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U.S. Market Update
- Earnings season kicked off this morning with strong quarterly reports from
financials SCHW, STT and USB, as well as pharma names JNJ and FRX. The
financial sector led the way higher in early trading, but slipped after STT
raised concerns about conduit purchases on it conference call, noting a $1. 49B
unrealized mark-to-market loss and later in the morning an even larger $2.5B
- PII reported profits up more than 50% and higher guidance, opening +10% but
then dropping below yesterday's close on further fears of a slowing economy,
finally climbing just into positive territory by mid-morning. CROX -40% took a
beating after guiding lower. JNJ said profit rose 40% on sales of its Zyrtec
allergy pill and other consumer products, helping the company beat analysts'
estimates. The company raised its full-year guidance slightly.
- Delta and Northwest made it official last night, announcing that DAL would
pay $17.7B for NWA, with Northwest holders receiving 1.25 Delta shares for each
NWA share, representing a 16.8% premium. The combined company will be called
Delta, and is expected to have more than $35B in total annual sales.
Northwest's CEO believes the deal could close within 6-8 months. The DoJ said
it was "interested" in examining the proposed combination, as various
figures have commented that the deal will decrease competition and lead to
- Brazilian oil company Petrobras cautioned that further exploration is needed
to assess the size of its Carioca field after comments from a state official
sent the company's shares sharply higher. Early today the head of Brazil's National Petroleum Agency said the
field could contain 33B boe, making it the largest oil discovery in the last 30
years, sending PBR up nearly 8%.
- In currencies, the dollar was mixed as a barrage of data, corporate earnings
and central bank speak all managed to influence the short-term direction.
Overall firmer commodity prices continue to weigh on USD sentiment. The
front-month NYMEX crude oil contract rose to a record high above $113.31 per
barrel as dealers digested news of supply disruptions in Nigeria and Mexico, and rising fuel demand in China and a cautious WSJ report that Russian
oil production fell in Q1.
- More hawkish comments were heard at the ECB, emphasizing that the central
bank will act decisively on any signs of second-round effects keeping the
EUR/USD above the 1.58 area, within striking distance of fresh all-time highs.
The April ZEW economic sentiment highlighted the plight of the European
economic environment as growth risks increase, yet inflation continues to
- The USD did find some minor tidbits to wane its bearish momentum as the April
Empire Manufacturing Index beat expectation with a 0.6 reading against a -17 forecast.
US PPI data was mixed with a higher
headline reading at 1.1% m/m, but a tamer core figure at 0.2.
- Feb TIC data was above expectations with a $72.5B inflow. Dealers noted with
caution that the Asia lightened up on its US Treasury
holdings, with China's hoard falling by $5.7B m/m to $486.9B,
while Japan's holdings slipped by $300M m/m to
- The JPY was off its worst levels on some risk aversion flows as dealers noted
the bad conduit news at STT weighing on financial sector sentiment. However,
Lehman's CEO statement that â€śthe worst is behnd usâ€ť in regards to his firm's
situation in the financial market turmoil helped counter this sentiment.
USD/JPY at 101.35, EUR/JPY at 160.00
- June Bunds futures -44 ticks at 115.43, June Gilts -7 ticks at 110.47
- Euro Stoxx 50 +0.6% at 3,693, FTSE 100 Index +1.3% at 5,909; CAC 40 Index
+0.4% at 4,785 and DAX +0.6% at 6, 595
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