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Daily US Opening News And Market Re-Cap: June 18

Tyler Durden's picture




 

From RanSquawk

  • New Democracy claims victory in the Greek elections with 29.7% of the vote, Syriza in second place with 26.9%.
  • Relief rally short-lived as concerns regarding Spain take focus once more.
  • Spanish 10-yr government bond yields breach the 7% level for much of the European morning.

Market Re-Cap

Relief in the markets, after the worst case scenario from the Greek elections was averted, proved to be decidedly short-lived. Although the pro-bailout New Democracy party came in first with 129 seats (with an additional 50 seat bonus) the markets still await confirmation of an actual working coalition given a caretaker government has been in place now for approximately two months. A degree of uncertainty in regards to the demands the new coalition will place on negotiating the country's bailout terms has resulted in many investors being unwilling to get their toes wet just yet. Away from the election fever, rising Spanish yields continue to spook the market with the 10yr yield breaching the 7% level, prompting aggressive re-widening of the 10yr government bond yield spreads. The move comes at a crucial time for Spain as they look to come to market tomorrow in 12 and 18 month bills followed by three shorter dated bonds to be tapped this Thursday. Meanwhile, the FX markets have reflected the shift in sentiment with EUR/USD well off its overnight highs and the USD index firmly supported by the prevailing flight to quality bid. However, the biggest currency move of the day came in the early hours after the rupee (INR) weakened substantially following the RBI's decision to leave rates on hold, this coupled with Fitch changing the country's outlook to negative from stable has kept the currency under pressure throughout the day.

Looking ahead the US calendar is decidedly light so focus will remain on European developments and how the North American markets digest the latest Greek news. The New Democracy party leader, Samaras, is to meet the Pasok chief Venizelos at 1600BST.

Global Headlines

The IMF paved way for world leaders to roughly double the IMF’s global emergency cash base by approving the technical terms for members to loan it money. Total funds are to be boosted to USD 430bln, however, still subject to final approval. (Newswires) The Chinese vice-finance minister has said the BRICs nations are likely to announce their IMF contributions at the current G20 summit.

Asian Headlines

China’s President Hu says China are to continue with a proactive fiscal policy and prudent monetary policy. Hu added that he is also confident China will maintain steady and robust growth. (Xinhua)

US Headlines

According to a WSJ poll the Fed are most likely to extend Operation Twist in June, with economists seeing only a 24% chance of QE3 this week. (WSJ) 63% of economists in the poll do not expect a new bond-buying program in 2012, they see a 43% chance of no new Fed action in June and if the Fed launches QE3, the economists surveyed predict a size around USD 429bln.

EU & UK Headlines

Greece’s pro-bailout New Democracy party scrapped its way to victory over Syriza, its radical leftist opponents, on Sunday, according to interior ministry projections. New Democracy was set to take 29.5% of the vote and 129 seats in the 300-member parliament, compared with 27.1% and 71 seats for Syriza. (FT-More) The projected result made it likely that New Democracy would try to form a government with the socialist Pasok party and the Democratic Left. The Eurogroup have welcomed the results and reiterated their commitment to assist Greece in their adjustment effort, with the Troika set to return to the country once a government is formed. Elsewhere, according to sources, New Democracy and Pasok are likely to form a coalition by Wednesday. (Newswires)

Greek New Democracy leader Samaras is to meet PASOK leader Venizelos at 1600BST. (Newswires) Samaras has already met with the Greek President to receive to mandate to form government, and has also met with the Syriza leader Tsipras, who reiterated that he will not join a governing coalition.

ECB policy makers have overcome a key concern about taking the benchmark interest rate below 1% according to two central bank officials. (Newswires/DerSpeigel) In related news, the EU may propose the introduction of short-term common debt instruments for the Euro-area countries, termed Euro-bills.

The German foreign minister as well as the German finance ministry have reiterated the German stance that the substance of the Greek reform programme is non-negotiable. Elsewhere, on the subject of Eurobills, the German Bundesbank have rejected the scheme to spread debt liabilities, adding that Germany cannot take on all of Europe's debt. (Newswires)

The head of the OECD sees the ECB acting within a week in order to soothe volatile markets and aid Spain and Italy's borrowing costs. On Spain, the chief said the country can deal with the extra debt that the EUR 100bln banking bailout brings, adding that once the banks are recapitalized, bond spreads should moderate. (Newswires)

Equities

European cash equities are seen mixed heading into the US open, with peripheral Spanish and Italian markets underperforming, as the FTSE, CAC and DAX hold on to modest gains. Equities opened sharply higher across Europe, seeing relief off the back of the Greek election, but have been observed on a downward trajectory throughout the European morning, as sentiment towards Spain continues to sour. Financials are seen as the sector taking the heaviest losses, with the Italian and Spanish banks peppering the top losers in individual stocks. US stock futures are indicating a lower open in the DJIA and S&P500, and a slightly lower open in the NASDAQ.

In individual equity news, UK-listed Cable & Wireless shares are outperforming, currently seen higher by over 7.5%, as a major company shareholder, Orbis, approved the proposed takeover agreement from Vodafone.

Other than the Italian and Spanish banks, another of the top losers today is Italian listed ENEL, who are ex-dividend today. ENEL shares currently trade lower by around 8%.

FX

EUR/USD initially benefited from a relief rally following the Greek elections result hitting an Asian session high of 1.2749, but the sentiment was not held as Spanish concerns continue to loom. EUR saw weakness at the European open, dropping comfortably below the 1.2700 mark for the most of the European session. EUR/USD has tipped into negative territory ahead of the US open and should the pair see any major upside, it could come into close proximity to a touted decent-sized option expiry at the 1.2700 handle for the 10am (1500BST) NY cut.

GBP weakness is observed across the board after a mornings' trade, with GBP/USD descending to session lows of 1.5637, as reports from the over the weekend garner attention that UK banks may be able to utilize their reserves, prompting further speculation of QE from the BoE. As such, EUR/GBP is seen stronger on the day and currently trades in close proximity to a touted option expiry at the 0.8100 level for the 10am (1500BST) NY cut.

Commodities

WTI and Brent crude futures are seen relatively unchanged ahead of the NYMEX pit open after seeing a brief relief rally off the back of the Greek election results, but as fears linger, the energy complex has moved comfortably back below the highs.

Oil & Gas News:

  • BP have resumed oil supplies via the Baku-Supsa pipeline that had been halted due to maintenance.
  • Iraq aims for oil output capacity of 3.4MBPD by year end, according to the PM's advisor.
  • As US oil production climbs to record levels, the world’s top oil consumer should eventually consider easing its restrictions on crude exports, according to the head of the API.
  • Norway's Aasgard natural gas field was halted today and may be shut down for 24 hours, according to the Norwegian pipeline operator.

Geopolitical News:

  • Iran and the P5+1 group are due to meet today in Moscow for talks intended to narrow differences over Tehran's nuclear programme and avert the danger of a new war in the Middle East, according to diplomats. According to Iranian state media, Iran sees minimal chance for progress in the talks.
  • Iran is ready to halt 20% enrichment if Europe supplies nuclear fuel, according to Ahmadinejad.
  • The EU's planned July 1st oil embargo on Iran will move forward in the absence of an Iranian compromise, according to a European
    foreign-policy spokesman.
 

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Mon, 06/18/2012 - 08:21 | 2535880 The Swedish Chef
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Sorry, seems I can if I just look...

Mon, 06/18/2012 - 08:42 | 2535935 Alejandrito
Alejandrito's picture

a short-term vision of the Russell 2000

http://agstock.blogspot.fr/2012/06/chart-of-week.html

Mon, 06/18/2012 - 09:17 | 2536019 localpacific
localpacific's picture

Finally something about the U.S on ZH .... lol but here check this video: premarket  action

Do NOT follow this link or you will be banned from the site!