Need To Know News

Top members of Germany’s Social Democrats will push for handing out a payment in the form of a “consumption check” to every adult German, the German newspaper Rheinische Post reports. The one-off payments, designed to spur economic growth, could be as high as EUR 500, the Frankfurter Allgemeine said. High-ranking SPD officials will make their case for the payments at a 5 January meeting with grand coaliton partners the Christian Democrats, the reports said.

US shares rebounded from Monday’s massive sell-off to close sharply higher Tuesday as GE promised to pay its dividend and the FED extended emergency lending. The Dow gained 3.3%. The S&P was up 4%. The Nasdaq added 3.7%. GE jumped 13.6% after saying it would retain its dividend at the current level while paring down its finance ops and axing jobs. Financials surged after the FED announced it would extend three liquidity facilities through April.

Asian shares caught some of the US updraft. The Nikkei gained 1.8%. The ASX added 0.1%. The Hang Seng added 2.1% Qantas rose 6.2% on news it is in merger talks with British Airways.

European shares are expected to open mixed. The European calendar focuses on November services PMI data from Italy, France, Germany and the Eurozone. EZ October retail sales will also be released this morning. The market could take a breather ahead of tomorrow’s BOE and ECB rate decisions.

Risk aversion sent investors back into yen and the greenback. EUR/JPY fell 0.1%. GBP/JPY slipped 0.3%. EUR/USD fell 0.2%. Cable was off 0.4%. USD/CHF added 0.2%. USD/JPY rose 0.1%.

Bonds were mixed. The 10yr Bund future rose 8 ticks to 123.55. The 10yr Bund yield was flat at 3.09%. The 2yr Schatz added 1bp to 2.13%. The 10yr Gilt was off 2bps to 3.47%. The 2yr was steady at 1.79%. The 10yr JGB gained 4bps to 1.39%. The 10yr T-note added 1bp to 2.72%.

Oil took a bid after touching a 42mth low overnight. The Qatari oil minister said OPEC would decided to cut crude output at its meeting later this month. WTI rose 1.2% to $47.52. Brent was up 1.2% to $45.98.

BA, Quantas Talk Merger
FT1 http://www.ft.com/cms/s/0/85ac818a-c072-11dd-9559-000077b07658.html

EU to Loose Restrictions on Government Aid
FT1 http://www.ft.com/cms/s/0/0ec8552a-c05a-11dd-9559-000077b07658.html

US Automakers Want $34bln Bailout
FT1 http://www.ft.com/cms/s/0/2bbfdb18-c0a9-11dd-b0a8-000077b07658.html

Oil Plummets to 42mth Lows
FT http://www.ft.com/cms/s/0/9d41a448-c0b7-11dd-b0a8-000077b07658.html

FED Extends Emergency Lending Program
FT2 http://www.ft.com/cms/s/0/95b3761a-c0a4-11dd-b0a8-000077b07658.html

US Treasury’s Paulson Says China Needs to Shore Up Its Currency
FT http://www.ft.com/cms/s/0/bf5bb77c-c0b1-11dd-b0a8-000077b07658.html

UK Retail Bankers Worry About Indebted Customers
WSJE1 http://online.wsj.com/article/SB122825679091373673.html

European shares moved higher on hopes declining inflation will spur the BOE and ECB to cut rates at their meetings Thursday. The German market, home to Europe’s largest economy, lead with way, with the DAX up 2.5%. The FTSEurofirst 300 rose 1.3%. The FTSE 100 gained 1.6%. The CAC added 1.4%.

EZ October PPI fell -0.8%, providing more ammunition for central bank doves. The economic weakness was evident in a 17.6% decline in German new car registrations last month. The French finance minister said the ECB should do more about interest rates.

The euro moved higher as investors returned to equities in Europe. EUR/USD added 0.3%. EUR/GBP rose 0.8%. EUR/JPY added 0.2%. Cable was down 0.5%. The Aussie reversed its early losses against the greenback, moving 0.4% higher.

Bonds remained strong despite the surge in equities. The 10yr Bund future was up 54 ticks at 123.02. The 10yr Bund yield fell 6bps to 3.11%, a 3yr low. The 10yr Gilt yield plunged 11bps to 3.55%. The 10yr T-note fell 1bp to 2.72% to flirt with record lows as investors piled in on hopes the US government will buy bonds to boost growth.

Oil bounced from lows to traded little changed following a shift away from the dollar. WTI fell 0.1% to $49.17. Brent was up 0.1% at $48.03.

US shares tanked Monday after it was revealed the world’s largest economy has been in recession since December 2007 and FED Chairman Ben Bernanke indicated the downturn could be worsening. The Dow plunged 7.7%. The S&P shed 8.9%. The Nasdaq lost nearly 9%.

The bloodletting continued in Asia, where global economic concerns pounded stocks. The Nikkei fell 6.4%. The ASX lost 4%. The Hang Seng dropped 4.7%

European shares were called sharply lower. The DAX future fell 1%. The CAC future dropped 2.2%. The economic data calendar is light today, with EZ November PPI scheduled for 1000 GMT.

The currency market — with the exception of the Aussie — is taking a breather after the monster vacillations over the past few weeks. AUD/USD was off 0.8%. EUR/JPY was flat. GBP/JPY slipped 0.1%. USD/JPY was steady. EUR/USD rose 0.1%. Cable was little changed.

Bonds surged yet again as investors fled stocks. The 10yr Bund future was up 38 ticks to 122.87. The 10yr Bund yield fell 5bps to 3.12%. The 10yr Gilt was up 2bps to 3.67% after a massive slide Monday. The 10yr JGB fell 5bps to 1.35%. The 10yr T-note ws off 2bps to 2.71%.

Oil fell down a well as renewed growth concerns hurt demand hopes. WTI was off 3.3% to $47.66. Brent lost 3.7% to $46.20.