Submitted by Ran Squawk:
- Eurozone CPI Estimate (Sep) Y/Y 3.0% vs. Exp. 2.5% (Prev. 2.5%)
- Chinese Premier Wen says economic growth remains relatively fast and rapid prices have been contained.
- “Operation Twist" might be more powerful than many investors expect, according to the WSJ.
- The IMF is exploring how it can have at least USD 1.3tln in lending power, according to officials involved with the discussions.
- German upper house approves EFSF expansion.
- Bank of Spain says all Spanish banks now comply with its minimum solvency ratios.
Today’s session has been a quiet one so far as markets digest yesterdays German EFSF vote and trading has seen light volumes heading into the month and quarter end. Weakening in the Euro currency was observed after higher than expected Eurozone CPI, which led to market participants further questioning whether the ECB will now be cutting interest rates in their monthly Governing Council meeting next week. As European bank fragility has remained in focus in recent times, news came from the EU Commission that they have temporarily approved state aid worth EUR 4.75bln to recapitalize three Spanish savings banks, although little reaction was seen in the markets. The largest moves have been seen in crude futures today with WTI and Brent trade down around USD 1, extending their quarter losses which remain on track for their biggest drop in 15 months. We’ve also seen the German upper house now approve EFSF expansion, and are awaiting final approval from Austria at today, although no time has been given.
Looking ahead to the US cash open, focus will be on the US Chicago PMI data which is expected to show a slightly lower than previous reading at 55.0, plus the final University of Michigan Confidence number 10 minutes later. Hope will be that these readings add to yesterday’s indication of some recovery in the US economy.
· Japanese Jobless Rate (Aug) M/M 4.3% vs. Exp. 4.7% (Prev. 4.7%)
Japanese CPI (Aug) Y/Y 0.2% vs. Exp. 0.1% (Prev. 0.2%)
Japanese Industrial Production (Aug P) M/M 0.8% vs. Exp. 1.5% (Prev. 0.4%), Y/Y 0.6% vs. Exp. 1.1% (Prev. -3.0%) (RTRS)
· Chinese HSBC Manufacturing PMI (Sep) M/M 49.9 vs. Prev. 49.9 (RTRS)
· Chinese Premier Wen says economic growth remains relatively fast and rapid prices have been contained. (RTRS)
· The financing problems affecting Chinese real estate developers could help an overheating sector let off steam and prevent a dramatic property market collapse, according to senior government officials. (FT-More)
**NYSE LIFFE US MINI MSCI EAFE AND EMERGING MARKETS INDEX FUTURES ARE HAVING A RECORD MONTH THIS SEPTEMBER UP 36% (155K) AND 47% (215K) RESPECTIVELY FROM ITS PREVIOUS RECORD SET BACK IN JUNE 2011. **
EU and UK Headlines:
· Eurozone CPI Estimate (Sep) Y/Y 3.0% vs. Exp. 2.5% (Prev. 2.5%) (RTRS)
· German upper house approves EFSF expansion. (RTRS)
· Eurozone finance ministers are unlikely to decide on EFSF leveraging at the meeting on Monday according to officials. The Eurozone will pick EFSF leveraging method that will not require a new ratification process and that will not trigger rating downgrades of the EFSF or any guarantor-countries. (RTRS)
· NY Federal Reserve says Forex Swaps with ECB total USD 500mln. (RTRS)
· The IMF is exploring how it can have at least USD 1.3tln in lending power, according to officials involved with the discussions. (WSJ)
· Bank of Spain says all Spanish banks now comply with its minimum solvency ratios with the recapitalization process using EUR 7.551bln from FROB, EUR 5.838bln in private capital. (RTRS)
· Slovak junior government SAS party says it is open for talks on EFSF approval and believes a solution acceptable for Europe and Slovakia can be found. (RTRS)
European equity markets have continued a downward trend throughout the morning with the DAX index underperforming its peers, trading down approximately 3% heading into the North American open. The quarter and month end today has seen some position liquidation, coupled with the unexpectedly high Eurozone inflation data which precedes the ECB rate decision next week and could jeopardise speculated plans for a benchmark rate cut. The financial sector has therefore been particularly weak despite positive news out of Spain and the successful recapitalisation of Spanish savings banks. The Basic Materials sector has again underperformed amid worries regarding Chinese growth persisting, with the overnight HSBC PMI being contractionary even though it was in line with the previous.
The forex markets have been driven largely by the USD-index in the European session, with market talk of USD related buying towards the London fixings. As a result the USD-index has traded consistently above the +0.50% mark which has pressured the major pairs, EUR/USD moving below 1.3500 at its low. In related news there has been much focus on EUR/GBP with market talk of month end related trade. An official European name is said to be selling the pair with a French name and a German name said to be on the bid, this is however unconfirmed market talk. Elsewhere, the NZD has been weak following the New Zealand sovereign downgrade by both Fitch and S&P. USD/JPY has come off the overnight lows which were precipitated by the generally weak Japanese economic data, following the Japanese finance minister saying that the country’s intervention fund had been increased by JPY 15trl.
WTI and Brent crude futures pared back earlier session gains and trade back in negative territory. Prices this quarter remain on track for their biggest drop in 15 months on concerns that a slowing global economy will undercut fuel demand.
Oil & Gas News:
· Iraq’s oil exports from Southern ports jump to 1.80MBPD in September, which is the highest since January according to shipping data.
· Royal Dutch Shell says fire stricken Singapore refinery will take at least a month to restart from complete shut-down according to sources.