Daily US Opening News And Market Re-Cap: April 11

From RanSquawk

  • Germany Bund auction was technically uncovered this morning, resulting in a sharp sell-off of Bund futures.
  • Italian T-Bill auction results not as poor as many had feared.
  • Italian and Spanish 10-yr government bond yield spreads tighten against the German Bund on the day.

Market Re-Cap
As North America comes to market, there is a lot to digest. European equity markets are trading higher, with the FTSE MIB in particular outperforming after a volatile morning’s session, with bargain-hunting the active theme among investors. The first major risk event came and went with the Italian T-Bill auction. Participants were looking for a poor auction due to the ongoing Eurozone woes, and although bid/covers fell short and yields did increase, the auction was not as poorly received as many had feared.
As such, Italian and Spanish 10-yr spreads have tightened with the German Bund, with the Spanish spread closing in on 400BPS, with talk of domestic buying in the periphery and profit-taking from the last few sessions adding to the tightening effect.
A flashpoint of the day was the German Bund auction; results came in showing the auction to be technically uncovered, failing to sell the expected EUR 5bln. Analysts have pinned the poor auction on the Bund having record low yields providing a disincentive to buy the German security. Following the minutes after the auction, around 25,000 contracts went through on the Bund, spiking lower around 20ticks.
Asian Headlines
The BoJ have slightly upgraded its assessment of the domestic economy for the second straight month, with improving conditions following an upswing in public investment in the post-earthquake reconstruction phase. (Sources)
The BoJ will consider additional monetary easing at its next meeting on April 27th as inflation falls short of the 1% goal, according to Japanese Press. (Asahi)
Japanese Machine Orders (Feb) M/M 4.8% vs. Exp. -0.8% (Prev. 3.4%)
Japanese Machine Orders (Feb) Y/Y 8.9% vs. Exp. 3.0% (Prev. 5.7%) (Sources)
A Japanese government official has commented that February’s core machinery orders hit their highest amount since August last year. (Sources)
US Headlines
Looking ahead in the session, participants will be looking out for possible comments from Fed’s Lockhart and Bullard as well as the weekly DOE crude inventories in addition to the Fed’s Beige Book.
EU and UK Headlines
Germany failed to auction the indicated quantity in their Bund auction, with a particularly low bid/cover. The German debt agency commented on the auction saying that Germany retained exactly the volume it was aiming for and there is no lack of interest from investors in German bonds. Despite the comments, the 25,000 contracts went through on the Bund and in the two minutes following the auction, spiked lower 20 ticks. The security has failed to reverse the trend and remains in negative territory heading in to the US session:
Bundesbank sells EUR 3.87bln in its 1.75% July 2022 Bund with a B/C of 1.1, avg. yield 1.77%, retention 22.6%
Italy sold to the top end of the range in an earlier T-Bill auction. Although bid/cover ratios were lower and yields were higher since the previous auction, it was not as poor as many analysts had feared.
-Italy sells EUR 3bln 3-month T-bills, bid/cover 1.814, Prev. 2.23 (yield 1.249%, Prev. 0.492%)
-Italy sells EUR 8bln 12-month T-bills, bid/cover 1.516, Prev. 1.38 (yield 2.840%, Prev. 1.405%) - highest since Mid-December.
UK DMO sells GBP 4.5bln in its 1.0% March 2017 bond with a B/C 1.37 (Prev. 1.95), yield tail 0.8bps, price tail 4 ticks
Italian PM Monti has written to the WSJ in defence of his labour reforms. (WSJ) Monti writes that the reforms outline fair and common practice, with speedier dismissal procedures for economic and objective reasons. Monti adds that the reforms will have a major and positive impact on the Italian economy and introduce flexibility, and the reforms deserve serious analysis rather than snap judgements. Monti concludes by saying the changes induce productivity, economic growth and employment.
UK BRC Sales Like-For-Like (Mar) Y/Y 1.3% vs. Exp. 0.0% (Prev. -0.3%) (Sources)
Unseasonably warm weather has boosted UK retail sales supporting expectations that the UK has avoided a return to recession.
The IIF have said Greek bond swap participation is now above 96%, and have urged holdouts to participate in the debt deal. (Sources)
According to a Greek government official, Greece are to hold elections on May 6th. (Sources)
Following Alcoa reporting some forecast-beating earnings after the US close yesterday, European equities opened higher on hopes of a strong US earnings season. This risk appetite has carried on through the session, evident in the outperforming financials sector.
Going into the US open, peripheral European banks are performing particularly strongly amid bargain-hunting investors seeking to make gains following the losses over the last few sessions in Europe. As such, UniCredit are the strongest performing individual stock in Europe today, currently trading higher by 5.8%. Investors have also been undeterred by the rising yields in an Italian T-Bill auction held earlier today, as the auction was not as poorly received as some had feared. 
BT Group are one of the worst performing companies of the session so far following the publication of a downbeat research note from a major US bank forecasting slow dividend growth due to the company’s recent pension liability agreement. As such, BT shares currently trade lower by 2.25%.
Top performing sectors in the BE500: Financials (+2.36%), Basic Materials (+1.71%), Industrials (+1.67%)
Worst performing sectors in the BE500: Health Care (-0.56%), Technology (+0.35%), Consumer Services (+0.53%)

EUR/USD is seen holding above the 1.3100 level with Asian sovereign names assisting at the lows from the losses made yesterday. Progressing through the session, EUR/USD has seen support even though a poor German Bund auction looked to weigh down on the EUR, with interest going into the London fix boosting a move above the 100-DMA line.
GBP/USD is trading higher on the session, with support seen from the start following overnight UK retail sales data indicating stronger than expected growth for March. The pair shrugged off a disappointing gilt auction, moving in tandem with the EUR for much of the session.

WTI crude futures are trading higher into the North American open as participants await the weekly DoE oil inventory data and keep a close eye on developments on the Korean peninsula.
Oil & Gas News:

•  The EIA raised their forecast for non-OPEC 2012 oil output by 150,000BPD to 52.67mln BPD and raised their forecast for non-OPEC 2013 oil output by 100,000 BPD to 53.52mln. The EIA also sees US retail gasoline prices peaking at USD 4.01 per gallon in May and said that Iran's crude output may fall to 3.05mln BPD by the year end, down 500,000 BPD from last year.
•  The OPEC basket priced at USD 119.38 yesterday, marking the first time since the 21st of February that the price has dropped below USD 120 level.
•  The leak at Total’s North Sea Elgin Sea gas platform could be stopped by the end of this month if everything goes as planned, according to the company’s UK managing director.
•  A catalytic cracking unit wet gas compressor tripped at ConocoPhillips’ 356,000BPD JV refinery in Wood River, Illinois, according to latest filings.
Geopolitical News:

•  North Korea has rejected international protests over its planned long-range rocket launch and said it is injecting fuel “as we speak”. North Korea’s neighbours and the West say the launch is a disguised ballistic missile test and that it will take a three-stage rocket over the sea separating the Korean peninsula from China before releasing a satellite into orbit when the third stage fires over waters near the Philippines. In response to this news, China has repeated its call for a calm and restraint.
•  The next round of nuclear talks between the West and Iran will be held in Baghdad following this week’s negotiations in Istanbul, according to the Iraq foreign ministry.