SNAPSHOT:
-Dollar holds onto early gains against euro, down on yen; Treasurys
yields tighten; stocks to start lower; Brent lower at $99.23, Nymex
down at $84.92; Gold lower at $1,568.80.
-Watch for: Initial Jobless Claims; Monthly Budget Statement.
-News: ECB Still Has Tools Left After Rate Cut; Euro-Zone Industrial
Output Rises; Activity Slowdown to Weigh on Banks' 2Q FX Revenues.
MARKETS OUTLOOK:
FOREX:
Foreign exchange markets Thursday came to an impasse with the dollar
holding most of its early gains, European equities still nursing falls
and euro-zone bond yields generally close to the day's lows after the
average yield at an Italian 12-month T-bill auction came in at 2.697%
against 3.972% last time around. The euro barely moved against the
dollar in response to the good news.
At 0541 ET, the euro was down at $1.2222, the dollar was lower at
Y79.32 and the pound was down at $1.5475.
BONDS:
Treasurys pushed ahead in London trade as Bunds and gilts continued
their recent rallies. Wednesday's 10-year U.S. Treasury auction met
with very strong demand and priced at a record auction-low yield but
sellers soon emerged and pushed the bonds off their best levels.
Wednesday's FOMC minutes release showed "that while the Committee was
ready to take more easing action, it was more divided than had been
expected," according to Barclays. The September Treasury contract was
5/32 higher at 134-240 and the 10-year cash yielded 1.483%.
At around 0245 ET, the iTraxx Europe index of credit default swaps,
contracts that act as insurance against default on bonds, was at 168
basis points, one basis point wider from the close Wednesday,
according to data-provider Markit. The index tracks 125 high-grade
borrowers, 25 of which are banks and insurers,
The Crossover index of 40 mostly sub-investment-grade European
corporate borrowers widened five basis points to 662 basis points.
EQUITIES:
Stocks are expected to start down amid lingering disappointment that
the FOMC minutes did not reveal whether or not the Federal Reserve is
any closer to adding further stimulus to the economy, said Markus
Huber at ETX. Furthermore, said Huber, traders are positioning
themselves ahead of the earnings season, with JPMorgan Chase and Wells
Fargo reporting Friday. Finally, he noted some nervousness concerning
the release of Chinese GDP data early Friday.
At 0555 ET, Dow Jones Industrial Average futures were trading down
0.5% at 12477.0 while Nasdaq 100 futures were down 0.4% at 2551.0 and
S&P 500 futures were down 0.5% at 1329.2.
COMMODITIES:
Oil futures fell as concerns over the global economy weighed on
markets across the board. However, analysts were divided about the
long-term prospects for the oil market after major oil groups differed
in their demand growth forecasts this week. In its monthly oil market
report, the International Energy Agency forecast oil demand growth
would grow by 1 million barrels a day next year, taking a more
optimistic stance than the Organization of Petroleum Exporting
Countries which said earlier in the week that it expected a modest
growth of 0.8 million barrels a day in 2013.
Spot gold may test the lower end of its recent trading range this
session, as a stronger dollar and dented QE3 hopes weigh, said David
Govett of Marex Spectron. "The dollar is strong, there are no signs of
extra stimulus from the Fed, gold shows no interest in being a safe
haven and instead is behaving more like an industrial metal," he said.
"On that basis, I think we can see a test of the support at $1,565/oz
and if this breaks then a look at $1,550/oz," he added. Volumes
remained low, however, and this, rather than any fundamental reasons,
should prevent prices from moving much lower, Govett concluded. Spot
gold is down 0.5% at $1,568.80/oz.
=======TODAY'S CALENDAR=======
ET PERIOD
0830 US Jun PPI
0955 US Jul Thomson Reuters
University of Michigan
Survey of Consumers
1320 US Lockhart speech
1400 CAN BOC Statistics
==============================
TOP STORIES OF THE DAY:
ECB Still Has Tools Left After Rate Cut
ECB still has policy tools left after last week's interest rate cut,
which has taken the policy rate to a fresh record low.
ECB Ready To Take Firm Action On Inflation
The ECB stresses that it's ready to move quickly and firmly to keep
inflation close to its target rate, amid weak economic growth and
downward price pressures.
Euro-Zone Industrial Output Rises
Industrial production in the 17 countries that use the euro rises
unexpectedly in May as demand for a range of goods increases, Eurostat
says.
Finland Joins Negative-Yield Club
Euro-zone government bond yields continue to fall, although there is
no let up in the buying of assets deemed safe as Finland becomes the
third euro-zone country with negative yields.
No BOJ Plan To Cut Rates on Excess Reserves
Bank of Japan isn't thinking of following the ECB in lowering the
interest rate on excess reserves held at the central bank.
Italy's Istat May Stop Releasing Data
Italy's Istat may stop producing crucial economic data next year if
the government doesn't give it more financial resources, the head of
the national statistics institute says.
JGB Yields Hit Multi-Year Lows
Japanese government bond yields reach multi-year lows after the Bank
of Japan announces it's tweaking its asset-purchase program.
Activity Slowdown to Weigh on Banks' 2Q FX Revenues
A slowdown in client activity amid intense market uncertainty and
tight trading ranges for major currencies are likely to hit banks'
revenues from their foreign-exchange operations when they post their
interim results in the next few weeks.
Peugeot-Citroen to Shelve Major Plant
Peugeot-Citroen says that it plans to stop production at a major
Paris-area plant by 2014, the latest in a potential spate of closures
in Europe's troubled automobile industry.
US Raises 10-Year Debt at Record-Low Cost
U.S. government raises 10-year debt at a record-low borrowing cost, as
buyers willingly pay up for the perceived safety of U.S. Treasurys
given the array of global concerns.
Export Fears Overshadow Krona's Run
Sweden's krona is riding high against the euro, a trend that serves as
another vote of confidence in the safe-haven status of Nordic
countries.
Dentsu Buys Aegis for GBP3.16 Billion
Dentsu agrees to buy U.K. media firm Aegis for 3.16 billion pounds in
cash and says it has already purchased or has irrevocable undertakings
for around 30% of Aegis' stock, mainly through French businessman
Vincent Bollore.
PBOC Drains Liquidity; Rate Cut Imminent
China's central bank unexpectedly drains a net $6.3 billion from the
banking system this week, suggesting a widely expected reduction in
banks' reserve requirement is imminent.
BOJ Tweaks Asset Purchase Program
Bank of Japan decides to tweak the details of its asset purchase
program, moving to buy more treasury-discount bills, but keeping the
program's overall size unchanged.
Write to Simon Varcoe at simon.varcoe@dowjones.com
(END) Dow Jones Newswires
July 12, 2012 06:50 ET (10:50 GMT)
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