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Daily US Opening News And Market Re-Cap: December 23


From RanSquawk

  • Volumes remained thin across various asset classes ahead of market holidays related to Christmas and the New Year, together with a light economic calendar
  • Moody’s maintained the US’s sovereign credit rating at Aaa, adding that the US rating outlook is negative on federal government debt ratio risks, and the US rating could move down if debt ratios and interest costs continue rising
  • Outperformance was observed in Gilt futures partly helped by lacklustre economic data from the UK, which resulted in the UK 10-year yield falling below the 2% level and printing record lows
  • According to European government sources, the S&P ratings report on 15 Eurozone members is expected in January

Market Re-Cap
 
Markets lacked direction amid light volumes and lack of economic data, with European equities remaining in positive territory for a vast majority of the session. Strength in equities capped gains in Bund futures, while the Eurozone 10-year government bond yield spreads remained muted. However, outperformance was observed in Gilt futures partly helped by lacklustre economic data from the UK, which resulted in the UK 10-year yield falling below the 2% level and printing record lows. In the forex market, weakness in the USD-Index rendered support to EUR/USD, GBP/USD and commodity-linked currencies, although GBP came under some pressure following weaker than expected economic releases from the UK.
 
Moving into the North American open, the economic calendar remains thin, however markets look ahead to data from the US in the form of personal income/spending, PCE, and new home sales, together with the GDP release from Canada.
 
Asian Headlines:
 
**Note: Today is a Japanese market holiday
 
Global Headlines
 
Sovereign rating action and commentary from overnight (RTRS/Sources):
-  Moody’s maintains the US’s sovereign credit rating at Aaa; Outlook negative
-  Moody’s maintains Canada’s sovereign credit rating at Aaa; Outlook stable
-  Moody’s maintains New Zealand’s credit rating at Aaa; Outlook stable
-  Moody’s maintains Austria’s sovereign credit rating at Aaa; Outlook stable
-  Moody’s cut Slovenia’s sovereign credit rating by one notch to A1 from Aa3; Outlook negative
-  Moody’s maintains Slovakia’s sovereign credit rating at A1; Outlook stable
-  Moody’s maintains Denmark rating at Aaa; Outlook stable
 
US Headlines
 
Moody’s said the US rating outlook is negative on federal government debt ratio risks, and the US rating could move down if debt ratios and interest costs continue rising. The US rating also faces downward pressure on lower economic and employment growth rates. Moody’s said the US rating may be on review for downgrade if there are no further deficit reduction measures. (Sources)
 
In other news, US House of Representatives speaker Boehner caved in to growing criticism from within and outside his Republican party, agreeing yesterday to a short-term deal to extend a payroll tax cut for 160mln Americans. (RTRS)
 
Elsewhere, the Federal Reserve could signal it is likely to keep short-term interest rates near zero into 2014 or beyond, to bolster the fragile economic recovery. Fed officials have grown increasingly uncomfortable with their August statement that they are likely to hold short-term rates exceptionally low at least through mid-2013. Some believe low inflation and high unemployment could warrant low rates for longer – Jon Hilsenrath. (WSJ/RTRS) The Federal Reserve’s meeting in late January will provide a good opportunity for the US central bank to begin offering forecasts for interest rates according to a top Fed official.
 
Also, US Fed balance sheet liabilities were USD 2.899trl as of Dec 21th vs. USD 2.885trl Dec 14th week, Fed holdings of treasuries totalled USD 1.684trl as of Dec 21 vs. USD 1.673trl the prev. week, Fed discount primary borrowing averaged USD 13mln/day week vs. USD 393mln/day the prev. week, Fed holdings of agency debt totalled USD 104.70bln as of Dec 21, down from USD 105.91bln the prev. week and Fed holdings of MBS totalled USD 851.73bln, down from USD 858.08bln the prev. week. (RTRS)
 
BarCap US Treasury month end extension seen at +0.03yrs.
 
EU and UK Headlines
 
•  UK BBA Loans for House Purchase (Nov) M/M 34738 vs. Exp. 35400 (Prev.35295 Rev. to 35196)
•  UK Index of Services (Oct) M/M -0.7% vs. Exp. -0.1% (Prev. 0.1%, Rev. to 0.0%)
•  UK Index of Services (Oct) Y/Y 0.2% vs. Exp. 0.3% (Prev. 0.6%, Rev. to 0.7%) (RTRS)
 
EQUITIES
 
Markets lacked direction amid light volumes and lack of economic data, with European equities remaining in positive territory for a vast majority of the session. Moving into the North American open, equities continue to trade higher, with oil & gas and utilities as the best performing sectors.

FX
 
Weakness in the USD-Index rendered support to EUR/USD, GBP/USD and commodity-linked currencies, although GBP came under some pressure following weaker than expected economic releases from the UK. Elsewhere, weakness was observed in NZD overnight following news of an earthquake of 5.9 magnitude near the New Zealand city of Christchurch.

COMMMODITIES
 
WTI and Brent crude futures have eased off early European session highs amid thin trade as the USD-Index has rebounded from overnight lows.
 
Oil & Gas News:

•  China has bought an additional 1243mln barrels from the Middle East, West Africa and Russia to replace lost Iranian oil supply.
 
Geopolitical News:

•  Israel cancelled the sale of air surveillance equipment to Turkey over security concerns about Turkey’s ties with enemy states of Israel, particularly Iran.

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