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DAILY US OPENING NEWS - 19/03/12

· PIMCO's CEO El-Erian says Portugal will need a second rescue as the original package of EUR 78bln falls short.

· Bank of America forecast oil prices to temporarily hit USD 140/BBL this year.

· Bundesbank sees a possible spring revival for the German economy.

· RANsquawk European Morning Briefing Video: http://youtu.be/d7agusyvx1o

Market Re-Cap.

Going into the US open, European bourses are seen trading lower and have stabilised in recent trade. The risk-aversion may follow weekend reports from PIMCO's CEO El-Erian commenting that Portugal may require a second aid package to avoid a debt restructuring event similar to what we have seen in Greece over the past few weeks. This renewed concern on the European peripheries has weighed down on equities so far in the session.

Moving in tandem with the equity markets, the energy complex is seen lower going into the US open. Of note, Bank of America have revised their WTI and Brent forecasts for 2012 to USD 106/BBL and USD 118/BBL respectively.

In the FX markets today, USD/JPY is seen trading lower, against the trend of the last few weeks, with participants taking profits on the appreciations made so far this year.

Looking ahead in the session, there is little in the way of data other than the US NAHB Housing Market Index and we may see some commentary from the Fed speakers Fisher and Dudley.

Global Headlines

IMF's Lagarde said she sees signs of stabilization in the world economy and the world economy has stepped back from the brink; however she also noted that the rising price of oil is a new threat that could derail the recovery. (Sources/Telegraph)

US Headlines

Fed's Evans called for more QE, despite signs of economic recovery, and said that the Fed should avoid premature rate hikes until unemployment falls below 7% or inflation threatens to top 3%. (RTRS)

The Fed will have to raise rates before late 2014, according to a CNBC Survey. The article comments that the Federal Reserve has a growing credibility problem with markets when it comes to monetary policy. In its statement last week, the Fed said economic conditions are "likely to warrant exceptionally low levels for the federal funds rate at least through late 2014." The March CNBC Fed Survey, however, finds that nine out of 10 market participants don't believe the Fed will wait that long. In fact, 54 percent believe the first Fed interest rate hike will come by 2013. (NASDAQ:CNBC)

Asian Headlines

IMF's Lagarde said China's efforts to reduce its dependence on exports and investment for economic growth should incorporate financial reforms that include a stronger and more flexible exchange rate. Lagarde said that the IMF is to review valuation of the CNY and other currencies later this year, and that with financial reforms CNY can become a global reserve currency. (Sources) Lagarde added that China has space for modest fiscal stimulus and must continue to shift toward consumption.

Moody's have said that China's containment of local government debt is credit positive. (Sources)

EU and UK Headlines

PIMCO's CEO El-Erian said Portugal will need a second rescue as the original package of EUR 78bln falls short, adding that it will make the financial markets nervous because they are worried about a participation of the private sector. (Der Spiegel)

An IMF staff report released on Friday night said that without official support and access to ECB funding, a disorderly Greek exit from the Euroarea was unavoidable. Such an event would be very costly, and even so, Greece would probably not settle into a good state. (RTRS) The report also said that it estimate for Greek bank losses to total EUR 30-35bln over 3 years, but that the IMF has put aside EUR 50bln to help the banks cope with recession and restructuring of government debt.

IMF's Thomsen said that Greece's latest bailout program will fail if the new government doesn't push through the reforms according to a report. (Vima) In other news IMF's Lagarde said Euro-area 2012 government debt rollovers are worth 23% of GDP. (Sources)

According to a Barclays survey, a majority see a second EUR member restructuring their debt, with Ireland or Portugal expected to follow the same routine as Greece. (Sources) Elsewhere in the survey, investor sentiment regarding the Euroarea has improved significantly and shows a broader optimism on the global economy.

George Osborne will unveil plans this week to pump GBP 40bln of cheap loans into small businesses in a desperate effort to boost the economy. (Sunday Times/Independent/FT-More)

Bundesbank have released a report seeing a possible Spring revival in the German economy, with economic growth so far in the year constrained by cold weather in February. (Sources)

EQUITIES

Most European bourses are trading lower going into the US open, with weekend reports from PIMCO's CEO forecasting a troubling Portuguese future weighing down on equities.

In individual stock news, EADS shares are performing particularly poorly today following news that it may take years to address and deal with issues that the company has been having with cracks present on the wings of its largest airliner, the A380. Company shares currently trade down 2.2%. (Der Spiegel)

Peugeot, a particularly active stock so far in 2012, are one of the best performers of the session today, following announcements from General Motors that the joint venture aims to begin to develop at least two passenger cars before the end of the year. (WSJ)

American equity market participants will be awaiting news from the Apple conference call due to be held later today in which the company should announce what it plans to do with the USD 100bln it holds in cash. The conference is due to take place at 1300GMT/0900EDT.

Top performing sectors in the BE500: Telecommunications (+0.40%), Technology (+0.29%), Oil & Gas (+0.01%)

Worst performing sectors in the BE500: Utilities (-0.47%), Consumer Goods (-0.45%), Basic Materials (-0.40%)

 

 

Index

DAX

CAC

FTSE

EUROSTOXX

SMI

Level

7112.72

3569.53

5943.3

2597.34

6323.93

Change (ticks)

-45.10

-25.30

-22.28

-10.96

-17.4

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

FX

EUR/USD has seen volatility ahead of the US open, but official buying has helped the pair move from its intraday lows with market talk of Asian and Middle-Eastern names bidding in the pair, however this remains unconfirmed.

USD/JPY is seen moving against the trend of the past few weeks and is trading lower following the European morning, with participants taking advantage of the recent appreciations in the pair and profit-taking.

Currency

EURUSD

GBPUSD

USDJPY

Level

1.3163

1.5853

83.10

Change (pips)

-0.0012

0.0009

-0.3300

COMMODITIES

WTI and Brent crude futures are moving in tandem with other markets today, trading lower ahead of the US open. This follows weekend reports concerning the weakness of Eurozone peripheries raising fears that Europe may have to face another Greek scenario in Portugal or Ireland.

Oil & Gas News:

· Bank of America have revised their 2012 energy forecasts, predicting Brent and WTI crude to average USD 118/BBL and USD 106/BBL respectively. Bank of America have also forecast oil hitting the USD 140/BBL mark temporarily this year.

· Iraq has approved a plan to expand its oil export routes by adding capacity from its northern fields and building a pipeline to ship oil from southern fields to Ceyhan in Turkey, a government spokesman said. The contingency plan was set by the government's energy and economic committee to deal with any potential crisis should Iran close the Strait of Hormuz, which would halt about 80% of Iraq's oil exports.

· Iraq is to operate a 2nd oil export floating terminal in a few months that will boost the country's oil exports to 3.55 MBPD according to state-run Kuwait News Agency Kuna.

· Saudi oil output hit 9.871 MBPD in Jan vs. 9.810 MBPD in Dec. This is Saudi Arabia's second-highest monthly output since 1980, according to official data.

· Iraq's cabinet have approved measures to diversify crude export routes should Iran block the key Strait of Hormuz, according to an Iraqi state minister.

· The NDRC, China's energy watchdog, is expected to raise retail ceiling prices of both gasoline and gasoil by CNY 600/tonne, according to sources from PetroChina and Sinopec.

Geopolitical News:

· Iran will make absolutely no concessions on its nuclear program according to a key lawmaker.

· Iran will develop its air defence potential in proportion to the enemy's capabilities, according to an Iranian commander, as reported in Iranian state press.

· North Korea rejected criticism of its planned long-range missile launch which threatens to upset its only major benefactor, China, and put relations with the United States back in the freezer just as they seemed to be starting to thaw.

· South Korea have said that North Korea is seeking to develop a missile for nuclear weapon use.

Commodity

WTI Nymex

OTC Spot Gold

Level

106.7

1655.17

Change (NYSEARCA:USD)

-0.36

-4.84

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

LOOKING AHEAD

Economic Releases

CDT

GMT

 

DATA

EXP

PREV

0730

1230

CA

Wholesale Sales (Jan) M/M

0.4%

0.9%

0900

1400

US

NAHB Housing Market Index (Mar) M/M

30

29

1800

2300

AU

Conference Board Leading Index (Jan) M/M

 

0.2%

 

Speakers

0735

1235

US

Fed's Dudley on the economy

0830

1330

US

Fed's Killian on foreclosures

1030

1530

US

Fed's Dudley

1100

1600

PO

Portuguese finance minister Gaspar

1200

1700

EU

ECB's Nowotny

1200

1700

EU

EFSF's Regling

1240

1740

US

Fed's Dudley

N/A

N/A

US

Fed's Fisher

N/A

N/A

UK

Conference on "Financial Regulation and the real economy" to be held at Chatham House Think Tank

 

Auctions

0845

1345

FR

EUR 7.4bln combined 13-, 24- & 50-week T-Bill Auctions

0930

1430

EU

ECB Announces Bond Purchases

0945

1445

UK

BoE Asset Purchase Facility GBP 1.5bln 2015-2018 Gilt Purchases

1000

1500

US

Fed's Outright Trea. Coup. Purch. May'20-Feb'22 (USD 4.50-5.25bln)

1030

1530

US

USD 64bln combined 3- and 6-month T-Bill Auctions

 

Earnings

UK

N/A

EU

N/A

SZ

N/A

US

Adobe Systems

Prices taken at 1118GMT

'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.