Daily US Opening News And Market Re-Cap: August 15

From RanSquawk

  • Further reports from Chinese press suggest the reserve ratio requirement cut has been postponed
  • Bank of England's August minutes show MPC members voted unanimously to leave rates and the APF unchanged
  • Particularly light volumes in the Euro-area due to market closures for Assumption of Mary day

Market Re-Cap

The European morning session has been fairly quiet, with European equities opening lower following over night reports from China that the People's Bank of China might buy back government debt in the secondary market making the much speculated reserve ratio requirement cut it less likely.

With several market closures across the Euro-area thanks to the Assumption of Mary holiday, volumes have been particularly light, and with a distinct lack of European data, market focus was on the release of the Bank of England's minutes for the August rate decision. As expected, the MPC voted unanimously to keep the APF unchanged at GBP 375bln and the benchmark rate unchanged at 0.50%, though some MPC members noted there was a good case for further expansion of QE. The better than expected UK jobs report also helped strength GBP.

Looking ahead to the rest of the session, US CPI data is scheduled to be released at 1330BST/0730CDT, which is expected to show a slight increase of 0.2% for the monthly reading. Alongside this will be the release of the Empire Manufacturing data for August, followed by US TIC flows at 1400BST/0800CDT, and the weekly DoE numbers at 1530BST/0930CDT.

Asian Headlines

The People's Bank of China may buy back government debt in the secondary market in order to supply cash to the market, according to unidentified sources. Current injections of money supply occur through the maturing of central bank bills or cuts in the banks' Reserve Requirement Ratios. (China Business News)

US Headlines

Goldman Sachs said that based on their estimates, it will take until late 2012/early 2013 before Fed officials return to balance sheet

US MBA Mortgage Applications (Aug 10) W/W -4.5% (Prev. -1.8%) - fifth weekly drop. (Newswires)

EU & UK Headlines

The Bank of England minutes showed that all 9 MPC members voted unanimously to keep the benchmark interest rate unchanged at 0.50% and the APF unchanged at GBP 375bln. Some MPC saw good case for further expansion of QE, and noted that Inflation is still susceptible to external price shocks, but is likely to move closer to the 2.0% target in the coming months. BoE's Dale and Broadbent saw costs to reversing July decision.

UK Jobless Claims Change (Jul) M/M -5.9K vs. Exp. 6.0K (Prev. 6.1K, Rev 1.0K)

UK Claimant Count Rate (Jul) M/M 4.9% vs Exp. 4.9% (Prev. 4.9%)

UK ILO Unemployment Rate (Jun) 3M 8.0% vs. Exp. 8.1% (Prev. 8.1%). (Newswires)

EU's Rehn said Spain has an open mind on sovereign aid request, and there has been no decision yet on aid request. Furthermore, EU chiefs are working in the same direction as ECB's Draghi. (Newswires)

Greece is seeking a two-year extension of its latest austerity programme aimed at improving the country’s debt sustainability and prospects for a return to growth. This would slow the pace of the EUR 11.5bln in spending cuts from the present schedule of 2013-14 to a four year spread of 2016.


The major European bourses are seen in negative territory on particularly thin volumes due to market closures in Italy, Greece and Austria
for the Assumption of Mary holiday. Seven out of the ten sectors in the red, Telecommunications seeing weakness following reports that KPN had cancelled the sale of its Belgian unit. Else where, the FTSE 100 traded down following several large cap stocks from the index going ex-dividend, though some of these losses were pared following the better than expected UK unemployment data. Nokia shares   have traded up 7.5% and are leading Eurostoxx as the CEO promised to unveil a new smartphone using Microsoft's latest Windows 8 software soon, raising the prospect it will be launched in early September before Apple unveils its new iPhone.

Standard Chartered is up around 4.60% following reports that it has reached an agreement with New York regulators to pay USD 340mln to settle the Iranian money laundering claims. In additional to this sources noted that September is said to be the earliest for a deal with the US., However, the co. is yet to reach an agreement with the US Treasury. (Newswires)


There was distinct lack of EU related data and instead, market participants paid particular attention to the most recent BoE policy meeting minutes where a unanimous decision to keep the APF, as well as the encouraging jobs report supported the GBP. The broad based GBP strength saw EUR/GBP trip stops below yesterday’s low.

A combination of selling by an Asian central bank, profit taking following recent short-squeeze, as well as broad GBP strength has weighed on EUR/USD for much of the session. There is also is speculation of reserve diversification flow by the SNB. As a result, EUR/USD tripped number of sell stops earlier in the session and remains in a bearish pattern as we enter the North American cross over.


Crude futures have seen choppy trade during the European session so far with strength in the USD and the 2.8mln build in the crude API inventory after-market weighing on prices. Despite this the forecast for today’s DoE inventory is expected to show a draw-down, which is in conflict with last night’s report and therefore has lead to a lack of firm direction in early trade. In further geopolitical tensions the US Defence Secretary Panetta said late yesterday that sanctions on Iran are having an increasing effect and he does not believe Israel has decided on an Iranian attack. With focus falling on Iran, new developments on the situation this week will be a driver in the energy market as volumes remain thin and news-flow light.

In the precious metals, gold, silver and palladium are all trading in minor negative territory as a spill over from sentiment yesterday where better data out of the US dampened expectation of near-term stimulus from the Fed. Looking ahead the main focus in the commodity  sector will be the weekly DoE inventory numbers due at 1530BST (0930CDT) which are forecast to show a bounce following the large draw-down seen in the past two weeks.


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