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Daily US Opening News And Market Re-Cap: June 15

Tyler Durden's picture




 

From RanSquawk

  • German finance ministry spokesman has said there is no teleconference planned for Sunday.
  • UK swaps market now pricing in an 80% chance of the BoE cutting rates by 25bps by the end of 2012.
  • EU's Van Rompuy is to host a videocall for EU G20 leaders at 1500BST in order to coordinate the leaders' actions.

Market Re-Cap

The announcement by the UK Treasury and BoE to take co-ordinated steps to boost credit and with the central bank re-activating its emergency liquidity facility has resulted in a sharp move higher in UK fixed income futures. GBP swaps are now pricing in a cut of 25bps in the base rate by the end of this year and following on from Goldman Sachs, analysts at Barclays and BNP Paribas are now calling for an increase in QE next month. The new measures have seen the likes of Lloyds Banking Group (+4.3%) and RBS (+7.0%) outperform the more moderate gains observed in their European counterparts.

Meanwhile in Europe the focus remains on the possibility of co-ordinated action from the major central banks. However, it would seem more realistic that any new measures will likely come after the Greek election results are known and once ministers have conducted their G20 meetings. Given that there is an EU level conference call this afternoon scheduled for 1500BST the likelihood of rumours seem high but as the wires have indicated already these conversations are purely based upon co-ordination ahead of the meeting which is usual practice. The yields in Spain and Italy have been a lot calmer so far with the 10yr in Spain at 6.88%, off the uncomfortable test of 7% seen yesterday.

Looking ahead there are some key data points from the US including Empire Manufacturing, Industrial Production and the preliminary University of Michigan report for June. Another thing to note for today is the European June future and option expiries with the same also prevalent to the US market so some added volatility can be expected.

Asian Headlines

BoJ have unanimously left their overnight call rate range at 0.0-0.1% and kept the size of their asset purchase program at JPY 70trl. (Newswires)

BoJ have revised up their assessment for the Japanese economy, and said it is picking up moderately , but warned that major downside risks remain due to uncertainty regarding the European debt crisis. The bank have said one-year changes in CPI are expected to remain at around zero for the time being.

US Headlines

Participants look forward to a raft of data from the US, beginning with Empire Manufacturing due at 1330BST, closely followed by TIC flow data, Industrial Production for May and University of Michigan Confidence Index.

EU & UK Headlines

European officials are preparing incentives for a new Greek government to convince it to stick to the country's current bailout deal after Sunday's elections. (FT-More) The package includes further reductions to interest rates and extended repayment periods for bailout loans, as well as EU money to spur investments in the Greek economy through the EIB. The sweeteners are only envisioned for a new government if it i s led by New Democracy's Samaras.

The president of Germany's Bundesbank has backed referendums across Europe on a Eurozone fiscal union, which could pave the way for Eurobonds enabling the debt-burdened periphery to borrow more cheaply. (FT-More) ECB's Weidmann has also said that not everything can be solved with a rate cut, adding that Greece not meeting accords would lead to a funding interruption, and this could have repercussions for staying within the Eurozone. (Newswires)

German finance ministry spokesman says no teleconference planned for Sunday. (Newswires)

German finance minister says he rules out relaxing the terms of the Greek bailout.

ECB's Draghi has said we have reached a contingency where political decisions are predominant over monetary policy decisions we can take in the short term and the ECB will continue to supply liquidity to solvent banks when needed. (Newswires)

ABN Amro, BNP Paribas and now Barclays have joined Goldman Sachs in expected an additional GBP 50bln in QE at next month's MPC rate setting meeting. (Newswires) This follows the BoE and UK Treasury coordinating action last night to ease credit conditions for the UK economy.

Equities

European equities are seen higher across the board with outperformance noted in the Italian FTSE-MIB since the open. The UK FTSE is the laggard of the day, but still remains higher by 0.6% at the midpoint of the European session. European equities did see some selling off after comments from a German finance ministry spokesman, commenting that no teleconference call has been scheduled for Sunday. Markets have recovered markedly and remain significantly higher, heading for a higher close on the week, particularly the Spanish IBEX, currently higher by around 3.25% from last Friday's close. In terms of sectors, oil & gas are leading the way higher, closely followed by basic materials and financials.

Risk appetite is evident in the fact that defensive health care stocks are the only sector trading in the red today.

In individual equities news, UK banks are strongly outperforming, peppering the top gainers list for today, with RBS, Barclays and Lloyds all benefiting from the after-market news yesterday that the UK BoE and the Treasury are to provide emergency liquidity assistance for at least four months. RBS, Barclays and Lloyds shares are all seen higher by over 4.5% today.

To the downside, FTSE-listed Aggreko are seen as the worst performer today after having released their latest trade figures. Although the company forecast another year of good growth, investors were disappointed by the lack of growth in their earnings upgrades and their profit forecast. Aggreko shares are currently seen lower by around 4% after a morning's trade.

FX

The EUR has been surprisingly steady above the 1.2600 level despite much of the headline news suggesting the possibility of co-ordinated action from the major central banks. Should we remain around currently levels and as participants await the Greek elections this weekend there is a 1.2600 option expiry due at the 10am NY cut (1500BST) that may provide a draw.

GBP/USD has had a more volatile session after a swift move seen shortly after 0800BST saw sellers react to the latest announcement from the UK Treasury and BoE last night. Stops were tripped through 1.5500 as volumes picked up before running into decent sized bids at 1.5475. Since then the pair has continued its recovery over the proceeding few hours and is now back unchanged on the day.

Elsewhere, USD/JPY has moved significantly lower following no new policy moves from the BoJ. The Japanese Ministry of Finance continues to say that they will act on the JPY in a timely and appropriate manner but the market remains unconvinced and the pair trades down 55 pips into the North American crossover.

Commodities

WTI and Brent crude futures are trading within a tight range, seeing some moves higher in line with European equities.  Manufacturing data from the US due later in the session may see some movement in the energy complex. US Empire Manufacturing and Industrial Production figures are expected at 1330BST/0730CDT and 1415BST/0815CDT respectively.

Oil & Gas News:

  • OPEC held its output ceiling at 30MBPD yesterday, however several states called for Saudi Arabia to cut back on production to defend a price of USD 100/BBL. According to sources, OPEC is seeking to tighten output reporting amid oversupply concerns. The OPEC Secretary General has said he expects all OPEC members to respect the agreement to curb output above 30MBPD, and  expects to see signs of reduced output in July, as June would be too soon to implement a cut.
  • South Africa is looking to source oil from Angola, Nigeria and Saudi Arabia to replace supplies from Iran, according to the South African director general of its Energy Department.
  • Norwegian gas exports to France fell to zero this morning from an average of 40.6mln cubic meters per day. The Norwegian gas operator GassCo declined to comment on the reasons behind the drop.
  • Daily exports of the 12 main grades of North Sea crude for loading are to fall to their lowest level in 25 months, according to loading program schedules.

Geopolitical News:

  • South Korea's Iranian crude imports fell 40% from a year earlier across May, according to the South Korean customs office. South  Korea's Iranian crude imports fell 40% from a year earlier across May, according to the South Korean customs office.
 

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