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  • DAILY US OPENING NEWS - 19/04/12 0 comments
    Apr 19, 2012 8:09 AM

    · French and Spanish Treasuries sell to the top end of estimates.

    · EU Commission says there is no plan to activate the EFSF or the ESM to recapitalise Spanish Banks.

    · Market talk of a French sovereign downgrade - Unconfirmed**

    · RANsquawk European Morning Briefing Video: http://www.youtube.com/watch?v=4PKrQqftvpc

    Market Re-Cap

    With eyes focused on the fixed income markets this morning, participants have witnessed a turbulent session, with the Spanish bond auction selling to the top of the range. Markets were quick to note that the yield on the 10-yr line did increase to 5.743%, but still below the key 6% level. In the initial reaction, the German Bund saw a sharp spike to the upside, but as the results were digested, the security retreated back towards the unchanged level. Markets also witnessed a subsequent French auction, exhibiting solid demand.

    European equities have also seen volatility following the auctions, and now trade lower amid risk-aversion with the exception of the FTSE 100 as North America comes to market. Equity participants have witnessed Nokia report their Q1 earnings, with their EPS coming below expectations at a loss of EUR 0.25 per share. Nokia shares showed high volatility following the release as shareholders digested the report and now trade down 2.3%.

    The focus on the European periphery continues, with the EU Commission saying that there is no plan to activate the EFSF or the ESM to recapitalise the Spanish banking system. As such, eyes remain on the Mediterranean financials.

    Looking ahead in the session, US participants await further US earnings reports Microsoft after the close. In terms of data, the US Philadelphia Fed Manufacturing Survey will take the focus of the afternoon.

    Global Headlines

    IMF's Lagarde has said the global economic situation is extremely unstable. Lagarde continues by saying that the IMF has commitments for USD 316bln in resources and further commitments 'in the bag'. (Sources) Lagarde says Poland and Switzerland are to commit a total of USD 34bln in new fund resources.

    A senior Canadian finance official said yesterday that Canada is not prepared to make a bilateral commitment to increase IMF resources. (RTRS)

    Asian Headlines

    Japanese Merchandise Trade Balance Total (JPY) (Mar) M/M -82.6bln vs. Exp. -223.2bln (Prev. 32.9bln, Rev. 29.4bln)

    Japanese Adjusted Merchandise Trade Balance (Mar) M/M -621.3bln vs. Exp. 446.3bln (Prev. -321.4bln)

    Japanese Merchandise Trade Exports (Mar) Y/Y 5.9% vs. Exp. 0.2% (Prev. -2.7%)

    Japanese Merchandise Trade Imports (Mar) Y/Y 10.5% vs. Exp. 7.0% (Prev. 9.2%) (Sources)

    RTRS Tankan poll has shown Japanese Manufacturers Sentiment Index +1 in April and Non-Manufacturers Index +10 over the same period. (RTRS)

    BoJ's Shirakawa has said the central bank is fully committed to asset purchases to meet the 1% inflation target. Shirakawa said that the economy may come to expect a prolonged period of low interest rates, but warns that these low rates could exacerbate financial imbalances. (Sources)

    A Chinese PBOC Official has said the bank is to steadily boost liquidity via a cut in Banks' RRR and an increase in reverse repos. The official continued by saying that liquidity can also be boosted via the maturity of central bank bills. (Xinhua)

    Ex-PBOC adviser Li has said targeted policy easing is likely in the coming months in order to support manufacturing, services and small businesses. (Sources)

    EU and UK Headlines

    Both Spain and France held relatively well-received bond auctions earlier in the session, with the Spanish Tesoro selling to the top of the indicative range. Markets have noted that the yield on the 10-yr line has increased from the previous auction, but still remains below the key 6.00% level. Analysts have noted the reduced size of the auction possibly assisting the Tesoro, but the auction will buy some time for Spain. In recent trade, the European 10-yr Bund yield spreads all trade around their widest levels of the day.

    Spanish Auction Results

    -Spain sells EUR 1.116bln 3.30% Oct'14 Bonds, bid/cover 3.3, Prev. 2.00 (yield 3.463%, Prev. 3.495%)

    -Spain sells EUR 1.425bln 5.85% Jan'22 Bonds, bid/cover 2.4, Prev. 2.17 (yield 5.743%, Prev. 5.403%)

    French Auction Results

    -France sells EUR 3.545bln 0.75% Sep'14 BTAN, bid/cover 2.286 (yield 0.85%)

    -France sells EUR 1.730bln 3.50% Apr'15 OAT, bid/cover 3.0, Prev. 2.85 (yield 1.06%, Prev. 2.680%)

    -France sells EUR 2.698bln 1.75% Feb'17 BTAN, bid/cover 2.695, Prev. 1.99 (yield 1.83%, Prev. 1.780%)

    French President Sarkozy's campaign for re-election appears to have stalled ahead of the first round of voting on Sunday, according to polls. (FT-More) The polls show that an earlier advance by the current president has faded and he now remains far behind Francois Hollande for the decisive second round on May 6th.

    EQUITIES

    European cash equities are trading lower as North America comes to market, and have exhibited a turbulent morning. Following the release of the Spanish bond auction results, European bourses suffered losses, however a modest rally was observed following solid demand in the subsequent French auction. In recent trade, equities have seen some selling off and have slipped into negative territory.

    The basic materials sector is seen as one of the strongest performer at the midpoint of the day in Europe, with a string of good news coming from miners' output figures. Anglo American report increases in their iron ore and copper output as well as Rio Tinto commenting that their confidence has increased on their outlook for this year. As such, Anglo American and Rio Tinto shares are seen higher by 1.7% and 1.3% respectively.

    Bank of America (NYSE:BAC) Q1 EPS USD 0.03 (adjusted EPS USD 0.31) vs. Exp. USD 0.12

    - Q1 Revenue USD 22.28bln vs. Exp. USD 22.64bln

    - Q1 Net USD 653mln

    - Q1 global wealth & investment management revenue USD 4.36bln

    - Q1 tier 1 capital ratio 13.37%

    - Provision for credit losses declines to lowest level since Q3 2007 as credit quality continues to improve

    - Strong performance in global markets; sales and trading revenue excluding DVA third highest since Merrill Lynch acquisition

    Morgan Stanley (NYSE:MS) Q1 adjusted EPS cont ops ex DVA USD 0.71 vs. Exp. USD 0.44

    - Q1 revenue USD 6.935bln vs. Exp. USD 7.94bln

    - Q1 fixed income, commodities, sales and trading revenue USD 2.6bln

    - Q1 Tier 1 capital ratio (Basel 1) about 16.8%

    - Q1 net revenue ex DVA USD 8.9bln

    Top performing sectors in the BE500: Industrials (+0.47%), Basic Materials (+0.43%), Health Care (+0.39%)

    Worst performing sectors in the BE500: Telecommunications (-0.69%), Oil & Gas (-0.69%), Utilities (-0.55%)

     

     

    Index

    DAX

    CAC

    FTSE

    EUROSTOXX

    SMI

    Level

    6693.91

    3229.53

    5766.94

    2312.32

    6201.39

    Change (ticks)

    -38.12

    -10.76

    21.65

    -15.52

    28.04

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

    FX

    EUR/USD was seen lower following the Spanish bond auction, but reversed the losses and was supported by solid demand in the French auctions thereafter. Strong bids were seen at 1.3100, however the pair has come under selling pressure in recent trade amid risk-aversion in Europe and is now close to a large 1.3100 option expiry for the 10am NY cut. GBP/USD is seen broadly unchanged as North America comes to market, seeing some modest strength earlier in the session but selling off in recent trade. The pairs may see some further fluctuations as the US comes to market and digests the latest information from Europe as well as some key manufacturing data from the US at 1500BST/0900CDT.

    Currency

    EURUSD

    GBPUSD

    USDJPY

    Level

    1.3084

    1.6023

    81.66

    Change (pips)

    -0.0039

    0.0000

    0.4000

    COMMODITIES

    WTI and Brent crude futures are seen higher ahead of the NYMEX pit open but have seen some selling off in recent trade amid risk-aversion in Europe. Energy prices may see fluctuation with key US manufacturing data due at 1500BST/0900CDT.

    Oil & Gas News:

    · TransCanada have submitted a new Keystone XL pipeline proposal. The proposal outlines new plans to move the route of the pipeline eastwards, avoiding an aquifer that has been a point of contention.

    · China's fuel demand rose 2.9% in Q1 as diesel consumption was little changed from a year earlier, according to the National Development and Reform Commission.

    · Japan's LNG imports rose to a record high in the last fiscal year as utilities turned to fossil fuels after the Fukushima disaster. Japan purchased 83.18MMT of LNG from overseas in the fiscal year ending March.

    · Saudi Aramco has started testing the first of three trains at an expanded gas processing facility for its offshore Karan field that are set to deliver an output boost for the project later this year, according to a report.

    · BNP Paribas cut its Nymex 2012 natural gas forecast 13% to USD 2.34.

    Geopolitical News:

    · UN officials are studying images of military equipment paraded by North Korea at the weekend after a tip-off that one of the new missile launchers included significant Chinese technology that could put Beijing in breach of international sanctions against North Korea.

    · India have tested a new long-range nuclear-capable missile, according to reports.

    · Japan's Showa Shell, the top-buyer of Iranian crude, have renewed their annual contract with the country with a reduced volume, in compliance with Western sanctions.

    Commodity

    WTI Nymex

    OTC Spot Gold

     

    Level

    102.64

    1634.5

     

    Change (NYSEARCA:USD)

    -0.03

    -7.60

     

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

    LOOKING AHEAD

    Economic Releases

    CDT

    BST

     

    DATA

    EXP

    PREV

    0730

    1330

    US

    Initial Jobless Claims (Apr 14) W/W

    370K

    380K

    0730

    1330

    US

    Continuing Claims (Apr 7) W/W

    3300K

    3251K

    0900

    1500

    US

    Philadelphia Fed. Manufacturing Survey (Apr) M/M

    12.0

    12.5

    0900

    1500

    US

    Existing Home Sales (Mar) M/M

    4.62M

    4.59M

    0900

    1500

    US

    Existing Home Sales (Mar) M/M

    0.7%

    -0.9%

    0900

    1500

    US

    Leading Indicators (Mar) M/M

    0.2%

    0.7%

    0900

    1500

    EU

    Eurozone Consumer Confidence (Apr A) M/M

    -19.0

    -19.1

    0930

    1530

    US

    EIA Natural Gas Storage Change (Apr 13) W/W

    23

    8

     

    Speakers

    0745

    1345

    WLD

    IMF's Lagarde

    0845

    1445

    WLD

    World Bank President Zoellick press conference

    1030

    1630

    EU

    ECB's Praet on the role of the ECB in crisis

    1200

    1800

    UK

    BoE's Posen at the Banking Reform for Social Justice and Sustainability Conference

    1330

    1930

    EU

    ECB's Asmussen speaks in Washington DC

    N/A

    N/A

    WLD

    IMF and World Bank Spring Meeting in Washington, DC

    N/A

    N/A

    WLD

    G-20 Deputy Finance Ministers meeting

    N/A

    N/A

    WLD

    IMF's Lagarde gives speech at Bertelsmann Foundation

    N/A

    N/A

    US

    US National Association of State Budget Officers 2012 Spring Meeting

     

    Auctions

    1000

    1600

    UK

    BoE Confirms Details of Following Week's APF Operations

    1000

    1600

    US

    Fed's Outright Trea. Coup. Purch. Aug'22 - Feb'31 (USD 1.5-2.0bln)

    1000

    1600

    US

    US 2-, 5- and 7-yr Note Refunding Announcement

     

    Earnings

    UK

    N/A

    EU

    N/A

    SZ

    N/A

    US

    Altera, AMD, Capital One Financial, Microsoft, Peabody Energy, SanDisk, Wynn Resorts

    **Note:

    SMI April options expiry (1620BST/1020CDT)

    Prices taken at 1236BST

    **'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.

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