Daily US Opening News And Market Re-Cap: June 24

From Ran Squawk:

  • Greece reached a deal on extra tax rises and spending cuts with the EU/IMF to plug a EUR 3.8bln funding gap
  • Better than expected German IFO data promoted risk-appetite, which supported EUR
  • Shares in Italian banks, including Unicredit and Intesa Sanpaolo, got suspended, partly due to market talk that some Italian banks had failed stress tests
  • Moody’s changed its outlook on 13 mid-sized and smaller Italian banks to negative, and warned them of a potential downgrade. However, Italian PM said Italian banks are well capitalised, and is not worried about Moody’s warning
  • ECB’s Gonzalez-Paramo said the Eurozone crisis is not over and will not end soon
  • Greece's PASOK lawmaker, Robopoulos, said that he may vote against the mid-term fiscal plan

Market Re-Cap

European equities traded in positive territory for a vast majority of the session after EU leaders promised more money to help Greece stave off a looming bankruptcy. However, financials came under significant pressure following share suspensions of some Italian banks, including Unicredit and Intensa Sanpaolo, after another Greece's PASOK lawmaker said that he may vote against the mid-term fiscal plan, allied with market talk of some Italian banks failing stress tests. This also weighed on EUR, which earlier received support after better than expected German IFO data.

Moving into the North American open, markets look ahead to key economic data from the US in the form of final reading of the first quarter GDP, and durable goods orders. In fixed income, there is another Fed's Outright Treasury Coupon Purchase operation in the maturity range of Dec'13-May'15, with a purchase target of USD 4-5bln.

Asia Headlines:

Chinese Premier Wen Jiabao said that China’s efforts to stem inflation have worked and that the pace of consumerprice increases will slow. (Sources)

In other news, China may continue to tighten its polices in H2 because consumer prices may surge if the policies were loosened too early, according to Chen Dongqi, a deputy head of the National Development and Reform Commission’s macroeconomic research institute. (Sources)

Also, China has reiterated orders to banks to curtail lending to property developers to guard against overheating in the sector, according to Liao Min, head of Shanghai branch of the China Banking Regulatory Commission. (RTRS)

US Headlines

US Republicans walked out of budget talks setting up a showdown between President Obama and House Speaker Boehner over how to extend US borrowing and avoid a looming debt default. In other news, White House's Carney said debt talks have made 'a lot of progress’; Obama will keep looking for debt compromise (RTRS/Sources)

In other news, the US economy is “sputtering, but not stalling” Goldman Sachs said. The “recent disappointment in H1 growth is not yet long enough or deep enough to tilt the balance of risks towards recession” Goldman Sachs added. (Sources)

Elsewhere, according to Fitch, US banks’ continue to face revenue pressures and risks remain in US residential and commercial real-estate, which may necessitate further loan impairments due to continued high defaults and weak realestate values. (Sources)

Also, Fed’s balance sheet expanded to USD 2.841tln in the week ended June 22 from USD 2.811tln the prior week. Foreign central banks’ overall holding of US marketable securities at the Fed fell USD 484mln in the week ended June 22, to stand at USD 3.457tln. (RTRS)

BarCap month-end extensions: US Treasury +0.06 years

EU and UK Headlines:

EU leaders promised more money to help Greece stave off looming bankruptcy, provided its parliament enacts an austerity plan finalised in fraught last minute talks with international lenders. Greek PM promised to push through radical economic reforms after the new finance minister clinched agreement with EU and IMF inspectors on extra tax rises and spending cuts to plug a EUR 3.8bln funding gap. The EU leaders also exhorted conservative Greek opposition leader Samaras to rally behind the austerity programme, but he stuck his refusal to vote for the entire plan, saying he would support the spending cuts but not tax increases. The leaders also approved the creation of a permanent Eurozone bailout fund from June 2013 as well a strengthening of the existing temporary rescue fund. (RTRS)

  • German IFO Business Climate (Jun) M/M 114.5 vs. Exp. 113.4 (Prev. 114.2)
  • German IFO Current Assessment (Jun) M/M 123.3 vs. Exp. 120.8 (Prev. 121.4)
  • German IFO Expectations (Jun) M/M 106.3 vs. Exp. 106.3 (Prev. 107.4) (RTRS)

BarCap month-end extensions: Euro Sovereign Index +0.06 years
BarCap month-end extensions: Sterling Index +0.22 years

Full report:

Daily Us Opening News


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