Archive - Mar 28, 2011 - Story

Markets positive in the U.S., but mixed globally as this week will show the results of Ireland’s bank stress tests and possibly more events related to Portugal’s growing debt crisis. Speculation abounds this morning as to the future of QE2 as St. Louis Fed president James Bullard called the program into question. Germany sold €2.66B in 12M bills at 1.2649% v 1.0636% prior with b/c at 2.2x v 2.0x prior while waiting on ECB president Trichet’s statement today that may reaffirm his rate hike plan. German Chancellor Merkel’s CDU party showed further weakness in regional elections yesterday as the Green party and its anti-nuclear platform surged in the polls. The election results prompted the CDU to announce that most of the country’s older nuclear power plants will be shut down. Japan’s nuclear crisis persists as high levels of radiation at the power plant delay reactor cooling efforts.

More bad news for Portuguese bonds which just traded at lifetime high yields. From Moody's: "We are lowering our long- and short-term counterparty credit ratings on the five Portuguese banks and two related subsidiaries that we rate. The long-term ratings remain on CreditWatch with negative implications. The negative CreditWatch implications reflect the possibility of a further sovereign downgrade, which we expect could take place as early as this week, and its direct and/or indirect impact on our view of Portuguese banks' creditworthiness."

Today's economic docket includes Personal Income and Spending (which is expected to show a jump in inflation) and the Savings Rate, core PCE, Pending Sales, the Dallas Fed, and a whole lot of dovish Fed speeches. These will be analyzed under a fine toothed comb to see if any of the more dovish members are starting to become as hawkish as their brethren from last week. In the meantime, Frost-Sack will monetize another $5.5-7.5 billion in 5 year debt.

It only took TEPCO about two weeks to realize what had been so glaringly obviously to many - namely that the company is largely unprepared to deal successfully with the Fukushima catastrophe on its own. Reuters reports that TEPCO, which has conceded it faces a protracted and uncertain operation to contain the crisis, sought outside help, asking help from French firms including Electricite de France SA and Areva SA. The question now arises whether it is too late for any help to come, and how fast before the sudden inlfux of new cooks spoils the radioactive broth. The news comes after TEPCO announced highly radioactive water has leaked from a reactor at Japan's crippled nuclear complex, as environmental group Greenpeace said it had detected high levels of radiation outside an exclusion zone.

RANsquawk European Morning Briefing - Stocks, Bonds, FX etc. – 28/03/11