Forex Special
- Better than expected earnings from Intel and ASML boosted Technology sector in Europe
- Market talk of weaker than expected Chinese economic data to be released tomorrow
- BOE’s Sentance said that there is need to start a process of raising rates
Overnight News
ASIA
JGB's fell overnight with futures touching a two-week low as investors appetite for debt was curbed after the Nikkei rose over 2.5% in response to a continuing bull run on Wall Street and a pull back by the JPY from recent peaks. (RTRS)
In other news, Japan’s public pension funds were last year net sellers of government bonds for the first time in nearly a decade, underscoring the difficulties Tokyo faces financing its borrowings from domestic investors as the population ages. (FT) Also, Japan is likely to make broad cuts in spending to meet a self-imposed cap in next fiscal year’s budget. (Nikkei)
Elsewhere, Fitch Ratings said that the growing popularity of informal securitisation is increasingly distorting Chinese banks’ credit data at an institutional and system level, resulting in pervasive understatement of credit growth and credit exposure. (RTRS) Also in the news, there is market talk of weaker than expected CPI, RPI, Industrial Production and Retail Sales figures from China due to be released tomorrow. (RANsquawk)
US
US Federal Reserve officials are likely to amend their forecasts to predict slower economic growth today, and are divided on how to react if the US economy slows further, according to recent interviews with unidentified Fed officials. (WSJ) Also, Former Fed’s vice chairman Blinder said the US economy will probably grow 3% to 3.5% this year, less than his forecast in December for as much as 4% growth. (Sources)
In other news, the Federal Reserve said that US investors are demanding more securities, an encouraging sign that credit conditions are improving. According to a new survey by the central bank, demand has increased over the March to May period for funding high-grade corporate bonds, stocks, residential mortgage-backed securities issued by mortgage giants Fannie Mae and Freddie Mac and other asset-backed securities. (Sources)
Elsewhere, small US banks that took money from the Troubled Asset Relief Programme may struggle under the weight of their repayment obligations, according to a watchgroup led by Elizabeth Warren. (Sources)
- MBA Mortgage Applications W/W -2.9% vs. (Prev. 6.7%)
- ABC Consumer Confidence (Jul 11) W/W -44 vs. Prev. -42 (RTRS)
Bonds
EUROPEAN GOVERNMENT BONDS
Bund futures opened lower amid general risk-appetite and large supply from Germany, Italy and Portugal due later in the session. However, prices came off their worst levels following worse than expected Eurozone Industrial Production figures as well as clearance of supply. Moving into the North American open, Bunds are trading in minor negative territory, with European peripheral 10-year bond yield spreads widening marginally, as the market looks ahead to retail sales figures from the US.
In other news, Greece Finance Minister said that Greece will return to markets in 2011 if conditions are good. (CNBC)
- Eurozone CPI (Jun) Y/Y 1.4% vs. Exp. 1.4% (Prev. 1.4%)
- Eurozone CPI (Jun) M/M 0.0% vs. Exp. 0.0% (Prev. 0.1%)
- Eurozone CPI - Core (Jun) Y/Y 0.9% vs. Exp. 0.9% (Prev. 0.8%)
- Eurozone Industry Production SA (May) M/M 0.9% vs. Exp. 1.2% (Prev. 0.8%), (Rev. 0.9%)
- Eurozone Industry Production WDA (May) Y/Y 9.4% vs. Exp. 11.4% (Prev. 9.5%), (Rev. 9.6%) (RTRS)
| Maturity | 2 | 5 | 10 | 30 | Bund (Sep10) |
| Level | 0.736 | 1.582 | 2.645 | 3.315 | 128.81 |
| Change (bps) | 1.057 | 0.949 | 0.603 | 0.968 | -0.07 |
GILTS
NYSE LIFFE Gilt futures traded lower the entire European session on the back of general risk appetite and strength in equities. Prices gained during the run up to the Gilt auction in high anticipation, however following a reasonably well received auction, pared those gains. Moving into the North American open, Gilts are trading sideways in negative territory.
In other news, the UK government’s emergency budget has the right balance and is unlikely to drag the economy into a double-dip recession, according to the Centre for Economics and Business Research. (Sources) Elsewhere, UK unemployment may peak at 9.5%, or 2.95mln people, if the economic recovery is slower than coalition government forecasts, according to the Chartered Institute of Personnel and Development. (Sources)
- Jobless Claims Change (Jun) Y/Y -20.8K vs. Exp. -20.0K (Prev. -30.9K, Rev. to -31.1K)
- ILO Unemployment Rate (May) 3M/Y 7.8% vs. Exp. 7.9% (Prev. 7.9%)
- Claimant Count Rate (Jun) M/M 4.5% vs. Exp. 4.5% (Prev. 4.6%)
- Nationwide Consumer Confidence (Jun) M/M 63 vs. Exp. 62 (Prev. 65, Rev. to 66) (RTRS)
- Conventional Tap for GBP 2.25bln, 4.25% 2046, bid/cover 1.63 vs. Prev. 1.37 (RTRS)
- Australian Westpac Consumer Confidence (Jul) M/M 11.1% vs. Prev. -5.7%
- Australian Westpac Consumer Confidence Index (Jul) M/M 113.1 vs. Prev. 101.9
- New Zealand Retail Sales ex. Auto (May) M/M -0.2% vs. Exp. 0.6% (Prev. -0.2%, Rev. to -0.1%) (Sources)
- The Russian Energy Minister has said that sanctions against Iran will not hinder cooperation in energy and power sectors. He added that he sees no obstacles for Russian firms to supply oil products to Iran.
- Iran reduced its imports of gasoline by half, to 507,250 tons during the first quarter of its calendar year.
| Maturity | 2 | 5 | 10 | 30 | Gilt (Sep10) |
| Level | 0.771 | 2.071 | 3.383 | 4.189 | 120.86 |
| Change (bps) | 1.360 | 1.385 | 1.017 | -0.138 | -0.07 |
EQUITIES
European bourses gained strength in early trade following better than expected earnings from Intel overnight and boosting its guidance for year capital spending. Allied to this, better than expected earnings from ASML in the Netherlands further boosted European chipmakers. However, equities have since retraced earlier gains and moving into the North American open have ventured into negative territory, with Technology still remaining the best performing sector in Europe.
| Index | DAX | CAC | FTSE | EUROSTOXX | SMI |
| Level | 6184.9 | 3615.19 | 5233.02 | 2723.41 | 6285.58 |
| Change (ticks) | -6.23 | -22.57 | -38.00 | -14.18 | -13.01 |
FX
GBP gained strength across the board after comments from BOE’s Sentance who said that there is need to start a process of raising rates, followed by better than expected employment data from UK. In other news, EUR came under pressure after worse than expected Eurozone Industrial Production figures, however moving into the North American open has pared earlier losses.
Elsewhere, following a jump in Australian consumer confidence and comments from the Australian government predicting robust commodity prices will ensure the budget returns to surplus in 2012/13 boosted AUD across the board overnight. However, AUD has come off its best levels moving into the North American open. Also, overnight NZD lost strength following much worse than expected retail sales data.
| Currency | EURUSD | GBPUSD | USDJPY |
| Level | 1.2703 | 1.5251 | 88.62 |
| Change (pips) | -0.0021 | 0.0073 | -0.1200 |
COMMMODITIES
Despite trading higher during the Asian session, WTI Crude futures have trended lower during the European morning session, following the gradual downtick in European equity markets.
Geopolitical News:
| Commodity | WTI Nymex | OTC Spot Gold |
| Level | 76.67 | 1212.45 |
| Change (USD) | -0.48 | 0.10 |
LOOKING AHEAD
Economic Releases
| CDT | BST | EXP. | PREV. | ||
| 730 | 1330 | US | Import Price Index M/M (Jun) | -0.30% | -0.60% |
| 730 | 1330 | US | Import Price Index Y/Y (Jun) | 5.30% | 8.60% |
| 730 | 1330 | US | Advance Retail Sales M/M (Jun) | -0.30% | -1.20% |
| 730 | 1330 | US | Retail Sales Less Autos M/M (Jun) | -0.10% | -1.10% |
| 730 | 1330 | US | Retail Sales ex. Auto & Gas M/M (Jun) | 0.10% | -0.80% |
| 900 | 1500 | US | Business Inventories M/M (May) | 0.30% | 0.40% |
| 930 | 1530 | US | DOE Crude Oil Invent. W/W (Jul 9) | -1500K | -4961K |
| 930 | 1530 | US | DOE Gasoline Invent. W/W (Jul 9) | 350K | 1320K |
| 930 | 1530 | US | DOE Distillate Invent. W/W (Jul 9) | 1050K | 321K |
| 930 | 1530 | US | DOE Cushing Crude Invent. W/W (Jul 9) | -184K | |
| 930 | 1530 | US | DOE Refinery Utilisation W/W (Jul 9) | 0.15% | 1.40% |
| 1300 | 1900 | US | Minutes of FOMC Meeting | ||
| 1730 | 2330 | NZ | Business PMI M/M (Jun) | 54.5 |
- Auction
| CDT | BST | ||
| 1200 | 1800 | US | USD 13bln (Act) 30y Note Auction |
- Prices taken at 1215BST
