixed income, the Eurozone 10-year government bond yield spreads tightened across the board, with particular narrowing observed in the Spanish/German and Italian/German spreads, which traders attributed to Asian Central Banks buying in Spanish and Italian government paper. In the forex market, the USD-Index lacked any real direction during the European session, however strength was observed in commodity-linked currencies as both Gold and Silver traded over 1% overnight.
 
Moving into the North American open, the economic calendar remains thin, however markets look ahead to CPI data from the US later in the session. In fixed income, Fed's Outright Treasury Coupon Purchase operations in the maturity ranges of Feb'36-Nov'41 and Feb'20-Nov'21, with respective purchase targets of USD 2.25-2.75bln and USD 4.25-5bln are also scheduled for later.
 
Asian Headlines:
 
China may target growth of 10% for foreign trade next year according to people familiar with the matter. (21st Century Business)
 
US Headlines
 
Fed’s Dudley said if the Europe situation deteriorates it would have a negative impact on the US economy and possibly banking system and financial markets. US financial institutions do not face difficulty obtaining liquidity in short-term funding markets, and Dudley said if conditions were to deteriorate the Fed has a range of tools to provide effective liquidity backstops for US institutions; prepared to use as needed. (RTRS)
 
In other news, the chairman of the Senate Appropriation Committee said that he had formally signed off a bipartisan agreement that would fund the government for the remainder of the 2012 fiscal year. (Sources)
 
Elsewhere, US Fed balance sheet liabilities were USD 2.885trl Dec 14th vs. USD 2.803trl the prior week, Fed holdings of treasuries totalled USD 1.673trl as of Dec 14 vs. USD 1.675trl the prev. week, Fed discount primary borrowing averaged USD 393mln/day week vs. USD 13mln/day the prev. week, Fed holdings of agency debt total USD 105.9bln as of Dec 14, unchanged from the prev. week and Fed holdings of MBS totalled USD 858.08bln vs. USD 827.05bln the prev. week (RTRS)
 
EU and UK Headlines
 
A draft prospectus prepared for the latest Eurozone bail-out instruments includes explicit warnings to investors that the euro could break apart or even cease to be a “lawful currency” entirely. The EFSF is debating whether the “risk factors” should be included in the final version. (FT)
 
EQUITIES
 
Following a higher open, European equities gradually came off their best levels as the session progressed, weighed upon by market talk that S&P may downgrade sovereign ratings of Spain and Italy today, together with a downgrade of seven large banks based in Europe and the US by Fitch. Underperformance was observed in the technology sector after Research in Motion provided a downbeat earnings outlook. Meanwhile, option expiries in various European indices today also resulted in some volatility. Moving into the North American open, European equities are trading mixed, with basic materials and telecommunications as the best performing sectors.

FX
 
The USD-Index lacked any real direction during the European session, however strength was observed in commodity-linked currencies as both Gold and Silver traded over 1% overnight.

COMMMODITIES
 
WTI and Brent crude futures have tracked equity markets to trade flat in a mixed European session which has seen a dearth of liquidity and a range-bound USD-index. 
 
Oil & Gas News:

•  In their latest forecast Bank of America says that WTI crude is unlikely to rise above USD 101 per barrel in 2012 with Brent crude also unlikely to break above USD 108 per barrel next year.
•  China will announce a revamp of domestic fuel pricing at an “appropriate time” in 2012 and will also launch a trial reform of natural gas pricing according to top government officials.
•  South Korea extended its Iranian sanctions by banning fresh investment into its oil and gas sectors, however the measures seem to fall short of the sanctions demanded by the US. 
 
Geopolitical News:

•  Russia has proposed a draft resolution on the violence in Syria to the UN Security Council, strongly condemning violence by "all parties, including disproportionate use of force by Syrian authorities". Western members of the council welcomed the move, but said it did not go far enough.
 

Comments

[Spartan]

Great story below:

"Greek man claims for 19 kids-none real, police say" - you can't make this stuff up...

http://www.reuters.com/article/2011/12/15/us-greece-benefits-idUSTRE7BE1...

[sabra1]

aren't kids baby goats? there are more goats in greece, than people! who's kidding who?

[Schmuck Raker]

Ah hah! A Farmer!

I've been saying it for years, "Farmers are the real culprits". Everything was fine until some bastard started cultivating[shudder].

[PulauHantu29]

Housing market still in Free Fall...you forgot to mention.

The problem is now infecting Canada, China and Australia...anywhere there was lots of cheap money and EZ Credit is now collapsing...unless Ben prints.

[Schmuck Raker]

"German FDP party approved the set-up of ESM"

And yet...

Referendum On ESM Misses Quorum

BERLIN -- A referendum among members of German Chancellor Angela Merkel's junior coalition partner the Free Democratic Party about the set up of the European Stability Mechanism, the euro zone's future rescue mechanism, failed to reach the necessary quorum.

But 54.4% of FDP members who did vote supported the party's leadership and its government members that back the ESM, party leader and German economics minister Philipp Roesler said Friday.

The result is an apparent victory for Merkel's official European policy shared by Roesler and the FDP top. But the rift between the pro-ESM FDP leadership and the party's euro-skeptic minority is likely to continue, limiting the scope for the Chancellor to agree to further and bigger bailout efforts.

"The FDP is and remains pro-European," Roesler said in a broadcast statement to the press.

-By Bernd Radowitz, Dow Jones Newswires; [phone]; bernd.radowitz@ dowjones.com

So did they, or didn't they?

Governments work in mysterious ways.

[Schmuck Raker]

I see now, it was just a 'party vote', and meaningless(IMO).

Given the lack of quorum nothing has been determined.

"Only 21,503 FDP members, or 31.57%, cast a vote, short of the one-third necessary to turn the referendum decision into binding party policy. Of valid votes, 54.4% backed the party leadership's pro-ESM stance."

Source:German FDP Party Approves Set-Up Of ESM