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Daily US Opening News And Market Re-Cap: November 10

Tyler Durden's picture




 

From RanSquawk

  • Former ECB vice president Papademos will be the interim Greek PM. Meanwhile, media reported that the Italian PM Berlusconi may step down by Sunday
  • Market talk that the ECB is buying in the Italian and Spanish government bonds. Also, market talk that in an emergency meeting today, the ECB may decide to purchase the Italian government debt in unlimited amount
  • News emerged that the ESM may not be operational in mid-2012 as Germany and France clashed on bond loss provisions
  • ECB's Knot said that the ECB can keep buying bonds as long as sterilization works, adding that the central bank can speed up bond purchases. He further said that the ECB can keep purchased bonds until maturity. However, he also said that the ECB should only buy bonds when markets are panicking
  • The BoE kept its key benchmark interest rate and asset purchase target unchanged at 0.50% and GBP 275bln, respectively,  as expected

Market Re-Cap
 
As the European session progressed, risk-appetite gathered pace and equities came off their earlier lows on enhanced prospects of stable government formation in Italy and Greece. Financials led the gains in equities, with stark outperformance observed in the Italian FTSE MIB index, which sharply underperformed yesterday. However, French banks came under pressure following news that the ESM may not be operational in mid-2012 as Germany and France clashed on bond loss provisions. Bund futures came off their highs as equities recovered, whereas the Eurozone 10-year government yield spreads tightened, with particular tightening observed in the Italian/German and Spanish/German spreads on market talk that the ECB is buying in the Italian and Spanish government debt. The Italian/German spread tightened further on unconfirmed market talk that the ECB may decide on purchasing the Italian debt in unlimited amount in an emergency meeting today, as well as news that the Italian PM Berlusconi may step down by Sunday. In the forex market, EUR/USD, GBP/USD and commodity-linked currencies received support as the USD-Index weakened, whereas additional support came to GBP/USD after the BoE kept its key benchmark interest rate and asset purchase facility unchanged at 0.50% and GBP 275bln respectively as expected.
 
Moving into the North American open, markets look ahead to key economic data from the US in the form of jobless claims, trade balance, and monthly budget statement. In fixed income, USD 16bln 30-year Note auction, Fed's Outright Treasury Coupon Purchase operation in the maturity range of Nov'21-Feb'31, with a purchase target of USD 1.5-2bln, together with 10-year TIPS refunding announcement are also scheduled for later in the session. Market participants will keep a close eye on comments pertaining to the Eurozone debt and political situation.
 
Asian Headlines:
 
Japanese manufacturing sentiment slid in November on a raft of negative factors such as the JPY’s rise to record highs, softening demand from emerging markets, and the impact of floods in Thailand, according to the Reuters Tankan survey, which is highly correlated with the BoJ’s Tankan. (RTRS)
 
•       Chinese Trade Balance (USD) (Oct) Y/Y 17.03bln vs. Exp. 25.75bln (Prev. 14.51bln)
•       Chinese Exports (Oct) M/M 15.9% vs. Exp. 16.1% (Prev. 17.1%)
•       Chinese Imports (Oct) M/M 28.7% vs. Exp. 22.2% (Prev. 20.9%) (RTRS)
 
US Headlines
 
According to Moody’s, the US economy could be hurt by Lehman-like financial contagion if the Eurozone crisis engulfs major European countries such as Italy. Moody’s expects the US economy to grow between 1.5%-2.5% in 2012, and has warned that any significant departure from that growth range could have implications for the US Aaa rating. However, it said that US banks are stronger now than at the time of Lehman collapse. (RTRS)
 
In other news, according to RealtyTrac, US foreclosure filings rose 7% in October to a seven month high as lenders started to speed up action against delinquent borrowers after a yearlong review into documentation. (Sources)
 
Elsewhere, Jefferson County, Alabama, declared the largest municipal bankruptcy in the US history. (Sources)
 
EU and UK Headlines
 
The BoE kept its key benchmark interest rate and asset purchase facility unchanged at 0.50% and GBP 275bln respectively as expected.
 
EQUITIES
 
As the European session progressed, risk-appetite gathered pace and equities came off their earlier lows on enhanced prospects of stable government formation in Italy and Greece. Financials led the gains in equities, with stark outperformance observed in the Italian FTSE MIB index, which sharply underperformed yesterday. However, French banks came under pressure following news that the ESM may not be operational in mid-2012 as Germany and France clashed on bond loss provisions. Moving into the North American open, European equities are trading in positive territory, with utilities and telecommunications as the best performing sectors.

FX
 
EUR/USD, GBP/USD and commodity-linked currencies received support as the USD-Index weakened, whereas additional support came to GBP/USD after the BoE kept its key benchmark interest rate and asset purchase facility unchanged at 0.50% and GBP 275bln respectively as expected.
 
In other news, according to the RBNZ, New Zealand’s economy is facing more threats from global market turmoil, with funding costs set to rise at a time when the government has little room to drive domestic demand because of a growing debt burden. Elsewhere, according to RBA’s assistant governor Lowe, Australia’s interest rates are “broadly neutral” and monetary policy isn’t driving the economy’s structural change. (RTRS)

COMMMODITIES
 
Moving into the North American open, WTI crude futures received support as the USD-Index weakened amid growing prospects that an ongoing political turmoil in the Eurozone could soon be settled by the formation of stable governments in Greece and Italy.
 
Oil & Gas News:
 
•       IEA cut its global oil demand growth forecast by 90,000BPD for 2011 citing weaker economy, however it raised forecast for 2012 by 50,000BPD. It said fundamentals underpinning stubbornly high prices now but demand picture could sour significantly if economy falters.
•       According to the acting Libyan PM, Tarhouni, he expects oil output to easily exceed 700,000 BPD by the end of this year. In other news, according to sources, oil production at Libya’s Agoco may return to pre-war level by end of June.
 
Geopolitical News:
 
•       Iran’s supreme leader warned the US and Israel not to launch any military action against its nuclear sites, saying it would be met with “iron fists”. Meanwhile, Chinese foreign ministry said sanctions cannot fundamentally solve the Iranian nuclear issue. Also, a Soviet scientist, Vyacheslav Danilenko, denied helping Iran in its nuclear programme.

 

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Thu, 11/10/2011 - 09:50 | 1865532 BarryG
BarryG's picture

Germany is blackmailing everyone else to bail out europe, for their benefit, so they dont have to...

http://germanywatch.blogspot.com/2011/11/economic-blackmail-and-time-to-learn.html

Thu, 11/10/2011 - 09:51 | 1865541 jdelano
jdelano's picture

So if I was a bond vigilante, I guess I'd move on to France while the ECB is trying to plug the hole in Italy?  

Thu, 11/10/2011 - 10:19 | 1865682 s2man
s2man's picture

With perhaps a side helping of Spain.

Thu, 11/10/2011 - 09:55 | 1865556 Nate H
Nate H's picture

There is an irony with all the OWS movements going on, what ECBs stick save is doing/will do is a direct transfer of government wealth (or perceived wealth) to the short term traders (who buy in When Issued and sell to central banks at lower yield/higher price).

 

ECB balance sheet looks about as bad as the French Banks. How long will it be before they need recapitalization? Or as importantly, how long before market starts to ask that question?

 

 

Thu, 11/10/2011 - 10:15 | 1865664 Mike2756
Mike2756's picture

Central bank balance sheet? No such animal.

Thu, 11/10/2011 - 10:03 | 1865600 chubbar
chubbar's picture

A dumb question for bond traders here (or whoever can answer), what is the difference between announcing the purchase of Italian bonds in unlimited amounts and the concept of "direct monetization" by the ECB of Italys debt? Is it a distinction without a difference or is it two completely different events? Thanks in advance.

Thu, 11/10/2011 - 10:42 | 1865802 chrisina
chrisina's picture

"direct monetization" is when the central bank purchases a security directly from the issuer. This is forbidden by law (Art. 123 of the Lisbon Treaty) when said security is any form of credit instrument issued by Govt. or any public authority:

Art.123

Overdraft facilities or any other type of credit facility with the European Central Bank or with the central banks of the Member States (hereinafter referred to as ‘national central banks’) in favour of Union institutions, bodies, offices or agencies, central governments, regional, local or other public authorities, other bodies governed by public law, or public undertakings of Member States shall be prohibited, as shall the purchase directly from them by the European Central Bank or national central banks of debt instruments.

 

(NB: similar restrictions forbidding "direct monetization" of Govt. bonds apply for all other central banks  participating in the flexible exchange system, ie FED (FEDERAL RESERVE Act section 14b) BoE, BoJ, ....)

 

 

On the other hand, the central bank purchasing Govt. bonds on the secondary markets (ie from banks or any investor who purchased such securities previously) is perfectly legal as part of the open market operations that form the central bank's monetary policy.

For the ECB, purchase of Govt bonds on the secondary market are established within the so called Securities Markets Programme  (SMP)

detailed info and outstanding amounts of purchases at this link

http://www.ecb.int/mopo/liq/html/index.en.html#portfolios

Thu, 11/10/2011 - 10:05 | 1865611 Peter Pan
Peter Pan's picture

What have they fixed to date? NOTHING

Who have they put in jail? NO ONE

What have they stuffed up? EVERYTHING

Who are they trying to fool? EVERYONE

What are the chances of them succeeding? ZERO

Thu, 11/10/2011 - 10:06 | 1865619 Racer
Racer's picture

However, he also said that the ECB should only buy bonds when markets are panicking

 

In other words: 'markets' are only allowed to go up, any sign of a drop and they get propped

Thu, 11/10/2011 - 10:16 | 1865669 ivars
ivars's picture

One more supporting prediction chart for deflation in the USA in end of 2011-beginning of 2012 and all the scenarios that follows:

1) Economy in recession from q1 2012 ( increased cash hoarding=reduction of money velocity main reason)

2) Stocks sharply down, most commodities down

3) Gold, silver stable until more money -MUCH more is pressed in

4) USDx up

Supporting charts

This prediction is valid for up to q4 2012 (with differing details visible in other charts)

Thu, 11/10/2011 - 10:23 | 1865689 CPL
CPL's picture

http://www.businessweek.com/news/2011-11-09/india-s-trade-deficit-widens...

 

The I in BRIC is slowing right down.  India as far as a financial empires go is more important in the macro scale of things than any country in europe at the moment in time.

Infrastructure break down

 

http://www.winnipegfreepress.com/business/supply-running-dry-133516733.html

Retarded thing is the oil production fields are right there.  I see this news every second day.  This in turn effects the WTI price directlym because there is no production larger on the north american continent.

 

http://money.cnn.com/2011/11/09/news/international/iea_oil/?google_edito...

Oil and Coal shortages.  More coal than oil right now.  Peak oil is always on the lips of folks.  But have you heard of peak coal?  No?  There's a reason.  Coal as a source of cheap, portable power and energy has been a human power standard in the generation of heat and electricity for 300 years.  We've been running out of the stuff for the last ten years.  Coal directly impact the cost of food as it is heavily used in power production of electricity and maintaining the cold chain.  Without the cold chain we would lose around half the civilian population in north america in a month.

 

Here's a good fluff article to run down the Peak Coal scenario as far as usage goes..

http://www.theglobeandmail.com/report-on-business/history-of-peak-coal-i...

 

http://blogs.ft.com/beyond-brics/2011/11/09/china-diesel-thieves-on-prow...

 

Remember peak-oil doesn't exist.  It is a figment of your imagination...especially when theft becomes the third position of trade proposition.

 

Military

http://english.farsnews.com/newstext.php?nn=9007272725

- US troops found with Israelis on the broder of Iran...nothing to see here, move along.  Just more wacked out religious, desert people with sun stroke wanting to go at it.  Both in Israel and Iran.

http://www.defencetalk.com/china-to-send-armed-patrols-on-mekong-report-...

Piracy on the high rivers...China is getting pissed with the poverty it's created in pockets all over it's country.  Which in turn leads people to piracy.  So the best solution isn't to develop some type of industry in the area.  Better to just kill them and be done with it.

 

Thu, 11/10/2011 - 10:45 | 1865811 RiverRoad
RiverRoad's picture

Ahh, the roosting chickens....home at last.  This whole Euro thing was a farce from the get go.  A wonderful way for the global oligarchies (@ GE) to keep their profits offshore in an appreciating currency while the US dollar went down the toilet as it had to for us to compete with the Third World.  NOW they want their moola back in the US (untaxed!) as the ground shakes in Europe.  Worked great for Europe too:  allowing them a phony pumped up fiat to buy their yachts with.

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