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

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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.