Only registred members can create thier own customized alerts.
Pre Market Briefing, including 'More QE needed if economy weakens, says BoE’s Charlie Bean'
UK Market Snapshot
UK markets finished lower yesterday, led by declines in commodity sector stocks, on mounting concerns that Greece might leave the euro bloc. Additionally, downbeat assessment of the UK economy from the International Monetary Fund dented market sentiment. Miners, Vedanta, Kazakhmys and Polymetal International retreated between 5.4% and 9.1%, as a broker issued a cautious note on mining stocks. Energy stocks, Tullow Oil, Royal Dutch Shell and BP dropped between 2.0% and 5.0%, tracking declines in crude oil prices. Man Group declined 5.9%, after ratings agency, Moody’s stated that the company’s credit rating remains under review. Burberry fell 1.2%, after forecasting a decline in its profitability in the first half of the fiscal year. London Stock Exchange tumbled 7.3%, amid reports that UniCredit and Intesa Sanpaolo sold a combined 11.5% stake in the company. The FTSE 100 declined 2.5% to close at 5,266.4, while the FTSE 250 fell 1.9% to settle at 10,375.7.
US Market Snapshot
US markets closed mostly higher yesterday, as investors hoped for positive signals from Europe in dealing with a possible Greek departure from the euro bloc. Bank of America, JPMorgan Chase and Goldman Sachs rose between 0.5% and 2.7%. PetSmart surged 13.1%, following better-than-expected first quarter earnings. Homebuilders, Lennar and PulteGroup declined 2.9% and 2.4%, respectively, amid reports that demand for new homes in the US rose more-than-forecast in April. Ford Motor rose 2.2%, after rating agency, Moody's upgraded the company’s debt to investment grade from ‘Ba2’ to ‘Baa3’. Dell tumbled 17.2%, following lower-than-expected first-quarter sales and earnings, and after the company forecasted second-quarter revenue that missed market estimates. The DJIA fell 0.1% to settle at 12,496.2, while the NASDAQ advanced 0.4% to close at 2,850.1. The S&P 500 gained 0.2% to settle at 1,318.9.
Europe Market Snapshot
Other European markets finished lower yesterday, amid heightened worries about the political and economic situation in Greece after former Greek Prime Minister, Lucas Papademos, warned of a possible Greek exit from the Euro bloc, and ahead of a European Union summit. Banks, Credit Agricole, Societe Generale and Commerzbank retreated between 2.8% and 6.3%, on lower risk appetite among investors. ArcelorMittal and Total dropped 6.1% and 1.9%, respectively, as commodity prices traded lower. Thyssenkrupp lost 5.0%, after rating agency, Fitch, downgraded its outlook on the company to ‘Negative’ from ‘Stable’. The FTSEurofirst 300 index declined 2.2% to close at 972.0. Among other European markets, the German DAX Xetra 30 fell 2.3% to close at 6,285.8, while the French CAC-40 shed 2.6% to settle at 3,003.3.
Asia Market Snapshot
Markets in Asia are trading mostly lower this morning, following a preliminary survey that showed China’s manufacturing activity contracted at a faster-than-expected pace in May, and amid uncertainty about the outcome of EU summit. In Japan, Canon, Nissan Motor and Mazda Motor are trading between 1.3% and 2.9% lower, as the yen strengthened against the dollar and the euro. In Hong Kong, HSBC Holdings and Industrial and Commercial Bank of China are trading 1.2 % and 1.5% lower each, due to a rise in risk aversion among investors. In South Korea, Hanwha is trading 5.5% higher, after its construction unit won an $8 billion deal to build housing units in Iraq. The Nikkei 225 index is trading 0.3% lower at 8,532.1. Hang Seng index is trading 0.5% down at 18,693.8, while the Kospi index is trading 0.2% higher at 1,813.0.
Commodity, Currency and Fixed Income Snapshots
Crude Oil
At 0330GMT today, Brent Crude Oil one month futures contract rose 0.42% or $0.44, to trade at $106.00 per barrel, amid signs that China would accelerate efforts to spur economic growth. Yesterday, the contract gained 2.63% or $2.85, to settle at $105.56 per barrel, after the US Energy Information Administration reported that crude oil inventories rose 883,000 barrels to 382.5 million barrels for the week ended 18 May 2012, and on concerns about the economic uncertainty of the euro bloc ahead of the European leaders meet to discuss the region’s debt crisis.
Gold
At 0330GMT today, gold futures contract rose 0.75% or $11.60, to trade at $1560.00 per ounce, amid optimism that China would take the necessary steps to support its economy and boost demand. Yesterday, the contract fell 1.79% or $28.20, to close at $1548.40 per ounce, as the dollar strengthened against other major currencies, decreasing the appeal of the precious metal.
Currency
At 0330GMT today, the EUR strengthened against the USD, gaining 0.10%, to trade at $1.2575, after the Euro-zone current account registered a surplus of €9.1 billion in March, compared to a revised deficit of €1.2 billion recorded in February. Market had expected the surplus of €6.0 billion in March. Yesterday, the EUR fell 0.78% versus the USD, to close at $1.2562, as new home sales in the US rose 3.3% to an annual rate of 343,000 in April, compared to a revised rate of 332,000 in March. Market had expected new home sales to rise to an annual rate of 335,000.
At 0330GMT today, the GBP strengthened slightly against the USD, marginally gaining 0.04%, to trade at $1.5687. Yesterday, the GBP weakened against the USD, losing 0.49%, to close at $1.5680, after total order book balance in the UK dropped to -17.0 in May from -8.0 in April. Market had expected total order book balance to fall to -10.0 in May.
Fixed Income
In the US, long term treasury prices rose yesterday, pushing the yields on 30-year bond lower, as investors awaited the outcome of the European Union summit, and after the US government sold five-year notes at a record-low cost. Yesterday, yields on 10-year notes lost 6 basis points to 1.73%, while yields on 2-year notes remained fell 2 basis points to 0.28%. Meanwhile, 30-year bond yields decreased 7 basis points to 2.81%.
Key Economic News
UK retail sales fell more-than-expected in April
On a monthly basis, retail sales in the UK dropped 2.3% in April, compared to a revised 2.0% rise recorded in March. Market had expected retail sales to drop 0.8% MoM in April. On an annual basis, retail sales fell 1.1% in April, compared to a revised 3.1% rise recorded in March. Market had expected retail sales to rise 1.0% YoY in April. Additionally, on a month-on-month basis, retails sales excluding automotive fuel dropped 1.0% in April, compared to a revised 1.6% rise recorded in March and below the market expectation of a 0.6% MoM drop in April.
BoE’s MPC split on QE, indicates BoE minutes
The minutes of Bank of England (BoE) meeting revealed that BoE’s Monetary Policy Committee (MPC) decided to halt £325 billion bond purchase programme in May through a split vote as Governor Mervyn King and seven other members voted to maintain Quantitative Easing (QE) unchanged, while David Miles sought £25 billion increase to a total of £350 billion. At the same time, all nine of the members voted to hold the interest rate at a record low of 0.50%.
UK industrial order expectations declined in May
The Confederation of British Industry (CBI) in its latest industrial trends survey indicated that total order book balance in the UK dropped to -17.0 in May from -8.0 in April. Market had expected total order book balance to fall to -10.0 in May.
More QE needed if economy weakens, says BoE’s Charlie Bean
Bank of England Deputy Governor, Charlie Bean stated that the central bank might need to resume their asset purchases if economic situation deteriorates significantly. In a speech to the National Association of Pension Funds, he said, “With the present heightened uncertainty associated with the problems in the euro area, the likely future date for us to commence selling gilts has receded somewhat.” He added, “If conditions do deteriorate significantly, we may need to re-start the programme of purchases.”
Euro-zone current account swung to surplus in March
On a seasonally adjusted basis, the Euro-zone current account registered a surplus of €9.1 billion in March, compared to a revised deficit of €1.2 billion recorded in February. Market had expected the surplus of €6.0 billion in March. On an unadjusted basis, the current account logged a surplus of € 7.5 billion in March, compared to a revised deficit of €5.6 billion recorded in the previous month.
Greek exit will be manageable, says Bundesbank
Germany's Bundesbank, in its monthly report stated that the current situation in Greece is extremely worrying, and it is threatening not to implement agreed reforms and jeopardising the continuation of financial aid. It indicated that Greece would have to bear the consequences of such a decision. Euro area would face significant challenge if Greece exit from the region. But it would be manageable with the help of cautious crisis management.
EU leaders want Greece to remain in Eurozone
The European Union leaders at the summit in Brussels expressed their desire to keep Greece in the Euro bloc if it adheres to the austerity measures. However, they failed to agree on the introduction of Euro bonds.
US new home sales rose more-than-expected in April
On a seasonally adjusted basis, new home sales in the US rose 3.3% to an annual rate of 343,000 in April, compared to a revised rate of 332,000 in March. Market had expected new home sales to rise to an annual rate of 335,000 compared to a rate of 328,000 originally reported in the previous month.
US Home Price Index rose more-than-estimated in March
The Federal Housing Finance Agency reported that, on a seasonally adjusted monthly basis, its Home Price Index in the US rose 1.8% in March, compared to 0.3% increase recorded in the previous month. Market had estimated the index to rise 0.5% MoM in March.
US MBA mortgage applications rose last week
According to Mortgage Bankers Association (MBA), for the week ended 18 May 2012, mortgage application volume in the US, on a seasonally adjusted basis, rose 3.8% from one week earlier. Additionally, the refinancing demand for the week gained 5.6% from the week before.
Fed probably can’t totally revive jobs, says Narayana Kocherlakota
Minneapolis Federal Reserve Bank (Fed) President, Narayana Kocherlakota, reiterated his recent comments that the US was closer to full employment than jobless figures suggest because of structural factors. He indicated that the Fed likely cannot mend all the damage done to the US job market due to the credit crisis.
Canada leading indicator remained unchanged in April
The Statistics Canada reported that, on a month-on-month basis, the Composite Leading Index in Canada increased 0.3% in April, compared to a same rate of rise recorded in the previous month. Market had expected the index to rise 0.4% MoM in April.
Canada retail sales rose in March
On a monthly basis, retail sales in Canada rose 0.4% in March, compared to a 0.2% drop recorded in February. Market had expected the index to rise 0.3% MoM in March.
China HSBC manufacturing PMI dropped in May
The HSBC flash China manufacturing Purchasing Managers’ Index (PMI) fell to a reading of 48.7 in May from a final reading of 49.3 recorded in April.
