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DAILY US OPENING NEWS - 15/03/11

 

 

·   Markets remained focus on latest developments in Japan, with particular emphasis on the radiation leak from the damaged nuclear reactors

 

·   Risk-averse trade continued in Europe, with strength seen in CHF and the USD-index, and equities under pressure

 

·   RANsquawk EU Morning Briefing Video: http://www.youtube.com/watch?v=ZiGZhpNr3Tg

 

Market Re-Cap

 

Today the attention of the market remained on Japan, with investors fretting over the implications of radiation spill over from the damaged nuclear plants, which led the Nikkei to close down more than 10% in Asian trade. Risk-aversion continued in the European session, with strength seen in bunds, CHF and the USD-index, which in turn weighed upon GBP/USD and EUR/USD.

 

European equities traded lower during the session, with underperformance seen in nuclear industry related shares, such as E.ON and RWE, as well as insurance and reinsurance stocks, which weighed upon the DAX in particular, however, alternative energy sector shares gained. WTI crude futures once again traded under pressure primarily on Japanese concerns, however natural gas gained strength on anticipation of further demand.

 

Moving forward, markets look ahead to key economic data from the US in the form of Empire Manufacturing and import price data, allied with the FOMC rate decision (scheduled for 1815 GMT) later in the session. Ongoing developments in Japan will continue to remain the focus of the market.

 

Asian Headlines

 

FUKUSHIMA DAI-ICHI NUCLEAR POWER PLANT UPDATE (RTRS / IFR / FT More / AP / Sources)

 

·   The pumps which send water into the reactors to cool the nuclear fuel rods were damaged in the Tsunami which was caused by the earthquake on Friday. These fuel rods are Zirconium tubes which contain Uranium fuel pellets.

·   TEPCO (Tokyo Electric Power Company) have pumped sea water into the reactors to try to keep the fuel rods submerged with limited success. Exposure of these fuel rods has led to damage to the Zirconium tubes cracking and caused radioactive material to be released.

·   Explosions have occurred after exposed fuel rods reacted with steam to produce the flammable hydrogen gas which led to explosions. These explosions have damaged the outer buildings of the reactors.

·   Japanese Prime Minister Nanto Kan has warned the nation that radiation has spread from the reactors and there is a very high risk of further leakage. Meanwhile radiation levels around the plant have been seen significantly higher, whilst levels in Tokyo were reported to be 20 times higher than normal earlier this morning.

·   However. The UN weather agency has said that currently winds are dispersing radioactive material over the ocean and there is no danger for Japan or the region for now.

 

EU and UK Headlines:

 

According to an IMF spokesperson, officials from the IMF, ECB and European Commission will meet Ireland’s new government on March 16th to discuss the country’s economic plans. The spokesperson further said that a full mission to review Ireland’s IMF/EU bailout programme will take place in a few weeks. In other news, Irish finance minister said Ireland can’t seek to re-negotiate the terms of its rescue package until the central bank completes stress tests to determine whether the nation’s lenders need new capital. (RTRS/Sources)

 

·   German ZEW Survey (Economic Sentiment) (Mar) M/M 14.1 vs. Exp. 15.9 (Prev. 15.7)

·   German ZEW Survey (Current Situation) (Mar) M/M 85.4 vs. Exp. 86.0 (Prev. 85.2)

·   UK DCLG House Prices (Jan) Y/Y 0.5% vs. Exp. 2.3% (Prev. 3.8%)

 

 

 

 

 

 

 

EQUITIES

 

Jitters from the nuclear radiation leak in Japan were felt in the European market resulting in European equities to trade lower during the session, with underperformance seen in nuclear industry related shares, such as E.ON and RWE, as well as insurance and reinsurance stocks, which weighed upon DAX in particular, however, alternative energy sector shares gained. Strength in the USD-index exerted pressure on the basic materials sector, and moving into the North American open, equities continue to trade lower with technology and basic materials as the worst performing sectors.

 

Index

DAX

CAC

FTSE

EUROSTOXX

SMI

Level

6590.33

3748.31

5651.8

2755.94

6046.6

Change (ticks)

-276.30

-129.73

-123.44

-96.17

-227.87

 

FX

 

Risk aversion, emerging from recent events in Japan, remained the main theme today in the forex market, with strength seen in CHF and the USD-index, which in turn weighed upon EUR/USD and GBP/USD. It is also worth noting that overnight USD/JPY remained volatile with market talk of the BOJ checking rates in the pair at its lows around 81.23.

 

In other news, according to a PBOC adviser, Xia Bin, a large, one-off revaluation of the Chinese exchange rate, long seen as anathema to the government, should remain on the table as a policy option. (RTRS)

 

Currency

EURUSD

GBPUSD

USDJPY

Level

1.3883

1.6012

81.37

Change (pips)

-0.0109

-0.0160

-0.2600

 

COMMMODITIES

 

Both WTI Crude futures and Brent Crude futures have moved sharply lower as the fears of radiation leakage from the Fukushima nuclear reactor drove investors towards safer assets outweighing the on-going tension in the Middle East. Natural Gas futures have continued their strong performance as analysts predict an increase in demand to replace the lost electricity output from Japan’s nuclear power plants.

 

Geopolitical News:

  • Pro Gaddafi forces in Libya have continued their advance to retake rebel held territory, whilst rebels urge the UN to implement a no-fly zone over the country. A draft G-8 communiqué has urged the UN Security Council to increase pressure on Gaddafi including via economic measures.
  • Iran has said the presence of foreign troops in Bahrain is unacceptable and will further complicate the issue. Meanwhile, there are reports of police in Bahrain firing tear gas at protestors in Sitra Village.

 

Oil & Gas News:

  • Kuwait’s oil minister has said oil prices are sustainable at their current levels and there will be no need for OPEC to meet before June as prices are dropping.
  • IEA’s Tanaka has said he remains worried about the impact of high oil prices on the worldwide economic recovery.
  • The IEA have said global oil demand will be lower than previously forecast in 2011, lowering the outlook slightly by 10,000 BPD to 1.44mln BPD.

 

Commodity

WTI Nymex

OTC Spot Gold

Level

97.3

1402.95

Change (NYSEARCA:USD)

-3.89

-23.45

 

 

 

 

 

 

LOOKING AHEAD

 

Economic Releases

 

CST

GMT

 

DATA

EXP

PREV

0730

1230

US

Empire Manufacturing M/M (Mar)

16.10

15.43

0730

1230

US

Import Price Index M/M (Feb)

0.9%

1.5%

0730

1230

US

Import Price Index Y/Y (Feb)

6.4%

5.3%

0730

1230

CA

Labour Productivity Q/Q (Q4)

0.2%

0.1%

0755

1255

US

Redbook M/M (Mar 15)

 

-0.5%

0755

1255

US

Redbook Y/Y (Mar 15)

 

2.0%

0800

1300

US

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

35.0B

48.2B

0800

1300

US

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

55.0B

65.9B

0900

1400

US

NAHB Housing Market Index M/M (Mar)

17

16

1315

1815

US

FOMC Rate Decision M/M (Mar)

0.25%

0.25%

1530

2030

US

API Crude Oil Inventories W/W (Mar 11)

 

3820K

1530

2030

US

API Gasoline Inventories W/W (Mar 11)

 

-3743K

1530

2030

US

API Distillate Inventory W/W (Mar 11)

 

-1473K

1530

2030

US

API Cushing Crude Inventory W/W (Mar 11)

 

1653K

1600

2100

NZ

Westpac Consumer Confidence Q/Q (Q1)

 

108.3

1830

2330

AU

Westpac Leading Index M/M (Jan)

 

0.8%

 

Speakers

0900

1400

US

Treasury Secretary Geithner

1200

1700

EU

ECB’s Tumpel-Gugerell

 

Prices taken at 1148GMT