Daily US Opening News And Market Re-Cap: October 11

From RanSquawk:

• Market participants keep a close eye on the outcome of the EFSF ratification by the Slovak parliament. In the latest news, Slovak lawmakers have adjourned the EFSF session until 2pm local time
• The Troika Commission said Greece will miss its 2011 target, however it will get the new aid tranche when the Eurogroup and IMF approve results of their review, most likely in early November
• According to sources, haircuts of 40%-60% on Greek bonds are under consideration, however the debate is over whether the haircut should involve the ECB and EU governments
• ECB's Nowotny and Trichet said that the EFSF will not be leveraged with ECB funds
• Strength in the USD-Index weighed upon EUR/USD, GBP/USD and commodity-linked currencies

Market Re-Cap

Chinese stocks gained overnight following news that the country's sovereign wealth fund has increased its stake in the big four lenders. However, European equities traded lower throughout the session as concerns persisted over a successful ratification of the EFSF by the Slovak Parliament. Equities came under further pressure on the back of market talk of reallocation trade from equities into fixed-income, together with downbeat comments from ECB's Nowotny and Trichet who said that the EFSF will not be leveraged with ECB funds. A report in Die Welt saying that European banks may face forced recapitalisation, allied with yet another large deposit by the European banks at the ECB further dented appetite for risk. Weakness in equities provided support to Bunds, whereas marginal widening was observed in the Eurozone 10-year government bond yield spreads with respect to Bunds. In the forex market, the USD-Index strengthened amid risk-averse trade, which in turn weighed upon EUR/USD, GBP/USD and commodity-linked currencies. Also, weakness was observed in CHF across the board, and there was market talk of a large buyer in USD/CHF.

Moving into the North American open, markets will keep a close eye on the outcome of the EFSF ratification vote by the Slovak Parliament as well as any comments by the Troika on Greece. In fixed income, USD 32bln 3-year Note auction, together with another Fed's Outright Treasury Coupon Purchase operation in the maturity range of Feb'36-Aug'41, with a purchase target of USD 2.25-2.75bln are also scheduled for later. The BoE will also be publishing the result of its asset purchase operation in the maturity range of 2038-2060. Elsewhere, the US corporate earnings season will commence today with results from Alcoa after market.

Asian Headlines

Chinese shares rose nearly 2% in early trade boosted by a unit of the country’s sovereign wealth fund increasing its stakes in the big four lenders in a sign of government support for the languishing stock market. (RTRS)

•    Japanese Consumer Confidence (Aug) M/M 38.6 vs. Prev. 37.0 (RTRS)

EU, UK and US Headlines:

The Maltese parliament voted in favour of enhanced powers for the EFSF unanimously, with both the Labour opposition and the government giving their backing. (RTRS)

•    US NFIB Small Business Optimism (Sep) M/M 88.9 vs. Exp. 88.8 (Prev. 88.1)
•    UK Industrial Production (Aug) M/M 0.2% vs. Exp. -0.2% (Prev. -0.2%, Rev. -0.4%)
•    UK Manufacturing Production (Aug) M/M -0.3% vs. Exp. -0.2% (Prev. 0.1%, Rev. -0.2%)
•    UK BRC Sales Like-For-Like (Sep) Y/Y 0.3% vs. Exp. -0.9% (Prev. -0.6 %)
•    UK RICS House Price Balance (Sep) M/M -23% vs. Exp. -24% (Prev. -23%) (RTRS)

•    Italian 3-month T-Bill auction for EUR 2.5bln, bid/cover 3.05 vs. Prev. 1.86 (yield 1.735% vs. Prev. 1.907%)
•    Italian 12-month T-Bill auction for EUR 7bln, bid/cover 1.876 vs. Prev. 1.53 (yield 3.570% vs. Prev. 4.153%)
•    Greek 26-week T-Bill auction for EUR 1.3bln (incl. EUR 300mln in non-comp. bids), bid/cover 2.73 vs. Prev. 3.02 (yield 4.86% vs. Prev. 4.80%)
•    UK Index-Linked Gilt auction for GBP 0.9bln, 1.125% Nov'37, bid/cover 1.36 vs. Prev. 2.03 (RTRS)

EQUITIES

Chinese stocks gained overnight following news that the country's sovereign wealth fund has increased its stake in the big four lenders. However, European equities traded lower throughout the session as concerns persisted over a successful ratification of the EFSF by the Slovak Parliament. Equities came under further pressure on the back of market talk of reallocation trade from equities into fixed-income, together with downbeat comments from ECB's Nowotny and Trichet who said that the EFSF will not be leveraged with ECB funds. A report in Die Welt saying that European banks may face forced recapitalisation, allied with yet another large deposit by the European banks at the ECB further dented appetite for risk. Moving into the North American open, equities continue to trade lower, with telecommunications and utilities as the worst performing sectors.

FX

The USD-Index strengthened amid risk-averse trade, which in turn weighed upon EUR/USD, GBP/USD and commodity-linked currencies. Also, weakness was observed in CHF across the board, and there was market talk of a large buyer in USD/CHF.

COMMMODITIES

WTI and Brent crude futures traded lower during the European session as the USD-Index strengthened and focus remained on the EFSF ratification vote by the Slovak parliament.

Oil & Gas News:

•    China's State Council has announced the extension of its resource tax on domestic sales of crude oil and natural gas to the entire country and has also increased the number of products subject to the levy, effective as of November 1st.
•    OPEC Secretary General El-Badri said it is too early to talk about a meeting in December. He also said the oil market is in a ‘very comfortable’ situation. El-Badri said Libyan oil output will reach 1 MBPD in 6 months.
•    State owned Saudi Arabian Oil Company has told lifters in Europe that it will deliver the contracted volumes in November under its long-term contracts, according to trade sources.
•    The ongoing customs workers’ strike in Kuwait hasn’t had any significant impact on the country’s crude oil exports so far, according to an oil executive.
•    China and Russia will discuss an elusive giant gas deal during Prime Minister Vladimir Putin's visit to Beijing, but a Russian official said on Monday that there were no plans to sign an agreement just yet.
•    India may skip importing gas oil on ample supplies and low demand, according to industry sources.

Geopolitical News:

•    Russia has told both the Syrian government and the opposition that real actions are needed to solve the internal crisis in Syria, according to the Russian upper house of parliament's foreign-affairs chief.

Comments

[Zgangsta]

If the haircuts work like Greek bonds, expect the haircuts to be over 150% by the end of the year.

[cherry picker]

Reading the news today is like stepping back into time a few short years, except this time there seems to be more fires and the fire department is smaller than it used to be.

It is too big, too confusing, too much, too everything and the people in control, many lawyers turned into politicians listening to their degreed advisors, many who have no clue what it is like to start a business and nurture its growth are making this a lot worse than it needed to be.

That is my take on it for whatever it is worth....

[Johnny Lawrence]

Greece keeps missing their deficit targets, but yet the bailouts continue.  Makes perfect sense.