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US Morning Briefing

Fri, Nov 6 2009, 12:54 GMT
by RANsquawk Research Team

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Overnight News

Asia:

Lead 10-year Japanese government bond futures briefly touched a three-month low hurt by a rise in Tokyo share prices and the previous day’s weak 10-year auction. JGBs were trading at 137.55 (-0.05) at 0614 GMT. Nikkei rose 0.7% as exporters climbed after good news on US jobs renewed hopes about the pace of economic recovery and as tech shares rose after gains by their US peers, but profit-taking weighed on gains. Pioneer Corp. advanced nearly 9% after UBS upgraded the consumer electronics company to neutral from sell after it said on Thursday that it needs to raise less funds than previously planned, and NEC Corp climbed despite saying it plans to raise up to USD 1.5bln in shares. (RTRS)

BOJ Oct 13-14 Policy Board minutes said that funding conditions at smaller firms are still severe and there are some concerns over calendar and fiscal year-end funding. It said that there is hesitation on ending corporate assistance as it might spark speculation of more exit moves and most agreed the need to keep policy easy. (RTRS) In other news, BOJ’s latest regional economic report blames government policies for job and wage woes. (Nikkei)

In other news, BOJ deputy governor Yamaguchi said that chance of Japan’s economy experiencing double-dip is small, adding that Japan's financial system is stable. (RTRS) However, Japan strategy minister Kan said that the next fiscal year's budget is likely to remain simulative for the economy and he strongly feels there is a strong risk of Japan experiencing double dip. (RTRS) Also, Japan’s Bank Minister Kamei said that he doesn’t think that Japan economy will move in an optimistic way as BOJ thinks. (RTRS)

Elsewhere, PBOC's Fan said that China’s economic recovery will be sustained and policy changes will depend on economic condition. He added that China faces no problem to achieve 8% GDP growth in 2010 and China's FX reserves diversification will be gradual. Fan further said there is little threat of near-term inflationary pressure from China (RTRS) Also, China denounced as protectionist new US anti-dumping duties on Friday and vowed to protect the interests of its industry a week before President Barack Obama heads for talks in Beijing and Shanghai. The US on Thursday slapped preliminary anti-dumping duties of up to 99% on USD 2.63bln in Chinese-made oil well pipe. (RTRS)

GLOBAL

Moody's Cailleteau said there are still some questions on the Triple-A Eurozone sovereign credits over medium term and sees fragile stabilisation in Eurozone sovereign credits. Cailleteau added that he sees US and UK as resilient AAA rated countries. (RTRS)

The United Nations nuclear watchdog has demanded that Iran explain evidence indicating that its scientists have experimented with the design of an advanced nuclear warhead, it emerged last night. (Telegraph)

US:

Beginning on January 1, banks the FDIC says are not "well capitalised" won't be allowed to pay more than a bare minimum interest rate to depositors, increasing their chance for failure. (WSJ)

In other news, Fannie Mae said bad mortgages and a federal foreclosure prevention programme left it with a USD 18.9bln loss, forcing it to tap the Treasury again to plug a hole in its net worth. It sees weakness in the real estate financial markets to continue through the end of 2009 and into 2010 and sees home prices decline up to another 6% on a national basis in 2009. Fannie said it continues to expect further increases in level of foreclosures and single family delinquency rates in 2009 and into 2010. (RTRS)

Elsewhere, US Fed balance sheet liabilities grew to USD 2.147trl November 4 vs. USD 2.144trl October 28, according to the Fed. (RTRS)


Bonds

European Government Bonds:

ECB's Nowotny said that the ECB will probably withdraw liquidity first then raise rates, adding that ECB hasn't decided yet whether to stop 12-month lending. Nowotny said the ECB has no plan to intervene at certain EUR level and sees very low inflation outlook. (RTRS/BBG) In other news, EU mulls early exit from Government guarantees on bank debt, according to a document, that further said EU could raise the cost of guarantees starting June 2010. (Sources)

  • German Factory Orders (Sep) M/M 0.9% vs. Exp. 1.0% (Prev. 1.4%, Rev. to 2.1)

  • German Factory Orders (Sep) Y/Y -13.1% vs. Exp. -13.6% (Prev. -20.4%, Rev. to -19.8%) (BBG)

  • France Trade Balance (EUR) (Sep) M/M -1.75B vs. Exp. -3.0B (Prev. -3.4B) (BBG)

Maturity251030Bund (Dec09)
Level1.2852.4963.3504.105121
Change (bps)-1.6360.7500.4640.253-0.01


Gilts:

NYSE LIFFE gilt futures have also remained near unchanged throughout the morning with little reaction to stronger than expected PPI data.

UK DMO Head said today he expects demand for Gilt to remain strong even as BOE slows down QE programme. (RTRS) Robert Stheeman, chief executive officer of the UK’s DMO, said he is confident there will be demand for UK government bonds in 2010 as economy recovers. (BBG)

In other news, We are reaching the end game for quantitative easing as the Bank of England voted to slow the rate of asset purchases it is making through quantitative easing (QE) to the lowest speed since it introduced the policy in March. (Telegraph)

Elsewhere, the housing recovery will come to an end this year because of lingering effects of the weak economy, according to forecasts by a leading estate agent Savills. The main UK market is forecast to fall by 6.6% in 2010, before returning to growth of 2.7% in 2011, with stronger gains of 5.5% and 8% in 2012 and 2013. (FT)

  • UK PPI Input NSA (Oct) M/M 2.6% vs. Exp. 1.5% (Prev. -0.5%, Rev. to -0.2%)

  • UK PPI Input NSA (Oct) Y/Y 0.1% vs. Exp. -1.3% (Prev. -6.5%, Rev. to -6.2%)

  • UK PPI Output NSA (Oct) M/M 0.2% vs. Exp. 0.3% (Prev. 0.5%)

  • UK PPI Output NSA (Oct) Y/Y 1.7% vs. Exp. 1.9% (Prev. 0.4%)

  • UK PPI Output Core NSA (Oct) M/M 0.3% vs. Exp. 0.2% (Prev. 0.5%)

  • UK PPI Output Core NSA (Oct) Y/Y 2.0% vs. Exp. 2.0% (Prev. 1.4%, Rev. to 1.3%) (BBG)


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