Daily US Opening News And Market Re-Cap: October 25

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From RanSquawk

  • Strong European corporate earnings results from the likes of BP and Deutsche Bank supported equities
  • There was market talk of a potential reserve requirement ratio cut by the PBOC, however no action has materialised so far in the session
  • SNB's Hildebrand said that the SNB will defend the CHF floor with full determination and will buy currencies in unlimited quantity if needed
  • Italian transport minister said that a collapse of the Italian government is possible. Also, the Italian Northern League leader, Bossi, said a government crisis is possible
  • According to summit draft conclusions, Eurozone leaders will call on the ECB for it to continue buying distressed countries’ bonds in the secondary market under current exceptional circumstances

Market Re-Cap

European equities traded mixed during the session as growing optimism on progress to tackle the Eurozone debt crisis in tomorrow's EU leaders' summit, together with strong corporate earnings results from the likes of BP and Deutsche Bank boosted appetite for risk. However, some underperformance was observed in French banks' shares as concerns persisted over their sovereign exposure to troubled Eurozone countries, whereas comments from Fitch that a Greek default is inevitable weighed on financials. A lack of transparency over the issue of PSI and haircut on Greek debt holdings, allied with comments from the Italian transport minister that collapse of the Italian government is possible also dented appetite for risk. In the forex market, weakness in the USD-Index rendered support to EUR/USD and GBP/USD. In other news, some weakness was observed in NZD overnight following lower than expected CPI data from New Zealand, whereas CHF came under pressure after SNB's Hildebrand said that the SNB will defend the CHF floor with full determination and will buy currencies in unlimited quantity if needed.

Moving into the North American open, markets look ahead to economic data from the US in the form of consumer confidence, Richmond Fed manufacturing, and API oil inventories report. Markets will keep a close eye on US corporate earnings from the likes of 3M, and Amazon.com among others. In fixed income, BoE's Gilt purchase operation in the maturity range of 2038-2060, together with another Fed's Outright Treasury Coupon Purchase operation in the maturity range of Oct'17-Aug'19, with a purchase target of USD 4.25-5bln are due for later.

Asian Headlines:

BoJ will lower its FY 2011/12 GDP growth forecast to 0.2% from 0.4% and also lower its FY 2012/13 GDP growth forecast to 2%-2.5% from 2.9%, according to Asahi newspaper. (Asahi)

US Headlines:

Fed's Dudley said it is possible the Fed could pursue a QE3 policy and the Fed has not run out of options to aid the economy. Also, The Fed’s latest monetary easing program will have about the same impact on the US central banks’ second round of asset purchases according to NY Fed’s Sack. (RTRS)

EU and UK Headlines:

German vice chancellor, Roesler, said both proposed EFSF leverage models would fulfil his party’s core criteria; however a final evaluation of the schemes will depend on details. He added that option of excluding members from the Eurozone is currently not under consideration, adding that he is not convinced that financial transaction tax is the best way of regulating financial markets. Roesler further said that he is confident Merkel’s coalition will get its own majority in Wednesday’s Bundestag vote on EFSF leverage. (RTRS)

•    Spain sells EUR 1.38bln in 3-month T-Bill auction, bid/cover 3.10 vs. Prev. 2.47 (yield 2.292% vs. Prev. 1.692%)
•    Spain sells EUR 2.09bln in 6-month T-Bill auction, bid/cover 2.60 vs. Prev. 3.95 (yield 3.302% vs. Prev. 2.665%) (RTRS)

EQUITIES

European equities traded mixed during the session as growing optimism on progress to tackle the Eurozone debt crisis in tomorrow's EU leaders' summit, together with strong corporate earnings results from the likes of BP and Deutsche Bank boosted appetite for risk. However, some underperformance was observed in French banks' shares as concerns persisted over their sovereign exposure to troubled Eurozone countries, whereas comments from Fitch that a Greek default is inevitable weighed on financials. A lack of transparency over the issue of PSI and haircut on Greek debt holdings, allied with comments from the Italian transport minister that collapse of the Italian government is possible also dented appetite for risk. Moving into the North American open, equities continue to trade higher, with oil & gas and basic materials as the best performing sectors.

**Note: For US equities news in detail, kindly refer to the RANsquawk Daily US Equity Opening News report.

FX

Weakness in the USD-Index rendered support to EUR/USD and GBP/USD. In other news, some weakness was observed in NZD overnight following lower than expected CPI data from New Zealand, whereas CHF came under pressure after SNB's Hildebrand said that the SNB will defend the CHF floor with full determination and will buy currencies in unlimited quantity if needed.

Elsewhere, RBA’s Deputy Governor Battellino said there could be scope for monetary policy to support demand if looming figures on inflation proved benign adding that RBA is less concerned about inflation outlook. (RTRS)

•    New Zealand Consumer Prices (Q3) Q/Q 0.4% vs. Exp. 0.7% (Prev. 1.0%)
•    New Zealand Consumer Prices (Q3) Y/Y 4.6% vs. Exp. 4.9% (Prev. 5.3%) (RTRS)

COMMMODITIES

WTI and Brent crude futures came off their best levels of the session as uncertainty reflected cautious trade heading into the EU summit on Wednesday.

Oil & Gas News:

•    Standard Chartered cut its forecasts for Asian gasoil, jet fuel and naphtha refining cracks for 2011 and 2012 citing slower growth in China and India.
•    Sri Lanka has received bids from China and the Czech Republic for plans to spend USD 2bln to expand its refining capacity.
•    BoFA said US WTI oil may rally to USD 105 as supply shrinks with WTI going back into backwardation signalling prices to rally. However, they warned that the rally may be short-lived due to logistics.

Geopolitical News:

•    North Korean leader Kim Jong Il expressed his hope to resume six-party talks in the nuclear arms issue as early as possible. (Xinhua)

Corporate News:

•    BP in its earnings release reported Q3 net income at USD 4.91bln vs. Prev. USD 1.79bln a year earlier, Q3 profit USD 4.9bln, and Q3 replacement cost profit USD 5.14bln. Co. said it will pay a quarterly dividend of USD 0.07 per share, and will increase divestments to USD 45bln. In other news, TNK-BP CFO declined to comment on minority shareholder litigation against BP.

**Note: For commodities news in detail, kindly refer to the RANsquawk Daily Energy Commentary report.