From RanSquawk
- European asset classes look to consolidate after seeing a volatile start to September, as such, price action remains range bound and volatility muted.
- ECB's Bonnici and Constancio said current ECB policy is accommodative and appropriate, and the topic of negative deposit rates is not currently on the agenda.
Market Re-Cap
Stocks in Europe traded lower throughout the session, as market participants were seen booking profits following last weeks gains after the Fed announce a radical open ended QE program. Equity indices were led lower by the telecommunications, as well as utility related stocks. It is also worth noting that peripheral stock indices underperformed their core-EU counterparts, with some noting fast money and system accounts selling equities and instead turning to fixed income. As a result, Bunds have edged higher, with yields touching on highest level since April. Also, this week’s supply from France and Spain, as well as Germany, lead to modest spread widening. In the FX space, flows were light so far this session, as such both EUR/USD and GBP/USD are seen little changed as we enter the EU session. Going forward, there are no major economic releases scheduled for the second half of the session and volumes are expected to be thin given the Rosh Hashanah holiday.
Asian Headlines
Japanese asset classes closed for market holiday, Shanghai Composite heavily underperforms, closing lower by 2.1% as the renewed speculation of the instalment of property curbs weighs on the Chinese property sector. Additionally, Citigroup cut their 2013 Chinese growth forecast to 7.8% from 8.0%. (RANsquawk)
US Headlines
The Federal Reserve's attempts to boost the US economy is being blunted by banks struggling to process mortgage applications fast enough, keeping rates on home loans elevated, according to some of the US' largest lenders. (FT-More)
EU & UK Headlines
Spain has held informal talks with the EU on possible aid request, sounding out EU on policy conditions before deciding whether to request aid according to sources. (WSJ) However, overnight reports suggested that PM Rajoy is looking to delay as much as possible or even avoid requesting a full bailout from the EU, while the finance minister is said to be more prone to asking for assistance, citing unidentified government sources. (El Pais)
Both ECB's Bonnici and Constancio have said that current ECB policy is appropriate and accommodative, and have both said that a negative deposit rate is not on the immediate agenda - contrary of reports that we saw towards the tailend of last week from ECB members Hansson and Demetriades, who said a negative rate is on the table and is up for discussion among the governing board. (Newswires/RANsquawk)
European government bond yield spreads have drifted wider throughout the morning, as investors look to take profits on the outperforming peripheral securities against the German benchmark. As such, the Spanish spread has now moved above the 400bps mark, with the 10yr yield now standing at 5.9%. (RANsquawk)
Equities
Both US and European stock futures have drifted lower since the European open, with the lack of newsflow and volume limiting price action today. Markets are looking to consolidate and reflect on the recent sharp gains seen across stocks over the past two weeks.
Telecommunications are leading the way downwards, with Vodafone's share price lower by 1% as the latest reports suggest the Co. could take a USD 2.2bln should India press ahead with their latest tax bill changes.
Earlier reports that China Construction Bank, one of the country's largest, is planning to make a USD 15bln European bank acquisition has failed to stir sentiment in the European financials (FT-More), with the sector currently trading lower by 0.5%.
FX
EUR/USD and GBP/USD traded in a relatively tight range today and heading towards the North American cross over are seen little changed. Good sized bids are seen in EUR/USD just below the key 1.3100 level, with real money accounts seen on the bid at 1.3080. GBP/USD consolidated last week’s gains, resistance levels seen at 1.6255 (Friday's 5-month high) and option barrier said to be placed at 1.6275. (RANsquawk)
Commodities
WTI and Brent crude futures are moving in line with the modest reversal of risk appetite as investors look to take profit on the sharp gains seen across the energy complex over the past two weeks. Spot gold and silver prices are lower on the day moving in line with the broader commodities index. Market action looks to remain quiet for the rest of the session, with the only risk event of note coming with US Empire Manufacturing due at 1330BST/0730CDT. (RANsquawk)