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Daily US Opening News And Market Re-Cap: December 21

Tyler Durden's picture




 

From RanSquawk

  • The ECB allotted EUR 489.191bln in its 3-year refinancing operation vs. Exp. EUR 310bln
  • German finance agency said the Federal government plans to issue EUR 250bln worth of debt in 2012 in total vs. Prev. EUR 275bln in 2011
  • AUD received a boost overnight following higher than expected Westpac leading index from Australia

Market Re-Cap
 
The 3-year ECB refinancing operation remained the main focus during the European session, where market participants anticipated a much higher allotment than EUR 310bln indicated by a Reuters poll - a move to enhance market liquidity. This enhanced the appetite for risk and European equities moved higher with outperformance seen in the Italian FTSE MIB and Spanish IBEX 35 indices. The allotment was indeed much higher than expected at EUR 489.191bln and observed a brief move higher in equities, however the move was soon retraced largely on profit-taking. Strength in equities weighed on Bunds, however prices moved back in positive territory following the ECB's 3-year LTRO operation. The Eurozone 10-year government bond yield spreads tightened moving into the ECB's 3-year LTRO, however did observe widening after the results, led by the Italian/German and Spanish/German spreads.
 
In the forex market, weakness in the USD-Index, in early European trade, supported EUR/USD, GBP/USD and commodity-linked currencies, while GBP/USD strengthened further on market talk of a UK clearer buying in the pair. Also, higher than expected Westpac leading index report from Australia overnight boosted AUD across the board. However, the USD-Index regained strength following the ECB's LTRO operation, which resulted in EUR/USD to trade near unchanged moving into the North American open. The pair came under further pressure on market talk of European and leveraged names selling in EUR/USD.
 
Moving into the North American open, markets look ahead to economic data from the US in the form of existing home sales and the DOE oil inventories report. In fixed income, USD 29bln 7-year Note auction together with Fed's Outright Treasury Coupon Sale operations in the maturity ranges of Nov'13-Mar'14 and Jun'13-Nov'13, with respective sale targets of USD 8-8.75bln each are also scheduled for later in the session.
 
Asian Headlines:
 
Smaller Japanese rating agency R&I lowered Japan’s sovereign debt rating to AA+ from AAA. R&I said Japan’s government’s ability to adjust fiscal conditions no longer supports highest rating. (Sources)
 
In other news, the Japanese government is set to forecast real economic growth of 2.2% (previous estimate of 2.7% and 2.9%) for fiscal year 2012, and the cabinet will adopt the forecast on December 22nd according to a report. The government are also set to cut 2011/12 estimate for economic growth to -0.1% (previous forecast of 0.5%). (Asahi)
 
•  Bank of Japan’s Target Rate (Dec) M/M 0.10% vs. Exp. 0.10% (Prev. 0.10%) (RTRS)
 
US Headlines
 
The Fed proposed several new measures that will affect large bank holding companies with consolidated assets of USD 50bln or more and systemically important nonbank financial firms. The Fed said that it would require institutions to reach the capital levels mandated by the latest Basel committee. The Fed also mentioned that they will implement quantitative liquidity requirements based on Basel, and conduct annual stress tests on these institutions. The Fed added they will propose limits on bank exposure to single trading partner, and triggers that allow regulators to restrict troubled banks activities. (RTRS/Sources)
 
In other news, Republicans in the House of Representatives voted down a 2012 tax deal yesterday, increasing the chances of a sudden jump in payroll taxes and a halt to unemployment benefits on January 1. If there is no agreement, then payroll taxes will rise from 4.2 to 6.2%, several million Americans will lose unemployment benefits, and payments to doctors treating Medicare patients will be cut by 27% on January 1. (FT)
 
•  US MBA Mortgage Applications (Dec 16) -2.6% vs. Prev. 4.1% (RTRS)
 
BarCap US Treasury month end extension seen at +0.03yrs.
 
EU and UK Headlines
 
•  Italian GDP SA and WDA (Q3 F) Q/Q -0.2% vs. Exp. -0.2% (Prev. 0.3%)
•  Italian GDP SA and WDA (Q3 F) Y/Y 0.2% vs. Exp. 0.4% (Prev. 0.8%, Rev. 0.7%)
•  UK Public Finances (PSNCR) (Nov) M/M 10.6bln vs. Exp. 10.3bln (Prev. -0.6bln)
•  UK Public Sector Net Borrowing (Nov) M/M 15.2bln vs. Exp. 16.6bln (Prev. 3.4bln, Prev. 3.0bln) (RTRS)
 
EQUITIES
 
The 3-year ECB refinancing operation remained the main focus during the European session, where market participants anticipated a much higher allotment than EUR 310bln indicated by a Reuters poll - a move to enhance market liquidity. This enhanced the appetite for risk and European equities moved higher with outperformance seen in the Italian FTSE MIB and Spanish IBEX 35 indices. The allotment was indeed much higher than expected at EUR 489.191bln and observed a brief move higher in equities, however the move was soon retraced largely on profit-taking. Moving into the North American open, European equities are trading mixed, with financials and basic materials as the best performing sectors.

FX
 
Weakness in the USD-Index, in early European trade, supported EUR/USD, GBP/USD and commodity-linked currencies, while GBP/USD strengthened further on market talk of a UK clearer buying in the pair. Also, higher than expected Westpac leading index report from Australia overnight boosted AUD across the board. However, the USD-Index regained strength following the ECB's LTRO operation, which resulted in EUR/USD to trade near unchanged moving into the North American open. The pair came under further pressure on market talk of European and leveraged names selling in EUR/USD.

COMMMODITIES
 
WTI & Brent crude futures traded in positive territory during the European session with softening in the USD-Index (-0.5%).
 
Oil & Gas News:

•  Libya awards crude oil export contracts for 2012 to Glencore, Vitol, Trafigura and Gunvor according to the NOC.
 
Geopolitical News:

•  North Korea’s missile test on Monday was a warning, and they are unlikely to conduct a nuclear test unless provoked according to a source. The source said North Korea wants the US to pull purported nuclear weapons out of South Korea and wants an armistice to replace 1953 ceasefire. The North Korean military pledges allegiance to the new leader Kim Jong-Un. North Korea will shift to a collective rule from a strongman dictatorship after last week’s death of Kim Jong-Il, although his untested son will be at the head of the ruling coterie according to a source.
•  The UN nuclear watchdog today said it may visit Iran for talks, a day after a senior Iranian official said Tehran was prepared to discuss international concerns and remove ambiguities about its disputed nuclear programme.
•  America’s most senior military official General Martin Dempsey has indicated that the country is ready to engage in a conflict with Iran if necessary.
 
Corporate News:

•  Royal Dutch Shell said they shut Bonga field due to pipeline leak; less than 40,000 barrels spilled into the sea from the leak.

 

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Wed, 12/21/2011 - 09:18 | 2000566 michaelsmith_9
michaelsmith_9's picture

"Risk" to find support and continue higher.  Here is a look at the ES, DX, and TNX.    http://bit.ly/uYmE8m

Wed, 12/21/2011 - 10:07 | 2000724 GMadScientist
GMadScientist's picture

Crackpipe to find junkie and continue higher.

Wed, 12/21/2011 - 10:07 | 2000722 GMadScientist
GMadScientist's picture

Okay..."250B Euro" worth, but what is it in DM, man?

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