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DAILY US OPENING NEWS - 26/03/12

· German IFO Business Climate (Mar) M/M 109.8 vs. Exp. 109.6 (Prev. 109.6)

· German Chancellor Merkel says can imagine EUR 200bln of the EFSF running in parallel with the EUR 500bln of the ESM.

· Renewed concern regarding the Spanish economy weighs down on the IBEX.

· RANsquawk European Morning Briefing Video: http://youtu.be/wHmQ34KP_JI

Market Re-Cap

European cash equity markets are seen mixed going into the US open, with particular underperformance seen in the Spanish IBEX index, led downwards by the financial sector following weekend reports that the European Commission are pressing the Spanish government to push forward with further austerity measures.

In recent trade there has been downwards pressure on the Bund following the slightly better than expected German IFO data, as well as some market talk of reallocation of assets from fixed income securities and into equities. As such, the DAX index is seen trading higher by 0.55%. Commentary regarding the boosting of the firewall funds has also assisted with the slide in the bund, as officials confidently see an agreement being made this Friday at the Eurogroup meeting in Denmark.

Looking ahead in the session, the market awaits US Pending Home Sales data as well as possible commentary from the Fed's Bernanke who is due to speak at the National Association for Business Economics.

Global Headlines

BoJ's Shirakawa, ex-ECB head Trichet and BIS's Caruana have warned of the effects of taking advantage of low interest rates to avoid taking hard steps to repair their own finances after years of aggressive borrowing. (WSJ)

US Headlines

Fed's Lockhart said that it is important for the Fed not to tighten policy prematurely or inadvertently, and wouldn't rule out more stimulus if needed, but that he would like to see how the economy evolves before coming to a decision. However, he said that cautious optimism is allowed. (RTRS)

Economists say a combination of higher taxes and lower spending would be the best way to reduce the federal budget deficit. (Washington Post) The National Association for Business Economists also forecast that short-term interest rates would remain at current levels for at least another year.

BarCap US Treasury month end extension seen at +0.02yrs.

EU and UK Headlines

German Chancellor Merkel has said she can imagine the EUR 200bln of the EFSF running in parallel with the EUR 500bln of the ESM. Merkel has further commented that she will not agree with the decision to raise the EUR 500bln limit on the ESM and her CDU leaders back her position on the funds. (Sources)

Weekend reports suggested that Germany is poised to bow to international pressure and allow a temporary increase in the eurozone's financial "firewall" this week with senior European officials saying that consensus appeared to be building behind EU's Rehn's "mid-range" option of combining the EFSF and ESM. (FT-More) That would boost the rescue system's overall firepower to EUR 940bln, although with about EUR 200bln committed to Greek, Irish and Portuguese bailouts, the total available would be EUR 740bln.

EU's Rehn said the recent sharp rise in Spanish borrowing costs was the result of perceptions Madrid was seeking to wiggle out of tough deficit-shrinking targets and called on the Spanish government to push through more austerity measures. (FT-More/RTRS/Telegraph)

The IMF said that European governments would need to fill the Greek financing gap as IMF analysts noted that the Greek 2015-2020 financing gap may range between EUR 32bln-EUR 67bln. The IMF also outlined an alternative scenario based on a potential 3-year delay in completing the required fiscal reforms and state assets selling at a slower pace than originally projected. (Sources)

Bondholder Communications Group, the company that helped provide Greece with the technological platform to pull off its debt restructuring plan, is in initial talks with several Eurozone countries on the possibility of conducting further bond swap deals "if the need arises", according to the BCG president. (Sources)

Headline data from Europe today was the German IFO survey, slightly beating expectations and providing support for the DAX index and assisting the downward slide on the bund. IFO economists have said the increase in the IFO survey is mostly down to better than expected retail sales.

German IFO Business Climate (Mar) M/M 109.8 vs. Exp. 109.6 (Prev. 109.6)

German IFO Current Assessment (Mar) M/M 117.4 vs. Exp. 117.0 (Prev. 117.5)

German IFO Expectations (Mar) M/M 102.7 vs. Exp. 102.6 (Prev. 102.3) (Sources)

BarCap Pan Euro Agg month end extension seen at +0.13yrs.

BarCap UK Agg Month end extension seen at +0.31yrs.

EQUITIES

European bourses are seen mixed as we progress through the session as the IBEX index underperforms amid renewed concern for the Spanish economy and the DAX trades higher, supported by strong IFO data and market talk of asset reallocation from fixed-income securities and into stocks.

In individual equity news, Spanish financials are taking particularly heavy losses with BBVA and Banco Santander shares both trading around 2% lower.

Tullow Oil are seen performing strongly today outperforming the already strong Oil & Gas sector following reports that it has struck oil in Kenya. (RTRS) Tullow Oil shares currently trade higher by 3.3%.

AstraZeneca have reported that group sales were down 2% in 2011, causing a sharp downwards spike in their share price. They have since recovered but remain in negative territory, down 0.2%.

Top performing sectors in the BE500: Consumer Goods (+0.85%), Oil & Gas (+0.85%), Consumer Services (+0.53%)

Worst performing sectors in the BE500: Financials (-0.49%), Telecommunications (-0.09%), Utilities (-0.08%)

 

 

Index

DAX

CAC

FTSE

EUROSTOXX

SMI

Level

7039.7

3479.75

5881.54

2529.54

6272.91

Change (ticks)

44.08

3.57

26.65

4.11

32.58

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

FX

EUR/USD is seen in negative territory ahead of the US open. The pair has exhibited some fluctuations earlier in the session with a 20 pip upwards spike following the better than expected German IFO data. As we progress through the session we may see further downward movements amid market talk of Middle-eastern, German and Eastern European names selling the pair, however this remains unconfirmed.

USD/JPY is on an upward trend as Japan approaches its year end with little downside flows seen. The pair may see some fluctuations as American participants come to market and react to weekend news and volume in the pair picks up.

GBP/USD is seen echoing the movements in EUR/USD and is seen in modest positive territory, but may see some further fluctuations around the US headline data for the day, Pending Home Sales.

Currency

EURUSD

GBPUSD

USDJPY

Level

1.3254

1.5886

82.97

Change (pips)

-0.0016

0.0017

0.6200

COMMODITIES

.

WTI and Brent crude futures are seen down ahead of the US open amid renewed concerns on the European economy, as Spain now hits the headlines with the European Commission pressing the country to push through further austerity measures.

Oil & Gas News:

· The Obama administration on Saturday said it would again gauge interest from the oil and gas industry to explore federal waters off the Alaska coast; another bid to expand domestic energy production as gas prices soar and political pressure grows.

· Asia's biggest refiner, China Petroleum & Chemical Corp, will ramp up crude production and develop natural gas fields to counter losses from selling diesel and gasoline at state-mandated prices.

Geopolitical News:

· US President Obama said there was still time to resolve the Iranian nuclear standoff with the West through diplomacy but that the window for such a solution was closing.

· US President Obama and China's Hu have agreed to coordinate closely in responding to any "potential provocation" of the planned North Korean rocket launch, according to the White House. The White House have reported that Obama felt it important for China to use its influence with North Korea and to send a message of concern to Pyongyang.

· According to Kyodo, citing government sources, Japan is set to deploy three Aegis destroyers in the East China Sea and the Sea of Japan to intercept a rocket North Korea plans to launch in mid-April if it falls within Japanese waters.

· South Sudan's shutdown of its crude production in a damaging row with Sudan over oil payments seem to have backfired and put pressure on South Sudanese officials to soften their bargaining stance. The deal now hinges on whether the two countries can address alleged support for rebels on both sides of the border.

Commodity

WTI Nymex

OTC Spot Gold

Level

106.82

1661.88

Change (NYSEARCA:USD)

-0.05

-0.03

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

LOOKING AHEAD

Economic Releases

CDT

BST

 

DATA

EXP

PREV

0730

1330

US

Chicago Fed Nat. Activity Index (Feb) M/M

 

0.22

0900

1500

US

Pending Home Sales (Feb) M/M

0.9%

2.0%

0900

1500

US

Pending Home Sales (Feb) Y/Y

 

10.3%

0930

1530

US

Dallas Fed Manufacturing Activity (Mar) M/M

16.0

17.8

1100

1700

FR

Jobseekers - Net Change (Feb) M/M

15.2

13.4

1100

1700

FR

Total Jobseekers (Feb) M/M

2880.0K

2861.7K

 

Speakers

0700

1300

US

Fed's Bernanke speaks to Business Economists

0800

1400

WLD

OECD's Gurria

1100

1700

EU

ECB's Draghi speaks at BDB Private Bank Event

N/A

N/A

WLD

Nuclear Safety Summit in Seoul

 

Auctions

0750

1350

FR

EUR 6.9bln combined 12-, 23- and 49-Week T-Bill Auctions

0830

1430

EU

ECB Announces Bond Purchases

0845

1445

UK

BoE Asset Purchase Facility GBP 1.5bln 2015-2019 Gilt Purchases

1000

1600

US

Fed's Outright Trea. Coup. Sale Feb'13 - Jul'13 (USD 8.0-8.75bln)

1030

1630

US

USD 60bln combined 3- and 6-month T-Bill Auctions

 

Earnings

UK

N/A

EU

N/A

SZ

N/A

US

Apollo Group

Prices taken at 1222BST

'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.