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US Morning Briefing

Fri, Oct 30 2009, 12:28 GMT
by RANsquawk Research Team

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Overnight News

Asia:

JGB’s traded lower for the majority of the session after US Treasuries dropped and stock market gained (Nikkei +1.45%) on data showing that the US economy grew in the third quarter for the first time in more than a year.
JGBs were trading at 137.99 (-0.01) at 0611 BST. Nikkei rose 1.5%, buoyed by shares of tech companies with improved earnings prospects such as Pioneer Corp, while exporters climbed on data showing the US economy had returned to growth. (RTRS)

A split Bank of Japan began withdrawing from credit markets on Friday and said it would scrap all key funding support programmes by March, despite government pressure to support corporate borrowing until the economy strengthens. The bank extended a low-interest loans scheme by three months, but voted 7-1 to end that lending in March and also chose to end less-used funding measures – buying of corporate bonds and commercial paper – in December. The bank also voted unanimously to keep interest rates steady at 0.1%. (RTRS)

In related news, BOJ's Shirakawa said that BOJ is to keep easy policy and to keep accommodative policy tenaciously. He added that it will still take time for the economy to return to growth path. Shirakawa said the effect of low rate policy is becoming stronger and corporate debt programs have fulfilled their purpose. He commented that prolonging extra steps could distort markets. Shirakawa also said that the global economy is to expand albeit moderately. (BBG) In other news, Japan PM Hatoyama said optimism is not warranted for Japan's economy. (RTRS)

PBOC said that China saw positive signs of economic recovery in Q3 and the economy is set to continue in the positive direction, adding that China's Q3 loans rose to CNY 1.3trl. It further said that Q4 GDP will continue to rebound and FY GDP is expected to be over 8%. PBOC also said that inflation expectations are strengthening. (BBG) In related news, China will stick to an appropriately loose monetary policy, central bank governor Zhou said. (RTRS)


GLOBAL

In geopolitical news, a bill to impose sanctions on companies providing Iran with gasoline and limit other business dealings with the country cleared a US Senate panel on Thursday, as lawmakers stepped up pressure on Tehran to stop its nuclear work. (RTRS) In related news, Tehran seeks big changes to nuclear deal and the move threatens hope of final accord. The West is likely to reject Iran’s demands. (FT)

US:

US Treasury Secretary Geithner said commercial real estate woes won’t set off a new banking crisis. (BBG)

Nouriel Roubini said that the recovery in the US, the Eurozone and Japan will be anaemic, adding that potential growth is 3% in the US and 2% in the Eurozone and Japan. In other related news, Pimco’s McCulley said US recession might not even be over and he sees no economic rationale for Fed to raise rates. (BBG)

US Fed balance sheet liabilities shrinks to USD 2.144trl on October 28 vs. USD 2.183trl on October 21, according to Fed. (RTRS)

Bar. Cap. US Treasury index extensions at 0.06years.


Bonds

European Government Bonds:

Bund futures have been on an upward trend since the open buoyed by a weaker tone in European equities and with month end buying touted. Technically, bunds have fully retraced the entire fall yesterday after better than expected US Q3 GDP.

ECB's Stark said there are increasing clear signs of economic recovery next year. (RTRS) In other news, an EU summit concluded that economic decline is coming to an end and the financial markets are stabilising. It further said that governments need to keep economic support until recovery is ensured and it expects further climb in EU unemployment. (Sources) Elsewhere, Fitch said financial instability may lead to Ukraine rating cut. (BBG)

  • Eurozone CPI Estimate (Oct) Y/Y -0.1% vs. Exp. -0.1% (Prev. -0.3%)

  • Eurozone Unemployment Rate (Sep) M/M 9.7% vs. Exp. 9.7% (Prev. 9.6%) (BBG)

  • German Retail Sales (Sep) M/M -0.5% vs. Exp. 1.0% (Prev. -1.5%, Rev. to -1.8%)

  • German Retail Sales (Sep) Y/Y -3.9% vs. Exp. -2.2% (Prev. -2.6%, Rev. to -2.9%) (BBG)

  • French Producer Prices M/M (Sep) -0.3% vs. Exp. -0.3% (Prev. 0.4%)

  • French Producer Prices Y/Y (Sep) -8.1% vs. Exp. -8.1% (Prev. -8.5%) (BBG)

Maturity251030Bund (Dec09)
Level1.3232.4573.2694.013121.6
Change (bps)-3.028-4.577-5.345-5.5470.39


Gilts:

Gilts followed EGB’s higher retracing a large portion of yesterday’s losses but gains were capped after the latest Citi/yougov survey showed UK 1yr inflation expectations had risen to 2% from a previous 1.8%.

The Bank of England’s preferred measure of money supply hit a record low last month, further boosting expectations that the Bank’s Monetary Policy Committee (MPC) will extend quantitative easing (QE) next week. Two thirds of the 62 economists surveyed by Reuters this week said that they expected QE to be extended by at least GBP 25bln, with many forecasting a GBP 50bln increase. (Times)

Former MPC member Goodhart said BOE may reduce or pause QE. (BBG)

  • GfK Consumer Confidence Survey (Oct) M/M -13 vs. Exp. -14 (Prev. -16), highest since January 2008 (BBG/RTRS)

  • Nationwide House Prices SA (Oct) M/M 0.4% vs. Exp. 0.6% (Prev. 0.9%)

  • Nationwide House Prices NSA (Oct) Y/Y 2.0% vs. Exp. 1.8% (Prev. 0.0%) (BBG)

iBoxx Sterling index extensions +0.05y.


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