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DAILY US OPENING NEWS - 16/04/12

· Italian and Spanish spreads against the German 10-yr remain elevated but have come off their widest levels.

· GDF Suez agree on a GBP 4.18 offer per share for International Power's remaining shares.

· Iranian foreign minister says Iran is ready to resolve all nuclear issues in their Baghdad meeting if sanctions are lifted, according to the Iranian Student News Agency.

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

Market Re-Cap

Eurozone periphery concerns continue to loom as Italian and Spanish spreads against the German 10yr remain elevated, but have come off their widest levels in recent trade amid some unconfirmed market talk of real money accounts buying Spanish paper.

Despite the concerns in Europe, the major European bourses are trading higher with individual stocks news from over the weekend propping up indices with reports of intra-European M&A and a string of good news for mining stocks pushing up markets today. Some stock stories of note include the agreement of an offer between France's GDF Suez and UK's International Power for GBP 4.18 per share, and a speculated merger of BHP Billiton's and Rio Tinto's diamond units by private equity firm KKR.

The financials sector, however, is showing the strain, as the 3m EUR basis swap moves sharply lower to -53.87 from approximately -50 on Friday, with particular underperformance noted in the French banking sector.

The session so far has been very data-light, with Eurozone trade balance coming in slightly lower than expectations but markets remained unreactive to the release.

Looking ahead in the session, participants await the release of Citigroup's Q1 earnings and US advance retail sales due at 1300BST and 1330BST respectively.

Global Headlines

Japan is considering lending USD 60bln to the IMF to help strengthen a global firewall against contagion from European sovereign debt and China is expected to offer a similar amount. (Kyodo/Sources) Elsewhere, it was reported that European officials will travel to Washington this week seeking a larger global war chest to combat the two-year debt crisis as the Spanish government battles to quell renewed market turmoil.

Britain is close to agreeing to a new GBP 10bln commitment to the IMF as the Institution seeks to double its war-chest at its spring meeting this week, according to unspecified sources. (Telegraph)

ECB's Asmussen called on the rest of the world to pledge more money to the IMF, saying Europe "has done its part" by pledges to boost the euro zone's bailout resources to around USD 1 trillion and to contribute an extra USD 200 billion to the IMF. (WSJ)

The IMF this week will urge the world's top finance ministers in Washington to take more aggressive action to help households burdened by mortgage debt and thus boost consumer spending and spur growth, according to fund officials. (WSJ)

Asian Headlines

The US is bending its own rules in trade disputes with China, posing new challenges for Chinese exporters, according to a commerce ministry official. (Xinhua) The deputy head of the ministry's fair trade department said the trend of bending rules to suit objectives has become apparent in the recent years, making the export environment more complicated. He further commented that China faces pressures on foreign trade as friction with trading partners worsens and the export environment tightens.

China expanded the daily trading range that its currency can fluctuate against the USD over the weekend in an important step towards allowing the CNY to eventually float freely. (FT-More/RTRS/Sources) The PBOC announced that starting today the CNY would be allowed to rise or fall each day by as much as 1% from the daily official rate against the USD, a doubling of the trading band from the previous 0.5% limit. In response, the White House said it viewed the widening of the CNY band as positive action, but would like to see more movement and IMF's Lagarde has called the move an important step as this underlines China's commitment to rebalance its economy toward domestic consumption.

According to Standard & Poor's, China's local and regional governments are strong enough to prevent widespread defaults of their financing platforms, despite a likely slowdown in revenue growth for the governments. (Sources)

US Headlines

US Treasury Secretary Geithner has warned Congress against repeating last year's 'very damaging' debate over the debt limit and said the economy is stronger than at any time over the past few years. (Sources)

EU and UK Headlines

The Italian government is preparing a special fund to support growth-boosting initiatives without loosening current fiscal policy, according to the Italian industry minister. (Sources) The fund would gather resources from a crackdown on tax evasion and a review of public-sector budgets.

ECB's Nowotny has said deflation poses a greater risk than inflation as it may cause the 'lost decades' seen in Japan. (Sources/ekathimerini) Nowotny also said he sees a risk for the European debt crisis in the Greek elections.

A majority of Greeks reject an economic recovery plan imposed in return for EU/IMF loans and would prefer a coalition government to emerge from the upcoming elections, according to opinion polls by MRB. (Sources)

EQUITIES

European markets opened higher amid some positive news for many individual stocks in Europe, overriding renewed concerns over the European periphery sovereigns.

Two of the strongest performing stocks in Europe today are GDF Suez and International Power, following the news that GDF Suez have agreed on an offer for International Power of GBP 4.18 per share in cash, and have announced that shareholders will receive a final dividend of GBP 0.066 per share. As such, GDF Suez and International Power shares trade higher by 3.6% and 3.2% respectively.

Some stocks are not performing as well, with the financials sector registering losses, particularly in France, however Lloyds is one of the top losers in Europe so far following the weekend news that talks of a sale of 632 branches to Co-Operative Group are floundering and a rival approach from NBNK offers no obvious solution. As such, Lloyds shares trade lower by 5%.

Top performing sectors in the BE500: Oil & Gas (+1.39%), Health Care (+1.20%), Consumer Goods (+1.14%)

Worst performing sectors in the BE500: Financials (-1.04%), Technology (-0.64%), Consumer Services (+0.23%)

 

 

Index

DAX

CAC

FTSE

EUROSTOXX

SMI

Level

6632.89

3218.98

5689.53

2304.97

6104.38

Change (ticks)

48.99

29.89

37.74

13.46

32.26

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

FX

EUR/USD trades lower by around 50 pips ahead of the US open with selling pressure seen at the 1.3040 level, with unconfirmed market talk of offers in that area. The pair now trades in close proximity to a touted option expiry at 1.3025 for the NY cut. EUR/GBP also hit a fresh 2012 low of 0.8210 and now trades close to a touted option barrier at 0.8200.

USD strength has been noted earlier in the session, as such GBP/USD is also seen lower on the session with market talk of offers in the pair at 1.5860 weighing down on the pair. GBP/USD now trades in close proximity to its 200DMA line of 1.5843.

Currency

EURUSD

GBPUSD

USDJPY

Level

1.3028

1.5839

80.78

Change (pips)

-0.0050

-0.0008

-0.1500

COMMODITIES

WTI and Brent crude futures are trading lower ahead of the US open, with a stronger USD index weighing on prices and Iranian nuclear talks over the weekend proving "constructive and useful", according to EU's Ashton.

Oil & Gas News:

· The South Korean finance minister has sent a letter ahead of the G-20 meeting calling for stronger action to address rising oil prices, adding that oil producing nations should ensure an adequate supply. The minister added that regulations to stem speculative oil trades should be implemented.

· Oil speculators cut their net long positions to the lowest level since December in the week up to April 10th, according to data released from the CFTC.

· The MT Tour tanker carrying Syrian crude dropped anchor in the Strait of Hormuz near the Iranian port of Bandar Abbas over the weekend, according to AIS Live ship tracking data.

· Citigroup have said that an SPR release is already factored into current oil prices, and any sell-off would be short-lived.

Geopolitical News:

· Iranian foreign minister says Iran is ready to resolve all nuclear issues in their Baghdad meeting if sanctions are lifted, according to the Iranian Student News Agency.

· Iran agrees to extend nuclear talks. At the conclusion of Saturday's talks, western diplomats made clear there had not been any concession by Iran over any aspect of its nuclear program, which many states believe is aimed at building a bomb. All sides agreed to meet in Baghdad on May 23 to try and forge a confidence building agreement that could prevent an Israeli or US attack on Tehran. Additionally, according to a source Iran rejected the US request for bilateral nuclear talks on the sidelines of the diplomatic meetings. US President Obama has commented that there would be more sanctions imposed on Iran if there is no breakthrough in the talks.

· EU's Ashton described the P5+1 talks held in Turkey as "constructive and useful", saying that the next meeting, due to be held on May 23rd, should lead to a "negotiated solution with Iran which restores international confidence in the exclusively peaceful nature of the Iranian nuclear programme".

· Kim Jong-un, North Korea's leader, has used his first publicly televised speech to dismiss US suggestions that Pyongyang should stop wasting money on weapons, even though its latest long-range rocket disintegrated shortly after blast-off on Friday.

Commodity

WTI Nymex

OTC Spot Gold

 

Level

102.47

1648.11

 

Change (NYSEARCA:USD)

-0.36

-10.04

 

**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

Advance Retail Sales M/M (Mar)

0.4%

1.1%

0730

1330

US

Retail Sales Less Autos M/M (Mar)

0.6%

0.9%

0730

1330

US

Retail Sales Ex Autos & Gas M/M (Mar)

 

0.6%

0730

1330

US

Empire Manufacturing M/M (Apr)

18.00

20.21

0730

1330

CA

Intl Securities Transactions M/M (Feb)

 

-4.19B

0800

1400

US

Total Net TIC Flows (USD) M/M (Feb)

 

18.8B

0800

1400

US

Net Long-Term TIC Flows (USD) M/M (Feb)

40.0B

101.0B

0900

1500

US

Business Inventories M/M (Feb)

0.5%

0.7%

0900

1500

US

NAHB Housing Market Index M/M (Apr)

28

28

 

Speakers

1000

1600

GE

German Chancellor Merkel at North-Rhine Westphalia Rally

1100

1700

GE

German Finance Minister Schaeble speaks with SWR Television

1130

1730

US

Fed's Pianalto speaks on Banking & Economy in Kentucky

1130

1730

EU

ECB's Nowotny speaks in Vienna

1430

2030

US

Fed's Bullard speaks on Economy & Monetary Policy in St. Louis

 

Auctions

0800

1400

FR

EUR 7.9bln 13-, 24- & 50- Week T-Bill Auctions

0830

1430

EU

ECB announcement of purchases under the SMP

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-Jun'13 (USD 8.0-8.75bln)

1030

1630

US

USD 30bln 3-Month and USD 28bln 6-Month Bill Auctions

 

Earnings

UK

N/A

EU

N/A

SZ

N/A

US

Citigroup, Charles Schwab

Prices taken at 1234BST

'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.