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EUROPEAN OPENING NEWS INCLUDING: In the FX market USD weakness is once again prevalent

Last updated: 09:33 26 Jul 2013 BST, First published: 08:33 26 Jul 2013 BST

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Asia

Japanese National CPI (Jun) Y/Y 0.2% vs. Exp. 0.1% (Prev. -0.3%) - fastest pace in five years

- National CPI Ex Food, Energy (Jun) Y/Y -0.2% vs. Exp. -0.3% (Prev. -0.4%)

PBOC governor Zhou said that China has big economic downward pressure and further reiterated prudent monetary policy will be pursued. (Newswires)

10yr JGBs moved higher overnight (+8 ticks at 143.61), tracking gains in T-notes after a dovish article from Fed watcher Hilsenrath that the Fed are on track to continue USD 85bln a month bond buying at July 30-31 meeting and may lower the jobless rate threshold. The Nikkei 225 underperformed (-2.6%), weighed by all 10 sectors in the red. Last price taken at 0615BST. (RANsquawk)

Europe

Former ECB chief economist Juergen Stark said ECB will have to activate bond program. Said there'll be a lot of pressure from France to buy French government bonds, even without applying for a bailout and a lasting end of the Euro-area debt crisis is not in sight. (Newswires) 

Rating agency DBRS says political tensions in Italy could accelerate in the Autumn, putting downward pressure on rating. (Newswires)

Barclays prelim month-end extensions for Pan Euro agg. at +0.11yrs 

UK

Barclays prelim month-end extensions for UK at +0.04yrs 

FX

In the FX market USD weakness is once again prevalent, continuing it’s recent descent, after a dovish article from Fed watcher Hilsenrath who said that the Fed won’t taper at their next meeting and may lower their unemployment threshold. This saw USD/JPY break below the 99.00 handle. USD/JPY did see brief support following the Japanese core CPI reading of 0.4% vs. Exp. 0.3%, which was the first Y/Y rise since April and also the fastest Y/Y rise since November 2008, which suggests that Abenomics and the BoJ’s quantitative and qualitative monetary easing programs are succeeding in moving towards the 2% inflation target. (RANsquawk)

Commodities

WTI crude futures traded in a narrow range throughout the session, last seen down USD 0.08 at USD 105.42 as of 0615BST. Elsewhere, gold prices advanced as USD weakened, amid a Hilsenrath article which suggested a dovish Fed. (RANsquawk)

US

T-notes finished lower yesterday after choppy trade and price swings were seen in low volumes. T-notes first saw weakness as durable goods data beat expectations, falling 3+ ticks in immediate reaction but were able to come off the lows as disappointing jobless data was digested by market participants. The Treasury completed its supply of USD 99bln this week with an auction of USD 29bln 7y notes. Much like the 5y auction yesterday and the 2y the day before the auction was average, with a high proportion of the issuance being taken by foreign buyers, a yield which stopped through by 0.4bps and dealers taking a lower proportion than average. The bid to cover ratio however was lower than the 5 auction average and the previous. After 29bln in 7s was absorbed T-notes remained in negative territory and settled at 126.09+, down 4+ ticks at the pit close. Overnight, T-notes pared yesterday's losses and accelerated the move higher in Tokyo, last seen up 8 ticks at 126.17+ as of 0615BST. (RANsquawk)

Fed watcher Jon Hilsenrath writes "The Federal Reserve is on track to keep its USD 85bln-a-month program in place at its policy meeting next week, but officials will debate changes to the way the central bank describes its plans for the program and for short-term interest rates. Mr Bernanke suggested at his June press conference that the Fed might lower that 6.5% threshold for unemployment which was set in September. Such a move would drive home to markets that short-term interest rates will be low for a long time." (WSJ)

Lawrence Summers made dismissive remarks about the effectiveness of quantitative easing at a conference in April, raising the possibility of a big shift in US monetary policy if he becomes chairman of the Federal Reserve. Said “QE in my view is less efficacious for the real economy than most people suppose”.(FT-more) Seperately, Senate Democrats circulated a letter backing Janet Yellen as Fed Chairman, in which the letter reflected concern that President Obama may name Lawrence Summers to the Fed post. (Newswires)

Barclays prelim month-end extensions for US Treasuries at +0.06yrs 

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