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Daily US Opening News And Market Re-Cap: October 4

Tyler Durden's picture




 

Submitted by RanSquawk

  • Ministers at yesterdays Eurogroup meeting pushed back a decision on the release of Greece’s next loan instalment until after October 13th. EU’s Junker said technical revision discussions are underway on PSI haircuts and the ministers also settled the terms under which collateral will be offered to Finland.
  • Greek finance minister said there is no discussion about a Greek default, adding that other counties are not attracted by same collateral deal as with Finland.
  • Deutsche Bank says that Q3 2011 results will come in significantly lower than expected for the CB&S business division.
  • Goldman Sachs cut their global growth forecast to 3.5% from 4.2% in 2012.  They see Eurozone growth of 0.1% from 1.2% previously in 2012.
  • Belgian core cabinet is to hold a meeting on Dexia at 8pm CET.

Market Re-Cap

Risk aversion has again dominated the European session in what is becoming a familiar theme.  The postponement of the decision on the next Greek aid tranche weighed heavily on sentiment which was compounded by several other factors.  Goldman Sachs cut their forecasts for global growth saying they expected the Euro-area to experience a “mild recession” and this was later echoed by S&P who also noted they see a 40% chance that Western Europe would experience a recession.  Developments in the financial sector have been in focus with Dexia shares at one point falling 30% after reports that its exposure to troubled Eurozone sovereign debt amounts to more than its entire equity base, with the French finance minister having to say that France and Belgium will guarantee the banks creditors.  Furthermore, Deutsche Bank cut their 2011 forecast for their core business area saying that Q3 results for this year will be significantly lower than forecast; the banks shares fell 8% before bouncing with the DAX index lagging its European peers.  Elsewhere, there were solid government debt auctions from Austria and Belgium while the Italian government bond yield spread over Bunds tightened due to renewed market talk that the SMP was again buying in the Italian curve.  In the currency markets, GBP/USD fell 20 pips following the weaker than expected UK Construction PMI whereas the NZD has performed well compared to the AUD after Goldman Sachs said the RBNZ would keep rates on hold while also overnight the RBA kept its key rate unchanged citing the current prudent monetary policy. 

Moving into the North American session the key data will be the Durable Goods and Factory Orders, while comments will be anticipated from both ECB’s Trichet and Fed’s Bernanke.  Later into the session there will second round of Operation Twist purchases from the Fed while the Belgian cabinet will hold an emergency meeting to discuss the Dexia situation. 

Asian Headlines

•    Legislation being considered by the US to punish China over the value of its currency may undermine joint efforts by the two counties to revive the global economy according to Shen Danyang, spokesman at the Ministry of Commerce.

EU and UK Headlines:

•    Ministers at yesterdays Eurogroup meeting pushed back a decision on the release of Greece’s next EUR 8bln loan instalment until after October 13th. EU’s Junker said technical revision discussions are underway on PSI haircuts and the ministers also settled the terms under which collateral will be offered to Finland. (Sources)
•    Greek finance minister said there is no discussion about a Greek default, adding that other counties are not attracted by same collateral deal as with Finland. (RTRS)
•    Any bigger losses on Greek bond swap unlikely to trigger CDS if participation is still voluntary according to an ISDA lawyer. (RTRS)
•    Goldman Sachs expects a mild recession in Germany and France and a deeper downturn in the Euro periphery. The economic weakness will probably result in a cut in the repo rate by 50bp to 1% by December. (Zerohedge)
•    Deutsche Bank says that Q3 2011 results will come in significantly lower than expected for the CB&S business division. (RTRS)
•    Belgian Finance Minister said we need to isolate all dangerous parts of Dexia and isolate them in bad bank, while they are not waiting for EFSF approval to help the bank. Also, the Belgian core cabinet is to hold a meeting on Dexia at 8pm CET.

EQUITIES

Equity markets were again weighed by risk averse trade with all four major European bourses trading with losses of over 2.5%.  The Industrial sector is the worst performing in the European session due to the general economic growth fears as noted by Goldman Sachs who see France and Germany experiencing a “mild recession”.  Elsewhere in the Financial sector Dexia shares fell 30% following  reports that its exposure to troubled Eurozone sovereign debt amounts to more than its entire equity base, with the French finance minister having to say that France and Belgium will guarantee the banks creditors.  Furthermore, Deutsche Bank cut their 2011 forecast for their core business area saying that Q3 results for this year will be significantly lower than forecast; the banks shares fell 8% before bouncing with the DAX index lagging its European peers.  In the US session a lot of focus will be on Apple shares as the new iPhone is due to be unveiled at an Apple conference.

FX

There were some interesting moves in the currency markets overnight with the AUD coming under selling pressure following the RBA keeping their key rate unchanged at 4.75%, the RBA noted that current monetary policy is prudent and the .AUD has declined from very high levels.  The NZD has been slightly more resilient following comments from the Goldman Sachs analyst Borkin who said the NZD would keep rates lower to help the economy still recovering from natural disasters.  Elsewhere EUR/USD has held onto minor gains despite the general risk averse tone in the European markets as investors are already looking ahead to Thursday and the expectation of the ECB unveiling new supportive measures for the Eurozone.  Finally, on a related note GBP/USD has come under pressure as traders also look ahead to Thursday and the expectation of further QE from the BoE and today’s weaker than expected UK Construction PMI.

COMMMODITIES

Oil & Gas News:

WTI crude futures traded under continued pressure during the European session as Euro-zone concerns continued to weigh on prices.

Oil & Gas News:

•    Libya’s NOC chairman reiterates it will take up to 15 months to reach full pre-war output. NOC chairman says total oil production is currently at 350,000 BPD.
•    Iran to propose maintaining OPEC output quotas at next OPEC meeting according to the oil ministry website.
•    Kuwait to extend long imports into November, import up to 47 cargoes in 2011 according to KPC executive. Kuwait oil output rose to 2.87 MBPD in August on higher demand according to an OPEC delegate.
•    Goldman Sachs cut its year-end forecast for Brent crude to USD 112.50 a barrel from USD 120. Goldman forecast that Brent/WTI spread will narrow to USD 16, USD 13, USD 6.5 in favour of Brent on 3, 6, 12 month horizon.
•    OPEC’s average crude price is now below USD 100 per barrel for the first time since February.

The CME increased its margin requirements on Platinum futures by about 29% and on Comex Copper futures by 15%. (RTRS)

 

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Tue, 10/04/2011 - 08:43 | 1736581 ivars
ivars's picture

Stocks had to drop, nothing special here,  and it was expected by many that after QE2 stocks will tank. Zerohedge was one of the first to note it. Now they are doing it, e.g. compare to the chart I made in February 6th 2011:

http://saposjoint.net/Forum/viewtopic.php?f=14&t=2626&start=0#p30485

What follows is relatively slow, but accelerated tanking till approx DJIA 7000 in March 2012. After that, a bump up, either in expecations of USD devaluation ( not to be materialized though), or just a normal reaction to oversell- post oversell ( inverse peak crach ) rebound. Than down again, and so on during 2012-2013 ( here is longer prediction chart, made in April 2011):

This one says DJIA will reach even 6000 briefly in early 2013.

http://saposjoint.net/Forum/viewtopic.php?f=14&t=2626&st=0&sk=t&sd=a&start=180#p31988

I have even longer prediction up to 2014 which I have not published yet- it does not look much better, in general, still below 8000.

Wed, 10/12/2011 - 12:30 | 1766179 karmete
karmete's picture

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