Daily US Opening News And Market Re-Cap: September 19
- Bank of Japan follows in the footsteps of the Federal Reserve and the European Central Bank and expands their total asset purchase target to JPY 80trl; underpinning risk sentiment in the overnight Asian session.
- Bank of Japan's easing measures provide only temporary relief for the European asset classes, but European stocks erase all gains to trade lower at the North American crossover.
- Bank of England minutes provide no surprises at their September minutes release; showing the MPC voted unanimously to keep policy on hold at this month's meeting.
The BoJ obediently submitted to pressure from stimulus addicted markets and announced yet another expansion to its JGB buying program. The program now stands at JPY 80trl, the expansion impacts only JGBs and T-Bills, both of which will be monetized by a further JPY 5trl. As a result, risk assets rallied overnight in Asia and in turn supported European equity markets in early trade. However, the half life of the latest policy easing action from the BoJ proved to be very short-lived and as the session progressed, the risk on sentiment quickly subsided. As such, as we enter the North American cross over, equity markets in Europe are seen lower, led by tech and financial stocks.
Elsewhere, Bunds topped yesterday’s high and look set to make a test on the 140.00 level should the sentiment deteriorate further. Nevertheless, peripheral bond yield spreads are actually tighter today, with the Spanish 10y bond yield spread tighter by 9bps and the shorter dated 2y bond tighter by 24bps vs. German equivalent. EUR/USD and GBP/USD edged lower throughout the session, currently trading in close proximity to intraday option expiry levels at 1.3000 and 1.6200 respectively. Going forward, the second half of the session will see the release of the latest housing data, as well as the weekly DOE report.
The BoJ kept rates on hold overnight as expected at 0% to 0.1% but expanded its asset and credit facility to JPY 80trl from JPY 70trl, a more aggressive move than the market was looking for, as such there was a spike higher in the Nikkei 225 to a four month high while the JPY weakened significantly across the board. The JPY weakness has been largely pared heading into the North American open, with USD/JPY in minor positive territory. (Newswires)
The central bank also removed minimum bidding yield for JGB and corporate bond buying and decided to extend its asset purchase deadline to the end of December 2013. The Bank did also downgrade its economic assessment in September.
China Securities Journal reported that USD weakness would help the CNY’s effective exchange rate, which would relieve some pressure from China's export growth and reduce the need for further pro-growth policy adjustment.
US MBA Mortgage Applications (Sep 14) W/W -0.2% vs. Prev. 11.1%
EU & UK Headlines
S&P's Kraemer has said the Spanish sovereign rating is unlikely to be cut to non-investment grade in near future. (Newswires) Of note, S&P currently rate Spain at 'BBB+'; Outlook negative.
The Bank of England's minutes release showed the board was unanimous in keeping their APF and benchmark borrowing rate unchanged.
Most of the MPC saw additional stimulus as 'more likely than not' to be needed in the future, with one member seeing a good case for more QE this month. On inflation, the board saw the CPI risk are more balanced around the target than previously seen. (Newswires)
Germany sold their 2-yr Schatz with the first positive yield since June, in a further sign of rotation towards peripheral paper following the ECB's OMT announcements. (RANsquawk) Germany sold EUR 4.084bln in Sep'14 Schatz with a bid/cover of 2.1, up from the previous 1.5 and with a yield of 0.06%, retaining 18.2% today.
After opening markedly higher on the back of the Bank of Japan's easing announcements, European equities have trended lower and back into the red as focus turns once again to the ongoing European debt crisis woes. Technology and telecommunications shares lead the way lower with the financials sector closely following, currently lower by 0.4%. US stock futures have not suffered to the same extent as their European counterparts, indicating a flat-to-minor-positive open on Wall Street today.
FTSE-100 listed Anglo-American are one of the stronger performing stocks in Europe today as smaller company Lonmin report late yesterday that an agreement has been settled with their workers on their respective wage dispute, lifting hopes that a similar deal could be struck with Anglo-American workers. The moves higher in their share price come despite the reports that rubber bullets had been fired at miners near Anglo's Rustenberg mine in South Africa. Anglo-American and Lonmin shares currently trade higher by 1.1% and 1.7% respectively. (RANsquawk)
EUR/USD and GBP/USD edged lower throughout the session as risk appetite that was prevalent during the overnight session in Asia waned. EUR/USD is trading in close proximity to an intraday option expiry level of 1.3000, break below will open the door towards the 200DMA line at 1.2829. USD/JPY came off overnight highs and is consolidating around 79.00 option expiry level, bids seen at 78.80/60. (RANsquawk)
WTI crude futures have come off their best overnight levels seen following the Bank of Japan's easing announcement, coming back into negative territory in a continuation of the themes seen on Monday and Tuesday. The next risk event for the energy complex comes with the weekly DOE crude oil inventories due at 1530BST/0930CDT. Spot gold prices touched their highest level since February this year as the Bank of Japan added to the global central bank easing theme. Heading into the North American open, spot gold has come its best levels but still remains higher by 0.2%. (RANsquawk)