Daily US Opening News And Market Re-Cap: February 2

From RanSquawk

  • Hopes of a Greek PSI deal have edged away following comments from EU’s Juncker, calling the discussions “ultra-difficult”, contrary to earlier reports from EU commissioner Rehn that talks are very far along.
  • China’s Premier Wen has said China is considering greater involvement in the EFSF and ESM stabilisation funds

Market Re-Cap
European Indices are sliding following comments from EU’s Juncker that Greek PSI talks remain “ultra-difficult”, despite earlier gains following comments from the Chinese Premier considering further contributions to the EFSF and the ESM.
The Basic Materials sector is outperforming others amid news of a possible merger between Glencore and Xstrata, causing shares in both companies to trade in strong positive territory ahead of the North American open.
Oil & Gas are one of the worst performing sectors in Europe today, with Royal Dutch Shell shares showing the biggest losses following disappointing corporate earnings.
Elsewhere, S&P released a report suggesting Eurozone recession could end in late 2012, forecasting 1% GDP growth for the Eurozone in 2013, however these comments were not followed by significant European index movements.
In terms of fixed income securities, Spain held a well received bond auction earlier in the session, with all three lines showing falling yields and strong bid/cover ratios.
US Headlines
US Senate negotiators have offered a partial jobless benefits proposal and lawmakers are working on a deal to extend key tax breaks and benefits expiring at the end of the month. (Sources)
US Challenger Job Cuts (Jan) Y/Y 53.48K vs. Prev. 41.8K. (Sources)
Asian Headlines
Chinese Premier Wen has said China is considering and is researching into greater involvement in the EFSF and the ESM stabilisation funds. (RTRS)
BoJ’s Yamaguchi has said Japan must watch the impact of the European debt crisis on global markets and has said Japan will take appropriate policy measures if necessary. (Sources)
EU and UK Headlines
The EU’s Juncker has said Greek PSI talks remain “ultra-difficult”, contrary to earlier reports from EU Commissioner Rehn, stating that a Greek deal was very far along. On the back of these comments, risk averse sentiment has caused a flow into fixed income securities, with the German 10-year trading in strong positive territory ahead of the North American open.
Separate reports on the Greek talks have said the deal is being held up by differences between the IMF and Germany, with the IMF wanting sacrifices by official creditors with Germany disagreeing and not seeing the need for official sector involvement. Germany also wants deeper cuts in the Greek budget according to sources, and the IIF have said that Greece and private creditors are close to finalising the debt agreement and they expect to conclude discussions by the ‘close of this week’. (Sources)
Leader of the Greek Laos party Karatzaferis has written to EU’s Barroso and Van Rompuy and requested a loosening of the terms of Greece’s second bailout or risk a “social explosion”, furthering unease over the domestic economy. (FT-More)
European Indices are sliding into negative territory following comments from EU’s Juncker, prompting flows out of the riskier assets and into fixed income securities.
Royal Dutch Shell have posted below expected earnings before the European open, causing shares to trade in negative territory at the midpoint of the European session. Further declines in energy companies have pushed the Oil & Gas sector downwards, with the sector being one of the worst performing at the midpoint of the European session.
In the Basic Materials sector, Xstrata and Glencore shares are performing strongly following reports of a planned merger between the two companies, leading the sector to outperform all others in Europe ahead of the North American open. (Sources)
Despite reports that the EU is considering easing asset-lending rules for banks, Financials continue to trade relatively in minor negative territory ahead of the North American open following risk averse flows away from the more dangerous assets.
EU considers easing asset lending rules for lenders. (WSJ)
European regulators are considering loosening some rules that require lenders to maintain deep pools of ultrasafe assets to protect them in a crisis. This would allow the banks to hold a broader variety of assets. European regulators and central bankers say they have grown increasingly worried in recent weeks that overly stringent liquidity requirements could force banks to rapidly shrink by constraining their lending.
Top performing sectors in the BE500: Basic Materials (+1.43%), Consumer Services (+0.05%), Industrials (+0.05%)
Worst performing sectors in the BE500: Utilities (-0.76%), Oil & Gas (-0.75%), Consumer Goods (-0.46%)

EUR/USD is currently trading in negative territory following flows away from Europe as hopes of a Greek PSI deal edge further away, prompted by EU’s Juncker referring to the talks as “ultra-difficult”. EUR/USD may come under increasing downwards pressure later on in the session amid market talk of a left hand side ECB fix due at 1315GMT, however this remains unconfirmed.
Australian Trade Balance M/M (Dec) 1709mln vs. Exp. 1200mln (Prev. 1380mln, Rev. 1343mln). (Sources)
Japanese Finance Minister Azumi has said the domestic economy cannot overlook speculative moves in the foreign exchange market, and he will take decisive steps if necessary to intervene. (Sources)

WTI Crude is trading downwards ahead of the North American open following an unexpected glut in US energy supplies reported yesterday. Bank of America have released comments concerning forecasts for WTI in Q1 2012 to be around USD 100/BBL.
Oil & Gas News:

• Iran has agreed to accept 45% of the payment for its oil exports to India in rupees after recent negotiations with Indian officials during their visit to Tehran, the Daily Indian Express reported quoting unnamed sources.
•  Iraq oil exports in January fell 1.9% M/M to 2.106MBPD, according to source close to the State Oil Marketing Organization.
•  JP Morgan have said commodities may “bottom out” in Q2 when the Chinese government steps in to boost growth.
•  Iraq have resumed Northern Crude oil exports via Turkey after a technical halt.
•  BofA raise Q1 WTI price forecast to USD 100 from USD 92.
•  BofA raise Q1 Brent price forecast to USD 108/BBL from USD 100/BBL.
•  BofA lowers US Q1 gas forecast to USD 2.90 from USD 3.40.
•  BofA lowers US gas output forecast to 2BCF/D from 2.4BCF/D.
•  BofA says cuts Q1 2012 US natural gas price forecast to USD 2.90/MMBTU from USD 3.40/MMBTU
Geopolitical News:

•  German Chancellor Merkel has urged China to further pressure Iran to be more “open and transparent” over its nuclear program.
•  Citi have reported that the Iranian oil embargo will remove 500,000-700,000BBL/D.
•  Chinese Premier Wen has said China supports further discussion between Iran and international organisations, and does not support any Middle-Eastern nation developing nuclear weaponry.


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