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DAILY US OPENING NEWS - 04/05/12

· Eurozone Services PMI data disappoints, with German growth outweighed by contractions in all other European countries.

· Spanish economy ministry denies talks of using the EFSM for a Spanish bad bank.

· Volumes remain light as participants await the April US Non-Farm Payrolls data due at 1330BST/0730CDT; Current median estimate: 160K.

· RANsquawk European Morning Briefing Video: www.youtube.com/watch?v=E5AZHP4A8s8

Market Re-Cap

European equities are trading lower at the halfway point of the session, with underperformance noted particularly in the technology and basic materials sectors. Poor macroeconomic data from the Eurozone this morning continues to weigh on sentiment despite a slight upside surprise coming from Eurozone retail sales. The story remains the same with German services PMI data recording growth in the sector whereas France, Italy, Spain and the Eurozone as a whole offset the positive effect with worse-than-expected contractions.

RBS are performing against the trend of the FTSE index following the release of a confident set of earnings as well as reports that the bank is to fully repay the emergency lending that it received from the UK government. As such, RBS are outperforming the European banking sector, and shares currently trade higher by over 3.4%.

Overnight reports from Spanish press that the national economy minister de Guindos had been in discussions with EU's Olli Rehn concerning the use of the EFSM for a Spanish bad bank have been vehemently denied by the Spanish economy ministry earlier in the session, as the Spanish government attempt to play down any reports of Spanish financial sector weakness.

Volumes remain light as participants await the next risk event of the day, US non-farm payrolls for April, due at 1330BST/0730CDT.

Asian Headlines

Chinese HSBC Services PMI (Apr) M/M 54.1 (Prev. 53.3) (Sources)

**Note:

Japanese Market Holiday - Greenery Day

US Headlines

The Monster Employment Index gained 2.1% to 146 points last month from 143 in March. The index saw annual growth in 14 of 20 industries and 17 of the 23 occupations monitored. (Sources)

EU and UK Headlines

Eurozone Services PMI disappoints across the board, with only Germany able to post growth in the services sector.

Eurozone Services PMI (Apr) M/M 46.9 vs. Exp. 47.9 (Prev. 49.4)

German Services PMI (Apr) M/M 52.2 vs. Exp. 52.6 (Prev. 52.1)

French Services PMI (Apr) M/M 45.2 vs. Exp. 46.4 (Prev. 50.1)

Italy Services PMI (Apr) M/M 42.3 vs. Exp. 44.0 (Prev. 44.2) (Sources)

Eurozone Retail Sales (Mar) M/M 0.3% vs. Exp. 0.0% (Prev. -0.1%, Rev. -0.2%)

Eurozone Retail Sales (Mar) Y/Y -0.2% vs. Exp. -1.1% (Prev. -2.1%, Rev. -2.2%) (Sources)

Spanish banks' toxic property assets are to be parked in liquidation entities on a voluntary basis according to a Spanish Economy Minister spokesperson. (Sources)

German Chancellor Merkel hopes to meet the next French President for talks within a day of his being sworn into office, followed swiftly by an informal European summit at the end of May, according to officials in Berlin and Brussels. (FT-More)

The latest polls ahead of this Sunday's French general election shows Sarkozy closing the gap behind Hollande, but not enough to secure a second term in office. (Sources) The polls show Hollande winning with 52.5% +/- 2.2%.

EQUITIES

European cash equities are trading lower on the whole after another morning of poor data from the Eurozone. Volumes remain very thin ahead of the key US data scheduled for later in the session, so movements remain volatile evident in recent buying at the lows.

In individual stocks news, RBS are reported a strong set of earnings pre-market today, recording a Q1 operating profit of GBP 1.18bln vs. Exp. GBP 917mln. RBS also announced that they are to fully repay the emergency lending that it received from the UK government, with the remaining GBP 5bln set to be returned. The company CEO Hester has said the bank has made pleasing progress in 2012 and has proposed a dividend on various preferred shares of USD 0.01. Following the morning in Europe, RBS shares trade higher by just under 3.4%.

The top losers in Europe today consist mostly of companies going ex-dividend, with Nokia, Axa, Vivendi and E.On all trading markedly lower.

Top performing sectors in the BE500: Telecommunications (+0.91%), Financials (+0.66%), Utilities (+0.38%)

Worst performing sectors in the BE500: Technology (-1.80%), Basic Materials (-1.66%), Industrials (-1.21%)

 

 

Index

DAX

CAC

FTSE

EUROSTOXX

SMI

Level

6663.88

3218.04

5728.82

2287.53

6111.82

Change (ticks)

-30.56

-5.32

-37.73

0.43

14.14

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

FX

Weakness remains in the EUR currency, as the disappointing Services PMI data takes its effect and the positive Eurozone retail sales data fails to buoy EUR/USD. The pair now trades between two touted option expiries for the 10am NY cut (1500BST), one at 1.3100 to the downside, one at 1.3150 to the upside.

AUD/USD is seen coming off session lows, amid recent unconfirmed market talk of Asian names bidding in the pair. The pair now trades in close proximity to a touted option expiry of 1.0250 due for the 10am NY cut.

All USD-linked pairs are likely to see volatility following the closely-watched US non-farm payrolls data due at 1330BST/0730CDT.

ICAP analysts have noted that EBS daily currency trading volumes are down 11% on the month in April, with April volumes down 26% from April 2011. (Sources)

Currency

EURUSD

GBPUSD

USDJPY

Level

1.3128

1.6184

80.25

Change (pips)

-0.0024

0.0006

0.0700

COMMODITIES

WTI and Brent crude futures are trading lower ahead of the NYMEX pit open with another raft of poor Eurozone macroeconomic data dampening sentiment across the continent. All markets now look ahead to the key non-farm payrolls data due at 1330BST/0730CDT.

Oil & Gas News:

· The CME group have received a 90-day extension for implementing margin changes to accounts that were announced yesterday. The changes have now been pushed back to August 5th. During the extension period, The CME group will work with the CFTC to address customer concerns.

· The Obama administration wishes to clamp down on shale gas drilling on public lands and set tougher regulation in order to send a message to drilling oversight nationwide, according to industry sources. The plans on fracking could be proposed as soon as today. The measure would reportedly force drillers to disclose chemicals they use in the fracking process in order to extract fuel.

· Overseas investors will be allowed to trade on the new Chinese crude oil futures market, expected to launch later this year. Chinese regulators are examining methods on how to allow foreign participation, including granting the investors membership at the Shanghai Futures Exchange or permitting them to trade through domestic brokers.

· Russian PM Putin has approved a package of stimulus measures to unlock vast untapped unconventional oil resources in Western Siberia that could boost Russian oil production by up to 2MBPD.

· Exports of North Sea Brent crude for June will remain unchanged from May at seven cargoes, according to loading programs. The shipments will total 140,000BPD.

Geopolitical News:

· Iran may lose over 192,000BPD of crude contracts, totalling to around 9.5% of its global exports, as Asian buyers comply with Western sanctions.

· The IAEA chief has said he hopes to reach a concrete result with Iran on their nuclear programme and will meet Iran for dialogue on May 13-14th. The P5+1 group are to meet with Iran in Baghdad on May 23rd.

· An Iranian envoy has said Iran will never suspend uranium enrichment and there is no justification to close the Fordow site.

· The UN Nuclear Chief has said he does not have knowledge that North Korea is planning a third nuclear test but would not be surprised if it happens.

Commodity

WTI Nymex

OTC Spot Gold

 

Level

101.18

1632.88

 

Change (NYSEARCA:USD)

-1.36

-3.11

 

**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

Change in Nonfarm Payrolls (Apr) M/M

160K

120K

0730

1330

US

Change in Private Payrolls (Apr) M/M

165K

121K

0730

1330

US

Change in Manufacturing Payrolls (Apr) M/M

20K

37K

0730

1330

US

Unemployment Rate (Apr) M/M

8.2%

8.2%

0730

1330

US

Average Hourly Earnings (Apr) M/M

0.2%

0.2%

0730

1330

US

Average Hourly Earnings (Apr) Y/Y

2.0%

2.1%

0730

1330

US

Average Weekly Hours All Employees (Apr) M/M

34.5

34.5

0730

1330

US

Underemployment Rate (Apr) M/M

 

14.5%

0900

1500

CA

Ivey PMI (Apr) M/M

61.0

63.5

0930

1530

US

ECRI Weekly Index (May 4) W/W

 

124.1

0930

1530

US

ECRI Weekly Index Annualized (May 4) Y/Y

 

0.6%

1200

1800

US

Baker Hughes US Rig Count (May 4) W/W

 

1945

 

Speakers

0900

1500

GE

German Chancellor Merkel

1025

1625

US

Fed's Williams

1030

1630

US

Fed's Evans moderates panel on economic stability

1050

1650

US

US President Obama on student loans

1100

1700

GE

German Chancellor Merkel holds rally

 

Auctions

1000

1600

US

Fed's Outright Trea. Coup. Sale Aug'12 - Feb'13 (USD 8.00 - 8.75bln)

 

Earnings

UK

N/A

EU

N/A

SZ

N/A

US

N/A

Prices taken at 1226BST

**Note

Dollar Index May options expiry (2000BST/1400CDT)

**'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.