Daily US Opening News And Market Re-Cap: December 7

From RanSquawk

• According to the FT, last-minute negotiations have commenced to create a much bigger financial "bazooka" to present at this week's EU summit that could include running ESM and EFSF together as well as winning increased support for the IMF. However, the report was later denied by a senior German government official
• According to a senior German government official, he is more pessimistic than last week on overall summit deal. He also said that he can't foresee running EFSF and ESM simultaneously, and he is not sure if the summit will reach conclusion on using IMF funds in the Eurozone crisis
• ECB funding to Italian banks rose to EUR 153.2bln at the end of November from EUR 111.3bln at the end of October
• Bund futures received a boost following a strong Bobl auction from Germany
• ECB allotted USD 50.685bln in its 3-month USD operation vs. Exp. USD 10bln
• CHF moved lower after the SNB slashed its 7-day USD repo rate, and weakened further after a Swiss minister said that Switzerland is still looking at negative rate options

 
Market Re-Cap
 
FT ran a story saying that last-minute negotiations have commenced to create a much bigger financial "bazooka" to present at this week's EU summit that could include running ESM and EFSF together as well as winning increased support for the IMF. This promoted risk-appetite in early European trade, and led European equities to trade higher, with outperformance seen in financials. However, as the session progressed, the appetite for risk weakened after it emerged that the ECB's lending to Italian banks rose in November as compared to October and after a senior German official denied the earlier FT story. In fixed income, Bund futures came off their earlier lows back into positive territory following a strong Bobl auction from Germany, whereas the Eurozone 10-year government bond yield spreads widened marginally as the session progressed. A sharp jump was observed in the Eurodollar futures following much higher than anticipated allotment by the ECB in its 3-month USD operation.
 
In the forex market, EUR/USD, GBP/USD and commodity-linked currencies came under pressure as the USD-Index regained strength during the European session, whereas GBP/USD came under further pressure following lacklustre industrial/manufacturing production data from the UK. Elsewhere, CHF moved lower after the SNB slashed its 7-day USD repo rate, and weakened further after a Swiss minister said that Switzerland is still looking at negative rate options. However, AUD received support overnight on the back of stronger than expected GDP data from Australia.
 
Moving into the North American open, markets look ahead to economic data from the US in the form of consumer credit and DOE oil inventories report. In fixed income, another BoE's Gilt purchase operation in the maturity range of 2025-2036, together with Fed's Outright TIPS sales operation in the maturity range of Apr'12-Apr'14, with a sale target of USD 1-1.5bln are also scheduled. Comments relevant to the Eurozone debt situation and the upcoming EU summit later this week will also be closely watched.
 
Asian Headlines:
 
Japan's manufacturers turned pessimistic for the first time in six months as Europe's debt crisis and worsening global growth prospects hurt business sentiment, according to Reuters Tankan survey, which has close correlation with the BoJ’s Tankan Survey. (RTRS)
 
US, EU and UK Headlines
 
According to a senior German government official, he can't foresee running EFSF and ESM simultaneously, and he is not sure if the summit will reach conclusion on using IMF funds in the Eurozone crisis. He further said that the EU and Eurozone should apply IMF practises on PSI, and it is not Germany’s goal to give the ESM character of a bank. He further said that he is more pessimistic than last week on overall summit deal. (RTRS)
 
In other news, French PM Fillon said the government will do whatever it takes to keep its AAA rating and they are not planning a third austerity package, although if further budget measures prove necessary in 2012, France would be willing to take them. (RTRS)
 
•       US MBA Mortgage Applications (Dec 2) W/W 12.8% vs. Prev. -11.7%
•       German Industrial Production SA (Oct) M/M 0.8% vs. Exp. 0.3% (Prev. -2.7%, Rev. to -2.8%)
•       German Industrial Production NSA WDA (Oct) Y/Y 4.1% vs. Exp. 3.5% (Prev. 5.4%)
•       UK Industrial Production (Oct) M/M -0.7% vs. Exp. -0.3% (Prev. 0.0%)
•       UK Industrial Production (Oct) Y/Y -1.7% vs. Exp. -0.7% (Prev. -0.7%, Rev. to -1.5%)
•       UK Manufacturing Production (Oct) M/M -0.7% vs. Exp. -0.3% (Prev. 0.2%, Rev. 0.1%)
•       UK Manufacturing Production (Oct) Y/Y 0.3% vs. Exp. 1.4% (Prev. 2.0%, Rev. 1.3%) (RTRS)
 
•       German Bobl auction for EUR 4.09bln, 1.25% Oct'16, bid/cover 2.10 vs. Prev. 1.50 (yield 1.110% vs. Prev. 1.000%, retention 18.2% vs. Prev. 20.0%)
•       Portuguese 3-month T-Bill auction for EUR 1.0bln, bid/cover 2.0 vs. Prev. 2.40 (yield 4.873% vs. Prev. 4.895%) (RTRS)
 
EQUITIES
 
FT ran a story saying that last-minute negotiations have commenced to create a much bigger financial "bazooka" to present at this week's EU summit that could include running ESM and EFSF together as well as winning increased support for the IMF. This promoted risk-appetite in early European trade, and led European equities to trade higher, with outperformance seen in financials. However, as the session progressed, the appetite for risk weakened after it emerged that the ECB's lending to Italian banks rose in November as compared to October and after a senior German official denied the earlier FT story. Moving into the North American open, equities continue to trade in minor positive territory, with utilities and basic materials as the best performing sectors.

FX
 
EUR/USD, GBP/USD and commodity-linked currencies came under pressure as the USD-Index regained strength during the European session, whereas GBP/USD came under further pressure following lacklustre industrial/manufacturing production data from the UK. Elsewhere, CHF moved lower after the SNB slashed its 7-day USD repo rate, and weakened further after a Swiss minister said that Switzerland is still looking at negative rate options. However, AUD received support overnight on the back of stronger than expected GDP data from Australia.
 
•       Australian GDP (Q3) Q/Q 1.0% vs. Exp. 0.8% (Prev. 1.2%, Rev. 1.4%)
•       Australian GDP (Q3) Y/Y 2.5% vs. Exp. 1.9% (Prev. 1.4%, Rev. 1.9%) (RTRS)

COMMMODITIES
 
WTI crude futures traded in positive territory during the European session supported by supply concerns related to sanctions on Iran, however moving into the NYMEX pit open, prices pared some of the earlier gains as European debt concerns took precedence.
 
Oil & Gas News:
•       IEA executive director said recent OPEC producers’ oil output levels are appropriate for the market in 2012, and demand in 2012 will be for at least as much as OPEC currently pump.
•       Iranian oil supplies to Europe would be difficult to replace if a ban supported by some EU states is imposed according to OPEC’s secretary general Badri.
 
Geopolitical News:
•       Russia’s energy minister rejects Iranian oil ban as they see the move as political, and does not believe energy supplies should be used to exert pressure.
•       The Obama administration does not know Israel's intentions regarding potential military action against Iran, and the uncertainty is stoking concern in Washington, where the preferred course for now is sanctions and diplomatic pressure.
 
Corporate News:
•       British Gas reasserted its status as the front runner among four planned massive gas export projects in Australia’s Queensland State, saying that its USD 15bln development is already a quarter finished.

Comments

[AngryGerman]

I wonder if Merckel has not received the memo sent by the squid...

[longonSpam]

http://m.youtube.com/index?desktop_uri=%2F&gl=US#/watch?v=K_7PwbxcDbs

[michaelsmith_9]

The sideways correction in many of the markets will make a breakout soon.  Here is a look at the ES, DX, and HG, which are offering clues.  http://bit.ly/vtJVJM

[longonSpam]

http://m.youtube.com/index?desktop_uri=%2F&gl=US#/watch?v=gHBbLNwYHOk

[dcb]

I'd like some feedback. I get up early in the am, I didn't see the close yesterday. futures are up, but looking at the way the close went (last hour) I know the futures should be down, so what the heck happepned. amd why does this happen.