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DAILY US OPENING NEWS - 09/03/11

 

 

·   According to an OPEC delegate there is no need for an emergency meeting as oil supplies are sufficient

 

·   Market talk of the ECB buying in Eurozone peripheral debt helped Eurozone 10-year government bond yield spreads to come off their earlier highs

 

·   GBP gained strength on the back of higher BRC shop price index data from the UK, allied with narrowing of UK's trade balance

 

·   S&P said more sovereign rating downgrades are possible for Eurozone countries

 

·   RANsquawk European Morning Briefing Video: http://www.youtube.com/watch?v=b9aMkxQD7gg

 

Market Re-Cap

 

In early European trade, markets re-focused its attention on the Eurozone periphery ahead of the Portuguese Sep'13 bond auction, allied with comments from S&P that it anticipates more sovereign downgrades in Eurozone, leading to widening across the board of the Eurozone 10-year government bond yield spreads. In particular the Portuguese 10 year bond yield traded at a fresh Euro lifetime high, and the Italian 10 year yield rose above 5%, the first time since November 2008. However, later in the session, peripheral spreads tightened on the back of market talk that the ECB is buying in European peripheral bonds.

 

Elsewhere, after trading in negative territory early in the session, WTI and Brent crude futures regained strength following comments from the OPEC that there is no need for an emergency meeting as oil supplies are sufficient, allied with news that heavy fighting shut down the Zawiyah refinery in Libya. In other news, GBP received a boost from higher BRC shop price index data from the UK, allied with narrowing of UK's trade balance.

 

Moving forward, markets look ahead to economic data from US and Canada, allied with USD 21bln 10-year Note auction, and another Fed's Outright Treasury Coupon Purchase operation in the maturity range of Mar'15 - Aug'16, with a purchase target of USD 5-7bln.

 

Asian Headlines

 

According to Ba Shusong, a researcher at the Chinese Development Research Centre, China may raise interest rates once or twice during the first half of the year, but low rates in developed economies will limit room for further increases. He also said that China is likely to use tools such as increasing banks’ reserve requirement ratios more frequently if the country’s trade surplus and capital inflows remained large. (RTRS)

 

US Headlines

 

According to US Treasury debt official, Kim, even if a government shutdown occurs, Treasury will do auctions as normal, adding that a failed auction is the least of his worries. He further said that all metrics point to US debt keeping its AAA status, and sees average debt maturity to gradually expand to upper end of historic range. (RTRS)

 

In other news, JPMorgan lowered its US economic growth forecast for 2011 to 3.2% from 3.4%, partly attributed to the fiscal drag from the US local government. (Sources)

 

·   MBA Mortgage Applications (Mar 4) W/W 15.5% vs. Prev. -6.5% (RTRS)

 

EU and UK Headlines:

 

·   German Industrial Production SA (Jan) M/M 1.8% vs. Exp. 1.7% (Prev. -1.5%, Rev. to -0.6%)

·   German Industrial Production NSA WDA (Jan) Y/Y 12.5% vs. Exp. 11.1% (Prev. 10.0%, Rev. to 11.3%)

·   UK Visible Trade Balance (GBP/mln) (Jan) M/M -7057 vs. Exp. -8500 (Prev. -9247, Rev. to -9686)

·   UK Trade Balance Non EU (GBP/mln) (Jan) M/M -4173 vs. Exp. -5150 (Prev. -5817, Rev. to -5816)

·   UK Total Trade Balance (GBP/mln) (Jan) M/M -2950 vs. Exp. -4000 (Prev. -4831, Rev. to -5475)

·   BRC Shop Price Index (Feb) Y/Y 2.7% vs. Prev. 2.5%, highest level since November 2008 (RTRS)

 

·   Portuguese bond auction for EUR 1bln, 5.45% 23-Sep-13, bid/cover 1.6 vs. Prev. 1.9 (yield 5.993% vs. Prev. 4.086%) (RTRS)

 

EQUITIES

 

European bourses came under pressure in early trade partly on the back of renewed Eurozone sovereign fears, however as the session progressed equities received some support following market talk of the ECB buying in Eurozone peripheral debt, allied with better than expected industrial production data from Germany. In equity specific news, stronger sales data from Deutsche Lufthansa boosted the aviation sector, with strength seen in other airline stocks like Air France. Also, Carrefour shares rose around 2% after investor Knight Vinke Asset Management said it is a shareholder in the co. Moving into the North American open, equities are trading mixed with telecommunications and oil & gas as the worst performing sectors, however industrials performing well.

 

Index

DAX

CAC

FTSE

EUROSTOXX

SMI

Level

7180.89

4021.44

5957.88

2951.6

6496.5

Change (ticks)

16.14

5.53

-16.88

6.18

-14.71

 

FX

 

GBP gained strength on the back of higher BRC shop price index data from the UK, narrowing of UK’s trade deficit, allied with comments from the OECD that food prices in UK are rising more quickly than in any other Western European country. In other news, EUR/USD traded under pressure in early trade weighed upon by Eurozone sovereign fears, and strength in the USD-index, however the pair retraced earlier losses on the back of market of the ECB buying in European peripheral debt, as well as stronger than expected industrial production data from Germany.

 

Elsewhere, CHF gained strength across the board after comments from the KOF Swiss Economic Institute that the Swiss economy may expand at a faster pace this year than previously projected.

 

Currency

EURUSD

GBPUSD

USDJPY

Level

1.3923

1.6212

82.71

Change (pips)

0.0018

0.0052

0.0400

 

COMMMODITIES

 

WTI Crude futures retraced earlier losses following comments from the OPEC that there is no need for an emergency meeting as oil supplies are sufficient, allied with news that heavy fighting shut down the Zawiyah refinery in Libya

 

Geopolitical News:

·   On going fighting in Libya sees rebel forces being hammered in the east of the oil town Bin Jawad. The Zawiyah Oil Refinery Co., Libya’s second-largest refinery, has been shut down due to heavy fighting in the city.

·   In related news, Greek officials have said a Libyan plane passed over Greece en route to Egypt. However officials say they have no further information on whether the plane is Gaddafi’s.

·   Elsewhere, a Tunisian court dissolved the Rally for Constitutional Democracy, a former governing party of Tunisia’s disposed leader Zine El Abidine Ben Ali.

·   Saudi Foreign Minister says its up to the Arab League to decide on protecting Libyans

 

Oil & Gas News:

·   OPEC has said it currently sees no need to hold an emergency meeting as supply is ample despite the decline in Libyan production.

·   The Angolan oil minister has said he feels OPEC should wait to see how events unfold before calling a meeting.

·   Nigeria says its state owned Oil Company will boost oil output if requested by OPEC.

·   Lagarde, the French Finance Minister says Saudi’s have the capacity to compensate for lost output from Libya. Addressing the domestic situation, she says France has ‘several weeks’ of oil reserves.

·   Iraq has cut Aprils Basra light crude price to the US to a discount of USD 1.65

·   Bank of America has revised their Q2 Brent forecast to USD 122/bbl in 2012 (prev. USD 86/bbl)

 

Elsewhere, according to a Chinese government adviser, Li Yining, China should use some of its USD 2.85trl foreign exchange reserves to buy more Gold, in order to hedge against risks of foreign currency devaluations. (RTRS)

 

 

 

Commodity

WTI Nymex

OTC Spot Gold

Level

105.01

1434.28

Change (NYSEARCA:USD)

-0.01

5.33

 

LOOKING AHEAD

 

Economic Releases

 

CST

GMT

 

DATA

EXP

PREV

0730

1330

CA

New Housing Price Index M/M (Jan)

0.1%

0.1%

0730

1330

CA

New Housing Price Index Y/Y (Jan)

1.9%

2.1%

0900

1500

US

Wholesale Inventories M/M (Jan)

0.9%

1.0%

0900

1500

US

Wholesale Sales M/M (Jan)

0.5%

0.4%

0930

1530

US

DOE Crude Oil Inventories W/W (Mar 4)

1000K

-364K

0930

1530

US

DOE Gasoline Inventories W/W (Mar 4)

-1500K

-3590K

0930

1530

US

DOE Distillate Inventory W/W (Mar 4)

-800K

-751K

0930

1530

US

DOE Cushing Crude Inventory W/W (Mar 4)

 

1130K

0930

1530

US

DOE Refinery Utilisation W/W (Mar 4)

0.00%

1.50%

1400

2000

NZ

RBNZ Official Cash Rate M/M (Mar)

2.75%

3.00%

1750

2350

JN

GDP Q/Q (Q4 F)

-0.3%

-0.3%

1750

2350

JN

GDP Annualised Y/Y (Q4 F)

-1.2%

-1.1%

 

Speakers

1000

1600

SW

Riksbank’s Deputy Governor Nyberg

1230

1830

US

Treasury Secretary Geithner

1500

2100

EU

ECB’s Weber

N/A

N/A

SW

Riksbank’s Deputy Governor Ekholm

 

Auctions

1000

1600

US

Fed’s Outright Trea. Coup. Purch. Mar’15-Aug’16 (USD 5-7bln)

1200

1800

US

USD 21bln 10y Note Auction

 

Prices taken at 1256GMT