News Headline Summary

DAILY US OPENING NEWS: UK chancellor Osborne presents the autumn budget...

UK chancellor Osborne's presentation of the autumn budget is still ongoing; so far said OBR have cut forecasts as expected

Spain would ask for bailout if given guarantee on yields according to an official

European Services PMI data continues to show a shrinking services sector in Europe

RANsquawk European Morning Briefing Video: http://youtu.be/87AWMqJnAVk

Market Re-Cap
European equity markets opened higher this morning echoing their Asian counterparts after the Shanghai Composite saw large gains overnight. Bourses are holding on to small gains although have come off the highs as less-than-impressive PMIs from Europe have weighed on sentiment. Basic Materials (+0.87%) is the best performing sector in Europe after the Chinese construction industry saw gains following comments about regional development from the Politburo Standing Committee, where they said they are to accelerate development of economically underdeveloped regions. Elsewhere, Nokia shares are up over 7% after the company announced they are to sell their Lumia 920 phone with China Mobile who are the largest wireless operator in the country.

The Spanish bond auction was not well received as the Spanish treasury announced they failed to sell the maximum amount of EUR 4.5bln, selling only EUR 4.25bln. Peripheral bond yield spreads have widened, in particular Spain with the SP/GE 10s wider by 14bps and IT/GE 10s wider by 5bps.

Looking ahead, the UK chancellor Osborne is to announce the autumn budget statement in parliament today and in terms of data releases, US ADP employment change for November is due to be released at 1315GMT/0715CST. As a reminder, this is the second month the ADP have used a new method of compiling the data to make the measure more in-line with Non-Farm payrolls, which is due to be released on Friday.

Asian Headlines
China will further carry out the country's regional development strategy by accelerating development of economically underdeveloped regions. Markets reacted to this comment with construction stocks in China seeing large gains overnight leading to the Shanghai Comp. closing the session up by almost 3%.

EU & UK Headlines
UK chancellor Osborne says OBR forecasts 2012 GDP growth of -0.1% (March 0.8%). Osborne also says OBR expects unemployment to peak at 8.3%, down from earlier estimate 8.7%

A Spanish official said that Spain would ask for bailout if given guarantee on yields. Continued to add that if it could be guaranteed the risk premium would be kept 200 basis points lower, it would ask for a bailout tomorrow.

European Services PMI data continues to show a shrinking services sector in Europe with Germany, France, Italy and Spain all printing lower than the 50-threshold.

Today's Spanish bond auction was lacklustre with the treasury selling less than the EUR 4.5bln maximum amount, at EUR 4.25bln although as a reminder this auction was pre-funding for 2013.

Equities
European equities opened higher and still trade in minor positive territory although the gains have been eroded as downbeat Services PMIs from Europe have dented sentiment. The Basic Materials sector (+0.87%) has seen the biggest gains in early trade with Vedanta Resources (+3.94%) and Anglo American (+3.43%) being two of the best performing stocks in Europe. This has been attributed to the comments out of China where the government said they are to accelerate development of economically underdeveloped regions in the country.

In other individual stocks news, Nokia has seen gains after the company have reached an agreement with China's largest mobile operator, China Mobile, to sell their new Nokia Lumia in the country.

FX
Despite UK services PMI printing lower than expectations, staffing levels in the UK service sector increased for the first time in 3 months which saw strength in GBP and EUR/GBP move lower to currently trade at 0.8114 (-20 pips). This is in close proximity to 0.8100 which is a touted option expiry for the 1000am NY cut.

USD/JPY has moved to the upside attributed to further JPY weakness as the Japanese election is just over a week away with expectations the pro-easing opposition leader Abe will assume power. USD/JPY currently trades at 82.14 (+23 pips).

Australian GDP missed expectations overnight at 0.5% vs. Exp. 0.6% which saw an initial move in AUD/USD to the downside although the move instantly pared. Earlier in the session the central bank's Lowe said the response in AUD to RBA rate cuts was smaller than typical as the cut had already been priced in.

Commodities
WTI crude futures trade in minor positive territory as Chinese equities saw large gains overnight, particularly the construction sector, which has fuelled demand. Adding to the increase in prices, yesterday's API inventories showed a drawdown from the previous week. As a reminder, today's DoE inventories are due at 1530GMT/0930CST.

Geopolitical news continues to be at the forefront after Iran said it will take legal action against the US for drone incursion over the Persian gulf. The US navy have continued to deny reports that Iran captured a drone and said US drones are fully accounted for.

Commodities have been supported across the board due to the strength in construction stocks. Spot gold being the best performing metal, currently trading up 0.42% at USD 1704.74 as expectation of easing from the Fed at next weeks FOMC decision supports prices.

Print 13:04, 05 Dec 2012 - Market Analysis - Source: RANsquawk