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US Morning Briefing
Tue, Dec 22 2009, 12:57 GMT
JGBs slipped, with futures pulling away from an 11-month peak, hurt by falling US Treasuries and a rise in Tokyo stocks. The Nikkei rose 1.9% to a three-month closing high, as a weaker JPY lifted exporters, while Isuzu Motors jumped on a report that the truck maker wants to develop new diesel engines for GM. Chip-related stocks got a boost after the Nikkei business daily reported that Toshiba Corp and partner Sandisk would jointly invest JPY 150bln to boost their venture’s production capacity by about 40%. (RTRS)
Japanese manufacturers’ confidence edged up in December but the mood in the service sector worsened to levels seen in May as an export-led recovery has not yet filtered through to domestic demand amid deflation. Overall, the manufacturers’ sentiment index in the Reuters Tankan rose 1 point to -27 in December and is seen improving further by 8 points over the next three months. (RTRS)
PBOC’s Zhou says China can tolerate “certain” level of inflation and that Central bank may still need to use reserve ratios to soak up liquidity.
Bund futures opened sharply lower following the downtick in t-notes overnight which has seen the 2/10yr Euro-Zone spread expand to its widest in over a month. During the session, the news that Moody’s cut the sovereign rating on Greece to A2 from A1 was not as bad as some had feared and has resulted in the 10yr Greek/bund spreads narrowing back the lowest in a week prompting the surrounding peripherals to follow suit.
ECB’s Nowotny says economy is recovering slowly but sees bottlenecks and insolvency at companies. (BBG/RTRS)
ECB’s Stark says last months have seen stabilisation in Euro zone and sees 2009 Euro zone GDP -4%. (BBG/RTRS)
ECB’s Orphanides says the ECB should maintain its ultra-loose monetary policy as long as is necessary to head off fresh risks to the Euro-zone economy posed by exceptionally low inflation. (FT)
Greece rating cut to A2 from A1 by Moody’s, outlook negative. Moody’s says Greece “extremely unlikely” to face liquidity problems but added it is more likely than not that the rating goes down in the next 12-18 months.
Gilt futures opened lower following losses overnight in Asia, but have since ticked higher after a disappointing revision to the UK Q3 GDP reading.
UK GDP Q/Q (3Q F) -0.2% vs. Exp. -0.1% (Prev. -0.3%)
UK GDP Y/Y (3Q F) -5.1% vs. Exp. -4.9% (Prev. -5.1%) (BBG)
The strength in the European equities is partly attributed to the “relief rally” after the latest move from the ratings agency Moody’s was not as bad as some feared. Also underpinning the move higher was a positive finish in Asia session, with Nikkei rising to a three-month high. Traders are now awaiting a report that is expected to show sales of existing homes rose to their highest level in nearly three years.
Despite a positive revision to the UK Q3 GDP reading, it failed to meet the street estimate and consequently the GBP came under pressure across the board. Elsewhere the USD has managed to pare back earlier European losses to trade in minor positive territory.
Heading into the North American open, WTI crude futures are trading lower after the USD index moved off European session lows.
OPEC has agreed to leave oil output curbs unchanged.
OPEC sec. gen. said wants to see quota compliance at 75-80%. Adds that he isn’t concerned that oil prices will collapse.
OPEC’s Vascancelos said that compliance is fine however Libya oil minister said that OPEC will urge greater compliance.
The latest Weather Derivatives forecast sees temperatures for the next 6-10 days in the US to be 1.5F below the average for this time of year, with colder temperatures seen in the northcentral and the northwest regions.
Spot Gold falls to six-and-a-half week low at USD 1089/oz. (RTRS)
**Prices taken at 12.33 GMT