Daily US Opening News And Market Re-Cap: March 20

From RanSquawk

  • Saudi Arabia announce they will co-operate with oil consumers on an individual basis in order to bring a fair price back to oil markets.
  • ONS reports UK CPI fell to 3.4% in February, however decline was slowed by alcohol and tobacco price increases.
  • BHP Billiton report Chinese iron ore demand flattening out, putting downward pressure on commodity prices.

Market Re-Cap.
Heading into the North American open, EU stocks are seen lower across the board as market participants reacted to cautious comments from Moody’s rating agency on Spain, which noted that Spain’s fiscal outlook remains challenging despite easier targets. Still, the ratings agency further commented that easier targets do not affect Spain’s A3 government bond rating with a negative outlook. Separately to this, a BHP Billiton executive said that Chinese demand for iron ore is flattening, while according to China's state-backed auto association, China's vehicles sales this year will probably miss their growth forecasts. As a result, basic materials sector has been the worst performing sector today, while auto related stocks such as Daimler and VW also posted significant losses. The ONS reported that inflation in the UK fell to 3.4% in February, down from 3.6% in January. However, higher alcohol prices stopped the rate declining further.
Going forward, the latter half of the session sees the release of the latest US housing data, as well as the weekly API report.
US Headlines
The House GOP budget plan will target tax rates, aiming to drop individual rates to two brackets of 10% and 25%. (WSJ)
Obama’s tax hikes threaten a new US recession (FT-More)
The Congressional Budget Office predicts that, under current law, the revenue of the federal government will rise from USD 2.4trl in the current fiscal year, which ends in September, to USD 2.9trl in the following fiscal year. The higher revenue would reflect an increase in personal tax rates, higher payroll taxes, as well as higher taxes on dividends, capital gains and corporate incomes. A sustained tax increase of that magnitude would push the US into a new and deep recession next year, according to Ronald Reagan’s former chief economic adviser.
Asian Headlines
China can ease monetary policy according to a ministry of finance researcher. (Sources)
PBOC’s Zhou has said that conditions are ripe for pushing forward with interest rate liberalization. Zhou further commented that the PBOC are to speed up the establishment of the deposit insurance mechanism and will enhance the flexibility of the CNY float system. The PBOC are also to expand channels for capital outflows, according to the governor. (Sources)
China's vehicles sales this year will probably miss their growth forecasts, according to China's state-backed auto association. (Sources)
EU and UK Headlines
Portuguese finance minister Gaspar said the new IMF review of debt is to be more favourable than before, but adjustment is unavoidable. However, he also noted that Portugal expects to see positive economic growth in 2013. (Sources)
Moody’s have commented that Spain’s fiscal outlook remains challenging despite easier targets. The ratings agency further commented that easier targets do not affect Spain’s A3 government bond rating with a negative outlook. (Sources) Moody’s believe that the Spanish government will still need to implement substantial fiscal adjustment this year.
US Treasury Secretary Geithner has said Europe is only at the initial stages of a long, difficult reform path adding that IMF resources cannot substitute for a strong EU firewall, but can help supplement the EU’s own resources. (Sources)
The OBR are set to increase their growth forecasts, following recent moves by private sector economists. (FT) These outlook revisions mean the OBR are not expecting a technical recession in the UK.
UK Chancellor Osborne is to launch a new stimulus plan that will channel billions of pounds to small businesses via discounted loans from RBS, Lloyds, Barclays and Santander. The credit easing program will allow banks to raise up to GBP 20bln of funding that is guaranteed by the government. (Sources) The guarantee means that banks can borrow at a low interest rate due to the UK’s top triple-A rating and banks can then pass the funding on to small businesses.

It is worth noting that HSBC have elected not to take part in the scheme. 
UK CPI Annual rate lowest since November 2010, however the rate of decline was slowed by increases in alcohol and tobacco prices.                                          
UK CPI (Feb) Y/Y 3.4% vs. Exp. 3.3% (Prev. 3.6%)
UK CPI (Feb) M/M 0.6% vs. Exp. 0.4% (Prev. -0.5%) (Sources)
UK CBI Trends Total Orders (Mar) M/M -8 vs. Exp. -5 (Prev. -3)
UK CBI Trends Selling Prices (Mar) M/M 24 vs. Exp. 13 (Prev. 10) (Sources)
-Records highest Industrial output balance since March 2011.
European cash equity markets are making losses across the board in Europe led downwards by the basic materials sector underperforming the rest of the market. This follows overnight reports from BHP Billiton, in which a company executive commented that Chinese demand for iron ore is flattening, pressing down on the basic materials sector. BHP Billiton shares currently trade down 3.2%.
Separately, China’s state-backed auto association have said China’s vehicle sales this year will probably miss their growth forecasts, weighing down upon European carmakers, with Peugeot, Volkswagen and Daimler featuring in the 15 most under-performing stocks in Europe ahead of the European open.
Other individual stocks of note include Tata Communications joining the race to acquire Cable & Wireless Worldwide. Tata Communications are reported to have raised up to USD 2bln in short term debt in order to make the acquisition. Cable & Wireless Worldwide shares currently trade up 6.75%. (Sources)
Top performing sectors in the BE500: Telecommunications (+0.60%), Health Care (-0.28%), Utilities (-0.34%)
Worst performing sectors in the BE500: Basic Materials (-2.09%), Industrials (-1.54%), Consumer Goods (-1.39%)

EUR/USD is seen in negative territory ahead of the US open, however the pair has seen some support in the lows slowing the descent and allowing the price to hold near a touted options expiry of 1.3200. If the pair continues to make losses, stops are touted below the 1.3180 level, which could be tripped following the US open.
Commodity-linked currencies are making losses following reports from BHP Billiton concerning a flattening of Chinese iron ore demand, particularly in AUD/USD, which currently trades down over 100pips, echoing the moves in commodities today.

WTI and Brent crude futures are seen lower heading into the North American open following overnight news that Saudi Arabia are to co-operate with oil consumers on an individual basis in order to restore fair pricing to global energy markets.
Oil & Gas News:

•   Saudi Arabia is moving to cool the overheating energy market by boosting its exports to the US and reopening oilfields in order to expand output. The Saudi cabinet said yesterday that the kingdom would work individually and with others in order to return the price of oil to fair levels. Saudi Arabia is preparing to dispatch 11 super-tankers, capable of delivering 22mln BBLs. “This is the first time in several years for Saudi Arabia to hit the market with such volume – and in such a small time frame.” according to shipping experts.
•   SocGen raised their 2012 WTI and Brent prices forecasts to USD 117.15 from USD 103 and to USD 127.35 from USD 110/BBL respectively, and the WTI 2013 price forecast to USD 117 from USD 112.
•   Idled refineries may lead to local gasoline shortages and even higher fuel prices in the US Northeast, according to the Obama administration.
•   Liquefied Natural Gas prices may surge as Japan’s avoidance of nuclear power and limited supply increases to create an “extremely tight” market, according to Bernstein & Co.
•   Libya’s oil exports are set to return to full pre-war levels by April this year, beating optimistic estimates and easing the strain on the global shortfall in oil production, according to a senior official from the NOC.
Geopolitical News:

•   The UN nuclear agency said it has received an invitation to visit North Korea from the country.
•   A key US Senator is close to unveiling legislation that would further isolate Iran by penalizing foreign companies that do any kind of business with an Iranian energy company.