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DAILY US OPENING NEWS - 28/03/11

 

 

·   WSJ wrote that the ECB is devising a plan to keep troubled Irish banks afloat, citing an unidentified euro-zone banking official

 

·   According to an EU source, there is no reason to think Ireland needs more than EUR 35bln for banks after the new ECB lifeline, adding that a possible deal on new terms for Ireland's EU/IMF package could be agreed in early April

 

·   BOE’s Posen said that UK’s inflation would drop to 1.5% by mid-2012 as the government’s austerity drive and a weak economy would lead to a decline in consumer spending

 

·   S&P said it could downgrade Portuguese sovereign rating again this week

 

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

 

Market Re-Cap

 

In the Asian session, Nikkei closed down 0.6% over ongoing worries surrounding radioactive radiation spread from Japan's Fukushima damaged nuclear plant, but European equities traded higher in early European trade partly on the back of an article in the WSJ, citing banking sources, that the ECB is devising a plan to keep troubled Irish banks afloat. This helped financials in particular in early trade, with bunds under pressure, however as the session progressed, equities gradually came off their earlier highs due to a lack of key economic releases. In other news, GBP/USD traded under pressure following dovish comments from BOE's Posen, which allied with stops triggered to the downside at 1.5999 and 1.5980, led the pair to print a 6-week low at 1.5968. Elsewhere, CHF observed downside pressure after SNB said that the currency is still very strong.

 

Moving forward, markets look ahead to key economic data from the US in the form of personal income/spending, PCE and pending home sales, allied with USD 35bln 2y Note auction, and 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

 

China will be able to cap inflation below the full-year target of 4% average rise in prices. (People’s Daily)

 

US Headlines:

 

Fed’s Bullard warned lengthening the ‘extended period’ of lower US interest rates could encourage a liquidity trap and that additional QE would be a better policy response to a negative shock. Meanwhile Bullard also said that the recent strong economic data means that the QE2 programme should be reviewed in the coming meetings especially in April to decide if the program should stop early. (RTRS / Sources)

 

In other news, a breakdown late last week in closed-door negotiations between congressional leaders and the White House on funding the federal government makes it increasingly possible that Congress will not agree on a long-term funding resolution or another temporary measure by an April 8 deadline, aides from both parties said. (NY Times)

 

BarCap Month End Extensions: US Treasury +0.07

 

EU and UK Headlines:

 

The ECB is devising a plan to keep troubled Irish banks afloat, citing an unidentified euro-zone banking official. The facility would replace the use of Emergency Liquidity Assistance, and offer lending to assist banks faced with short term emergencies. In related news, according to an EU source, there is no reason to think Ireland needs more than EUR 35bln for banks after the new ECB lifeline, adding that a possible deal on new terms for Ireland's EU/IMF package could be agreed in early April. (WSJ/RTRS)

 

In other news, BOE’s Posen said that UK’s inflation would drop to 1.5% by mid-2012 as the government’s austerity drive and a weak economy would lead to a decline in consumer spending. Posen further said that he would not seek re-election to the BOE’s MPC if his view on quantitative easing turned out to be wrong. (RTRS)

 

·   Germany sells EUR 2.655bln of new 12-month bubills, bid/cover 2.2 vs. Prev. 2.0 (yield 1.2649% vs. Prev. 1.0636%)

·   Italian 6-month T-Bill auction for EUR 8bln, bid/cover 1.612 vs. Prev. 1.55 (yield 1.396% vs. Prev. 1.307%) (RTRS)

 

BarCap Month End Extensions: Europe +0.07, UK +0.23

 

EQUITIES

 

European equities traded higher in early trade, partly on the back of an article in the WSJ, citing banking sources, that the ECB is devising a plan to keep troubled Irish banks afloat, which helped financials in particular. However, as the session progressed, equities gradually came off their best levels due to a lack of key economic releases from Europe, and moving into the North American open, equities are trading mixed with technology and financials as best performing sectors.

 

Index

DAX

CAC

FTSE

EUROSTOXX

SMI

Level

6929.42

3973.82

5905.47

2912.33

6369.07

Change (ticks)

-16.94

1.44

4.71

1.00

16.79

 

FX

 

GBP/USD traded lower following dovish comments from BOE's Posen, which allied with stops triggered to the downside at 1.5999 and 1.5980, led the pair to print a 6-week low at 1.5968. In other news, CHF came under pressure after the SNB said that the currency is still very strong.

 

Currency

EURUSD

GBPUSD

USDJPY

Level

1.4044

1.5976

81.72

Change (pips)

-0.0044

-0.0066

0.3800

 

COMMMODITIES

 

WTI crude futures came under pressure overnight on the back of delays in rebuilding efforts after Japan’s nuclear crisis and European nations' debt may cut demand, overshadowing turmoil in Libya and the Middle East.

 

Geopolitical News:

·   There are conflicting reports surrounding the capture of Gaddafi hometown of Sirte by Libyan rebels.  Gaddafi forces, 30 km from Sirte, have reportedly blocked the rebel advance and there has been no confirmation that Sirte is under rebel control. 

·   Gaddafi forces bombard Zintan and Misrata with rockets according to rebel spokesman.

·   Qatar recognises the rebel Libyan National Council as sole, legitimate representative of the Libyan people according to a Qatari Foreign Ministry official.

·   Russian Foreign Minister says “Intervention” by coalition in Libya’s civil war not sanctioned by U.N resolution.

·   Yemen President Saleh states “Yemen is a time bomb” and would offer no more concessions to opponents.  He further states “Everyone will side with his tribe, and we will then end up with a destructive civil war.”

·   The al-Wefaq opposition group in Bahrain says it welcomes Kuwait mediating between the government and opposition groups.  The party has moderated its demands as it seeks to open a dialogue with the government in an effort to end the political crisis engulfing the kingdom.   

·   US Secretary of State Clinton said the US will not enter into the internal conflict in Syria that way it has in Libya.  President Bashar al-Assad deployed the army in Syria’s main port of Latakia.

 

Oil News:

·   Colder than expected weather in the U.S coupled with increased demand from Japan stoked speculation that demand for natural gas will increase, with hedge funds looking to capitalise by raising their bets.

·   China energy consumption may rise 6% to 3.45bln tons of coal equivalent this year.

·   The UAE OPEC Governor says that the UAE will step in to fill the Libya supply gap.

 

Commodity

WTI Nymex

OTC Spot Gold

Level

104.71

1415.8

Change (NYSEARCA:USD)

-0.69

-13.94

 

 

 

 

LOOKING AHEAD

 

Economic Releases

 

CDT

BST

 

DATA

EXP

PREV

0730

1330

US

Personal Income M/M (Feb)

0.4%

1.0%

0730

1330

US

Personal Spending M/M (Feb)

0.5%

0.2%

0730

1330

US

PCE Core M/M (Feb)

0.2%

0.1%

0730

1330

US

PCE Core Y/Y (Feb)

0.9%

0.8%

0730

1330

US

PCE Deflator Y/Y (Feb)

1.6%

1.2%

0900

1500

US

Pending Home Sales M/M (Feb)

0.4%

-2.8%

0900

1500

US

Pending Home Sales Y/Y (Feb)

 

-4.4%

0930

1530

US

Dallas Fed Manufacturing Activity M/M (Mar)

18.5

17.5

0930

1530

UK

DMO’s quarterly consultation meeting with end investors

 

 

1100

1700

UK

DMO’s quarterly consultation meeting with GEMMs

 

 

1645

2245

NZ

Trade Balance M/M (Feb)

270M

11M

1645

2245

NZ

Exports M/M (Feb)

3.50B

3.29B

1645

2245

NZ

Imports M/M (Feb)

3.30B

3.28B

 

Speakers

1140

1740

US

Fed’s Lockhart

1440

2040

US

Fed’s Evans

1700

2300

US

Fed’s Rosengren

 

Auctions

0745

1345

FR

EUR 7.5bln combined 12-, 27-, 33-, and 49-week T-Bill Auctions

1000

1600

US

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

1200

1800

US

USD 35bln 2y Note Auction

 

**Notes:

Natural Gas/Heating Oil/RBOB April options expiry

 

**As the UK goes back to Summer time, the time difference between London and Chicago will be 6 hours**

 

Prices taken at 1230BST

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Liffe have announced an extension of their New Market Participants Scheme for selected futures contracts (Euribor, Short Sterling, Euroswiss, EONIA, Gilt, Euro Swapnote and FTSE) for a further 12 months from 1 April 2011 until 30 March 2012. This is for traders who are new to trading these contracts and is subject to a monthly cap. On a separate note NYSE Liffe have also announced an extension of their US Liquidity Provider Programme for US based traders of Euribor, Short Sterling and Euroswiss Futures for a further six months from 1 April 2011 until 30 September 2011. If you require any further information, please contact your LIFFE account manager.

 

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