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DAILY US OPENING NEWS - 16/03/11

 

 

·   Moody’s downgraded Portuguese sovereign rating to A3 from A1, outlook negative, which allied with a lacklustre 12-month T-Bill auction from Portugal promoted risk-aversion

 

·   Ongoing geopolitical tension in the Middle-East, especially in Bahrain, helped WTI crude futures to come off its earlier lows

 

·   Markets continued to keep a close eye on recent developments in Japan, in particular the radiation leak from damaged nuclear reactors

 

·   RANsquawk EU Morning Briefing Video: http://www.youtube.com/watch?v=Eajh29XOp_k

 

Market Re-Cap

 

Markets continued to keep a close eye on recent developments in Japan, in particular the radiation leak from damaged nuclear reactors, although the Nikkei did recover some of the past two day's losses and closed up 5.68%, which provided an early boost to European equities. However, as the session progressed, European equities pared gains and ventured into negative territory, weighed upon by Moody's downgrade of Portuguese sovereign rating, allied with a lacklustre 12-month T-Bill auction from Portugal, which together with strength in the USD-index weighed upon EUR/USD. Also, GBP/USD received strength early in the session following hawkish comments from BOE's King, however came under pressure as the USD-index regained strength, allied with a rise in ILO unemployment data from the UK. Elsewhere, ongoing geopolitical tension in the Middle-East, especially in Bahrain, helped WTI crude futures to come off its earlier lows, whereas natural gas futures rallied on anticipation of enhanced demand following the nuclear disaster in Japan.

 

Moving forward, markets look ahead to a slew of key economic data from the US, in the form of PPI and housing figures, allied with another Fed's Outright Treasury Coupon Purchase operation in the maturity range of Mar'15 - Aug'16, with a purchase target of USD 5.5-7.5bln.

 

Asian Headlines

 

According to sources, the BOJ is far from finished easing monetary policy and may act again as soon as next month. (RTRS)

 

US Headlines

 

Congressional leaders and the White House voiced support for striking a deal on funding for the US government through September 30th, setting up talks in earnest on how much public spending to cut. (RTRS)

 

·   US MBA Mortgage Application (Mar 11) W/W -0.7% vs. Prev. 15.5% (RTRS)

 

EU and UK Headlines:

 

Moody’s cut Portugal’s sovereign debt rating by two notches to A3 from A1 and said it might have to downgrade again given the impact of high borrowing costs and the difficulty of meeting tough fiscal targets. Meanwhile, Portuguese PM, Socrates, said the decision by the main opposition party to not support the government’s latest austerity measures could result in the country seeking a bailout. He further said that his government is available to discuss its deficit-cutting measures with opposition parties. (RTRS)

 

In other news, BOE’s King said that long-term interest rates are unsustainably low, adding that global policy makers’ response to the financial crisis of 2008 has left borrowing costs too low. (Sources)

 

·   Eurozone CPI (Feb) Y/Y  2.4% vs. Exp. 2.4 (Prev. 2.3%)

·   Eurozone CPI - Core (Feb) M/M 1.0% vs. Exp. 1.1% (Prev. 1.1%)

·   UK ILO Unemployment Rate (Jan) 3M/Y 8.0% vs. Exp. 7.9% (Prev. 7.9%)

·   UK Jobless Claims Change (Feb) M/M -10.2K vs. Exp. 1.3K (Prev. 2.4K, Rev. 1.5)

·   UK Claimant Count Rate (Feb) M/M 4.5% vs. Exp. 4.5% (Prev. 4.5%) (RTRS)

 

·   Portuguese 12-month T-Bill auction result, for EUR 1bln, bid/cover 2.2 vs. Prev. 3.1 (yield 4.331% vs. Prev. 4.057%)

·   German Schatz auction for EUR 4.9525bln, 1.5% 15-Mar-13, bid/cover 1.9 vs. Prev. 1.8 (yield 1.53% vs. Prev. 1.53%), retention 17.5% vs. Prev. 19.4% (RTRS)

 

EQUITIES

 

European equities opened higher on the back of strength in the Nikkei, however as the session progressed, prices retraced earlier gains and ventured in negative territory as news of Moody’s downgrade of Portuguese sovereign rating by two notches as well a lack-lustre 12-month T-Bill auction from Portugal weighed upon sentiment. Renewed Eurozone sovereign concerns weighed upon financials, which in turn resulted in the Spanish IBEX 35, and Italian FTSE MIB indices underperform their peers. Moving into the North American open, equities continue to trade lower with financials and health care as worst performing sectors.

 

It is worth noting that, regulators in the US, Japan and UK are investigating whether some of the biggest banks conspired to “manipulate” the benchmark interest rate used to calculate the cost of billions of dollars of debt. The investigation centres on the panel of 16 banks that help the British Bankers’ Association set the London interbank offered rate, or Libor – the estimated cost of borrowing for banks between each other. The banks are: Bank of America, Barclays, UBS, Citigroup, Credit Suisse, Deutsche Bank, HSBC, JPMorgan Chase, Lloyds and HBOS, Rabobank, Royal Bank of Canada, Bank of Tokyo-Mitsubishi , Norinchukin Bank, Royal Bank of Scotland and West LB. (FT More)

 

Index

DAX

CAC

FTSE

EUROSTOXX

SMI

Level

6643.79

3752.79

5652.76

2766.28

6066.41

Change (ticks)

-3.87

-28.06

-42.52

-17.92

-34.6

 

FX

 

EUR came under pressure on the back of Moody’s downgrade of Portuguese sovereign rating by two notches, allied with a lack-lustre 12-month T-Bill auction from Portugal. In other news, GBP/USD received support from hawkish comments from BOE’s King in early European session, however as the session progressed, the pair retraced earlier gains as the USD-index regained strength, allied with an increase in ILO unemployment data from the UK.

 

Currency

EURUSD

GBPUSD

USDJPY

Level

1.3937

1.6072

80.66

Change (pips)

-0.0061

-0.0006

-0.0600

 

COMMMODITIES

 

Both WTI and Brent Crude futures have surged higher during the Asian and European sessions, partly buoyed by a strong rebound from the Japanese equity markets (Nikkei 225 +5.68%) and also from the deteriorating situation in Bahrain.

 

**MENA REGION CRISIS**

 

Bahrain:

  • Protests continue despite additional troops arriving from GCC member states.
  • Fitch cut Bahrain’s credit rating by two notches to BBB from A-, and warned of further downgrades.
  • Bahrain closed its stock exchange as country’s default risk rose to a two-year high amid unrest.
  • Reports of deaths of both protestors and security forces.

 

Libya:

  • Pro Gaddafi’s forces have pushed eastwards towards the Libyan rebel stronghold of Benghazi.
  • Gaddafi’s son, Saif, said that all will be over within 48 hours.
  • The French Foreign minister has said that several Arab countries are ready to take an active role in a military operation against Libya.

 

Elsewhere in the region:

  • Protesters in Damascus call for freedom in rare display of dissent against Bashar al-Assad's Baathist regime.
  • At least 120 people in Yemen have been hurt during protests in the west of the country.

 

 

In other Oil & Gas News:

  • Nigeria’s foreign minister has said that Nigeria plans to expand crude output capacity to 4mln BPD from 2.5mln BPD, and plans to expand crude reserves to 40bln barrels. He also said that his country is trying to expand output to meet any global shortfall; however it will not do so on its own. He added that OPEC may meet to assess demand-supply situation after Japan crisis.
  • According to China’s NDRC, China’s inventories of refined oil products at the end of February increased by 3.94mln tonnes from the beginning of this year.

 

Commodity

WTI Nymex

OTC Spot Gold

Level

99.1

1402.7

Change (NYSEARCA:USD)

1.92

7.00

 

LOOKING AHEAD

 

Economic Releases

 

CST

GMT

 

DATA

EXP

PREV

0730

1230

US

Housing Starts M/M (Feb)

567K

596K

0730

1230

US

Housing Starts M/M (Feb)

-5.0%

14.6%

0730

1230

US

Building Permits M/M (Feb)

570K

562K

0730

1230

US

Building Permits M/M (Feb)

1.2%

-10.4%

0730

1230

US

PPI M/M (Feb)

0.7%

0.8%

0730

1230

US

PPI Y/Y (Feb)

4.7%

3.6%

0730

1230

US

PPI ex. Food & Energy M/M (Feb)

0.2%

0.5%

0730

1230

US

PPI ex. Food & Energy Y/Y (Feb)

1.8%

1.6%

0730

1230

US

Current Account Balance (USD) Q/Q (Q4)

-110.0B

-127.2B

0730

1230

CA

Manufacturing Sales M/M (Jan)

1.0%

0.4%

0745

1245

UK

OECD Economic Survey of UK

 

 

0800

1300

NO

Norwegian Deposit Rates M/M (Mar)

2.00%

2.00%

0930

1430

US

DOE Crude Oil Inventories W/W (Mar 11)

2125K

2516K

0930

1430

US

DOE Gasoline Inventories W/W (Mar 11)

-1750K

-5494K

0930

1430

US

DOE Distillate Inventory W/W (Mar 11)

-1625K

-3977K

0930

1430

US

DOE Cushing Crude Inventory W/W (Mar 11)

 

1693K

0930

1430

US

DOE Refinery Utilisation W/W (Mar 11)

 

1.10%

 

Speakers

0730

1230

EU

EU’s Van Rompuy

0915

1415

UK

Chancellor Osborne

0915

1415

WLD

OECD’s Secretary-General Gurria

1100

1600

WLD

World Bank Chief Economist Lin

1300

1800

US

Treasury Secretary Geithner

 

Auction

1000

1500

US

Fed’s Outright Trea. Coup. Purch. Mar’15-Aug’16 (USD 5.5-7.5bln)

 

Prices taken at 1153GMT