- German and French government officials said that the issue of Eurobonds is not on agenda in tomorrow’s meeting between Chancellor Merkel and President Sarkozy
- BoE's Miles said the UK economy is on a fragile recovery path, and now is not the right time for more asset purchases, which provided support to GBP
- CHF remained under pressure on increased speculation that the SNB may take more drastic measures to check the currency’s gains
Markets remained volatile during the European session amid thin trade owing to a European public holiday, together with indecision regarding the issuance of Eurobonds to help troubled Eurozone nations. During the weekend several German newspapers reported that in their upcoming meeting tomorrow, Chancellor Merkel and President Sarkozy may discuss the issue of Eurobonds, which observed some appetite for risk during early trade. However, as the session progressed both the German and French governments denied the news, saying that the issue of Eurobonds is not on the agenda, which weighed on the EUR and equities, thereby providing support to Bunds. Elsewhere, GBP received a boost following comments from BoE's Miles, who said this is not the right time for more asset purchases.
Moving into the North American open, the economic calendar remains thin, however markets look ahead to Empire manufacturing and TIC flows data from the US later in the session.
• Japanese GDP (Q2 P) Q/Q -0.3% vs. Exp. -0.6% (Prev. -0.9%)
• Japanese GDP Annualised (Q2 P) Y/Y -1.3% vs. Exp. -2.5% (Prev. -3.5%, Rev. to -3.6%) (RTRS)
Moody’s said Fed’s interest rate announcement is positive for US government credit, however it is negative for banks, life insurers, money market fund sponsors, and housing finance agencies. (Sources)
In other news, according to a survey for the USA Today, the chances of the US economy slipping into another recession have risen significantly and now stand at 30%. (USA Today)
Elsewhere, according to Gallup’s daily tracking poll, President Obama’s approval rating has fallen to an all time low below 40% for the first time. The poll showed that 39% of Americans approve of Obama’s job performance, while 54% disapprove. (LA Times)
EU and UK Headlines:
• UK Rightmove House Prices (Aug) M/M -2.1% vs. Prev. -1.6%
• UK Rightmove House Prices (Aug) Y/Y -0.3% vs. Prev. 0.1% (RTRS)
European equities traded higher in early European session as anticipation grew regarding the issuance of Eurobonds to help troubled Eurozone states. However, later in the session, both the German and French governments denied the issuance of Eurobonds, which weighed on equities. In equity specific news, Google announced that it will acquire Motorola Mobility in a deal worth approximately USD 12.5bln. Elsewhere, Bank of America said that it will exit its International Credit Card businesses, adding that TD Bank Group has agreed to purchase co.’s USD 8.6bln Canadian credit card portfolio. Moving into the North American open, equities are trading mixed with health care and basic materials as the best performing sectors.
The CHF demonstrated some further weakness this morning following reports in the Swiss press over the weekend that the Swiss government and the SNB were discussing a EUR/CHF peg around the 1.1100 mark. The German Manager-Magazin reported that a decision on the CHF had already been made and was due to be announced to the general public. The EUR itself came under selling pressure following a German government spokesman confirming that Eurobonds were not the agenda for the meeting between Merkel and Sarkozy, however the EUR/USD pair remains supported by a turgid USD-index. Elsewhere, GBP found some strength after BoE’s Miles said that further assets purchases are not needed at this time.
WTI and Brent crude futures traded higher on the back of positive economic data from the US and Japan, however, as the session progressed prices reversed their earlier gains as Eurozone debt concerns continued to weigh on sentiment.
Oil & Gas News:
• Iran hopes that oil deliveries to India will return to a normal level now that a long-running payment problem has been resolved, the head of international affairs at the National Iranian Oil Co. said. Iran has now received at least EUR 1bln in payment of the EUR 5bln debt. Iran and India have discussed paying for oil exports in Gold with Iran accepting Gold if necessary, according to the Iranian central bank chief.
• Iran’s Bushehr nuclear power plant will start on time and is not being delayed because of disagreements with Russia.
• Libyan rebels advanced north to within 25km (15 miles) of the coastal city of Zawiyah west of Tripoli on Saturday, after a six-hour battle which pushed the front line to its closest point to the capital since the uprising against Muammar Gaddafi began in February. In other related news, Gaddafi urged his people early today to liberate Libya from NATO and traitors, a day after rebel’s captured a key town on the road west to Tunisia, severing Tripoli’s main supply route.