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US OPENING NEWS - 04/04/12

· ECB holds their key benchmark rate at 1.00%. Press conference to follow at 1330BST/0730CDT.

· UK Services PMI (Mar) M/M 55.3 vs. Exp. 53.4 (Prev. 53.8).

· Spain sells to the low end of the indicative range in their bond auction earlier today.

· RANsquawk European Morning Briefing Video: http://youtu.be/jThrf-4SIz0

Market Re-Cap

More pain in Spain has been the theme so far in the European morning as poor auction results across three lines has resulted in significant widening in the 10-yr government bond yield spreads over benchmark bunds with the Spanish 10yr yield up some 24bps on the day. In combination with this the latest Germany Factory orders also fell short of analysts' expectations and as such the lower open in bund futures following yesterday's less than dovish FOMC minutes has been completed retracted and we now sit above last Friday's high at 138.58.

Elsewhere, UK data continues to surprise to the upside with the service PMI for March coming in at 55.3 vs. Exp. 53.4, with Markit the data compiler, suggesting the PMI's this week signal UK GDP growth of 0.5% for Q1. Meanwhile in the FX markets USD/JPY has moved lower with a UK clearer and Swiss name being noted sellers, stops tripped in EUR/JPY through 108.50 is also attributed for some of the recent JPY strength.

Looking ahead attention now turns to the ECB press conference (1330BST).

Global Headlines

The IMF said that the board has extended access to an emergency credit reserve that will allow the fund to continue financing loan programmes in Europe, reflecting the "membership's commitment to ensure the IMF has an adequate lending capacity". (Sources)

Asian Headlines

China has almost trebled the amount of money that foreign institutions can invest in its capital markets, in the latest move aimed at loosening capital controls and internationalising the CNY. (FT-More) The China Securities Regulatory Commission said yesterday that international fund managers would be allowed to invest a total of USD 80bln in China's onshore capital markets - up from the previous limit of USD 30bln -in an expansion of the qualified foreign institutional investor scheme.

**Note: Chinese Market Closed

US Headlines

The FOMC minutes said that a significant change in the economic outlook could alter the 2014 rate plan, and there is no need for further QE unless growth slows, highlighting that slower overseas growth and prospective US fiscal tightening could restrain the pace of US expansion. Fed officials stated the current US economic outlook is a bit stronger overall, similar to that of the January meeting. (RTRS) Most officials only saw a temporary impact from rising oil and gas prices, and expect the inflation rate at 2% or less. With regards to the labour market, officials said that market conditions had improved and they see the jobless rate gradually declining. The statement said global financial markets had eased since January but continue to pose significant downside risks to the economy.

EU and UK Headlines

The ECB hold rates at 1.00% at their April rate-setting meeting. Press conference to follow at 1330BST/0730CDT. (RTRS)

Services PMI for France, Germany and the Eurozone came in roughly in line with expectations; however the UK continued the trend of outperformance in data and beat expectations.

Eurozone Services PMI (Mar F) M/M 49.2 vs. Exp. 48.7 (Prev. 48.7)

German Services PMI (Mar F) M/M 52.1 vs. Exp. 51.8 (Prev. 51.8)

French Services PMI (Mar F) 50.1 vs. Exp. 50.0 (Prev. 50.0)

UK Services PMI (Mar) M/M 55.3 vs. Exp. 53.4 (Prev. 53.8)

Following the stronger than expected UK Services PMI data, UK Gilts moved lower by 10 ticks. Markit Research commented that this year's UK PMI data signals UK GDP growth of 0.5% in Q1. (Sources)

Spain held a poorly received bond auction earlier in the session, with bid/covers generally weak and selling to the lower end of the indicative range. Following the release, risk-averse flows moved into the bund, rising 17 ticks.

-Spain sells EUR 1.1bln 4.40% Jan'15 bonds, bid/cover 2.41, Prev. 4.96 (yield 2.890%, Prev. 2.440%)

-Spain sells EUR 0.973bln 4.25% Oct'16 bonds, bid/cover 2.46, Prev. 2.59 (yield 4.319%, Prev. 3.376%)

-Spain sells EUR 0.489bln 4.85% Oct'20 bonds, bid/cover 2.96, Prev. 1.99 (yield 5.338%, Prev. 5.156%) (RANsquawk/Sources)

German Factory Orders SA (Mar) M/M 0.3% vs. Exp. 1.5% (Prev. -2.7%, Rev. -1.8%) (Sources)

Following the worse than expected German data, the Bund moved 10 ticks to the upside.

Portugal could alleviate the pressure to repay a EUR 10bln bond redemption that falls in September 2013 by carrying out a limited bond swap as Ireland did earlier this year, according to an EU official. (Sources)

Italy's austerity measures are stunting activity in the Eurozone's third largest economy, according to data releases. (WSJ) The Italian treasury said its state-sector borrowing requirement - a proxy for the budget deficit - fell 10% in the first quarter of 2012 from a year earlier. The figures suggest recent tax increases are helping Italy cut its fiscal shortfall, but also that they are pushing economic activity to contract even faster.

Arguments that divided the EU over its fiscal discipline treaty are beginning to be replayed over financial policy, as the Eurozone explores forging ahead with its own regime for bank regulation. (FT-More)

The Bank of England should hold fire on extra stimulus, according to the Times Shadow Monetary Policy Committee. (Times) The committee argued that "in the absence of another external shock, the MPC no longer needs to provide more emergency relief. It should now start thinking about a new phase of monetary management, one which will, in time, lead to dearer money and QE unwinding."

EQUITIES

European markets are trading lower across the board as North America comes to market, with particular underperformance noted in the DAX index following factory orders data coming in below expectations as well as general risk-averse sentiment in Europe today.

All sectors are seen lower, however certain health care stocks such as Roche and GlaxoSmithKline are registering gains, with defensive flows seen moving away from the riskier equities. However it should be noted that Roche have sent a letter to Illumina shareholders urging them to accept their tender offer, saying it is a fair deal in all financial metrics, this sentiment may also be contributing to the higher trading. Roche shares currently trade higher 0.5%.

Daimler have been active on the wires today as they announced that they are to back their 2012 earnings view. Daimler's CEO has also said he expects the global auto market to grow by 40mln vehicles per year until 2020 and the company is to invest EUR 10.9bln in research & development in 2012 and 2013. Despite the positive comments, Daimler shares are trading lower by 2.2% following worse than expected German factory orders data as well as general market sentiment.

Top performing sectors in the BE500: Health Care (-0.26%), Oil & Gas (-1.09%), Utilities (-1.11%)

Worst performing sectors in the BE500: Industrials (-2.18%), Basic Materials (-2.06%), Technology (-1.80%)

 

 

Index

DAX

CAC

FTSE

EUROSTOXX

SMI

Level

6861.61

3357.49

5770.78

2430.3

6219.73

Change (ticks)

-120.67

-49.29

-67.56

-28.68

-38.93

Click to enlarge

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

FX

USD/JPY is seen moving lower in the session amid market talk of a UK clearer selling in the pair, also some stops were tripped in EUR/JPY through 108.50 also contributing to JPY strength.

AUD/USD is seen at an 11-week low of 1.0244 earlier in the session, following the less-than-dovish minutes from yesterday's FOMC release as well as overnight Australian trade balance data, recording an unexpected deficit for February against a forecast surplus.

EUR/USD is seen moving lower, printing session lows at 1.3141, however there has been some market talk of large bids at the 1.3150 level, however this remains unconfirmed, but the pair may experience some further fluctuations as the US comes to market.

Currency

EURUSD

GBPUSD

USDJPY

Level

1.3153

1.5875

82.36

Change (pips)

-0.0080

-0.0038

-0.4500

Click to enlarge

COMMODITIES

WTI and Brent crude futures are seen trading lower ahead of the Nymex pit open, following a high build of crude oil in last night's API inventories, as well as a strong USD index. The energy complex now looks ahead to DOE inventory numbers due at 1530BST/0930CDT.

Oil & Gas News:

· Abu Dhabi National Oil Co. has raised its retroactive official selling prices for March shipments of all four grades of its crude by more than 5%, the fourth monthly increase. The state-run producer added USD 6.55 per BBL to the pricing.

· Saudi Arabia may cut prices for Asian exports relative to benchmark grades as supply rises and refinery profits ease.

· Five UK power plants were idle at 0730BST after being on yesterday, according to National Grid data.

· The UK port of Milford Haven will receive a delivery of Liquefied Natural Gas this month, according to ship-tracking data.

Geopolitical News:

· Iran has proposed nuclear talks to take place in Iraq instead of Turkey. The switch to Baghdad would be advantageous to Iran as Tehran considers the Iraqi government as falling within its sphere of influence.

US API Crude Oil Inventories (Mar 30) W/W 7848K vs. Prev. 3602K

API Gasoline Inventories (Mar 30) W/W -4458K vs. Prev. 1339K

API Distillate Inventory (Mar 30) W/W -1391K vs. Prev. -1448K

API Cushing Crude OK Inventory (Mar 30) W/W 739K vs. Prev. 1046K. (RTRS)

Further Oil Inventory numbers expected at 1530BST/0930CDT:

DOE Crude Oil Inventories (Mar 30) W/W Exp. 2500K, High 3500K, Low -1500K (Prev. 7102K)

DOE Gasoline Inventories (Mar 30) W/W Exp. -1400K, High 1750K, Low -2500K (Prev. -3537K)

DOE Distillate Inventory (Mar 30) W/W Exp. -500K, High 1250K, Low -1000K (Prev. -711K)

DOE US Refinery Utilization (Mar 30) W/W Exp. 0.35%, High 1.00%, Low 0.00% (Prev. 2.30%)

.

Commodity

WTI Nymex

OTC Spot Gold

 

Level

103.09

1626.72

 

Change (NYSEARCA:USD)

-0.92

-19.41

 
Click to enlarge

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

LOOKING AHEAD

Economic Releases

CDT

BST

 

DATA

EXP

PREV

0715

1315

US

ADP Employment Change M/M (Mar)

206K

216K

0900

1500

US

ISM Non-Manufacturing Composite M/M (Mar)

56.8

57.3

0930

1530

US

DOE Crude Oil Inventories W/W (Mar 30)

2200K

7102K

0930

1530

US

DOE Gasoline Inventories W/W (Mar 30)

-750K

-3537K

0930

1530

US

DOE Distillate Inventory W/W (Mar 30)

-50K

-711K

0930

1530

US

DOE Cush. OK Crude Invent. W/W (Mar 30)

 

1043K

0930

1530

US

DOE US Refinery Utilization W/W (Mar 30)

0.40%

2.30%

 

Speakers

0700

1300

US

US Treasury Secretary Geithner speaks in Chicago

0730

1330

EU

ECB Press Conference

1000

1600

US

Fed's Williams speaks in San Francisco

1055

1655

CA

BoC's Deputy Governor Boivin speaks in Toronto

 

Auctions

0845

1445

UK

BoE Asset Purchase Facility GBP 1.5bln 2019-2025 Gilt Purchases

1000

1600

US

Fed's Treasury Coupon Purchase USD 1.5-2.0bln Feb'36-Feb'42

1300

1900

US

Fed's Treasury Coupon Purchase USD 4.25-5.0bln Apr'18-Feb'20

 

Earnings

UK

IAG (Traffic)

EU

N/A

SZ

N/A

US

Bed, Bath & Beyond, Monsanto

Click to enlarge

Prices taken at 1251BST

'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.