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DAILY US OPENING NEWS - 31/01/12

· Banks could double their uptake of next month's LTRO, according to reports.

· European Indices trading in positive territory following the agreement of the EU fiscal pact following the leaders' summit yesterday.

· The co-ordinated running of the EFSF, ESM and IMF funds could raise the European firewall to EUR 1.5trl, according to reports.

· RANsquawk European Morning Briefing Video: http://youtu.be/iDG1TqfXjoY

Market Re-Cap

European stocks are performing strongly ahead of the North American open following optimism from the signed EU fiscal pact of yesterday's summit, with the strongest gains seen in the Oil & Gas sector. However, a recent spike in WTI and Brent crude futures has been put down to a possible trading error according to news wires citing various brokers.

Data releases from the first half of the European session include Germany posting an all-time low for January adjusted unemployment figures as well as UK consumer credit data showing the largest fall since 1993, however, neither data had a lasting impact on the market. Attention remains focused on Europe with ECB member Nowotny quoted as saying he can't be sure Greece will stay in the Euro.

Elsewhere, according to the FT, European banks could reportedly take up double or even triple the quantity of cheap loans from February's LTRO and as such the Euribor strip has maintained a bid tone from the open. Also a report in the FTD suggested that a co-ordinated running of the EFSF, ESM and IMF funds could raise the European firewall to EUR 1.5trl which was also noted as a weighing factor on the bund future today.

US Headlines

Looking forward the main economic data from the US comes in the form of the Chicago PMI and US consumer confidence reports for January both of which are expected to show an improvement on the December readings.

BarCap US Treasury month end extension seen at +0.01yrs.

GLOBAL

S&P have said governments in large developed economies will face "ballooning" debt levels and rating downgrades if they do not act quickly to limit the impact on their budgets of rising healthcare costs. (Sources)

Asian Headlines

China may cut reserve-requirement ratios "relatively substantially" or several times throughout the first half of this year, according to a Chinese government-backed research institute. (Sources)

A senior IMF official has said that China was taking steps to reduce property bubble risks and said it has room to add fiscal stimulus if conditions worsen. (RTRS)

EU and UK Headlines

ECB's Nowotny has commented in an interview that he "can't be sure" that Greece will remain in the EUR.

European Banks are set to double their crisis loans from the ECB. (FT-More) Several of the Eurozone's biggest banks have said they could double or triple their request for funds in the ECB's three-year money auction on February 29th. Bankers expect many more banks to take part in the auction, encouraged by the widespread participation in the previous LTRO.

French President Sarkozy said everything went to plan at the EU summit after 25 EU states reached agreement on the fiscal compact. (RTRS) Additionally, Sarkozy rejected Greece ceding national budgetary management and said the ESM statutes were also endorsed. As expected the UK and the Czech Republic did not join the fiscal compact.

EU leaders agreed on the permanent ESM bailout mechanism to come into effect from July and said they are to sign the treaty at later stage according to EU officials. (RTRS) EU are to tie up ESM aid to the passage of the fiscal compact by March 2013 and push back the collective action clause requirements for bonds until Jan 1 2013, having previously foreseen Aug 1 2012 as the start date. (Sources)

The Portuguese PM has said there is no risk of PSI being imposed on holders of Portuguese bonds, adding that "Portuguese debt is perfectly sustainable." He also commented that Portugal was not discussed at the Brussels Summit. (Sources)

BarCap Pan Euro Agg month end extension seen at +0.12yrs.

EQUITIES

European indices are trading in positive territory with the Industrials and Oil & Gas sectors performing strongly with an accompanying spike in Brent and WTI crude futures earlier in the session.

Financials are showing positive moves following news that European banks may double or even triple their uptake from the next LTRO in February due to widespread use of the previous operation removing stigma, according to the FT-More.

Earnings reports from Europe this morning include ARM holdings, outperforming forecast Q4 revenues and confirming that Q1 results should be in line with expectations, and BSkyB announcing above expected figures and subsequently trading up around 3%.

Top performing sectors in BE500: Industrials (+1.39%), Utilities (+1.34%), Oil & Gas (+1.33%)

Worst performing sectors in BE500: Health Care (+0.22%), Consumer Goods (+0.36%), Telecommunications (+0.44%)

US earnings reported pre-market so far today include Pfizer reporting in line with expectations and Eli Lilly outperforming forecast revenues.

Pfizer Q4 adjusted EPS USD 0.50 vs. Exp. USD 0.47, cuts forecast range mainly on unfavourable forex issues

- Q4 revenue USD 16.7bln vs. Exp. 16.65bln

- Q4 International revenue USD 10.4bln, up 3%

- Q4 Lipitor revenue USD 2bln

- Q4 Lyrica revenue USD 998mln

- Q4 Celebrex revenue USD 667mln

- Co. committed to buying back USD 5bln in shares

- Co. committed to paying over USD 6bln in dividends (RTRS)

Eli Lilly Q4 adjusted EPS USD 0.87 vs. Exp. USD 0.81, reaffirms forecast

- Q4 revenue USD 6.05bln vs. Exp. USD 5.88bln

- Zyprexia sales USD 749.6mln, down 44%

- Cymbalta sales USD 1.18bln, up 20%

- Cialis sales USD 494.2mln, up 6%

- Humalog sales USD 662.0mln, up 21%

- 2012 revenue estimate included USD 3bln expected decline in Zyprexa sales (RTRS)

 

 

Index

DAX

CAC

FTSE

EUROSTOXX

SMI

Level

6510.32

3313.56

5714.11

2432.07

5992.13

Change (ticks)

65.87

47.92

43.02

27.45

21.39

**Note: For US equity news in detail, kindly refer to the RANsquawk Daily US Equity Opening News report.

FX

Ahead of the North American open, EUR/USD has shown appreciations due to optimistic sentiment in Europe following the signing of the EU fiscal pact yesterday.

USD index is currently trading in negative territory with possible further fluctuations amid market talk of USD selling due to take place towards the month end London fix at 1600GMT, however this is unconfirmed.

The Japanese Ministry of Finance has said data shows there has been no FX intervention throughout January to this point. (Sources)

Currency

EURUSD

GBPUSD

USDJPY

Level

1.3185

1.5772

76.39

Change (pips)

0.0041

0.0062

0.0400

COMMODITIES

Both Brent and WTI crude futures are trading in strong positive territory ahead of the North American open following renewed optimism from the signing of a fiscal pact in Europe late last night as well as higher than expected Industrial Production figures reported from Japan pressing speculation over future fuel demand.

Oil & Gas News:

· Turkey has taken Iran to arbitration over the price paid for natural gas imports after Tehran rejected Turkey's complaint that the price is too high.

· Morgan Stanley has cut its 2012 forecast for natural gas futures by 30% to an average of USD 2.70 per MBTU.

Geopolitical News:

· Three Republican US senators plan to introduce legislation that would bypass US President Obama's rejection of the controversial Keystone XL pipeline and assert Congress' authority to approve the project.

· Germany wants China to limit Iranian oil imports, according to a German government source ahead of an official visit to China from German Chancellor Merkel.

· Kuwait is said to be working on a contingency plan should the Strait of Hormuz be blocked, according to a source.

· US lawmakers are said to be taking the next step on new Iran oil sanctions, aimed at choking funds used by Tehran to fund nuclear development.

**Note:

Heating Oil & RBOB February futures expiry (1930GMT/1330CST)

Commodity

WTI Nymex

OTC Spot Gold

Level

100.22

1739.1

Change (NYSEARCA:USD)

1.44

9.02

**Note: For commodities news in detail, kindly refer to the RANsquawk Daily Energy Commentary report.

LOOKING AHEAD

Economic Releases

CST

GMT

 

DATA

EXP

PREV

0730

1330

US

Employment Cost Index Q/Q (4Q)

0.4%

0.3%

0730

1330

CA

GDP M/M (Nov)

0.2%

0.0%

0730

1330

CA

GDP Y/Y (Nov)

2.3%

2.7%

0730

1330

CA

Industrial Product Price M/M (Dec)

-0.1%

0.2%

0730

1330

CA

Raw Materials Price Index M/M (Dec)

0.00%

3.80%

0755

1355

US

Redbook W/W (Jan 27)

 

-1.6%

0755

1355

US

Redbook Y/Y (Jan 27)

 

2.5%

0800

1400

US

S&P/CaseShiller Home Price Index M/M (Nov)

 

140.30

0800

1400

US

S&P/CaseShiller 20 City SA M/M (Nov)

-0.40%

-0.62%

0800

1400

US

S&P/CaseShiller Composite-20 Y/Y (Nov)

-3.20%

-3.40%

0845

1445

US

Chicago PMI M/M (Jan)

63.0

62.2

0900

1500

US

Revisions: ISM's 2012 Seasonal Adjustments

   

0900

1500

US

Consumer Confidence M/M (Jan)

68.0

64.5

0900

1500

US

NAPM-Milwaukee M/M (Jan)

 

57.8

0900

1500

US

CBO releases The Budget and Econ. Outlook

   

1530

2130

US

API Crude Oil Inventories W/W (Jan 27)

 

7331K

1530

2130

US

API Gasoline Inventories W/W (Jan 27)

 

-573K

1530

2130

US

API Distillate Inventory W/W (Jan 27)

 

-2464K

1530

2130

US

API Cushing Crude OK Inventory W/W (Jan 27)

 

386K

 

Speakers

1000

1600

US

CBO Chief to Hold briefing on CBO report

1100

1700

GE

German Economy Minister Roesler

N/A

N/A

EU

EU To Seek Deal on Draft OTC Deriv. Law

 

Auctions

0845

1445

UK

BoE Asset Purchase Facility GBP 1.7bln 2038-2060 Gilt Purchases

1000

1600

US

Fed's Outright Trea. Coup. Purch. Feb'36-Nov'41 (USD 2.25-2.75bln)

1030

1630

US

USD 30bln 4-Week T-Bill Auction

1300

1900

US

Fed's Outright operation schedule announcement

                 

Prices taken at 1237GMT

'Market talk' - Signifies information that has not been formally tested through traditional journalistic channels and therefore is to be treated as unsubstantiated. Any interpretation of the talk is taken at the readers own risk and is a representation of the rumours within the market place and never generated by ourselves.