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DAILY US OPENING NEWS - 15/03/12

· SNB keep their 3-month Libor target rate unchanged and commit to defending EUR/CHF at 1.2000.

· Spain and France hold well-received auctions, with spreads tightening between their respective 10-years and the bund.

· International market focus shifts to the US for manufacturing, PPI and jobless data.

· RANsquawk European Morning Briefing Video: http://youtu.be/c9tYhRxZN8Y

Market Re-Cap

Heading into the North American open, stocks are trading flat to minor negative territory as market participants look forward to a slew of macroeconomic releases from the US later on in the session. This morning saw both the Spanish and the French Treasuries sell various bonds at the top end of the estimated range, which, combined with touted buying by domestic accounts of BTPs resulted in further yield spread tightening. In the FX space, the SNB kept the target rate unchanged and reiterated commitment to defend the ceiling in EUR/CHF with utmost determination. The latter half of the session sees the release of the latest Empire Manufacturing, Philadelphia Fed, weekly jobless as well as the PPI from the US for the month of February.

US Headlines

Foreclosure activity is rising in some US states, although national foreclosures fell by 8% in February compared with a year ago. The rise in foreclosures appear to be concentrated in the populated metropolitan areas, according to RealtyTrac's latest report released today. (Sources)

Asian Headlines

Chinese Premier Wen has warned Conservative officials in China's Communist Party that failure to implement political reform will prevent the nation from instituting economic and structural reform. (FT-More)

China is considering legalizing 'gray' lending. (WSJ) China's informal lending system (from small firms, wealthy individuals and loan sharks) has been crucial to small businesses and rural areas that find attaining credit difficult from mainstream banks. Premier Wen declared that authorities are now looking at ways to make the sector legitimate. UBS estimates the volume of this lending to be somewhere between USD 316-632bln, or around 10% of GDP.

EU and UK Headlines

Fitch affirmed UK at AAA; revised outlook to negative from stable. (RTRS) Fitch said the rating affirmation reflects the progress made in reducing the government's structural budget deficit and credibility of the fiscal consolidation effort, and the outlook revision reflects the very limited fiscal space to absorb further economic shocks in light of such elevated debt levels and a potentially weaker than current forecast economic recovery. The mix of tight fiscal and "loose" monetary policies allowed for by the flexible monetary and exchange rate regime, including QE, is supportive of the necessary rebalancing of the UK economy, and in the absence of adverse shocks Fitch does not expect to resolve the negative outlook until 2014.

A UK Treasury spokesman said it is essential that the UK sticks to its deficit plan and the Fitch move is a warning to anyone who believes there can be deficit financed give-away in UK budget. (Sources)

The IMF board approved a longer loan-programme schedule, allowing for a four-year Greek programme, a decision that tweaks the extended fund facility, according to a source. The board also approved the EUR 28bln Greek bailout loan for Thursday. (Sources)

Eurozone fiscal pact encounters headwinds. (FT-More) After an initial burst of enthusiasm from Europe's leaders on the signing of the new fiscal pact, concerns have arisen that support is thin and ratification could fail in several countries. Yesterday, Netherlands' two front runners to lead the Labour Party said they would vote against the pact if it meant accepting a Brussels-enforced deficit target of 3% of GDP in 2012, which would require more cuts. The pact now faces opposition in Ireland's referendum, Germany's Bundestag and France's Presidential candidate Francois Hollande.

Germany's most populous state, North Rhine-Westphalia, will hold a snap election that is being seen as a test to German Chancellor Merkel's coalition. (WSJ) The state legislature of the area dissolved yesterday as the coalition failed to pass a budget. Polls are suggesting that the centre-left are likely to strengthen their grip on the state.

The Swiss National Bank have kept their key 3-month Libor rate unchanged and have reaffirmed their commitment to defending EUR/CHF at the 1.2000 level.

Swiss SNB 3-month LIBOR target rate (Mar) M/M 0.00% vs. Exp. 0.00% (Prev. 0.00%) (Sources)

BoE's Broadbent says is not advocating a withdrawal in BoE stimulus any time soon. (Sources)

Eurozone Labour Costs (Q4) 2.8% vs. Exp. 2.3% (Prev. 2.7%, Rev. 2.6%)

Eurozone Employment (Q4) Q/Q -0.2% (Prev. -0.1%, Rev. -0.2%)

Eurozone Employment (Q4) Y/Y -0.2% (Prev. 0.2%, Rev. 0.3%) (Sources)

EQUITIES

European equities are in mixed territory ahead of the US open, with the FTSE carrying across some of yesterday's losses into today's session The reaction to yesterday's Fitch actions, changing the UK's outlook to negative, has held back the FTSE from moving into positive territory.

In individual equity news, Deutsche Lufthansa are making losses today following the comments that the German federal court are to make a decision concerning night-flights from Frankfurt Airport, with the company commenting that their cargo division will have to seek growth in other markets to offset the impact from the ban. Company shares currently trade down 1.5%. (Sources)

The management board of Alstom have been particularly vocal so far in the session, with the company CEO commenting that they will not harm shareholders with adventurous deals and will not comment on earlier rumours that it was priming a bid for Suzlon's German subsidiary REpower. Company shares are one of the best performing in Europe today, currently trading up 2.2%. (Sources)

Top performing sectors in the BE500: Basic Materials (+0.53%), Industrials (+0.45%), Technology (+0.26%)

Worst performing sectors in the BE500: Oil & Gas (-0.40%), Health Care (-0.19%), Consumer Goods (-0.19%)

 

 

Index

DAX

CAC

FTSE

EUROSTOXX

SMI

Level

7098.54

3565.15

5940.23

2578.25

6307.75

Change (ticks)

19.12

0.64

-5.20

3.46

7.32

**Note: For US equity news in detail, kindly refer to the RANsquawk Daily US Equity Opening News report.

FX

In reaction to the SNB reiterating that they will continue to defend the EUR/CHF 1.2000 level the cross initially dropped 20 pips, however managed to stabilise to around 1.2100.

The market has been questioning whether or not the central bank will move the floor in EUR/CHF given the recent strength in CHF and given the fact the price has remained near the protected floor at 1.2000. However, the latest announcement failed to reveal any surprises with the SNB keeping its interest rate on hold and maintaining the current floor in the cross.

JP Morgan have boosted their USD/JPY forecast to 86.00 by June this year from 76.00. (Sources)

Currency

EURUSD

GBPUSD

USDJPY

Level

1.3061

1.5683

83.37

Change (pips)

0.0029

0.0008

-0.3600

COMMODITIES

WTI and Brent crude futures are trading roughly flat ahead of the US open. Natural gas prices may fluctuate later in the session following the release of the EIA natural gas storage change data, currently expected to come in at -58BCF.

Oil & Gas News:

· South Korean LNG imports rose 50% from a year earlier in February even as the average price climbed 41%.

· US President Obama and British PM Cameron discussed the possibility of releasing emergency oil reserves during a meeting on yesterday according to two sources familiar with the talks.

· China is expected to raise prices for refined oil products in the next few days after a steep price increase in oil over recent weeks.

Geopolitical News:

· Iran's oil production has fallen to a 10-year low and could drop to levels last seen during the Iran-Iraq war in the 1980s as sanctions over its nuclear programme disrupt an industry already suffering from years of underinvestment.

Commodity

WTI Nymex

OTC Spot Gold

Level

105.65

1649.08

Change (NYSEARCA:USD)

0.22

4.20

**Note: For commodities news in detail, kindly refer to the RANsquawk Daily Energy Commentary report.

LOOKING AHEAD

Economic Releases

CST

GMT

 

DATA

EXP

PREV

0730

1230

US

Empire Manufacturing (Mar) M/M

17.50

19.53

0730

1230

US

PPI (Feb) M/M

0.5%

0.1%

0730

1230

US

PPI (Feb) Y/Y

3.3%

4.1%

0730

1230

US

PPI Ex. Food & Energy (Feb) M/M

0.2%

0.4%

0730

1230

US

PPI Ex. Food & Energy (Feb) Y/Y

2.9%

3.0%

0730

1230

US

Initial Jobless Claims (Mar 10) W/W

357K

362K

0730

1230

US

Continuing Claims (Mar 3) W/W

3408K

3416K

0800

1300

US

Total Net TIC Flows (USD) (Jan) M/M

40.0B

87.1B

0800

1300

US

Net Long-Term TIC Flows (USD) (Jan) M/M

38.5B

17.9B

0900

1400

US

Philadelphia Fed (Mar) M/M

12.0

10.2

0930

1430

US

EIA Natural Gas Storage Change (Mar 9) W/W

-58

-80

 

Speakers

0955

1455

US

US President Obama delivers remarks on American energy

1130

1630

IT

Italian PM Monti speaks before Parliament

1330

1830

EU

ECB's Nowotny speaks in Vienna

N/A

N/A

EU

EU's Barnier meets local government officials in Germany

N/A

N/A

WLD

IMF Vote on Greek bailout

N/A

N/A

US

British PM Cameron meets with US President Obama

 

Auctions

1000

1500

US

Fed's Outright Trea. Coup. Purch. Mar'18 - Feb'20 (USD 3.50-4.25bln)

1000

1500

US

10-yr TIPS Announcement

1100

1600

UK

BoE Confirms Details of Following Week's APF Operations

 

Earnings

UK

N/A

EU

N/A

SZ

N/A

US

N/A

**Note:

SMI March options expiry (1620GMT/1120CDT),

S&P 500/NASDAQ 100 March options and futures expiry (2015GMT/1515CDT)

WTI Crude March options expiry (1830GMT/1330CDT), Brent Crude April futures expiry (1830GMT/1330CDT)

Prices taken at 1149GMT

'Market talk' - Signifies information that has not been formally tested through traditional journalistic channels and therefore is to be treated as unsubstantiated. Any interpretation of the talk is taken at the readers own risk and is a representation of the rumours within the market place and never generated by ourselves.