Quiet European session due to lack of tier-1 macroeconomic data
Weakness in European equity markets given the uncertainty in Greece ahead of next week's talks
US session looks to remain quiet with the data calendar light and speakers schedule thin
RANsquawk European Morning Briefing Video: http://youtu.be/nVVYVTFv-JI
Weakness in equity markets failed to provide support to German Bunds, which given the uncertainty surrounding Greece ahead of the next week’s meeting are seen little changed. Financials led the move lower, with the 3-month Euro-Dollar cross currency basis swap at c.30bps below Euribor as tensions in the peripheral Eurozone lead to higher funding costs for banks. Firmer USD weighed on EUR/USD which trended lower throughout the session, however unwind of long EUR/GBP benefited GBP/USD, essentially flat at last check. In terms of EU related commentary, German finance minister spokesperson said that there is no threat of IMF pulling out of the Greek aid programme, adding that it remains unclear when the full Troika report on Greece will come. Going forward, markets will get to digest the latest Industrial Production and TIC flow reports.
In Japan, the Nikkei 225 saw significant gains led by the exporters, underpinned by the prospect of opposition leader Abe coming to power after current PM Noda dissolved parliament this morning. Noda also added if the government was to set BoJ monetary policy steps and its goals, it would hurt the BoJ's independence.
In China, according to the vice finance minister, the impending fiscal cliff in the US could drag down China's economic growth by 1.2 percentage points. The Shanghai Composite also saw losses as the market awaits any definitive plans from the newly appointed standing committee and with property stocks coming under pressure on increased fears on an expansion of taxes on the sector.
Talks on the US fiscal cliff are due to begin today with President Obama due to meet congressional leaders this afternoon to discuss the issue.
EU & UK Headlines
The Eurozone Trade Balance for September came in at a larger surplus than August's reading although market attention in Europe remains on the EUR 4.1bln Greek redemptions today. On Tuesday, Greece sold just over EUR 4bln worth of 1-month and 3-month T-bills which was not quite enough to cover today's redemptions although a debt agency official said Greece is to clear the EUR 5bln debt hurdle after bids for another 30% of the nominal were being accepted until noon yesterday to take the total up to EUR 5bln.
European cash equity markets are all in negative territory and the the Financial sector is the worst performing sector in Europe as the debt-crisis in Greece weighs on sentiment. Talks on the next tranche of aid for Greece are to resume on Tuesday although once again it is not expected that Greece will receive the aid straight after the talks as disagreements between the EU and IMF need to be resolved. US stock futures trade in negative territory alongside the European counterparts, indicating a lower open on Wall Street today.
Top performers in Europe have included Serco who announced strong earnings this morning and confirmed their outlook for 2012 has not changed. In France, Danone has also performed well this morning as it was announced activist investor Peltz is looking to increase his stake in the company and that company shares are undervalued.
- Reg & E-Mini DOW/E-Mini NASDAQ, S&P/RUSSELL November options expiry (1430GMT/0830CST)
- CAC 40 November futures and options expiry (1500GMT/0900CST)
- Reg NASDAQ/S&P500 November option expiry (2115GMT/1515CST)
Profit taking following a week of gains by USD/JPY on the back of prospect of further and more aggressive policy easing by the BoJ saw the pair trade lower for much of the session. Uncertainty surrounding Greece also weighed on the pair as market participants turned away from riskier assets. Firmer USD weighed on EUR/USD which trended lower throughout the session. However unwind of long EUR/GBP positions, as well as safe-haven related flows benefited GBP/USD which as a result outperformed its peers.
Crude futures are trading flat despite worries on supply disruptions from the Middle East. The risk off tone has led to strength in the USD-index, hitting a two-month high, capping any upside in WTI and Brent crude futures. The USD strength is also seen weighing on spot Gold and Silver which both trade lower heading into the US open.
Despite calling a truce for the visit of the Egyptian PM, reports have suggested Israeli rocket fire has continued into Gaza although the Israeli army has denied this.
- WTI Crude December futures expiry (1930GMT/1330CST)
16 Nov 2012 - 13:03 - - Source: RANsquawk
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