Daily US Opening News And Market Re-Cap: September 27

Tyler Durden's picture

From Ran Squawk:

  • A European official said a detailed plan is being worked on leveraging
    EFSF money with the plan using some EFSF money to shore up bank
    capital.
  • The Austrian finance minister said Euro-zone officials are to discuss the EFSF leveraging plan on Monday
  • German Chancellor Merkel says we are not prepared to implement further stimulus programmes.
  • Confirmation of the EFSF leveraging talks sparked outrage in Germany,
    where opposition politicians threatened to derail the plans by voting
    against a key amendment to the bail-out fund this Thursday.

Market Re-Cap
 
Early European trade saw a continuation of the Asian session with easing concerns over the impact of the Europe debt crisis on the global economy. An interesting article in the Telegraph drew attention this morning, which said that the German opposition politicians threatened to derail boosting the Eurozone bail-out fund plans by voting against a key amendment to the fund this Thursday, although government bond yield spreads tighter across the board following reports that a detailed plan is being worked on leveraging the EFSF. Early in the session Spain's Salgado said plans to extend EFSF to EUR 2trl was not on the table, causing a downtick in EUR/USD, breaking through the 1.3500 handle, and earlier gains in the pair how now been pared back. The EU commission said no formal debate has started on EFSF leveraging and leveraging of the EFSF can be done without changing the treaty. Outside the Euro-zone UK CBI Reported Sales came in as expected at -15, with cable trading flat on the session despite some weakening in the USD-Index.
 
Looking forward to the North American open, market participants will be focussing on economic data in the form of US Consumer Confidence and political speakers EU's Junker, Fed's Fisher and the meeting between German Chancellor Merkel and Greek PM Papandreou after the European market close.
 
Asian Headlines
 
·   The IMF said Chinese inflation may decline below 4.5%, barring another wave of food price increases. Meanwhile, China should keep a proactive fiscal policy according to a researcher. (People’s Daily/21st Herald)
 
EU and UK Headlines:
 
·   A European official said a detailed plan is being worked on leveraging EFSF money with the plan using some EFSF money to shore up bank capital. The plan would use some as seed money for a European investment bank that would form a Special Purpose Vehicle that could issue bonds and sovereign debts. These bonds would be able to be used as collateral at the ECB with the plan awaiting approval from Eurozone governments. (CNBC/Sources)
·   EU commission says no formal debate has started on EFSF leveraging, however no comments were given relating to informal talks. The Austrian finance minister said Euro-zone officials are to discuss the EFSF leveraging plan on Monday (Sources)
·   German Chancellor Merkel says we are not prepared to implement further stimulus programmes. Echoed by a German government spokesman who said that the finance minister told the cabinet the EFSF volume will not be expanded, volume stands as it is. (RTRS)
·   Confirmation of the EFSF leveraging talks sparked outrage in Germany, where opposition politicians threatened to derail the plans by voting against a key amendment to the bail-out fund this Thursday. (Telegraph)
 
EQUITIES
 
Equity markets in Europe have reacted positively to the news that a detailed EFSF leveraging plan is being worked upon. As in the Asian session, financials have outperformed with French banks again seeing significant gains.  Elsewhere, the rally in commodity prices has helped the Basic Materials and Oil & Gas stocks so far in the European session, with the German and French bourses the main beneficiaries.

FX
 
Despite the positive reaction in the equity markets regarding the EFSF developments EUR/USD has been trading relatively flat given the uncertainty created by Germany steadfastly refusing to acknowledge any increase to the EFSF beyond that which has already been agreed.  There has been market talk through the session that an Asian central bank has been trading a short-term 1.3400-1.3600 range in EUR/USD which has capped the upward momentum.  Elsewhere, commodity linked currencies have been well supported by the general strength in commodities with AUD looking to move back toward parity against the USD.  Commentary from JPMorgan noted that there is an increased risk of JPY intervention between now and the 30th of September which is the fiscal half-year end in Japan, with the BoJ possibly looking to help Japanese exporters.  As a result the JPY has weakened slightly across the board.

COMMMODITIES
 
The Asian and European sessions have both seen WTI crude futures trade in firm positive territory as commodities have rallied across the board from yesterday’s sell-off, aided by EFSF developments in Europe supporting risk sentiment.
 
Oil & Gas News:

·   A Libyan oil official says oil exports are expected to resume today.
·   Supporters outnumbered critics at a government-sponsored hearing on the proposed TransCanada Corp's Keystone XL pipeline that would ship oil from Canada to the Texas Gulf Coast.