Daily US Opening News And Market Re-Cap: June 4
- German Chancellor Merkel and EU’s Barroso to hold a press conference at 1800BST/1200CDT.
- Troika deem Portugal to be making swift progress with their reforms, and confirm the next EUR 4.1bln tranche of aid in July.
- UK market closures take their effect on all asset classes, with volumes remaining thin across the markets.
The absence of the UK from today’s trade is particularly evident, with volumes remaining particularly light across all asset classes. Nonetheless, European equities are largely seen drifting higher with the exception of the DAX index, which is yet to move over into positive territory.
News flow remains light with the highlight of the day so far being comments from the Troika, confirming that Portugal remains on track with its bailout program, and have confirmed that the country will receive the next EUR 4.1bln tranche in July.
FX moves remain in a tight range, with EUR/USD looking relatively unchanged, with the USD index slightly weaker as the US comes to market.
Looking ahead in the session, participants can look forward to US ISM New York and Factory Orders data as the next risk events of the session.
Chinese Non-Manufacturing PMI (May) M/M 55.2 (Prev. 56.1) (Newswires)
According to a Chinese economic planner, Chinese CPI will be below 3.4% across 2012, expecting Q2 CPI at around 3% with a rebound in Q4. (Newswires)
EU and UK Headlines
The chiefs of four European institutions are in the process of creating a master plan for the Eurozone aimed at strengthening the monetary union. The plan involves proposals to integrate the members’ budget policy, create a banking as well as a political union and to undertake common structural reforms, according to unidentified EU and ECB sources. (Welt-am-Sonntag) However, the EU have since commented that there is no ‘secret master plan’ on saving the EUR. (Newswires)
German Chancellor Merkel has hardened her opposition to joint debt sharing, in favour of an economic overhaul to tackle the lack of competitiveness. And said the EU remains at odds over a financial transaction tax. (Newswires)
Contrary to weekend reports, WSJ writes that Germany is sending strong signals that it would eventually be willing to back ideas such as joint European bonds or a banking union if European leaders are willing to give up more sovereignty and transfer significant powers over national budgets to Europe, a step that, if embraced, would redesign the monetary union and be one of the boldest steps taken by the bloc since the Eurozone was launched. (WSJ) A German official told the WSJ: “The more that other member states get involved with this development and are prepared to give up sovereign rights to get European institutions more involved, the more we will be prepared to play an active role in developing things like a banking union.”
The European Commission is forecasting Spanish yields on long-term debt to reach 8% and short-term debt to reach 6.5%, while the country’s risk premium could rise to 650BPS if Spain fails to tackle its macroeconomic issues, according to a Commission report with worst-case scenario projections. (El Mundo)
The Troika have conducted their latest review of Portugal, with the country passing all measures and fulfilling its bailout plan. The Troika have revised Portugal’s growth target to -3% from -3.25% and confirmed a further EUR 4.1bln tranche of aid to be transferred in July. (Newswires)
European equities are broadly trading higher in the cash markets, with the exception of the DAX index, seen lower by around 0.6% currently. Outperformance is noted in the IBEX-35 ahead of the US open, with peripheral banks making up a large proportion of the top gainers in Europe today as Intesa Sanpaolo, BBVA and UniCredit trade higher by around 4% each.
To the downside, German carmakers are weighing in Europe, with Volkswagen, Daimler and BMW all trading markedly lower, as concerns continue to loom over prospects for Chinese growth in the sector. Chinese data overnight has done little to soothe concerns, with non-manufacturing PMI signalling a slowdown in growth.
Currencies remain relatively range-bound ahead of the US open, with the USD index slightly weaker on the session so far. EUR/USD currently trades flat after experiencing some modest weakness in the early hours, and may remain at the current level due to unconfirmed market talk of offers in the pair at 1.2450, however this remains unconfirmed. To the downside, 1.2400 is another level to look out for, with a touted option expiry for the 10am NY cut.
Elsewhere, JPY strength continues to be the prevailing theme of the currency, with several Japanese officials reiterating their stance of carefully watching for speculative interventions and their impact on the domestic economy. USD/JPY was seen markedly weaker on the session in the opening hours of European session, however has seen somewhat of a resurgence, pushing marginally into positive territory as the US comes to market, hovering just above an option expiry at the 78.00 for the 10am NY cut.
Both WTI and Brent crude futures are trading markedly lower ahead of the NYMEX pit open amid particularly thin markets due to a UK market holiday.
Oil & Gas News:
• Iranian oil minister Rostam Ghasemi said that OPEC's second-biggest producer will seek to retain the current output quota of the oil producers' group at the upcoming June 14 meeting, according to local news reports Monday. "Iran will insist on maintaining the OPEC production ceiling in the June meeting," Ghasemi was quoted as saying by the semi-official Fars news agency during his visit last week to Iraq.
• Bad weather has disrupted oil exports from Iraq's southern offshore terminal and forced neighbouring Kuwait to halt all of its oil exports, according to sources.
• Iraq’s crude exports in May fell 2.2% to 2.452MBPD from 2.508MBPD, according to Iraqi government data.
• The Pelagic fields offshore Israel have a relatively high probability for geological success, project partner Israel Opportunity says, after a new study put estimated reserves of natural gas at 6.7 trillion cubic feet and at 1.4 billion barrels of oil.
• Iran have warned Israel that any attack on their country will be responded with an attack that will ‘fall like thunder’.
• Iran’s Supreme Leader has said sanctions against the country will not succeed in hampering their progress and will only deepen hatred against the West.