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US Morning Briefing

Tue, Nov 3 2009, 13:04 GMT
by RANsquawk Research Team

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Overnight News

Asia:

Japanese markets closed for Culture Day.

China’s red-hot property market is a concern for its sovereign credit rating because of the threat of worsening asset quality in the banking system, Fitch Ratings said. (RTRS) In other news, new bank lending in China may have hit CNY 300-400bln in October, broadly in line with market expectations. (Shanghai Securities News)

GLOBAL

In geopolitical news, Iran’s supreme leader Khamenei said the US is a “really arrogant power” and should change its behaviour, he also added that Iran will not be deceived by Washington’s “apparent reconciliatory” behaviour. These comments came in response to those from US Secretary of State Hillary Clinton who yesterday urged Iran to accept the six-power’s proposal on its nuclear programme also stating the offer would not be changed. (BBG/RTRS)

US:

US commercial bankruptcy filings rose 7% in October compared to the previous month, with signs that there are more to come, citing data from a private company. (WSJ)

Bonds

European Government Bonds:

Bund futures are higher underpinned by the weaker tone in equity markets as fears sounding the financials remain. Prices received a further boost after the EU Commission presented its latest estimates forecasting a further EUR 200-400bln in bank losses for 2009/10, with Almunia sounding decidedly downbeat.

EU's Almunia said that the situation is stabilising in the economy, however the improvement is based on stimulus and emerging economies. He added that major challenges persist in the near term and further deterioration in labour market is seen in 2010. He commented that the banking sector is still fragile and credit stagnating with credit flows close to zero or negative. (BBG/RTRS)

In its economic growth forecast for the Euro area, the EU Commission said: (BBG/RTRS)

  • Eurozone GDP 2009: -4.0% vs. Prev. from EC's September report (-4.0%)

  • Eurozone GDP 2010: +0.7% vs. Prev. from EC's September report (-0.1%)

  • Eurozone Unemployment 2009: 9.5% vs. Prev. from EC's September report (9.9%)

  • Eurozone Unemployment 2010: 10.7% vs. Prev. from EC's September report (11.5%)

  • Risks to growth, inflation outlooks are broadly balanced.

  • Banking sector remains fragile and financial crisis impact not over.

  • Estimates further bank sector losses EUR 200-400bln in 2009/10.

  • Spain Bond Tap auction for EUR 2.29bln 29-Oct-12, Bid/Cover 2.23 (BBG)

  • Austrian Bond Tap Auction for EUR 500mln 4.15% 15-Mar-37, Bid/Cover 2.816 vs. Prev. 2.5 (BBG)

Maturity251030Bund (Dec09)
Level1.2522.3683.2063.980122.22
Change (bps)-4.039-4.196-2.890-1.8060.31


Gilts:

NYSE LIFFE gilt futures have underperformed EGB’s as the government set up its plans to bolster some of the UK’s largest banks and ahead of a new GBP 4.75bln 5yr auction from the DMO.

Lloyds and RBS agree to massive shake-up which will see the sale of hundreds of branches and key businesses to satisfy EU rules. Lloyds is to raise GBP 21bln capital whilst RBS will receive GBP 25.5bln injection from the UK government. The shares of RBS and Lloyds fell 1% and 7% respectively. (RTRS)

UK's Darling says UK economic outlook has improved, repeating that UK economy is to resume growth around the turn of this year. (BBG) In other news, Bank of England should cap its bond purchase plan at GBP 200bln this week in signal that it will stop buying assets in the next quarter, former policy maker DeAnne Julius said. (BBG)

  • UK PMI Construction (Oct) M/M 46.2 vs. Exp. 47.2 (Prev. 46.7) (BBG)

  • UK Conventional Tap Auction for GBP 4.75bln (Act) New 2.75% 2015, Bid/Cover 2.06 (BBG)


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