Global markets remain in a flux, with some talk of a budding bear-market
rally on an S&P futures pivot at 677. Still, investors remain cautious.
European stock markets and government bond markets are seen inching lower
Tuesday. The euro and oil are up, while spot gold is lower.

STOCKS:
======

European share markets are seen lower Tuesday, after bourses ended lower
Monday as losses for banks and miners more than offset a rebound in
drugmakers. Speculation centered on Merck’s decision to buy Schering-Plough
for $41.1 billion could spark more deals in the sector.
For Tuesday’s opening, One Financial is calling the FTSE down 25 at 3517,
the DAX down 4 at 3688 and the CAC off 6 at 2513.
“The market collapse is fully consistent with the macro environment in which
we currently find ourselves,” noted Peter Dixon, equity strategist at
Commerzbank.
At Morgan Stanley, European equity strategists said they are looking for
clues as to when it might be time to turn structurally bullish but that they
doubt any expect an imminent change.
“Those troughs are not in sight, in our view,” they said.
“Markets have become more pessimistic about the banking sector in
particular. I think that people are afraid of large-scale nationalizations.
That’s been one of the main drivers of the market,” noted Stephen Dowds,
head of international equities at the Northern Trust.
“With economies around the world still producing grim data on an almost
daily basis and stock markets having to continually revise expectations
downwards, this particular bear market appears to be still in full flow,”
said One Financial.
U.S. stock futures are higher Tuesday, after markets tumbled in choppy trade
to 12-year lows Monday amid worries over a deepening recession and more
unsettling news in the financial sector.
“Despite a rebound by financial stocks and a batch of merger news, the stock
market was unable to put together a sustainable advance,” said Briefing.com
analysts.
Fred Dickson at DA Davidson said that “the biggest problem remains turmoil
in the financial system even after massive multi-trillion dollar cash
injections by the Fed (Federal Reserve) and global banking authorities.”
Investment guru Warren Buffett said the economy has “fallen off a cliff” and
could take five years to recover.
“I’ve never seen Americans more fearful,” said Buffett, one of the world’s
richest men, in a CNBC television interview. “It takes five minutes to
become fearful, much more time to regain confidence. The system does not
work without confidence.”
Asian shares are mostly a bit higher Tuesday and holding up fairly well
given another fall on Wall Street, with financial stocks getting some
respite from recent heavy selling as their U.S. counterparts bounced.
Trade, though, was cautious and choppy, with a light data and event slate
for the week. “There’s a complete lack of interest. People are sort of
caught in the headlights at the moment, not knowing which way to jump,” said
ABN AMRO head of Sydney sales trading Justin Gallagher.
“It is day 19 in the ’selling stampede’ and such stampedes rarely go more
than 25 sessions before exhausting themselves on the downside,” said Raymond
James & Associates analyst Jeffrey D. Saut. “We continue to think the nadir
is near. The real question will be, ‘is it a bear market rally, or something
more?’”

FOREX:
======

The euro is gaining against the dollar and yen as sentiment swings again
toward a bit of risk-taking, with stock markets finding some footing.
Dealers report resistance to sales of euros because short-term charts seem
to be turning positive. In addition, dealers are citing a building opinion
that stock markets could enter a bear market rally soon.

BONDS:
=====

European government bond prices may test lower Tuesday, after markets fell
Monday.
“Long-end futures are to retrace lower Tuesday and short-end interest rate
futures may well continue to do so as well,” according to Axel Rudolph, Dow
Jones Newswires technician.
Market attention turns to this week’s supply calendar. Austria taps EUR1.65
billion of its 5-year 3.4% 2014 RAGB Tuesday, while the Netherlands sells up
to EUR3 billion of the 2.5% 2012 DSL. Germany auctions EUR8 billion of new
2-year Schatz on Wednesday.
Analysts at UniCredit note that EUR15 billion of redemptions from Germany
“should be supportive” for the market.
Euro-zone finance ministers Monday rejected U.S. calls for further fiscal
stimulus plans, setting the stage for sharp divisions when leaders from the
Group of 20 meet in London on April 2.
“We wouldn’t want to give the impression that we were considering
implementing further recovery packages,” Jean-Claude Juncker, Luxembourg’s
prime minister and finance minister, told a press conference after a regular
monthly meeting of euro-zone finance chiefs. “Europe has done what it needed
to do.” Juncker chairs this gathering, known as the Eurogroup.
Sentiment in the housing market in England and Wales deteriorated further in
February with average sales per surveyor dwindling to their lowest level
since records began more than three decades ago, the Royal Institution of
Chartered Surveyors said Tuesday
U.S. Treasury prices are lower Tuesday with more supply on tap, after
markets ended higher on Monday with the revival of risk aversion yet again.
“The story is becoming long in the tooth – weakening economic data are
balanced by massive supply,” said strategists at RBS Greenwich Capital.
On Tuesday, $34 billion in 3-year notes will be offered, followed by $18
billion in 10-year debt up for a sale Wednesday and an auction of $11
billion in 30-year bonds (UST30Y) Thursday.
Credit Suisse, one of the 17 primary government security dealers required to
bid at auctions, expects the Treasury to auction $450 billion in the quarter
that ends this month, surging up from $175 billion in the year-ago period.
Japanese government bond futures Tuesday found some sellers with the March
contract down 0.26 at 138.48 points and the 10-year cash yield up half a
basis point at 1.3%.
“I think we basically lack fresh news and activity is limited ahead of the
fiscal year-end this month,” in Japan, said Mitsubishi UFJ Securities
strategist Naomi Hasegawa.
China’s consumer price index dropped 1.6% in February from the year-earlier
period, taking the economy into a deflationary zone, according to official
data released Tuesday,

ENERGY:
=======

Oil prices are extending gains Tuesday amid expectations that OPEC will cut
output further this weekend, analysts said.
New York’s main futures contract, light sweet crude for delivery in April,
rose 21 cents to $47.28 a barrel. The contract hit a two-month high of
$48.83 in intra-day trade Monday.
Brent North Sea crude for April climbed 22 cents to $44.35.
“Crude oil prices may be dictated by noise of further production cuts from
OPEC nations this week, ahead of the meeting at the weekend, which might
push oil prices toward $50 per barrel,” said an analyst at Bloomberg.
The Organization of the Petroleum Exporting Countries (OPEC), which pumps
40% of the world’s oil, is due to meet Sunday in Vienna and Libya’s envoy to
the group said that output cuts were a possibility.
“I will not say that we are going to cut but I will not exclude it. All
options are open,” they said.
“We will evaluate the world situation of the (crude) stocks, the price
movement, the interpretation of the different countries … and then we can
take a decision. But we don’t have a decision at this time.”

COMMODITIES:
======

Spot gold fell $4.30 from New York levels to $917.20 a troy ounce. “Stock
markets are rising and falling at the drop of a hat. Gold is getting pushed
around by the dollar, and ETFs are reflecting poorer investor interest in
the market,” said Investec head of trading Darren Heathcote.
LME three-month copper added $24 from London levels, to $3,624 a metric ton.
The LME copper market is experiencing a bear rally that is unlikely to last,
said ANZ commodity strategist Mark Pervan.

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