European session has been quiet so far heading into the US crossover; markets look ahead to US Advance Retail Sales and FOMC minutes from their October meeting
BoE cut its forecast in the Quarterly Inflation Report
Japan announced that parliament is to be dissolved on Friday 16th November which has been a main driver of JPY weakness throughout the session
RANsquawk European Morning Briefing Video: http://youtu.be/zvmRn8IeZng
Equity markets in Europe surrendered earlier gains after another set of weak macro data (Eurozone Industrial Production and Greek GDP which came in at -7.2% vs. Prev. -6.3%), as well as the ever so critical Bundesbank said that ECB’s bond buying may not have sustained market impact. Bundesbank's Dombret also said that ECB’s measures may leave difficult legacy for financial stability. In terms of Greek related commentary, German government spokesman said that complete Troika report needed for decision on Greece, which is not yet complete.
Looking elsewhere, the latest jobs report from the ONS in the UK showed the number of people claiming jobless benefit rose by 10,100 last month, the largest increase since September 2011, that’s as a jobs boost from the Olympics continued to fade. The BoE reinforced the fragile nature of economic recovery with the release of the Quarterly Inflation report which revealed the MPC see 'material risk' that growth could be weaker for longer and that new macro forecast show that further stimulus unlikely soon. However Gilts failed to benefit from bleak macro outlook, in spite of the fact that King said that UK treasury decision to take BoE QE gilt coupons was one factor behind the decision to not extend QE last week.
In FX, reports that Japanese PM Noda is willing to dissolve the lower house on November 16 for snap elections if opposition meets demand on electoral reform, which will likely pave the way for LDP leader Abe to push for more aggressive in conducing easy monetary policy saw JPY weaken across the board.
Going forward, markets will get to digest PPI report for the month of October, as well as Retail Sales, where effects from Hurricane Sandy will likely skew the report.
China's Xi Jinping and Li Keqiang have been named to the Chinese central committee as expected, however central bank governor Zhou is not in new central committee of communist party . The next stage is for the Politburo to be appointed (25 members) followed by the all important Standing Committee (Exp. 7 members from prev. 9) which will be announced on Thursday.
Japanese PM Noda has said he would not mind dissolving lower house on November 16 for snap elections if opposition meets demand on electoral reform. Market expectations are for the DPJ to lose majority to the main opposition party; the LDP leader Abe is known to be more aggressive in conducing easy monetary policy.
Wall Street Journal reported that the US President is to seek USD 1.6trl more in revenue, double level from 2011 talks. President Barack Obama will begin budget negotiations with congressional leaders Friday by calling for USD 1.6trl in additional tax revenue over the next decade, far more than Republicans are likely to accept and double the USD 800bln discussed in talks with GOP leaders during the summer of 2011.
Fed's Yellen (voter) says an interest rate lift-off decision would require further Fed committee deliberation and judgement but the Fed is thinking carefully about potentially adverse impacts of holding interest rates low for a long-time. (Newswires) Yellen added that the Fed should link low-rate outlook to economic goals. Later on during the session markets await the FOMC minutes at 1900GMT/1300CST.
EU & UK Headlines
UK Jobless Claims Change (Oct) M/M 10.1K vs. Exp. 0.0K (Prev. -4.0K, Rev. 0.8K)
UK Claimant Count Rate (Oct) M/M 4.8% vs. Exp. 4.8% (Prev. 4.8%)
UK Unemployment Rate (Sep) 3M 7.8% vs. Exp. 7.9% (Prev. 7.9%)
Eurozone Industrial Production SA (Sep) M/M -2.5% vs. Exp. -2.0% (Prev. 0.6%, Rev. 0.9%)
Greek GDP NSA (Q3) Y/Y -7.2% (Prev. -6.3%)
The Bank of England released their quarterly inflation report with the main point being the BoE cutting their UK outlook although new forecast showed that further stimulus is unlikely soon. Despite this, BoE's governor King says the Monetary Policy Committee has not lost faith in asset purchases as a policy instrument or decided whether or not there will be any more asset purchases. The BoE also announced the UK recovery may start later than previously forecast.
European cash equity markets are all trading in minor negative territory particularly the FTSE 100 (-0.55%) following the BoE inflation report. Another reason for the FTSE 100 under-performing against its peers is that many companies are going ex-dividend today, which includes GlaxoSmithKline and Shell. Industrials and Basic Materials are the worst performing sectors as markets reacted to another disappointing macro-release, which underpinned the likelihood of prolonged recession in the bloc.
According to sources, early on in the session Peugeot had said it was considering an alliance with Tata Motors which saw Peugeot's shares increase 1.6% in an immediate reaction, however later on in the session Tata Motors said there was "absolutely no truth" in to the partnership talks which saw co. shares spike lower by 3.38%.
In other European stocks news, Nokia CEO says first days of Lumia sales have shown a pleasing pattern although they still have a lot of work ahead, which is supporting price action. Gartner said Nokia's global smartphone sales increased 46.9% Y/Y in Q3 although overall mobile phone sales fell 3.1% to 428mln. ICAP and Monte Paschi reported weak earnings this morning and as such their share prices have seen losses of greater than 5% this morning.
USD/JPY saw upside this morning as JPY weakness continues to be observed. The key reason for this is the news that the Japanese PM Noda has announced willingness to dissolve parliament on Friday for an election on 16th December. Noda's current popularity is at its lowest level and the leader of the main opposition party is known for his pro-monetary easing stance.
GBP/USD has weakened today after dovish comments following the BoE's quarterly inflation report. The BoE cut their outlook and said the European crisis is having a bigger impact than initially thought.
EUR/USD has traded steadily higher as weakness in the JPY and the GBP has resulted in cross-buying and has helped lift the currency pair.
Heading into the North American open, WTI and Brent crude futures were trading higher than yesterday's close boosted by minor USD weakness with the USD-index down 0.1% today. Looking ahead today we have the API inventories at 2130GMT/1530CST.
Earlier today there was news out of Asia where returns from producing fuel oil have tumbled to their lowest level since 2008 so China is set to allow some refineries to import crude for the first time. In Europe, the Russian energy minister says it may import fuel after January 1st to avoid any shortages when a ban on the sale of low grade gasoline comes into effect. Reports in the US said oil production in North Dakota was at a record high in September and reached nearly 730,000 BPD.
In geopolitical news, Israeli PM Netanyahu has said Israel is determined to defend its borders and is closely following developments in Gaza despite earlier reports that Israel and Gaza had reached a tacit truce.
Print 13:08, 14 Nov 2012 - Market Analysis - Source: RANsquawk
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