From Ran Squawk:
- Market talk of the ECB buying in the Eurozone periphery government bonds, together with an affirmation of Ireland's sovereign ratings by the S&P boosted risk-appetite
- EU's Rehn said the European Commission will present a report on feasibility of the Eurobonds, adding that effective lending capacity of the EFSF and its scope should be boosted
- CHF came under selling pressure in early trade after market talk of further intervention by the SNB
- The Eurozone 10-year government bond yield spreads narrowed across the board as the European session progressed
- Markets look ahead to the Nonfarm Payrolls report from the US due to be released at 1330BST (0730CDT)
Risk-appetite picked up during the European session backed by market talk of the ECB buying in the Eurozone periphery government bonds, together with an affirmation of Ireland's sovereign ratings by the S&P. Comments from EU's Rehn that the commission will present a report on the feasibility of Eurobonds, and favourable comments from him on boosting the effective lending capacity and scope of the EFSF, further enhanced appetite for risk. This resulted in outperformance of the Eurozone peripheral indices, and supported financials, whereas Bunds came under pressure, and narrowing was observed in the Eurozone peripheral 10-year government bond yield spreads across the board. Elsewhere, renewed risk-appetite together with weakness in the USD-Index helped EUR/USD and GBP/USD, however CHF came under selling pressure after market talk of further intervention by the SNB. Also, an unexpected decline in the net change in employment data from Canada weighed on the CAD.
Moving into the North American open, the main focus of the market remains on the nonfarm payrolls data from the US, however consumer credit data is also scheduled for later in the session. Markets will also keep an eye on building permits and PMI figures from Canada.
Fitch said Japan’s policy flexibility, as demonstrated by its latest easing measures and currency intervention, is a support for the sovereign “at the margin”. (Sources)
In other news, Chinese inflation rate may climb above 5% this year, although the pace of price rises may ease slightly in the second half of 2011, according to Chen Jiagui, a researcher at the Chinese Academy of Social Sciences. (People’s Daily)
Fed’s Bernanke may signal during August 9th Fed’s meeting that it will purchase Treasury securities with maturities of 10 years or greater in order to stimulate the economy. This would mark a change from the purchases during QE2, which concentrated more on the centre of the yield curve. (CNBC)
Elsewhere, the Fed’s balance sheet expanded to USD 2.851trl in the week ended August 3rd from USD 2.848trl in the week ended July 27th. Also, foreign central banks’ overall holdings of US marketable securities at the Fed rose USD 20.99bln in the week ended August 3rd to stand at USD 3.472trl. (RTRS)
EU and UK Headlines:
• German Industrial Production (SA) M/M June -1.1% vs. Exp. 0.1% (Prev. 1.2%, Rev. to 0.9%)
• German Industrial Production (NSA and WDA) Y/Y June 6.7% vs. Exp. 8.1% (Prev. 7.6%, Rev. to 7.2%)
• UK PPI Input NSA (Jul) Y/Y 18.5% vs. Exp. 18.7% (Prev. 17.0%, Rev. to 16.8%), fastest rise since Sep'08
• UK PPI Output NSA (Jul) Y/Y 5.9% vs. Exp. 5.8% (Prev. 5.7%)
• UK PPI Output Core NSA (Jul) Y/Y 3.3% vs. Exp. 3.2% (Prev. 3.2%)
• UK Halifax House Prices SA (Jul) M/M 0.3% vs. Exp. 0.0% (Prev. 1.2%)
• UK Halifax House Prices (Jul) 3M/Y -2.6% vs. Exp. -2.8% (Prev. -3.5%) (RTRS)
European equities came off their earlier lows as risk-appetite gathered pace during the session on the back of market talk of the ECB buying in the Eurozone periphery bonds, upbeat comments from EU’s Rehn on the EFSF, together with S&P affirming Ireland’s sovereign ratings. This resulted in the Eurozone peripheral indices to outperform their European peers, and provided support to financials in particular. Moving into the North American open, equities are trading in negative territory, with health care and oil & gas as the worst performing sectors.
Renewed risk-appetite together with weakness in the USD-Index helped EUR/USD and GBP/USD, however CHF came under selling pressure after market talk of further intervention by the SNB. Also, an unexpected decline in the net change in employment data from Canada weighed on the CAD.
• Canadian Net Change in Employment (Jul) M/M 7.1K vs. Exp. 15.0K (Prev. 28.4K)
• Canadian Unemployment Rate (Jul) M/M 7.2% vs. Exp. 7.4% (Prev. 7.4%) (RTRS)
In other news, SNB’s Hidebrand said he expects a marked weakening in the Swiss economy in the second half of 2011, adding that the unemployment rate may rise again in the next quarters. He said he will not tolerate a further appreciation in the CHF without acting, and the SNB is prepared to take further measures if necessary. He also said that pegging the CHF to the EUR is not compatible with the constitution, adding that there is no risk of inflation in Switzerland at the moment. (RTRS)
Elsewhere, Australian Central bank said that it considered raising interest rates this week as it lifted forecast for inflation, but decided it was prudent to wait as acute uncertainty in markets threatened global growth. The RBA lowered its 2011 growth forecast to 3.25% vs. its previous forecast of 4.25%, and said maintained its 2012 and 2013 growth forecasts at 3.75%. It raised 2011 and 2012 underlying inflation forecasts to 3.25% vs. its previous forecast of 3%, but left 2013 forecast at 3.25%. (RTRS)
WTI and Brent crude futures recovered from their earlier session lows as risk appetite gathered pace, allied with a weakening USD-Index.
Oil & Gas News:
• According to the Schork report, WTI crude below USD 90 per barrel level should be looking very cheap for the long term players.
• Iran’s OPEC governor said that OPEC ministers will meet if downward oil price trend continues, according to the Oil Ministry website. He added that it is too soon to say whether an emergency OPEC meeting is needed.
• An oil pipeline that exploded in Iran on Friday was of “very average size” of 40,000 BPD, according to an oil ministry official, adding that around 10,000 barrels of oil was burned in fire.
• India’s Mangalore Refinery and Petrochemicals will get at least two August cargoes from Iran after it restarted payments through a Turkish bank following a seven month gap, according to two sources familiar with the issue.
• According to traders, Iranian fuel oil inflows to East Asia are expected to stay at current low levels of less than 300,000 tonnes for September, as exports remain curbed by disruptions to country’s domestic natural gas supplies for a second consecutive month.
• According to a report by the NDRC, China could see a surge in crude-oil imports in the weeks ahead if refiners and state-owned oil companies take advantage of an opportunity to stock up on cheap oil.
• Gaddafi’s son, Khamis, was killed in an overnight raid by NATO forces on the town of Zliten, according to the French radio station Europe 1.