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US stock market opening report (March 09, 2010, Tuesday)

Contributed by Paddy Power Trader

By Paddy Power Trader

European bourses opened in minor positive territory, however soon lost strength following downbeat comments from Fitch on European sovereign ratings, which provided strength to the USD index due to the risk-averse trade that in turn weighed upon commodity-linked stocks. Comments from Fitch combined with those from Moody’s on possible downgrade of some British banks adversely affected the financial sector. Moving into the North American open, European equities are trading in negative territory with financials and basic materials being the worst performing sectors.

Fitch said Greece bailout is too uncertain to factor into rating, and Portugal may be downgraded if consolidation is insufficient, however Greek contagion risk to Portugal and Spain is not as great as market believes. Fitch further said that among larger AAA sovereigns, urgency is greatest for UK, Spain and France, and it hasn’t seen credible exit strategies from most nations. Fitch also said that US is vulnerable to interest rate shocks, however there is no pressure on US credit rating in short-to-medium term. (BBG/RTRS)

Fitch said that UK and global economic outlook is uncertain, and UK sovereign credit profile has deteriorated. Fitch added that stronger fiscal adjustments are needed in UK, and UK needs to reduce deficit to 3% of GDP by 2014-15. Fitch also said that UK is still within tolerance of AAA rating, but UK government’s plan to halve deficit over 4 years is too slow, and a permanently lower UK growth is a distinct possibility. (BBG/RTRS)

FDIC Bair said she wants an upfront levy on big financial institutions to cover the costs of possible failures. In other news, Brian Sack, the New York Federal Reserve Bank’s markets chief, said reducing the central bank’s USD 2.3trl balance sheet quickly through sales of assets would risk a sudden increase in long-term interest rates. (FT/BBG)

Elsewhere, the percentage of US homeowners who cut the listing price on their houses fell in February to the lowest level in 10 months, as initial pricing became more realistic heading into the spring selling season, real estate web site Trulia.com said. (RTRS)

Forex

GBP traded under pressure following ongoing concerns regarding hung parliament in UK’s next general election, comments from Moody’s on possibility of ratings downgrades of British banks (refer to Gilts section), worse than expected UK Trade Balance figures, and negative comments from Fitch on UK’s sovereign rating (refer to Global section). In other news, the USD index gained strength amid risk-averse trade following downbeat comments from Fitch on sovereign ratings.

Commodities

Heading into the North American open, WTI crude futures have moved in tandem with equities and into negative territory. This was followed by a move higher in the USD index subsequent to downbeat assessment of sovereign debt by Fitch Ratings agency.

In oil related news:

- Nigeria aims to boost utilisation of existing refineries to 90% over next 2 years. Nigeria says increases will still only meet 60% of fuel needs.

- A feud between Russian PM Putin’s deputies over how to plug the budget gap may end up curbing growth in oil output, the biggest source of state revenue and limiting flows to Asia, analysts said.

In gas related news:

- An unidentified European company is set to invest in Iran’s Lavan gas field which plans to export as much as 4mln tons of Liquefied Natural Gas (LNG) to Europe, a senior oil ministry official said.

In geopolitical news:

- North Korea’s army has set up a unit to operate missiles with ranges of more than 3,000 kilometres, according to an unidentified South Korean government official. Also, North Korea’s foreign ministry said the nation will bolster its nuclear deterrent if the US and South Korea continue their joint military exercises, repeating a March 7 threat made by the military.

- Joe Biden, the US Vice President, says “determined” to stop Iran getting nuclear weapons.