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DAILY US OPENING NEWS - 01/03/11

 

·   In latest news, according to reports in the Press TV, Saudi Arabia is sending 30 tanks to Bahrain. Also, there are unconfirmed reports of riots in Saudi Arabia

 

·   Core Eurozone countries and the UK reported strong Manufacturing PMI data for February, and a sharp decline was observed in German unemployment change for the month of February

 

·   BOE's King said the BOE will not try to cut the key interest rate below 0.5% under any circumstances, however if needed it could make further bond purchases

 

·   RANsquawk European Morning Briefing Video: http://www.youtube.com/watch?v=MsYKn6XTJk8

 

Market Re-Cap

 

Markets witnessed strong manufacturing PMI data from core Eurozone countries, which allied with a sharp decline in German unemployment change, boosted EUR/USD and equities, meanwhile record UK manufacturing PMI and Nationwide House Prices data lifted GBP/USD. Elsewhere, equities generally traded higher, however financials underperformed weighed upon by underperformance in HSBC shares as the co. was downgraded by UBS following weaker corporate earnings yesterday. In geopolitical news, tension continues to persist in the Middle East with Iranian opposition holding a demonstration today, allied with reports that Saudi Arabia is sending tanks to Bahrain, which provided a boost to WTI crude futures.

 

Moving forward, markets look ahead to Fed's Bernanke's semi-annual testimony at the Senate, key economic data from the US, as well as the Bank of Canada rate announcement. In fixed income, another Fed's Outright Treasury Coupon Purchase operation is scheduled in the maturity range of Aug'28 - Feb'41, with a purchase target of USD 1.5-2.5bln.

 

Asian Headlines

 

The Japanese government pushed through a USD 1trl budget for the year from April in the lower house, but some MPs from PM Kan’s own party boycotted the vote in a sign of his weakening clout. (RTRS) In terms of economic data, Japanese Jobless Rate (Jan) M/M 4.9% vs. Exp. 4.9% (Prev. 4.9%) (RTRS)

 

Elsewhere, lending by Chinese banks during the past two years has been excessively fast, topping the extreme upper limit set by regulators, according to the head of the China Banking Regulatory Commission (CBRC). In other news, according to the chief economist of the National Bureau of Statistics, Yao Jingyuan, China will find it difficult to stabilise prices this year although the nation will not see vicious inflation because it has sufficient reserves of agricultural commodities and has had bumper grain harvests. (RTRS)

 

·   Chinese Manufacturing PMI (Feb) M/M 52.2 vs. Prev. 52.1 (Prev. 52.9)

·   Chinese HSBC Manufacturing PMI (Feb) M/M 51.7 vs. Exp. 52.5 (Prev. 54.5) (RTRS)

 

US Headlines

 

The US government owes nearly a third more money to China than previously thought, the Treasury Department said as it revised Beijing’s December holdings of US Treasury debt sharply higher to USD 1.160trl. The USD 268.4bln increase over figures reported on February 15th was contained in a survey of foreign portfolio holdings of US securities that provided fresh evidence that China has been buying Treasuries through broker-dealers in Britain. (RTRS)

 

In other news, according to FDIC’s Bair, America’s big international banks may have to restructure and downsize their operations now, unless they can prove they will be easy to dismantle in another financial crisis. (RTRS)

 

EU and UK Headlines:

 

·   German Unemployment Change (000's) (Feb) M/M -52K vs. Exp. -18K (Prev. -13K, Rev. -18K)

·   German Unemployment Rate SA (Feb) M/M 7.3% vs. Exp. 7.4% (Prev. 7.4%)

·   Eurozone Manufacturing PMI (Feb F) M/M 59.0 vs. Exp. 59.0 (Prev. 57.3), highest since June 2000

·   Eurozone Unemployment Rate (Jan) M/M 9.9% vs. Exp. 10.0% (Prev. 10.0%)

·   German Manufacturing PMI (Feb F) M/M 62.7 vs. Exp. 62.6 (Prev. 60.5), record high

·   French Manufacturing PMI (Feb F) M/M 55.7 vs. Exp. 55.3 (Prev. 54.9)

·   Italian Manufacturing PMI (Feb) M/M 59.0 vs. Exp. 57.0 (Prev. 56.6), highest since April 2000

 

 

·   UK Manufacturing PMI (Feb) M/M 61.5 vs. Exp. 61.0 (Prev. 62.0), highest since survey began in 1992

·   UK Nationwide House Prices SA (Feb) M/M 0.3% vs. Exp. -0.2% (Prev. -0.1%)

·   UK Nationwide House Prices NSA (Feb) Y/Y -0.1% vs. Exp. -0.2% (Prev. -1.1%, Rev. to -1.4%)

·   UK Net Consumer Credit (Jan) M/M -0.3Bln vs. Exp. 0.2Bln (Prev. 0.2Bln, Rev. 0.8Bln) (RTRS)

 

·   Austrian Bond Auction for EUR 0.6bln, 3.5% 15-Jul-15, bid/cover 2.75 vs. Prev. 3.07 (yield 2.514 vs. Prev. 1.816%)

·   Austrian Bond Auction for EUR 0.6bln 3.65% 20-Apr-22, bid/cover 2.7 (yield 3.647%)

·   UK Conventional Gilt Auction for GBP 4bln, bid/cover 1.79 vs. Prev. 1.93 (RTRS)

 

EQUITIES

 

Following strong core Eurozone and UK manufacturing PMI data, European equities gained strength, however financials remained weak, weighed upon by HSBC shares that underperformed after getting downgraded by UBS on the back of weaker corporate earnings released yesterday. Basic materials demonstrated particular strength during the European session partly on the back of slowdown in Chinese manufacturing PMI data, waning concerns surrounding further monetary tightening by the PBOC. Moving into the North American open, equities are trading mixed with financials and utilities being the worst performing sectors.

 

Index

DAX

CAC

FTSE

EUROSTOXX

SMI

Level

7293.82

4114.3

5986.96

3014.46

6646.47

Change (ticks)

21.50

3.95

-7.05

1.37

36.03

 

FX

 

EUR/USD gained strength on the back of strong manufacturing PMI data from core Eurozone countries, allied with a sharp fall in German unemployment change. In other news, GBP/USD received support from a record rise in the UK manufacturing PMI and Nationwide House Prices figures.

 

Elsewhere, the Australian central bank kept interest rate steady for a fourth month and said inflation looked set to remain within its desired range all year, strongly suggesting it was in no hurry to hike again. Australia RBA Cash Target (Mar) M/M 4.75% vs. Exp. 4.75% (Prev. 4.75%) (RTRS)

 

Currency

EURUSD

GBPUSD

USDJPY

Level

1.3817

1.6264

82.07

Change (pips)

0.0011

0.0007

0.2900

 

COMMMODITIES

 

WTI Crude futures have traded largely unchanged during the Asian and European sessions, holding above the USD 97 level, whilst Brent Crude futures have held above the USD 112 level.

 

Oil & Gas News:

  • US natural gas production in the lower 48 states rose for a second consecutive month in December and showed a 9.1% increase from year-earlier levels, according government data released yesterday.
  • Oil exports from Iraq's southern Basra terminal were restored to 1.872 million barrels per day today after slowing to 1.2 million bpd in the last two days due to bad weather, a shipping source said.
  • US regulators granted the first deep-water drilling permit since the Deepwater Horizon spill shut Gulf of Mexico drilling last April.

 

Geopolitical News:

  • The EU have said there are no plans for military coordination on Libya at this stage, meanwhile the US is repositioning its forces around Libya.
  • Opposition supporters in Iran are planning to hold a demonstration today after two opposition leaders were transferred to a prison in Tehran.
  • North Korea has threatened a military response to the on-going US – South Korean joint military drills, calling them preparations for a nuclear war of aggression.

 

 

  • Russia’s foreign minister Lavrov has said international sanctions on Iran could be eased if Iran makes real positive steps on nuclear issues.

 

Commodity

WTI Nymex

OTC Spot Gold

Level

97.71

1419.63

Change (NYSEARCA:USD)

0.74

8.15

 

LOOKING AHEAD

 

Economic Releases

 

CST

GMT

 

DATA

EXP

PREV

0755

1355

US

Redbook M/M (Mar 1)

 

1.5%

0755

1355

US

Redbook Y/Y (Mar 1)

 

2.7%

0800

1400

CA

BOC Rate Announcement M/M (Mar)

1.00%

1.00%

0900

1500

US

ISM Manufacturing M/M (Feb)

61.0

60.8

0900

1500

US

ISM Price Paid M/M (Feb)

83.0

81.5

0900

1500

US

Construction Spending M/M (Jan)

-0.4%

-2.5%

0930

1530

UK

DMO Gilt Size Announcement

 

 

1100

1700

IT

New Car Registrations Y/Y (Feb)

 

-20.7%

1200

1800

IT

Budget Balance M/M (Feb)

 

-2.0B

1200

1800

IT

Budget Balance (Year to date) Y/Y (Feb)

 

-2.0B

1530

2130

US

API Crude Oil Inventories W/W (Feb 25)

 

163K

1530

2130

US

API Gasoline Inventories W/W (Feb 25)

 

-1621K

1530

2130

US

API Distillate Inventory W/W (Feb 25)

 

-534K

1530

2130

US

API Cushing Crude Inventory W/W (Feb 25)

 

-219K

1600

2200

US

Domestic Vehicle Sales Y/Y (Feb)

9.62M

9.59M

1600

2200

US

Total Vehicle Sales Y/Y (Feb)

12.60M

12.53M

N/A

N/A

UK

Halifax House Prices SA M/M (Feb)

-0.5%

0.8%

N/A

N/A

UK

Halifax House Prices 3M/Y (Feb)

-2.5%

-2.4%

 

Speakers

0900

1500

US

Fed’s Bernanke’s Semi-Annual Testimony at Senate

0900

1500

US

Treasury’s Geithner

 

Auction

1000

1600

US

Fed’s Outright Treasury Coup. Purch. Aug’28 - Feb’41 (USD 1.5-2.5bln)

 

Prices taken at 1252GMT