Daily US Opening News And Market Re-Cap: March 23
- Renewed market caution regarding Greece and Portugal prompts risk-aversion in recent trade.
- Market talk of a PBOC cut to the RRR prompted modest gains in European bourses in the early hours, however markets have moved into negative territory since the cut failed to materialise.
European cash equity markets were seen on a slight upward trend in the early hours of the session amid some rumours that the Chinese PBOC were considering a cut to their RRR. However, this failed to materialise and markets have now retreated into negative territory with flows seen moving into fixed income securities. This follows some market talk of selling in Greek PSI bonds due to the absence of CDSs. This sparked some renewed concern regarding the emergence of Greece from their recovery.
Elsewhere, we saw the publication of the BoE’s financial stability review recommending that UK banks raise external capital as soon as possible. This saw risk-averse flows into the gilt, with futures now trading up around 40 ticks.
Looking ahead in the session we have US New Home Sales due at 1400GMT.
Fed's Fisher said he would not support further QE, as economic growth is positive and gaining momentum, and money already in the system isn’t being put to proper use. He also said he thought the US economy was in a better that now than before the crisis, and he sees inflation coming down to 2%. (RTRS)
Fed’s Bullard has said the central bank is on pause, and more stimulus is not currently warranted. On the balance sheet, Bullard commented that the Fed has taken substantial risks and he does not want the Fed to overcommit on easy policy. On future policy, Bullard commented that adding more stimulus would further complicate the exit strategy. Bullard has estimated US GDP to rise 3% this year, but warns of future risks to the economy from fiscal problems and inflation. (RTRS/Sources)
Fed's Evans said guidance on fiscal tightening may curb inflation, and that more accommodation for this from the Fed is “appropriate”. He also called for the Fed to commit to lower rates until inflation reaches 3% or unemployment reaches 7%.
BarCap US Treasury month end extension seen at +0.02yrs.
The Japanese finance minister Azumi is to start compiling the temporary next full year budget from today. The Japanese government still has plans to submit sales tax bills this month, according to the minister. (Sources)
BoJ’s Shirakawa has said it will take time for the effects on monetary policy easing to appear. The BoJ member has said monetary easing alone will not end deflation. On future policy, he commented that it is not appropriate to raise Japan’s short-term rates through a US Fed ‘operation twist’ style operation. (Sources)
A DPJ Lawmaker has said the BoJ should buy tens of trl JPY more JGBs, adding that the current level of easing is not enough. (Sources)
EU and UK Headlines
The French finance minister has raised growth forecasts for the country. The minister said 2012 GDP growth forecast has been raised to 0.7% from 0.5% and estimated 2013 GDP growth at 1.75%. (Sources)
According to Les Echos who cited Insee, France will have no growth in Q1, and 0.2% growth in Q2 and the unemployment rate is expected to top 10% in Q1. (Les Echos)
Spain’s borrowing costs soar as investors’ Eurozone fears resurface. Spain’s borrowing costs rose above 5.5% for the first time since January as investors fretted about another escalation of the Eurozone crisis amid signs of further economic weakening even in Germany. (FT-More/Sources)
ECB's Gonzalez-Paramo said there is no risk of a Spanish default and it makes no sense to talk about PSI for Portugal. He added that the evidence at the moment is that 3-year LTROs have had little immediate impact on improving bank lending.
UK Nationwide Consumer Confidence (Feb) M/M 44 vs. Exp. 47 (Prev. 47) (Sources)
UK consumer confidence declined in February as rising joblessness and weak economic growth made Britons more pessimistic about the future, according to Nationwide. Nationwide’s Chief Economist commented that “weak labour-market conditions combined with weaker-than-expected economic growth are continuing to weigh on confidence. Consumers also scaled back their expectations for the future, with the forward-looking aspects of the index weakening during the month.”
The Bank of England have released their Financial Stability Review and have recommended UK banks to raise their external capital levels as soon as is feasible. The FPC commented that bank capital is not yet sufficient to ensure resilience to risks. (Sources)
PwC consultants have estimated that up to 15 multinationals are considering moving “substantial operations” to the UK in the wake of corporate tax changes seen in the budget. (FT-More)
Oil companies enjoy unintended North Sea tax 'windfall' (Telegraph) Lobbying from the oil and gas industry saw the Chancellor use the Budget to reveal a doubling of tax breaks on certain small oil and gas fields. The new field allowances "should lead to exploration that would not otherwise have happened", the Treasury said.
BarCap Pan Euro Agg month end extension seen at +0.13yrs.
European cash equity markets were seen making modest gains as we progressed through the early hours of the European session as market talk was doing the rounds concerning a PBOC cut to the RRR, however this failed to materialise and further market talk of rumoured selling of the new Greek PSI bonds weighed down on equities and have now pushed them into negative territory.
In individual stock news, UK company BT are the strongest performer following overnight reports that the firm is to pay GBP 2bln into its pension fund before the end of March as the company seeks to cut their deficit. Company shares are currently up just under 5%.
Banca Monte dei Paschi remains particularly volatile and is making heavy losses as Fondazione MPS reject an offer from private equity firm Equinox for a stake in the company. According to an unsourced report, Equinox has now withdrawn from bidding. Banca Monte dei Paschi shares now trade lower 3.44%.
Top performing sectors in the BE500: Consumer Services (+0.44%), Telecomms (+0.22%), Industrials (-0.14%)
Worst performing sectors in the BE500: Technology (-0.72%), Financials (-0.68%), Basic Materials (-0.51%)
Canadian CPI (Feb) M/M 0.4% vs. Exp. 0.4% (Prev. 0.4%)
Canadian CPI (Feb) Y/Y 2.6% vs. Exp. 2.7% (Prev. 2.5%) (Sources)
Following the release, USD/CAD has been grinding higher hitting session highs of 1.0031.
USD/JPY has seen some upwards trade this morning. Early in the session there were some comments from a DPJ lawmaker recommending that the BoJ employ further easing measures, as current levels of easing are not sufficient. (Sources)
Amid market talk circulating regarding a cut to the PBOC’s RRR prompted some modest risk appetite, as such, EUR/USD has made some gains, but has exhibited some selling off in recent trade. Following this, the USD index is seen lower going into the North American open. (Sources)
WTI and Brent crude futures are in positive territory going into the US open. The energy complex is regaining some of the losses made after yesterday’s disappointing manufacturing from China and Europe.
Oil & Gas News:
• China’s power consumption is expected to rise 8.5-9.7% in the first half of this year from one year ago, according to sources from China’s power producers association.
• The Iranian ambassador to India has said India is yet to start crude oil payments in INR. The ambassador expects crude exports to India this year to remain unchanged from 2010-2011 levels.
• A delegation of Indian traders to sanction-hit Iran has failed to clinch any deals, raising questions over the viability of a new mechanism to pay for 45% of oil imports in INR and increase exports to readdress the balance.
• The IEA chief has said there is no disruption in the global oil supply at present and expects Saudi Arabia to raise output if supplies become constrained. The chief has said there is no plan to release any emergency oil reserves at present.
• Japanese firms are tentatively looking at building a large geothermal plant in the area worst hit by last year’s nuclear crisis. The project could gain momentum after the government eased restrictions on drilling this week.
• Most Japanese mayors and governors whose communities host nuclear plants are seeking fresh assurances beyond government-imposed stress tests before agreeing to the restart of reactors taken offline following the Fukushima crisis.
• Japan have ordered the deployment of anti-missile defence systems that would enable the country to shoot down any North Korean long-range strikes.
• North Korea will face a ‘strong response’ if it launches a long-range rocket next month despite international calls to desist, according to a special adviser to the US President Obama.
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