Fed's Evans has said the threshold for more stimulus has already been breached, in-keeping with the FOMC's current dovish stance and heightening expectations of an asset purchase announcement this Friday from Fed Chairman Bernanke.
German IFO data confirms the slowdown in German business conditions, affirming the trend seen in last week's PMIs from the country.
UK August bank holiday keeps volumes particularly thin today, capping price action in European trade.
RANsquawk European Morning Briefing Video: http://youtu.be/fEv0zNg9iIA
European equities are trading in flat to minor positive territory at the North American crossover amid thin volumes as the UK's August bank holiday keeps participants away from their desks. Newsflow has been light, with volumes well below their daily average. As such, price action has remained muted; however a few releases have caught focus.
German IFO data confirmed the pattern outlined in last week's PMIs that the German economy does continue to weaken, as the Eurozone debt crisis erodes the country's business conditions. Elsewhere, commentary from Fed speaker Evans has refreshed markets' perception of a dovish Federal Reserve, as he states that there is no need for the board to await any further data, as the threshold for more stimulus has already been breached. As such, focus turns to the tail-end of the week and the Jackson Hole summit, where markets anticipate any hints from the Fed Chairman Bernanke on future policy from the FOMC.
In the Spanish debt markets, the short-end continues to outperform as participants expect intervention from the ECB in that section of the curve. As such, the yield spread between the Spanish 2-yr bond and its German counterpart is markedly tighter on the day as bull steepening characterises the Spanish curve today.
Looking ahead in the session, no tier 1 data is scheduled for release from Europe or the US, with speakers from both the Fed and the ECB likely to take more focus. Of note, German representative Asmussen is set to speak at 1700BST/1100CDT, who has previously referred to a Greek exit of the Eurozone as 'manageable', so any rhetoric regarding attitudes towards the Eurozone laggard economy will be closely eyed.
Chinese Premier Wen said that China is to further implement policies to stabilise its exports and are to proactively expand imports. (Xinhua/RANsquawk) As a recap, back in July exports rose by 1% from a year earlier, down from 11.3% growth in June, amid slowing demand from key markets. Elsewhere, further reinforcing the rhetoric on a slowing Chinese economy; Industrial Profits YTD in July fell by 2.7% on a yearly basis, lower than the previous reading of -2.2% (Newswires)
Fed speaker Evans said the Fed should consider buying mortgage backed debt, and urges open-ended bond purchases in order to boost the economy. (Newswires) He additionally commented that there remains significant downside risks from the fiscal cliff as well as the Eurozone debt crisis. Although Evans is known for his widespread dovish stance, and despite his status as a non-voter on the FOMC, his comments contributed to a slight pick-up in risk appetite, weighing on T-Note futures and prompting an uptick in the e-mini S&P.
BarCap US Treasury month-end extension seen at +0.08yrs
EU & UK Headlines
ECB officials are considering informal, flexible targets for yields on shorter-maturity bonds of Spain and other at-risk countries, according to a source close to the matter. (WSJ) The ECB would guide investors toward a goal or range by disclosing details about the amounts of bond purchases and types of bonds involved, but the ECB will probably not make any final decisions before their September 6th meeting.
Greece's parliament will vote on the EUR 11.5bln package of budget cuts for the next two years before a meeting of Eurozone finance ministers on October 8th, according to unsourced reports. (Imerisia) Elsewhere, Rheinische Post wrote that the Troika's report on Greece will likely be released in October, so the latest reports suggest that the Greek parliament will be attempting to put their policies in order ahead of the report's release.
German IFO - Business Climate (Aug) M/M 102.3 vs. Exp. 102.7 (Prev. 103.3) (Newswires)
- German IFO – Current Assessment (Aug) M/M 111.2 vs. Exp. 110.8 (Prev. 111.6)
- German IFO – Expectations (Aug) M/M 94.2 vs. Exp. 95.0 (Prev. 95.6)
Following the release, the IFO commented that export expectations were negative for the first time in 3 years.
The official Spanish statistics agency INE revised lower their 2010 and 2011 GDP growth figures for the country. 2010's numbers were revised to -0.3% from -0.1%, and 2011's revised lower to 0.4% to 0.7%. (Newswires)
BarCap Pan Euro agg month-end extension seen at +0.03yrs
BarCap Sterling month-end extension seen at +0.04yrs
European equities are seen in flat to minor positive territory at the North American crossover with the exception of the Spanish IBEX-35, which has trended lower since the release of downward revisions to 2010 and 2011 GDP figures for Spain from the country's official statistics agency. The technology sector is seen as the outperformer of the day, being led by Nokia shares, which have been seen higher by as much as 12% in European trade. The moves follow the weekend reports that Apple have claimed victory in their patent dispute case against Samsung Electronics, severely denting the future prospects for some of Nokia's primary rivals such as HTC and others that operate Google's Android operating system. Microsoft shares could also see a lift today, as Nokia's upcoming smartphone release is set to use the company's software.
Despite the lacklustre German IFO data, the EUR is making gains as the EUR/USD pair sees support from a large buy order following the data release. The pair currently sits between two touted option expiries at the 1.2500 and 1.2550 levels that could provide range definition heading into the 10am (1500BST) NY cut. With little significant data releases scheduled from the US and Europe data, focus remains on the speaker schedule, with ECB's Asmussen and Fed's Pianalto due on the wires later today.
USD/JPY has kept gains made through the Asia-Pacific session, assisted by USD index weakness, and the pair currently trades in very close proximity to a touted option expiry at the 79.75 level for today's NY cut. Again, a lack of risk events looks to keep the pair muted today, as investors await the tail-end of the week and the Jackson Hole summit.
WTI and Brent crude futures are seen making steep gains as the threat of Tropical Storm Isaac puts many Gulf of Mexico oil and gas platforms out of production, heightening supply concerns. The storm is forecast to strengthen over the eastern Gulf of Mexico, threatening the coasts of four U.S. states with a possible hurricane. Gold and silver spot prices are seen relatively unchanged ahead of the North American open, as the lack of London participants keeps a lid on price action in commodities. Last price taken at: 1227BST
UK Market Closed – August Bank Holiday
NYSE LIFFE Sterling Products Closed:
All Sterling (Futures and Options) Closed
Short-, Medium-, Long-Gilt (Futures and Options) Closed
FTSE-100,-250 (Futures, Options) Closed
UK Commodity (Futures, Options) Closed
NYSE LIFFE European Products Regular Close
NYSE Euronext Regular Close
Eurex Regular Close
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