Daily US Opening News And Market Re-Cap: December 20

From RanSquawk

• According to an EU source, EU finance ministers failed to agree on raising ESM/EFSF EUR 500bln joint ceiling. However, Eurozone finance ministers agreed to provide EUR 150bln in bilateral loans to the IMF for bailout use, according to an EU statement
• Stronger than expected IFO data from Germany, together with successful T-Bill auctions from Spain helped risk-appetite
• Weakness in the USD-Index provided support to EUR/USD, GBP/USD, commodity-linked currencies, and WTI crude futures

Market Re-Cap
 
European equities gained strength as the session progressed helped by stronger than expected IFO data from Germany together with successful T-Bill auctions from Spain. Weakness in the USD-Index supported basic materials, however underperformance was seen in the FTSE 100 index weighed upon by weakness in AstraZeneca shares following co.'s downbeat comments on its full year core EPS. Bund futures traded lower, amid light volume, as equities gained strength, whereas the Eurozone 10-year government bond yield spreads generally tightened, with the exception of the Dutch/German spread. The Spanish/German spread narrowed leading into and after T-Bill auctions from Spain, where the country sold more than the target amount, and auction yields went down substantially. Bund futures came under further pressure after stops were triggered to the downside below the 138.08 level.
 
In the forex market, EUR/USD, GBP/USD and commodity-linked currencies moved higher as the USD-Index weakened. GBP/USD received further support on the back of market talk of Middle Eastern names and prime US names buying in the pair, together with higher than expected Nationwide consumer confidence data from the UK. Also, AUD received a boost overnight after the RBA portrayed a positive picture of the Australian economy in its minutes, despite highlighting risks to the global growth.
 
Moving into the North American open, markets look ahead to economic data from the US in the form of housing starts, building permits, and API oil inventories report, together with the Canadian CPI data. In fixed income, USD 35bln 5-year Note auction, allied with Fed's Outright Treasury Coupon Purchase operation in the maturity range of Feb'36-Nov'41, with a purchase target of USD 2.25-2.75bln are also scheduled for later.
 
Asian Headlines:
 
Japan is in talks to purchase Chinese government debt to strengthen economic ties according to Japan’s finance minister Azumi. Japan’s Azumi said Japanese purchases of Chinese government bonds shouldn’t cause big changes in the USD trend, and said ‘our confidence in the USD won’t change even if we buy Chinese bonds’. (Sources)
 
Also, Bank of Japan said private financial firms took USD 9.035bln of 2-week dollar loans through a Bank of Japan funding operation. (Sources)
 
Elsewhere, the Chinese central bank will likely cut the required reserve ratio for banks again in the near term after the monetary authority last month announced its first lowering of the requirement in three years. Meanwhile, China central bank adviser Li Daokui said conditions are ripe for promoting interest rate liberalization. (China Securities Journal/Xinhua News Agency)
 
US Headlines
 
The Federal Reserve is expected to release this week a proposal for how it will oversee the largest US banks, the proposal is set to include rules on new capital and liquidity requirements to absorb market shocks. The European debt crisis put US banks at risk of financial contagion, and a disorderly outcome threatens to ongoing US economic recovery according to the San Francisco Reserve Bank. Fitch said that the Fed's Basel III rules could put a further strain on US banks. (RTRS)
 
EU and UK Headlines
 
EU finance ministers failed to agree on raising ESM/EFSF EUR 500bln joint ceiling, according to an EU source. The official said the two funds can run alongside each other but the limit will not be raised. Finance ministers also failed to make a decision on how ESM voting rules would work, with the proposal to allow the ESM to make decisions based on an 85% supermajority blocked by Finland. (RTRS)
 
Also, Eurozone finance ministers agreed to provide EUR 150bln in bilateral loans to the IMF for bailout use according to an EU statement. Czech Republic, Poland, and Sweden are also willing to provide loans to the IMF, although the UK will wait until early 2012 to define their contribution. The EU sees the German share of the IMF boost at EUR 41.5bln, French share at EUR 31.4bln and Italy's share at EUR 23.5bln. (Sources)
 
•  German IFO - Business Climate (Dec) M/M 107.2 vs. Exp. 106.0 (Prev. 106.6)
•  German IFO - Current Assessment (Dec) M/M 116.7 vs. Exp. 116.0 (Prev. 116.7)
•  German IFO - Expectations (Dec) M/M 98.4 vs. Exp. 97.0 (Prev. 97.3)
•  UK Nationwide Consumer Confidence (Nov) M/M 40 vs. Exp. 36 (Prev. 36) (RTRS)
 
•  Spanish 3-month T-Bill auction for EUR 3.72bln, bid/cover 2.90 vs. Prev. 2.85 (yield 1.735% vs. Prev. 5.110%)
•  Spanish 6-month T-Bill auction for EUR 1.92bln, bid/cover 4.10 vs. Prev. 4.92 (yield 2.435% vs. Prev. 5.227%) (RTRS)
 
EQUITIES
 
European equities gained strength as the session progressed helped by stronger than expected IFO data from Germany together with successful T-Bill auctions from Spain. Weakness in the USD-Index supported basic materials, however underperformance was seen in the FTSE 100 index weighed upon by weakness in AstraZeneca shares following co.'s downbeat comments on its full year core EPS. Moving into the North American open, equities continue to trade higher, with consumer services and industrials as the best performing sectors.

FX
 
EUR/USD, GBP/USD and commodity-linked currencies moved higher as the USD-Index weakened. GBP/USD received further support on the back of market talk of Middle Eastern names and prime US names buying in the pair, together with higher than expected Nationwide consumer confidence data from the UK. Also, AUD received a boost overnight after the RBA portrayed a positive picture of the Australian economy in its minutes, despite highlighting risks to the global growth.
 
•  Canadian CPI (Nov) M/M 0.1% vs. Exp. 0.1% (Prev. 0.2%)
•  Canadian CPI (Nov) Y/Y 2.9% vs. Exp. 2.9% (Prev. 2.9%)
•  Bank of Canada CPI Core (Nov) M/M 0.1% vs. Exp. 0.1% (Prev. 0.3%)
•  Bank of Canada CPI Core (Nov) Y/Y 2.1% vs. Exp. 2.2% (Prev. 2.1%) (RTRS)

COMMMODITIES
 
WTI & Brent crude futures gained ground during the European session with continued concerns over supply from Iran, weakness in the USD-Index (-0.5%) and with strength seen in US stock futures.
 
Oil & Gas News:

•  China’s top refiner Sinopec will in January buy less than half the crude it typically imports from Iran according to trade sources.
 
Geopolitical News:

•  Syria has agreed to allow an Arab observer mission into the country to monitor Damascus' compliance with a peace agreement aimed at stopping violence, as human rights activists said that more than 100 people were killed across the country.
 
•  US Secretary of Defence Leon Panett said that "despite the efforts to disrupt the Iranian nuclear program, they have reached a point where they can assemble a bomb in a year or potentially less." He said that a nuclear-armed Iran would be an existential concern for Israel, but the red line for America would be the disruption of Persian Gulf oil trade.
 
Corporate News:

•  Royal Dutch Shell has temporarily abandoned its deepwater well after 319 barrels of drilling fluid leaked into the Gulf of Mexico. Shell said production at the Ormen Lange gas field increasing back to normal today after instability on Monday night.
•  BP’s Brazilian CEO said investment in Brazil is to grow significantly over the next few years. BP invested around BRL 5bln in Brazil this year. In other news TNK-BP will triple investment in a natural-gas development next year.
•  Repsol and Alliance Oil have unveiled the financial terms of a joint venture signed today that will give the Spanish oil company access to significant producing assets in Russia. In other news Repsol bought 10% of its own shares for about USD 3.35bln from its largest stockholder, helping the construction company repay a syndicated loan due tomorrow.

Comments

[disabledvet]

I expect European equities to start getting hammered as the reality of the massive amount of debt needed to fianance the EU bail...in dawns. I also think the death of Kim Jong Il is a huge deal and needs to at least be mentioned.

[SheepDog-One]

Kim was reported yesterday morning, and yea its probably a bigger deal than what is being made of it now.

[johnu78]

I really wonder if all those stories about starving North Koreans is true, or if it's just Western propaganda.

-John
http://www.youtube.com/carmarketer

[Alex Kintner]

US Secretary of Defence Leon Panetta on CBS News last night basically hinted that War with Iran is an option on the table. The War Drums are getting louder Bitchez. The MIC will have their next war -- one way or another.

[disabledvet]

Mind Martians on the Move.

[Mercury]

RIP Bill of Rights

http://takimag.com/article/the_government_v_everyone#axzz1h5Cr5GXx