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US OPENING NEWS INCLUDING: Italy's Monti wins confidence vote on growth measures at Senate

December 06 2012, 2:51pm
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The ECB leaves its key benchmark interest rate unchanged at 0.75%.

The Bank of England left its asset purchase target unchanged at GBP 375bln and its interest rates unchanged at 0.5%.

Van Rompuy report hints at joint debt issuance further down the road.

RANsquawk European Morning Briefing Video: http://youtu.be/vYCJhvsGjhE

Market Re-Cap

European equity markets are trading in positive territory this morning as markets react to Van Rompuy’s report on a revamp in monetary union. Markets have reacted to comments in the report that said a Euro budget could be the basis for common debt issuance in the Eurozone. Basic Materials (+1.38%) continue to outperform other sectors in Europe, following on from yesterday’s Politburo comments on further construction in under-developed regions in China. GDF Suez has been the big lagger in Europe, currently trading down over 11.5% after they announced that the economic slump will cut company profits in 2013.

In terms of data releases, Eurozone GDP for Q3 printed in-line with expectations although German Factory Orders beat expectations at 3.9% vs. Exp. 1.0%. Immediate reaction saw EUR/USD move to the upside although focus remains on today’s ECB and BoE rate decisions. Neither central bank is expected to make any new policy decisions although the ECB could cut their CPI outlook.

In other European news, Italian PM Monti won a confidence vote on growth measures however Berlusconi’s PDL party walked out of the senate ahead of the vote. Initial risk-on moves were seen with Dec-Dax moving higher and Mar-Bund moving lower although as the session progressed, equity markets and particular Italian listed equities came under selling pressure given the lack of support for Monti with unconfirmed chatter that the PM could resign as early as today.

Looking ahead, the ECB and BoE rate decisions are the two key announcements today with Draghi’s press conference being closely watched. Elsewhere, US weekly jobs data is due to be released at 1330GMT/0730CST.

Asian Headlines

There has been a negative slant in Asian equities as Chinese markets gave back some of the large gains seen yesterday with the Shanghai Comp. closing the session down 0.13% at 2,029. and the Hang Seng closing the session down 0.09% at 22,250. The outperformer in Asia was the Nikkei 225, closing the session up 0.81% at 9,545, supported by a weaker JPY due to a poll release in the Nikkei that said opposition LDP party are on course for a majority victory at the December 16th elections. 

EU & UK Headlines

The ECB leaves its key benchmark interest rate unchanged at 0.75%, as expected.

The Bank of England left its asset purchase target unchanged at GBP 375bln and its interest rates unchanged at 0.5%, as expected. Minutes are to be published on Wednesday the 19th December at 0930GMT.

Van Rompuy's released a report on a revamp of Monetary Union and said Euro budget could be basis for common debt issuance. EU's Van Rompuy's report on Economic union says preparatory work on a single EU bank supervisor should begin in earnest in early 2013

S&P cut Greece's long-term debt rating to selective default, previously rated CCC, to bring the rating in line with Moody's.

German Factory Orders for October beat expectations  3.9% vs. Exp. 1.0% which saw a small reaction in EUR/USD moving immediately to the upside. 

Eurozone GDP for Q3 printed in-line with expectations at -0.1% showing continued negative growth in the area.

Italy's Monti wins confidence vote on growth measures at Senate although Silvio Berlusconi's PDL party walked out of the Senate ahead of the vote which has led to unconfirmed rumours that Monti could resign from his role.

The New York Times reported that concerns are mounting that investors might not partake in Greece's debt buyback. Bankers close to the transaction are voicing concerns that hedge funds might "blow up the deal" by holding out for a higher price. 

US Headlinse

US Realtytrac: Q3 foreclosure sales up 20.7%.

Equities

The main bourses in Europe are holding onto modest gains heading into the US crossover as a report from EU's Van Rompuy said a Euro budget could be the basis for common debt issuance amongst Eurozone countries. Basic Materials (+1.35%) is the best performing sector in Europe as market participants continue to react to the yesterday's news from China on the accelerating development in the country. The Utilities sector (-1.35%) is the biggest underperformer in Europe as GDF Suez shares weigh on the secotr, currently trading down over 12%. The reason for the move was because the company said earnings will drop next year due to a "challenging" economic outlook with net income at EUR 3.1-3.5bln from an expected EUR 3.7-4.2bln.

FX

AUD/USD rallied to fresh 2 and a half month highs today as strength in AUD has been seen following better-than-expected employment data out of the country overnight. There is also talk of an option barrier at 1.0500 which could provide resistance, last trades at 1.0495 (+41 pips).

USD/JPY weakened during yesterday's session as markets focus on Japan's election on 16th December. The weakness in USD/JPY has been tempered by a weakening USD. The main Japanese opposition party has also been told to tone down its pledges on targeting inflation by a key ally.   

EUR/USD trades in minor negative territory ahead of the US open after selling off early support from the Van Rompuy report however it sold off heading into the ECB decision as markets played wait-and-see. Upon the unchanged release, EUR/USD saw a brief bid tone. 

Commodities

WTI crude futures slid lower alongside European equities taking some of the shine off risk sentiment and USD-index regaining some territory. 

Gold remains Morgan Stanley's top pick for 2013. Morgan Stanley says Brent is to average USD 110 a barrel in 2013 and WTI is to average USD 13.50 below Brent in 2013.

In geopolitical news, five people have been killed as anti-Morsi protests in Cairo have escalated with gunfire and firebombs featuring in the violence.

 

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