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DAILY US OPENING NEWS - 25/03/11

 

 

·   S&P lowered its long-term sovereign credit ratings on Portugal to “BBB” from “A-“, and maintained negative outlook, after Fitch’s downgrade of country’s sovereign rating yesterday. Also, Moody’s maintained country’s sovereign rating at A3 with a negative outlook

 

·   Fed's Kocherlakota said Fed’s policy is appropriately accommodative, adding that the bar would be "extremely high" to end the QE early

 

·   Markets keep a close eye on EU’s leader summit today with regards to further details on the ESM/EFSF as well as the Portuguese situation

 

·   RANsquawk EU Morning Briefing Video: http://www.youtube.com/watch?v=F1sPVwkWGLk

 

Market Re-Cap

 

Following Fitch's sovereign downgrade of Portugal yesterday, S&P followed suit and lowered country's long-term sovereign rating to BBB from A-, and kept the outlook on credit watch negative, however the downgrade had a muted reaction on the market as participants focused on the ongoing EU leaders' summit, allied with anticipation that Portugal will opt for a bailout soon. It is worth noting that yield on Portuguese 10-year government bond reached Euro-lifetime high, and also the Portuguese/German 10-year government bond yield spread traded wider. In other news, Nikkei (+1.07%) closed higher, which partly translated into a higher opening in the European equities that also received support from strong corporate earnings from Oracle overnight. Elsewhere, EUR/USD moved up around 25 pips following better than expected German IFO data.

 

Moving into the North American open, markets look ahead to a slew of economic data from the US, allied with another Fed's Outright Treasury Coupon Purchase operation in the maturity range of Sep'12-Sep'13, with a purchase target of USD 4-6bln.

 

Asian Headlines

 

BOJ’s Shirakawa said the central bank will keep its stance of supplying ample funds to markets through operations including massive government bond purchases. However Japanese finance minister Noda said that Japan needs to be careful about taking on new debt to fund relief and reconstruction for the earthquake and tsunami, and may review its plan to cut the corporate tax. (RTRS)

 

In other news, the PBOC said countries should avoid competitive currency devaluations, adding that European sovereign debt crisis could spread this year. It further said that it will expand the role of CNY in cross-border investment and financing. (Sources/RTRS)

 

US Headlines:

 

Fed's Kocherlakota said Fed’s policy is appropriately accommodative, adding that the bar would be "extremely high" to end the QE early. He further said that data needs to be materially worsen for more Fed QE. (RTRS/Sources)

 

BarCap Month End Extensions: US Treasury +0.07

 

EU and UK Headlines:

 

S&P lowered its long-term sovereign credit ratings on Portugal to “BBB” from “A-“.  The “BBB” long term ratings and the unchanged “A-2” short term credit ratings remain on CreditWatch with negative implications. S&P also said they could lower ratings by one notch once details of the European Stability Mechanism are announced, and expect rating action could take place as early as next week. (RTRS)

 

·   German IFO - Business Climate (Mar) M/M 111.1 vs. Exp. 110.5 (Prev. 111.2)

·   German IFO - Current Assessment (Mar) M/M 115.8 vs. Exp. 114.6 (Prev. 114.7)

·   German IFO - Expectations (Mar) M/M 106.5 vs. Exp. 106.8 (Prev. 107.9) (RTRS)

 

BarCap Month End Extensions: Europe +0.07

BarCap Month End Extensions: UK +0.23

 

 

 

EQUITIES

 

European equities traded in positive territory for most of the session buoyed by strength in Nikkei allied with better than expected corporate earnings from Oracle, which helped technology sector to outperform its European peers. On the flip side Barclays shares traded under pressure on the back of news that the co. is emerging as a key focus of the US and UK regulatory probe into alleged rigging of benchmark interbank lending rates. Moving into the North American open, most European indices are trading higher, with health care and technology as best performing sectors.

 

Index

DAX

CAC

FTSE

EUROSTOXX

SMI

Level

6949.04

3978.81

5896.56

2916.25

6361.59

Change (ticks)

15.46

9.97

15.69

6.47

42.36

 

FX

 

EUR showed muted reaction to the sovereign downgrade of Portugal by S&P, however EUR/USD moved up around 25 pips following better than expected German IFO data.

 

In other news, IMF said there is no sign that Japanese insurers are selling foreign assets to pay rebuilding claims, adding that even if they do, it will not materially affect the JPY’s value. (RTRS) Elsewhere, Swiss KOF said the SNB may start raising rates by mid-2011. (Sources)

 

Currency

EURUSD

GBPUSD

USDJPY

Level

1.4171

1.6095

81.25

Change (pips)

-0.0006

-0.0027

0.2800

 

COMMMODITIES

 

Oil fell to a near two day low as the Libyan conflict and Middle East unrest were overshadowed by speculation of reduced demand in the US after the unexpected fall in durable goods orders.     

 

Geopolitical News:

  • NATO agreed on Thursday to enforce a no-fly zone in Libya but fell short of a final agreement to take full command of all military operations. According to NATO officials a decision is expected on Sunday on whether to broaden the mandate to take full command.
  • The United Arab Emirates will send 12 planes to take part in operations to enforce the no-fly zone in Libya according to the state news agency.
  • Bahraini activists plan “day of rage” on Friday, defying a ban on public gatherings under martial law declared last weekIt is unclear who is behind the marches, with plans being disseminated through internet and email.
  • EU’s Van Rompuy states that the EU is ready to cut off Libyan oil and gas revenues.

 

Oil and Gas News

  • IEA Chief Economist says oil prices entered dangerous area in terms of global economic recovery.
  • JPMorgan raised it’s price forecast for Brent crude oil stating that prices may spend “some time” above USD 120/bbl and could reach intraday highs of USD 130/bbl

 

Commodity

WTI Nymex

OTC Spot Gold

Level

105.81

1436.48

Change (NYSEARCA:USD)

0.21

5.82

 

 

 

 

 

 

 

LOOKING AHEAD

 

Economic Releases

 

CDT

GMT

 

DATA

EXP

PREV

0730

1230

US

GDP Annualised Q/Q (Q4 T)

3.0%

2.8%

0730

1230

US

GDP Price Index Q/Q (Q4 T)

0.4%

0.4%

0730

1230

US

Core PCE Q/Q (Q4 T)

0.5%

0.5%

0730

1230

US

Personal Consumption Q/Q (Q4 T)

4.1%

4.1%

0855

1355

US

University of Michigan Confidence M/M (Mar F)

68.0

68.2

0930

1430

US

ECRI Weekly Index W/W (Mar 25)

 

130.4

0930

1430

US

ECRI Weekly Annualised Y/Y (Mar 25)

 

7.1%

1100

1600

US

Annual Revisions: Industrial Production

 

 

1200

1700

US

Baker Hughes Rig Count W/W (Mar 25)

 

1720

N/A

N/A

EU

EU Leaders’ Summit

 

 

 

Speakers

0730

1230

US

Fed’s Evans

0815

1315

US

Fed’s Lockhart

1015

1515

CA

Finance Minister Flaherty

1115

1615

US

Fed’s Plosser

1200

1700

US

Fed’s Fisher

1330

1830

EU

EU’s Barroso

1330

1830

EU

EU’s Rehn

1515

2015

EU

ECB’s Gonzalez-Paramo

 

Auction

1000

1500

US

Fed’s Outright Trea. Coup. Purch. Sep’12-Sep’13 (USD 4-6bln)

 

**Notes:

UST April options expiry

 

Prices taken at 1135GMT

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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