DAILY US OPENING NEWS - 07/04/11

 

 

·   According to Portuguese caretaker PM, Socrates, Portugal requested financial aid from the European Commission, however, the European Commission said it has not received any formal request yet

 

·   The ECB raised its benchmark interest rate by 25 basis points to 1.25% as expected

 

·   The Bank of England left its benchmark interest rate and asset purchase target unchanged at 0.50% and GBP 200bln respectively as expected

 

·   RANsquawk EU Morning Briefing Video: http://www.youtube.com/watch?v=X5lylKzLYtA

 

Market Re-Cap

 

One of the main events today revolved around Portugal joining the ranks of Greece and Ireland in opting for a bailout, which sources said could be in the range of EUR 75-90bln, however details still remains sketchy and formal confirmation of the request from the European Commission is still awaited. Meanwhile, the ECB raised its benchmark interest rate by 25 basis points to 1.25%, and markets eagerly awaits ECB’s Trichet press conference at 1330 BST for clues regarding the pace of further rate hikes. Elsewhere, the Bank of England left its benchmark interest rate and asset purchase target unchanged at 0.50% and GBP 200bln respectively as expected.

 

Moving forward, apart from Trichet’s press conference, markets look ahead to key jobless data from the US later in the session. In fixed income, 3-, 10-, and 30-year Note refunding announcement, as well as Fed’s Outright Treasury Coupon Purchase operation in the maturity range of Apr’15 – Sep’16, with a purchase target of USD 5.5-7.5bln are also scheduled.

 

Asian Headlines

 

The Bank of Japan left the target rate unchanged and launched a new loan scheme for banks in the northeast region hit hardest by the earthquake. The central bank also cut its economic assessment and warned of heightening uncertainty over the outlook. Bank of Japan Target Rate (Apr) M/M 0.10% vs. Exp. 0.10% (Prev. 0.10%) (RTRS)

 

According to a senior ruling Democratic Party lawmaker, Azima Koshiishi, Japan’s initial extra budget for disaster relief will be around JPY 4trl. (Jiji)

 

According to the State Information Centre’s economic forecast department, China should expand limits on home purchases from large cities to the entire nation in a bid to curb speculation. (China Securities Journal)

 

US Headlines:

 

Fed's Pianalto said economic conditions, and low inflation trend warrant continuation of the current monetary policy stance, adding that growth and inflation outlook warrants completing the asset purchase programme as originally scheduled. Pianalto further said that longer run inflation expectations remain below 2%, and expects US economy to continue to expand at a moderate rate, a bit above long term average of 3%. (RTRS)

 

In other news, House Republicans will bring short-term budget bill up for a vote on Thursday. Meanwhile, according to a Democratic aide, Republicans and Democrats have mostly agreed on what would get cut in the budget deal, but remains at odds over the composition of less than USD 10bln in cuts. The aide further said that the final size of the package will depend on what is in it, but it will likely end up closer to the USD 33bln which the Democrats have agreed upon. Also, Senate majority leader Reid called Republican stopgap spending bill a fantasy. (RTRS)

 

Elsewhere, according to Qatar PM, his country plans to boost investments overseas to as much as USD 35bln from around USD 20bln last year in an attempt to get deals in US real estate. (Sources)

 

EU and UK Headlines:

 

According to Irish European affairs minister, Ireland won’t increase its levels of company taxation in exchange for being bailed out by the IMF and the EU, adding that Ireland’s refinancing of its banks is positive for lenders across Europe. (La Tribune)Source: RTRS

 

 

·   German Industrial Production SA (Feb) M/M 1.6% vs. Exp. 0.5% (Prev. 1.8%, Rev. to 2.0%)

·   German Industrial Production NSA WDA (Feb) Y/Y 14.8% vs. Exp. 13.2% (Prev. 12.5%, Rev. to 12.7%) (RTRS)

 

·   Spanish Bond auction for EUR 4.13bln, 3.4% 30-Apr-14, bid/cover 1.79 (yield 3.568%)

·   French OAT auction for EUR 4.4bln, 2.5% 25-Oct-20, bid/cover 2.527 vs. Prev. 2.25 (yield 3.77% vs. Prev. 3.61%)

·   French OAT auction for EUR 1.470bln, 4.25% 25-Oct-23, bid/cover 2.881 vs. Prev. 1.66 (yield 3.95% vs. Prev. 3.80%)

·   French OAT auction for EUR 2.185bln, 3.5% 25-Apr-26 (off the run), bid/cover 2.597 vs. Prev. 2.74 (yield 4.13% vs. Prev. 3.97%)

·   French OAT auction for EUR 1.39bln, 4.5% 25-Apr-41, bid/cover 2.18 vs. Prev. 1.94 (yield 4.31% vs. Prev. 3.17%) (RTRS)

 

EQUITIES

 

European equities traded mixed during the session, however financials outperformed its European peers, partly on the back of news of Portugal opting for financial aid to tackle its debt problems. Moving into the North American open, equities lack any real direction with financials as the best performing sector, however basic material and industrial sectors trading lower.

 

Index	DAX	CAC	FTSE	EUROSTOXX	SMI
Level	7218.17	4058.34	6035.24	2982.13	6494.62
Change (ticks)	3.06	10.18	-5.89	10.65	51.56

 

FX

 

EUR/USD moved lower following ECB’s rate decision on touted profit taking, whereas GBP/USD observed weakness after the BOE left its benchmark interest rate unchanged at 0.50% as expected. Elsewhere, AUD gained strength overnight after a sharp jump in employment change data from Australia.

 

·   Australian Employment Change (Mar) M/M 37.8K vs. Exp. 24.0K (Prev. -10.1K, Rev. to -8.6K)

·   Australian Unemployment Rate (Mar) M/M 4.9% vs. Exp. 5.0% (Prev. 5.0%) (RTRS)

 

Currency	EURUSD	GBPUSD	USDJPY
Level	1.4281	1.6305	85.16
Change (pips)	-0.0050	-0.0027	-0.3300

 

COMMODITIES

 

Overnight, WTI crude futures traded lower on speculation that rising fuel prices may dent demand in China and the US, however as the European session progressed, prices pared back most of earlier losses to trade near unchanged ahead of the NYMEX pit open.

 

Oil & Gas News:

 

·   Libya said a UN mandated British air strike had hit its major Sarir oilfield killing three guards and damaging a pipeline connecting the field to a Mediterranean port. However, according to an oil official in the rebel-controlled East Libya, Gaddafi’s troops were responsible for the attack, whereas UK denied the claim as well. Moreover, according to a rebel spokesman, production at Misla and Waha oasis area were stopped after the attack.

·   According to the chairman of Libya’s National Oil Corporation, Libya’s oil output had fallen to 250,000 BPD to 300,000 BPD from about 1.6 MBPD.

·   According to a Chinese source, China and Russia could conclude agreement on gas price talks by June, adding that both countries have narrowed gap in contract gas price expectations. The source said both countries will resume talks next week, and will discuss loan to build pipeline. The source further said that gas pipeline talks will focus on Yamal-Altai pipeline route.

 

Geopolitical News:

 

·   According to a rebel spokesman, NATO air strikes hit pro-Gaddafi forces in Misrata on Wednesday killing 5 people and wounding another 25.

 

 

Commodity	WTI Nymex	OTC Spot Gold
Level	108.89	1458.42
Change (USD)	0.06	-1.28

 

LOOKING AHEAD

 

Economic Releases

 

CDT	BST		DATA	EXP	PREV
0730	1330	US	Initial Jobless Claims W/W (Apr 2)	385K	388K
0730	1330	US	Continuing Claims W/W (Mar 26)	3700K	3714K
0730	1330	CA	Building Permits M/M (Feb)	1.3%	-5.1%
0930	1530	US	EIA Natural Gas Storage Change W/W (Apr 1)	-52	12
1400	2000	US	Consumer Credit (USD) M/M (Feb)	4.600B	5.014B
N/A	N/A	US	ICSC Chain Store Sales Y/Y (Mar)		4.2%
Speakers
0715	1315	WLD	OECD’s Secretary General Gurria and chief economist Padoan
0720	1320	US	Fed’s Lacker
0730	1330	EU	ECB’s Press Conference following the rate decision
Auctions
1000	1600	US	3y-10y-30y Note Refunding Announcement
1000	1600	US	Fed’s Outright Trea. Coup. Purch. Apr’15-Sep’16 (USD 5.5-7.5bln)
Earnings
US		Costco (Sales), Gap (Sales), JCPenney (Sales), Ross Stores (Sales), TJX (Sales), Target (Sales)

 

 

Prices taken at 1257BST

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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