Daily US Opening News And Market Re-Cap: June 22

From RanSquawk

  • Overnight the Greek government passed through a crucial confidence vote, however risk-aversion remained the dominant theme today as markets look ahead to next week when Parliament discusses the country's medium-term fiscal plan
  • A German government source said that the finance ministry will hold talks today on working group level with banks and insurers over private creditor contributions for Greece
  • BoE’s June meeting minutes revealed that some members think it is possible that more QE might be warranted if downside risks materialise

Market Re-Cap

Overnight the Greek government passed through successfully a confidence vote, however risk-aversion remained the dominant theme today as markets look ahead to next week when Parliament discusses the country's medium-term fiscal plan. This is a mandatory requirement for Greece to secure its next tranche of the EU/IMF loan. Comments from German chancellor Merkel regarding contagion from a potential Greek default brought further negative sentiment in the market. Elsewhere, GBP came under substantial pressure following the dovish tone of the BoE's June minutes, which also underpinned the rise in UK fixed income.

Moving forward, markets look ahead to the FOMC rate decision followed by Fed's Bernanke press-conference later in the session. House price index from the US, DOE inventories data, and Norwegian rate decision are also scheduled for later in the session.

Asia Headlines:

China’s annual inflation in June will be higher than May’s 34-month high of 5.5% before moderating in the second half, the National Development and Reform Commission said. The top economic planner said, government tightening measures to control inflation were gradually taking effect and consumer prices would remain under control this year. (RTRS)

Also, China should raise interest rates to reduce inflation expectations, according to Zhu Baoliang, a chief economist for the State Information Centre under the National Development and Reform Commission. He added that the banks’ reserve requirement ratio could be temporarily kept unchanged. (21st Century Business Herald)

Elsewhere, Fitch’s Chu said Chinese banks’ credit risks are underestimated and is distorted by off-balance sheet assets. He added that there is poor disclosure in Chinese banks’ off-balance sheet exposure. Chu said Chinese banks could face crisis despite government willingness to support the sector. (Sources)

US Headlines

The Fed should formally announce a “commitment to an explicit mandate-consistent rate of inflation that it uses as its long-run objective for its policy deliberation”, the Shadow Open Market Committee said. (Sources)

In other news, negotiators seeking a bipartisan plan to reduce federal deficit said they oppose pairing it with only a short term boost in the US debt limit. The group led by Vice President Jo Biden, also remain divided on including increased tax revenue as part of the plan, a position rejected by Republicans. (RTRS)

  • MBA Mortgage Applications (Jun 17) W/W -5.9% vs. Prev. 13.0% (RTRS)

EU and UK Headlines:

German Chancellor Merkel said the EU summit will not make final decisions on Greece, adding that she wants voluntary, substantial, and quantifiable contribution from private sector. Merkel added that it is not possible to demand private sector contribution if the ECB is not in agreement on the method. Merkel also said that she can only warn against a disorderly default, and a Greek haircut could force countries under the EFSF that currently have no problems. Merkel commented that the ECB decided on a voluntary basis to buy Eurozone periphery bonds, and the German government did not in any way forced the ECB to buy peripheral bonds. (RTRS)

Elsewhere, Pimco’s El Erian, predicted that Greece and other European economies would default on their debts. He added it was unlikely but not impossible that a Greek default would trigger another global financial crisis. Also the vote of confidence in Greek PM Papandreou is a “minor step” on the road to a likely default by the Mediterranean nation, said Larry Hatheway, the Chief economist at UBS. (RTRS/Sources)

In other news, Greek debt must be restructured as soon as possible and should include a reduction by about half, Lars Feld, a member of the German government’s council of economic advisors said. The EU must first stabilise the area’s banks to prepare them for a possible Greek default. The debt restructuring should take place in the first half of 2012 at the latest he said. (Rheinische)

Also, according to the BoE’s June minutes, BoE's MPC voted 7-2 to hold benchmark interest rate at 0.5% in June, with Dale and Weale voted for 25 basis points hike. BoE's MPC also voted 8-1 to keep the QE at GBP 200bln in June, with Posen voting for increase to GBP 250bln. (RTRS)

  • Eurozone Industrial New Orders SA (Apr) M/M 0.7% vs. Exp. 1.0% (Prev. -1.8%, Rev. to -1.5%)
  • Eurozone Industrial New Orders NSA (Apr) Y/Y 8.6% vs. Exp. 14.0% (Prev. 14.1%, Rev. to 14.3%) (RTRS)
  • German Bund auction for EUR 3.402bln, 3.25% 04-Jul-21, bid/cover 1.6 vs. Prev. 1.7 (yield 2.96% vs. Prev. 3.04%,
    retention 14.9% vs. Prev. 16.7%) (RTRS)

full report:

Daily Us Opening News


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