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US Morning Briefing

Wed, Nov 4 2009, 13:09 GMT
by RANsquawk Research Team

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Overnight News

Asia:

Ten-year Japanese government bond futures edged lower as traders returned from a holiday, taking their cue from falls in US Treasuries over the past couple of trading sessions. Moves in JGBs were subdued overall, with market players awaiting the US Federal Reserve’s policy decision later on Wednesday and a 10-year JGB auction on Thursday. JGBs were trading at 137.95 (-0.32) at 0618 GMT.

The Nikkei rose 0.4%, with Fast Retailing climbing on a surge in sales at its Uniqlo clothing stores but chip-related stocks lost ground after Morgan Stanley downgraded the US semiconductor sector to cautious. The overall trade was in a tight range throughout the day as investors remained cautious before a Federal Reserve statement on interest rates and the economy, analysts said. (RTRS)

BOJ’s Governor Shirakawa said that the central bank will maintain its very easy monetary policy and that the country’s economic pick-up is likely to remain moderate. Shirakawa added that the BOJ was sticking to a cautious view on the economy because corporate activity remained at low levels and deflation was likely to persist for some time and BOJ's outlook isn't an optimistic view. (RTRS) In other news, Japanese finance minister Fujii reiterated that the government would issue extra bonds to respond to a sharp fall in tax revenues in the year to next March. (RTRS)

Elsewhere, the World Bank raised its forecasts for Chinese growth this year and projected a slightly faster pace of expansion in 2010, but it said Beijing did not need to embark on major policy tightening at this stage. World Bank said that Chinese GDP will increase 8.4% this year and 8.7% in 2010 on the back of massive fiscal and monetary stimulus. (RTRS)


GLOBAL

UK said that G20 won't have formal talks on USD this week and G20 is likely to keep the pledge on stimulus to stay until recovery is assured. (BBG)

US:

Fed is likely to signal that the economy is improving and to keep interest rates low. (BBG) In other news, the Federal Reserve received USD 1.145bln of loan requests in this month’s round of its Term Asset-Backed Securities Loan Facility programme. (BBG)

  • US MBA Mortgage Applications (Oct 30) W/W 8.2% vs. Prev. -12.3% (BBG)

  • US Challenger Job Cuts (Oct) Y/Y 55.679K vs. Prev. 66.404K (BBG)

The number of jobs the Obama administration credits to federal stimulus money could be overstated by at least 20,000 of the 640,000 claimed. Recipients of the government grants and contracts appear to have made mistakes when estimating the number of jobs that have been saved or created, according to the Journal's review. Some recipients said they were confused by forms that asked how they spent the money.

In other news, Senator Harry Reid has signalled that Congress may fail to meet a year end deadline for passing health care legislation, leaving the measure’s fate to the uncertainties of the 2010 election session. (AP)


Bonds

European Government Bonds:

EGBs traded lower following the strength in Asian and European equities and after positive service PMI’s from the Eurozone. Market now looks ahead to the FOMC rate decision later today.

Fitch downgraded Ireland's sovereign ratings to AA- from AA+, keeping outlook stable. (BBG/RTRS) In other news, Irish finance minister said not to expect any upturn in Irish economy until H2 of 2010, adding that the Irish economy is not expected to move out of recession until 2011. (RTRS) Also, OECD said that Irish banks face very large losses on their assets, adding that Ireland should be ready to provide capital to banks and temporary nationalisation shouldn't be ruled out. (BBG)

Elsewhere, Sweden's Riksbank said that the recovery has begun, but it will take time. It further said that the repo rate may need to be raised in the late spring or summer, however, if recovery came sooner than expected in main scenario a tighter monetary policy than forecast would be needed. (BBG/RTRS)

  • Eurozone Services PMI (Oct F) M/M 52.6 vs. Exp. 52.3 (Prev. 50.9), 22-month high

  • Eurozone Composite PMI (Oct F) M/M 53.0 vs. Exp. 53.0 (Prev. 51.1), highest since December 2007

  • French Services PMI (Oct F) M/M 57.7 vs. Exp. 50.9 (Prev. 52.1), highest since February 2008

  • German Services PMI (Oct F) M/M 50.7 vs. Exp. 50.9 (Prev. 52.1)

  • Italian Services PMI (OCT) M/M 52.2 vs. Exp. 49.2 (Prev. 48.5)

  • Spanish Services PMI (Oct) M/M 47.7 vs. Prev. 46.4, lowest rate of contraction in 22 months (BBG)

  • Eurozone PPI (Sep) M/M -0.4% vs. Exp. -0.4% (Prev. 0.4%, Rev. to 0.5%)

  • Eurozone PPI (Sep) Y/Y -7.7% vs. Exp. -7.7% (Prev. -7.5%) (BBG)

Maturity251030Bund (Dec09)
Level1.3072.4593.3164.069121.29
Change (bps)2.8494.7085.4814.053-0.46


Gilts:

Gilts followed EGBs lower and remained subdued for most of the session also coming under further pressure after a relatively poor pick up in an auction of 2034.

  • UK Services PMI (Oct) M/M 56.9 vs. Exp. 55.5 (Prev. 55.3), highest since August 2007 (BBG)

  • Nationwide Consumer Confidence (Oct) M/M 72 vs. Exp. 73 (Prev. 71, Rev. to 72) (BBG)

  • UK Conventional Tap Auction for GBP 2bln (Act) 4.50% 2034, Bid/Cover 1.53 (BBG)


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