Daily US Opening News And Market Re-Cap: November 8

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From RanSquawk

  • Financials received a boost after Societe Generale reported a decline in their exposure to PIIGS nations, together with positive corporate earnings from Lloyds Banking Group
  • According to a government source, Greece’s two major parties have not reached a deal yet on coalition government. However, according to a minister, the Greek PM has said farewell at the cabinet meeting, and has told the cabinet that by tonight he will probably have settled the name of the new PM
  • According to reports, Italy’s main opposition parties will abstain in today’s vote. Also, Italy's Northern League leader Bossi asked Berlusconi to resign
  • Bank of Canada governor Carney said the BoC stands ready to reactivate its extraordinary liquidity facilities if needed, adding that European bank deleveraging could trigger sharp swings in global liquidity
  • SNB’s Jordan said that CHF is overvalued, however he also commented that it would be wrong to engage in a competitive devaluation of the currency

Market Re-Cap
 
European equities traded higher for a vast majority of the session, led by financials, after Societe Generale reported a decline in their exposure to PIIGS nations, together with positive corporate earnings from Lloyds Banking Group. The appetite for risk was strengthened further on growing prospects of formation of stable governments in Eurozone countries such as Italy and Greece, allied with news that China may soon inject additional capital into its banking system. Strength in equities weighed on Bunds, which came under further pressure due to an incoming large supply from the Eurozone countries including Netherlands, Austria, Greece and Belgium. The Eurozone 10-year government bond yield spreads tightened across the board, and particular tightening was observed in the Spanish/German spread partly helped by market talk of the ECB buying in the Spanish government debt. In the forex market, weakness was observed in CHF in early European trade after SNB's Jordan said that the currency is still overvalued, however the move was soon reversed following comments from Jordan that it would be wrong to engage in a competitive devaluation of the currency.
 
Moving into the North American open, markets will keep a close eye on the developments in the Eurozone, with Italy and Greece in focus. Market participants will also look ahead to economic data from the US in the form of IBD/TIPP economic optimism, together with the API oil inventories report. In fixed income, USD 32bln 3-year Note auction, Fed's Outright Treasury Coupon Purchase operation in the maturity range of Nov'19-Aug'21, with a purchase target of USD 4.25-5bln, as well as another BoE's Gilt purchase operation in the maturity range of 2038-2060 are also scheduled for later in the session.
 
Asian Headlines:
 
According to Moody’s China has defences to cope with any contagion from the euro area debt crisis including a higher savings rate, current account surplus and a central government that is spending within its means. (Sources)
 
US Headlines:
 
Fed’s Fisher says he would have voted against further policy easing and he has not changed his views of operation twist, he is not convinced it will benefit the real economy. Fisher added that QE3 is not going to happen. (RTRS)
 
•       US NFIB Small Business Optimism (Oct) M/M 90.2 vs. Exp. 90.0 (Prev. 88.9) (RTRS)
 
EU and UK Headlines
 
•       UK Industrial Production (Sep) M/M 0.0% vs. Exp. 0.1% (Prev. 0.2%, Rev. to 0.3%)
•       UK Manufacturing Production (Sep) M/M 0.2% vs. Exp. 0.1% (Prev. -0.3%)
•       Austrian bond auction for EUR 0.500bln, 4.00% Sep'16, bid/cover 2.272 vs. Prev. 2.54 (yield 1.960% vs. Prev. 4.480%)
•       Austrian bond auction for EUR 0.6bln, 3.50% Sep'21, bid/cover 2.427 vs. Prev. 2.74 (yield 2.992% vs. Prev. 2.811%)
•       Greek 6-month T-Bill auction for EUR 1.3bln (incl. EUR 300mln non-comp. bids), bid/cover 2.91 vs. Prev. 2.73 (yield 4.89% vs. Prev. 4.86%)
 
•       Belgian 3-month T-Bill auction for EUR 1.670bln, bid/cover 2.41 vs. Prev. 2.10 (yield 0.957% vs. Prev. 1.128%)
•       Belgian 6-month T-Bill auction for EUR 1.661bln, bid/cover 1.85 vs. Prev. 2.56 (yield 1.086% vs. Prev. 0.923%) (RTRS)
 
EQUITIES
 
European equities traded higher for a vast majority of the session, led by financials, after Societe Generale reported a decline in their exposure to PIIGS nations, together with positive corporate earnings from Lloyds Banking Group. The appetite for risk was strengthened further on growing prospects of formation of stable governments in Eurozone countries such as Italy and Greece, allied with news that China may soon inject additional capital into its banking system. Moving into the North American open, equities continue to trade in positive territory, with basic materials and financials as the best performing sectors.

FX
 
Weakness was observed in CHF in early European trade after SNB's Jordan said that the currency is still overvalued, however the move was soon reversed following comments from Jordan that it would be wrong to engage in a competitive devaluation of the currency. Elsewhere, weakness in the USD-Index provided support to EUR/USD and GBP/USD.
 
COMMMODITIES
 
Moving into the North American open, WTI and Brent crude futures gained strength amid renewed risk-appetite as the USD-Index weakened.
 
Geopolitical News:

•       Iran has acquired the know-how and material to build its first nuclear weapon with assistance from a former Soviet scientist the IAEA will disclose today. In latest news, Iran’s Minister said the West has no serious proof that Iran is seeking nuclear weapons. On the same issue the foreign policy spokesman for German chancellor Merkel reiterated that international sanctions against Iran over its nuclear program should be tightened as tension with Israel escalates. In related news, only crippling sanctions against Iran’s central bank and its oil and gas industries will force Tehran to halt its nuclear drive according to a senior Israeli minister.
 
Corporate News:

•       Repsol has made a discovery of large amounts of shale oil in the south of Argentina which could boost its energy reserves by 44% and mark a massive potential windfall for the country and the oil company. The company's Argentine unit said Monday it has identified 927 million barrels of oil equivalent in underground rock while exploring 428 square kilometers in the Loma La Lata area.