Daily US Opening News And Market Re-Cap: June 27

From RanSquawk

  • Italy sells EUR 9.00bln 6-month bills in an auction that drew decent demand, as such, focus now turns to tomorrow's 5- and 10-year issuance from the Italian treasury.
  • Spreads between peripheral 10-yr government bond yields and their German counterpart seen tighter on the day; Spanish PM Rajoy says he is to call for measures to ease borrowing costs at this week's summit.
  • Markets remain cautious, with volumes remaining light ahead of the two-day EU summit set to kick off tomorrow.

Market Re-Cap

European equities are seen modestly higher at the midpoint of the European session, with the utilities and financials sectors leading the way higher. As such, the Bund is seen lower by around 40 ticks at the North American crossover. The closely-watched Spanish 10-yr government bond yield is seen lower on the day, trading at 6.85% last, as such, the spread between the peripheral 10-yr yields and their German counterpart has been seen tighter throughout the European morning.

Issuance of 6-month bills from the Italian treasury passed by smoothly, selling EUR 9bln with a higher yield, but not an increase comparable with yesterday’s auction from the Spanish treasury. The decent selling from Italy today may pave the way for tomorrow’s issuance of 5- and 10-year bonds, which will be closely watched across the asset classes.

Data of note has come from Germany, with the state CPIs coming in slightly higher than the previous readings, proving supportive for the expectation of national CPI to come in flat at 0.0% over the last month.

Looking ahead in the session, US Durable Goods Orders for May are due at 1330BST/0730CDT followed by Pending Home Sales and the weekly DOE Oil Inventories at 1500BST/0900CDT and 1530BST/0930CDT respectively.

Asian Headlines

China may cut the RRR in July as funds are expected to remain tight even after the CNY 95bln of reverse repos by the PBOC yesterday, according to unsourced reports. (Shanghai Securities News)

The Chinese economy is expected to grow by more than 7.5% in the first half of this year, according to the ministry of industry and information technology. (Newswires) The ministry added that some economic indicators slowed faster in Q2 and economic downward pressure is increasing.

US Headlines

BarCap preliminary US Treasury month-end extension seen +0.02yrs

EU & UK Headlines

Italian PM Monti has set the stage for a tough fight with Germany at the EU summit this week, insisting he will continue to push Italy's proposal to use Eurozone bailout funds in an attempt to stabilize financial markets. (FT)

The Eurogroup are to hold a teleconference today in order to discuss a request for emergency lending from Cyprus and the details of a similar request from Spain, according to Eurozone officials. (Newswires)

The leader of the opposition SPD has called for German Chancellor Merkel to back urgent crisis measures to reduce Eurozone sovereign borrowing costs, warning that without such action the EMU will explode. The opposition leader did back Merkel in opposing jointly-guaranteed Eurozone bonds or a redemption fund. (FT)

ECB's Weidmann has said crafty attempts to cheat past EU treaties by the quick introduction of Euroarea liability such as Eurobonds, deposit insurance or a joint debt fund would undermine confidence in the currency union. (Sueddeutsche Zeitung)

Spain's government may increase taxes to rein in the budget deficit, including scrapping a rebate for homeowners that PM Rajoy introduced six months ago to meet a campaign pledge. (Newswires)

France is seeking to raise EUR 500mln with an oil product tax. The tax is to be based on the value of stocks of oil products and will affect both refiners and distributors, according to unidentified sources. (La Tribune)

EU's Barnier says a banking union is the first step to integration and that the UK must be a part of the supervision plan. (Newswires) Italy sells EUR 9.00bln 6-month BoTs with a bid/cover 1.615 (Prev. 1.61), yield 2.957% (Prev. 2.104%) - highest yield since December. (Newswires)


European equities are seen higher at the halfway point today, with utilities and financials leading the way, and the basic materials sector seen as the only laggard. Trade in equities remains cautious, as investors continue to focus on the tail-end of the week and the EU summit as the next risk events. US equity futures currently indicate a slightly higher open on Wall Street today.

In other equity news, the Glencore and Xstrata merger deal continues to take focus following last night's news that Qatar holdings has said it wants better terms in the merger between the companies and believes an exchange ratio of 3.25 new Glencore shares for every Xstrata share would provide a more appropriate distribution of benefits. With Qatar Holdings remaining a major shareholder in Xstrata, the requests from Qatar may throw the entire merger deal into question. At the midpoint today, Xstrata and Glencore shares trade lower by 0.2% and 2.1% respectively.

German utility E.ON are seen outperforming today, following news that the company have received final bids from four bidders for its waste incinerator business as it tries to raise more than EUR 1bln, according to sources close to the process. Halfway through the day, E.ON shares trade 2.8% higher.


EUR/USD has been range-bound throughout the European morning, currently trading just above the pivot level for the day. The pair is seen between two touted option expiries at the 1.2450 and the 1.2500 levels for 10am (1500BST) NY cut today. The pair has been observed slightly softer throughout the day as participants continue to eye the EU summit later in the week.

Unconfirmed market talk of decent sized bids in GBP/USD have helped prevent any major downside this morning, but the pair does continue to be observed. The pair did experience some strength following the better-than-expected CBI reported sales figure from the UK, but the effects were not long-lasting, resuming the downward trend. A touted option expiry in the pair lies at 1.5600 for the 10am (1500BST) NY cut.


WTI and Brent crude futures are seen lower going into the NYMEX pit open, moving in tandem with European equities, however both remain in a tight range throughout the European session. Energy participants can look forward to the weekly DOE inventory numbers as the next flashpoint of price action, due at 1530BST/0930CDT.

Oil & Gas News:

  • Oil and gas producers in the Gulf of Mexico have progressed with their restart of operations as tropical storm Debby weakened and made landfall in Florida. US regulators have said more than half of the Gulf's output that was shut for the storm has been restored.
  • According to a Harvard research fellow global oil supplies are growing at such a rate that they could outstrip demand and lead to a collapse in world prices.
  • TransCanada have been granted one of three permits it needs to move ahead with the USD 2.3bln southern section of the Keystone XL pipeline. The permit was granted by the US Army Corps of Engineers. The project still needs permits from Tulsa, Oklahoma and Fort Worth, Texas.
  • Iraq's Majnoon oilfield, one of the country's largest, has started its shutdown for maintenance and it is not known how long the repairs will last,  according to the field operator Royal Dutch Shell.
  • The Ecuadorian oil minister has said he expects global crude prices to remain around the USD 80.00/BBL mark over the next six months, but did add that they could move to USD 90.00/BBL if OPEC members complied with their respective output quotas.
  • Iran is looking to export more gas to Pakistan and India in order to offset the fall in crude exports, according to a National Iranian Oil Company official.
  • Indian refiners processed 2.9% more oil in May than from one year ago, the highest rate of growth since November, according to data releases from the Indian government.
  • Nigerian President Goodluck Jonathan is replacing the managing director of state oil company Nigerian National Petroleum Corp (NNPC) and three other senior directors on Tuesday, a presidency statement said.
  • Angola revises up its August crude oil export plan to 1.87MBPD, up 18.4% from July, according to loading schedules.

Geopolitical News

Iran cannot lawfully block access to tankers carrying crude through the Strait of Hormuz, according to a UK professor on international energy law and former WTO-adviser.