News Headline Summary

DAILY US OPENING NEWS: 'Fiscal cliff' deal reached...

'Fiscal cliff' deal reached - US lawmakers approved a deal preventing huge tax hikes and spending cuts. By a vote of 257 to 167, the Republican controlled House of representatives approved a bill that fulfills President Barack Obama's re-election promise to raise taxes on top earners

UK Manufacturing PMI (Dec) M/M 51.4 vs. Exp. 49.1 (Prev. 49.1, Rev. 49.2 ), highest since September 2011

RANsquawk European Morning Briefing Video: http://youtu.be/PdPmts2g_OM

Market Re-Cap
EU equity indices advanced today as market participants reacted to a deal in Washington which kept the US economy away from the edge of the fiscal cliff. DAX index in Germany rose to highest level since early 2008 and London's benchmark FTSE 100 share index broke through the 6,000 level for the first time in 18 months, also supported by unexpected jump in factory activity which grew at its fastest pace since September 2011. In terms of EU related data, the latest CPI reports from Germany (regional reports) came in higher than prev – in reaction to that, German 10y IL bond yield rose to c. -0.280% from c. -0.340% this morning.

Even though the so-called fiscal cliff has now been averted, lawmakers will now try to address the debt ceiling issue in a timely manner to avoid any negative sovereign debt rating action. The risk on sentiment weighed on the USD, which in turn supported EUR/USD and GBP/USD, up around 40pips at last check. Commodity complex, as well as precious metals also benefited from the renewed risk on sentiment. Going forward, market participants will get to digest the release of the latest ISM Manufacturing report at 1500GMT.

US Headlines
US fiscal cliff update:
- United States lawmakers approved a deal preventing huge tax hikes and spending cuts. By a vote of 257 to 167, the Republican controlled House of representatives approved a bill that fulfills President Barack Obama's re-election promise to raise taxes on top earners.
- The senate passed the measure earlier on New Year's day and Obama said he will sign it into law shortly. Spending cuts have been postponed for two months with a series of negotiations beginning between the White House and US Congress on America's debt ceiling.

Debt ceiling issues:
- However the bipartisan fiscal cliff deal did not address the debt ceiling issue. Treasury Geithner had submitted a letter to Congress saying he had begun a "debt issuance suspension period" that would last through Feb. 28. That means Treasury will employ a series of "extraordinary measures" so it does not exceed the debt limit.
- In terms of comments from the major rating agencies. Late last year, Moody's said it would likely take any rating action sometime in 2013, but could act earlier in the year if there is brinkmanship surrounding the debt limit, and if a failure to resolve the current budget negotiations triggers economic instability.

Asian Headlines
From Monday morning:
- Chinese HSBC Manufacturing PMI (Dec) M/M 51.5 vs. Exp. 50.9 (Prev. 50.5) highest since May 2011
- Chinese Manufacturing PMI (Dec) M/M 50.6 vs. Exp. 51.0 (Prev. 50.6)

EU & UK Headlines
Eurozone Manufacturing PMI (Dec F) M/M 46.1 vs. Exp. 46.3 (Prev. 46.3)
- German Manufacturing PMI (Dec F) M/M 46.0 vs. exp. 46.3 (Prev. 46.3), 10th consecutive reading below the key expansionary (50) level
- French Manufacturing PMI (Dec F) M/M 44.6 vs. Exp. 44.6 (Prev. 44.6)
- Italian Manufacturing PMI (Dec) M/M 46.7 vs. Exp. 45.3 (Prev. 45.1), highest since March
- Spanish Manufacturing PMI (Dec) M/M 44.6 (Prev. 45.3) , 20th straight month of fall in activity

Firmer inflation data from Germany (regional CPIs) lifted German 10y IL bond yield to around -0.280%, after trading at around -0.340% this morning
- German CPI - Saxony (Dec) Y/Y 2.2% (Prev. 2.0%)
- German CPI - Brandenburg (Dec) Y/Y 1.9% (Prev. 1.5%)
- German CPI North-Rhine Westphalia (Dec) Y/Y 2.1% (Prev. 1.9%)
- German CPI - Baden Wuerttemberg (Dec) Y/Y 1.9% (Prev. 1.5%)
- German CPI - Bavaria (Dec) Y/Y 2.2% (Prev. 2.1%)

UK Manufacturing PMI (Dec) M/M 51.4 vs. Exp. 49.1 (Prev. 49.1, Rev. 49.2 ), highest since September 2011

Equities
EU equity indices advanced today as market participants reacted to a deal in Washington which kept the US economy away from the edge of the fiscal cliff. DAX index in Germany rose to highest level since early 2008 and London's benchmark FTSE 100 share index broke through the 6,000 level for the first time in 18 months, also supported by unexpected jump in factory activity which grew at its fastest pace since September 2011.

FX
Broad based USD weakness continues to be observed as market participants react to a deal to prevent huge tax hikes and spending cuts in the US. The Republican controlled House of representatives approved a bill that fulfills President Barack Obama's re-election promise to raise taxes on top earners. EUR/USD and GBP/USD traded steady for much of the session, with option related flows linked to intraday expiries at 1.3300 and 1.6300 exerting magnetism on the price action. Commodity complex, including precious metals (gold and silver) also benefited from the renewed risk on sentiment. Upside in AUD/USD is being contained by touted 1.0500 option barrier.

Commodities
Crude futures hit 4 week highs after United States lawmakers approved a deal preventing huge tax hikes and spending cuts. By a vote of 257 to 167, the Republican controlled House of representatives approved a bill that fulfills President Barack Obama's re-election promise to raise taxes on top earners.

02 Jan 2013 - 07:09 - Forex Data - Source: RANsquawk

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