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US OPENING NEWS INCLUDING: Moving into the North American open, markets look ahead to key economic data from the US in the form of jobless claims, trade balance as well as the DOE oil inventories report

Last updated: 10:14 13 Oct 2011 EDT, First published: 09:14 13 Oct 2011 EDT

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Political and debt concerns surrounding Italy together with a downbeat ECB’s monthly bulletin promoted risk-aversion

Gilts received support following a well-received conventional Gilt auction from the UK, together with comments from BoE's Bean in favour of further QE

The USD-Index gained amid risk-averse trade, which in turn weighed upon EUR/USD and GBP/USD

The third quarter corporate earnings from JP Morgan beat on the EPS and revenue

RANsquawk European Morning Briefing Video: https://youtu.be/IP-SxBKQsdc

Market Re-Cap

Minutes of the FOMC as well as the BoJ's September meetings showed that policymakers considered scope for further monetary easing, which provided support to the Nikkei and helped European equities in early trade. However, as the European session progressed, equities came under pressure on the back of political and debt concerns surrounding Italy allied with a downbeat ECB's monthly bulletin. Lacklustre corporate earnings from Roche weighed upon the health care sector, whereas basic materials and oil & gas sectors came under pressure as the USD-Index strengthened as well as a decline in Chinese trade balance data. Market participants also paid attention to news flow regarding possibility of a much higher than anticipated haircut on Greek bonds, which further sagged appetite for risk. Weakness in equities provide support to Bunds, and the Eurozone 10-year government bond yield spreads generally widened, with particular widening observed in the Italian/German spread despite a successful BTP auction from Italy. Gilts received support following a well-received conventional Gilt auction from the UK, together with comments from BoE's Bean in favour of further QE. In the forex market, the USD-Index received a boost amid risk-averse trade, which in turn weighed upon EUR/USD and GBP/USD, whereas GBP came under further pressure following dovish comments from BoE's Bean. In other news, NZD came under selling pressure due to an unexpected decline in the Business PMI data from New Zealand, however AUD/USD remained in positive territory on the back of better than expected employment data from Australia overnight.

Moving into the North American open, markets look ahead to key economic data from the US in the form of jobless claims, trade balance as well as the DOE oil inventories report. Market participants will keep a close eye on developments in the Eurozone pertaining to the ongoing debt crisis. In terms of fixed income, USD 13bln 30-year Note auction together with a 30-year TIPS refunding announcement are scheduled for later in the session. There is also another Fed's Outright Treasury Coupon Purchase operation in the maturity range of Oct'17-Aug'19, with a purchase target of USD 4.25-5bln.

Asian Headlines

Minutes of the BoJ’s September meeting showed that a few BoJ members said further monetary easing may become necessary in future as the economy faces increasing risks including Europe’s debt crisis. (RTRS)

Chinese Trade Balance (USD) (Sep) Y/Y 14.51B vs. Exp. 16.30B (Prev. 17.76B)

Chinese Exports (Sep) Y/Y 17.1% vs. Exp. 20.5% (Prev. 24.5%) 

Chinese Imports (Sep) Y/Y 20.9% vs. Exp. 24.2% (Prev. 30.2%) (RTRS)

US Headlines:

The US congress approves free-trade agreements with South Korea, Colombia and Panama, bringing an end to years of stalemate and offering what supporters said was the biggest opportunity for exporters in decades. (Sources)

In other news, PIMCO’s Gross ramped up buying of MBS in September on the likelihood the Fed’s reinvestment program in securities will boost prices significantly. (RTRS)

EU and UK Headlines:

Leading European banks say they would rather sell assets than raise expensive new capital to meet compulsory demands from the European Union for higher capital ratios, threatening a further contraction of credit to the enfeebled Eurozone economy. (FT More)

UK Visible Trade Balance (GBP) (Aug) M/M -7768mln vs. Exp. -8800mln (Prev. -8922mln, Rev. to -8154mln)

UK Trade Balance Non EU (GBP) (Aug) M/M -4867mln vs. Exp. -5350mln (Prev. -5505mln, Rev. to -4651mln)

UK Total Trade Balance (GBP) (Aug) M/M -1877mln vs. Exp. -4250mln (Prev. -4450mln, Rev. to -2273mln) (RTRS)

Italian BTP auction for EUR 3.5bln, 4.75% Sep'16, bid/cover 1.344 vs. Prev. 1.28 (yield 5.32% vs. Prev. 5.600%), yield lowest since July

UK Conventional Gilt auction for GBP 2bln, 4.25% Sep'39 Gilt, bid/cover 2.26 vs. Prev. 2.00 (yield tail 0.4BPS vs. Prev. 0.3BPS) (RTRS)

EQUITIES 

Minutes of the FOMC as well as the BoJ's September meetings showed that policymakers considered scope for further monetary easing, which provided support to the Nikkei and helped European equities in early trade. However, as the European session progressed, equities came under pressure on the back of political and debt concerns surrounding Italy allied with a downbeat ECB's monthly bulletin. Lacklustre corporate earnings from Roche weighed upon the health care sector, whereas basic materials and oil & gas sectors came under pressure as the USD-Index strengthened as well as a decline in Chinese trade balance data. Market participants also paid attention to news flow regarding possibility of a much higher than anticipated haircut on Greek bonds, which further sagged appetite for risk. Moving into the North American open, equities continue to trade lower, with basic materials and financials as the worst performing sectors.

**US Corporate Earnings**

JP Morgan – Co.’s Q3 EPS USD 1.02 vs. Exp. USD 0.92, and Q3 revenue on a reported basis USD 23.76bln vs. Exp. USD 23.26bln. Co.’s Basel 3 Tier 1 common ratio was approx. 7.7% at the end of Q3, and co.’s Q3 provision for credit losses were USD 2.41bln. (RTRS)

FX

The USD-Index received a boost amid risk-averse trade, which in turn weighed upon EUR/USD and GBP/USD, whereas GBP came under further pressure following dovish comments from BoE's Bean. In other news, NZD came under selling pressure due to an unexpected decline in the Business PMI data from New Zealand, however AUD/USD remained in positive territory on the back of better than expected employment data from Australia overnight.

Australian Employment Change (Sep) M/M 20.4K vs. Exp. 10.0K (Prev. -9.7K, Rev. -10.5K) 

Australian Unemployment Rate (Sep) M/M 5.2% vs. Exp. 5.3% (Prev. 5.3%)

New Zealand Business PMI (Sep) M/M 50.8 vs. Prev. 52.9 (Rev. 52.7) (RTRS)

COMMMODITIES

WTI and Brent crude futures traded under pressure in the first half of the European session ahead of the DOE oil inventory numbers which are expected to show a build in both crude oil and gasoline.

Oil & Gas News:

China's crude oil imports in September eased 12.2% year-on-year to 20.45 million metric tonnes, or an average of 5 MBPD, declining for the first time in three months, preliminary data released today by the country's General Administration of Customs showed. In other news China is to build 8 LNG terminals on the Yangtze River.

Geopolitical News:

Libyan government fighters captured Gaddafi’s son Mo’tassim in Sirte yesterday after he tried to escape the battle-torn city in a car with a family according to officials with the NTC.

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