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US Morning Briefing

Mon, Nov 23 2009, 13:03 GMT
by RANsquawk Research Team

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Overnight News

Asia:

Japanese markets closed today for Labour Thanksgiving day holiday.

China’s annual economic growth will reach 10% this quarter and grow even faster in the first quarter of 2010, a government researcher from the State Council Development Research Centre said. The researcher also said that the international pressure on China to lift the value of its CNY against the USD could stoke risks to growth in 2010. (RTRS)

In other news, China should immediately halt some of its real estate stimulus policies, or risk inflating a bubble that in its bursting would wreck financial and even social trouble, according to central bank newspaper. (Financial News) Elsewhere, China bank regulator urged banks to lend at stable and sustainable pace, however denied it is asking big banks to meet 13% capital ratio. It also said that it is not imposing lending controls on banks. (RTRS)

GLOBAL

IMF's Strauss-Kahn said that sustainable recovery depends on policymakers taking the right steps in coming months, adding that the global economy is in a holding pattern; getting better but still vulnerable. He further said that interest rates can stay low for some time in advanced economies because of low inflation, however regulatory uncertainty may fuel risk taking. Strauss-Kahn said we don't see high probability of a double-dip, however early withdrawal is one of the biggest risks. (RTRS/BBG)

US:

Fed’s Bullard said that the central bank should keep alive its mortgage-related assets purchase programme beyond a planned end-date to give policy-makers more flexibility as they help the economy recover from a painful recession. Bullard added that the Fed could react to changes in the economy by adjusting its asset purchases.
Bullard earlier told Dow Jones in an interview that no decision had been made on the fate of the programmes. (RTRS)

In other news, US unemployment is likely to peak at about 10.5% and may not start to come down until the summer of 2010, according to Charles Evans, president of the Federal Reserve Bank of Chicago. Evans also said he expected economic growth of 3-3.5% over the next 18 months and did not think there was much risk of a double-dip recession. (FT)

Elsewhere, a group of US business economists boosted their forecast for economic growth over the next year, but said the jobless rate will remain stubbornly high. National Association for Business Economists predicted real growth in GDP for 2010 would be 2.9%, up from its October forecast for 2.6% growth. The group saw the jobless rate holding at an average 10% from the fourth quarter of 2009 to the second quarter of 2010 before dropping to 9.6% by the end of 2010. (RTRS)

Bonds

EUROPEAN GOVERNMENT BONDS

Bund futures are trading lower today in the wake of stronger equities and after manufacturing and service PMI's expanded for a fourth month in November.

ECB's Ordonez said that recovery is not without uncertainty; exiting too late could hurt the growth whereas exiting too early could undermine progress. Ordonez added that there is no risk of deflation seen for now and interest rates are appropriate. Ordonez also emphasised that the ECB is not talking about raising interest rates.
(BBG/Sources) ECB's Constancio said that economies are recovering slowly, however the crisis is not over.
(BBG) ECB’s Gonzalez-Paramo said that the ECB believes Eurozone interest rates are “now appropriate”. (El Mundo)

  • Eurozone Manufacturing PMI (Nov A) M/M 51.0 vs. Exp. 51.2 (Prev. 50.7), highest since March 2008

  • Eurozone Services PMI (Nov A) M/M 53.2 vs. Exp. 52.8 (Prev. 52.6), two year high

  • Eurozone Composite PMI (Nov A) M/M 53.7 vs. Exp. 53.4 (Prev. 53.0), two year high (BBG)

  • German Manufacturing PMI (Nov A) M/M 52.0 vs. Exp. 51.7 (Prev. 51.1), second consecutive month of growth

  • French Services PMI (Nov P) M/M 60.4 vs. Exp. 57.4 (Prev. 57.7), highest in 37 months. (BBG)

Maturity251030Bund (Dec09)
Level1.3562.4073.2833.970122.33
Change (bps)3.5364.7053.2153.766-0.23


Gilts:

Gilts traded lower on the back of strength in equities and strong manufacturing and services PMI data for Eurozone, Germany and France.

BOE's Sentance said a modest economic recovery is under way. He said that it is very tentative but there has been a turnaround on the demand side although the recovery remains quite fragile - that's an inevitable feature as it's at an early stage. (Western Morning News)

UK's PM Brown said that ending stimulus too early would be fatal to growth, adding that G20 should address global imbalances in trade and currencies. He also said that low inflation makes going for growth possible. (BBG)

In other news, IMF's Strauss-Kahn said that IMF’s UK forecasts shows strong 2010 recovery, however UK needs to return to normal trade flows. (BBG) Also, regulators need more tools to prevent the build-up of risks in the financial system but it would be unrealistic to think all asset bubbles can be prevented, according to a Bank of England paper. (RTRS)


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