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DAILY US OPENING NEWS - 29/03/12

· Possibility of an increase in Eurozone rescue fund to EUR 940bln in exceptional circumstances according to a draft Eurogroup statement.

· Italian BTP Auction disappoints, with bid/covers seen slightly higher, however yields were observed as only marginally lower.

· OECD predict a technical recession in the UK with Q1 GDP estimated at -0.4%.

· RANsquawk European Morning Briefing Video: http://youtu.be/cogoN8cRRW4

Market Re-Cap

As North America comes to market, European equities are seen lower with risk-aversion observed in the session so far. Earlier in the session, fixed-income participants noted a distinctly average Italian BTP auction, with slightly higher bid/cover ratios. However, the marginally lower yields disappointed across both lines, failing to lift market sentiment. Following the auction, European stock futures shifted lower, with EUR/USD echoing the move and Bund printing near session highs.

Adding to the risk-off sentiment, the OECD released their updated economic forecasts, estimating Q1 UK GDP at -0.5%, a technical recession for the UK. However the OECD have confirmed that Germany the US are to remain in positive growth for both Q1 and Q2 in 2012. In other macroeconomic news for Germany, unemployment was reported to have contracted further than expected, recording an 18K fall for March against an expected fall of 10K.

Looking ahead in the session, markets await a further reading for US GDP, with the annualized rate expected to stay unchanged at 3.0%.

Global Headlines

In its latest quarterly global economic outlook, Fitch forecast the economic growth of major advanced economies to remain weak at 1.1% in 2012, followed by modest acceleration to 1.8% in 2013. While the baseline remains a modest recovery, short-term risks to the global economy have eased over the past few months. Fitch expected the euro-zone to have the weakest performance among major advanced economies; real GDP is projected to contract by 0.2% in 2012 and grow by only 1.1% in 2013. Fitch said that Germany and France will have positive growth of 0.7% and 0.4% in 2012 respectively; and Spain and Italy will contract by 1.0% and 1.6% respectively; Fitch upgraded its US 2012 growth forecast to 2.2% from 1.8%, and maintained its 2013 growth forecast at 2.6%. (RTRS)

US Headlines

The OECD have updated their forecast for US GDP, estimating expansion of 2.9% and 2.8% in Q1 and Q2 respectively. (Sources)

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

Asian Headlines

Japanese Retail Trade SA (Feb) M/M 2.0% vs. Exp. 0.0% (Prev. 4.1%, Rev. 3.1%)

Japanese Retail Trade (Feb) Y/Y 3.5% vs. Exp. 1.4% (Prev. 1.9%, Rev. 1.8%) (Sources)

China has approved a broad package of financial reforms in Wenzhou, a city known for entrepreneurship and underground lending, in what may be a prelude to a national effort to liberalize China's creaking financial system. (WSJ) The move by the State Council represents an important symbolic step toward overhauling a system long seen as a barrier to developing a more substantial and sustainable growth model for the Chinese economy.

Morgan Stanley have raised their forecast for Chinese 2012 GDP growth to 9% from 8.4%. (Sources)

EU and UK Headlines

A draft Eurogroup statement has been obtained showing that the Eurozone is to set the combined capacity of bailout funds at EUR 700bln until mid-2013, with the possibility of an increase in the funds to EUR 940bln in exceptional circumstances. Commenting on the EFSF, it is to remain active only in servicing existing programmes after July 2012.

The OECD have released their latest economic forecasts and have estimated UK GDP in Q1 to be -0.4%, a technical recession for the UK, and growth in Q2 of 0.5%. The OECD have also updated their estimates for Germany, forecasting 0.1% and 1.5% GDP growth in Q1 and Q2 respectively. (Sources)

S&P's Kraemer has said Greece will probably have to restructure its debt again and this may involve bailout partners such as the IMF. (Sources)

Fixed-income participants have noted the marginally lower yields, dampening market sentiment following the release.

Italian BTP Auction Results

-Italy sells EUR 2.5bln 4.75% May '17 BTPs, bid/cover 1.647, Prev. 1.41 (yield 4.18%, Prev. 4.190%)

-Italy sells EUR 3.25bln 5.50% Sep '22 BTPs, bid/cover 1.654, Prev. 1.40 (yield 5.24%, Prev. 5.500%)

UK Nationwide House Prices SA (Mar) M/M -1.0% vs. Exp. 0.2% (Prev. 0.6%, Rev. to 0.4%)

UK Nationwide House Prices NSA (Mar) Y/Y -0.9% vs. Exp. 0.9% (Prev. 0.9%) (Sources)

UK house prices slumped in March as the boost from the tax-break for first time buyers came to an end, according to mortgage lender Nationwide. The lender has commented that the challenging economic backdrop will likely weigh on house prices over the next 12 months.

BarCap Pan Euro Agg month end extension seen at +0.07yrs.

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

EQUITIES

European equities are seen on a downward trend going into the US open, with the EuroStoxx and DAX indices underperforming other bourses.

In individual equity news, Banca Monte dei Paschi remains particularly volatile, currently one of the top losers in Europe today following the release of their corporate earnings. The report showed a 2011 net loss of EUR 4.69bln and the company have also scrapped their dividend for this year. Company shares are currently trading lower by 8.12%. Elsewhere, the deadline for bidding for Cable & Wireless Worldwide, touted to be a competition between Tata Communications and Vodafone, has been pushed back until April 19th, disappointing shareholders who were hoping for a conclusive deal by the end of today. Company shares are now moving along with the rest of Europe, trading lower 0.6%. FTSE-listed stock International Power have reported received a proposal from GDF Suez concerning a GBP 3.90 per share offer, with GDF Suez confirming the offer, company shares currently trade up 6%.

Top performing sectors in the BE500: Basic Materials (-0.21%), Utilities (-0.52%), Technology (-0.67%)

Worst performing sectors in the BE500: Consumer Services (-1.62%), Financials (-1.51%), Oil & Gas (-1.34%)

 

 

Index

DAX

CAC

FTSE

EUROSTOXX

SMI

Level

6925.56

3398.74

5770.13

2470.53

6207.64

Change (ticks)

-73.24

-31.41

-38.86

-26.15

-42.79

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

FX

AUD/USD is moving downwards in line with the other commodities and is currently seen close to an option expiry at the 1.0350 level.

Both JPY and USD are seen slightly stronger across the board with risk-averse sentiment dictating the theme of the market so far in the European session. USD/JPY is seen trading lower, and is observed close to an option expiry at the 82.30 level. USD may see some activity later in the session should US Annualized GDP revision move away from the previous reading of 3.0%.

M&A related flows have been observed in EUR/GBP, which has seen fluctuations in the session so far, and is now seen on a downward trend approaching 0.8360.

Currency

EURUSD

GBPUSD

USDJPY

Level

1.3285

1.5884

82.26

Change (pips)

-0.0032

-0.0005

-0.6400

COMMODITIES

.

WTI crude futures have drifted back toward the USD 105.00 level as European markets have traded with a cautious tone following less than impressive Italian government bond auctions. As such the USD has strengthened (+0.12%) in recent trade and US stock futures trade in negative territory ahead of the open on Wall Street.

Oil & Gas News:

· France believes there is a good chance of a US-Europe accord on the release of strategic oil reserves, according to French PM Francois Fillon.

· Japan imported 27.3% less crude from Iran in February from the month before as the country complies with US demands to sharply cut shipments from Iran.

· Moody's sees the average WTI oil price at USD 95/bbl for 2012 and USD 90/bbl in 2013; they also see an average Brent oil price of USD 105/bbl in 2012 and USD 100/bbl in 2013.

· Unconfirmed market talk overnight that China's March Manufacturing PMI data, due April 1st, may be better than expected. Current consensus is for a M/M reading of 50.6 (Prev. 51.0).

Geopolitical News:

· Officials who have gathered at the BRIC summit have said the situation in Iran should not be allowed to escalate, however, they recognise the right Iran has to pursue a peaceful nuclear energy policy.

· Reports in China suggest that the country and Russia will carry out a joint navy exercise from April to May, according to a Chinese Defence Ministry spokesperson.

· North Korea has begun to inject fuel into a rocket that is planned for launch, according to an unidentified person familiar with the situation.

Commodity

WTI Nymex

OTC Spot Gold

Level

104.94

1657.13

Change (NYSEARCA:USD)

-0.47

-6.55

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

LOOKING AHEAD

Economic Releases

CDT

BST

 

DATA

EXP

PREV

0730

1330

US

GDP (Annualized) Y/Y (Q4 T)

3.0%

3.0%

0730

1330

US

GDP Price Index Q/Q (Q4 T)

0.9%

0.9%

0730

1330

US

Personal Consumption Q/Q (Q4 T)

2.1%

2.1%

0730

1330

US

Core PCE Q/Q (Q4 T)

1.3%

1.3%

0730

1330

US

Initial Jobless Claims W/W (Mar 24)

350K

348K

0730

1330

US

Continuing Claims W/W (Mar 17)

3350K

3352K

0730

1330

CA

Industrial Product Price M/M (Feb)

0.5%

0.3%

0730

1330

CA

Raw Materials Price Index M/M (Feb)

0.5%

0.1%

0930

1530

US

EIA NatGas Storage Change W/W (Mar 23)

49

11

1000

1600

US

Kansas City Fed. Manuf. Activity M/M (Mar)

13

13

1500

2100

CA

Canadian Finance Minister presents Budget

   

1645

2245

NZ

Building Permits M/M (Feb)

0.0%

8.3%

N/A

N/A

PO

Bank of Portugal releases Spring Eco. Bulletin

   

N/A

N/A

CH

Leading Index M/M (Feb)

 

100.25

 

Speakers

0930

1530

US

Fed's Lacker speaks on Credit Markets in North Carolina

1145

1745

US

Fed's Bernanke's final lecture on the history of the Federal Reserve

1200

1800

US

Fed's Plosser on Economic Outlook in Delaware

1745

2345

US

Fed's Lacker speaks to Bankers in North Carolina

 

Auctions

1000

1600

US

Fed's Outright Trea. Coup. Sale Jun'14 - Mar'15 (USD 8.0-8.75bln)

1000

1600

UK

BoE Confirms Details of Following Week's APF Operations

1200

1800

US

USD 29bln 7-year Note Auction

 

Earnings

UK

N/A

EU

N/A

SZ

N/A

US

Best Buy, Research in Motion

Prices taken at 1237BST

'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.