Market Internals Update at 12:00ET

***Economic Data***

– (RU) Russia Feb Reserve Fund: $26.1B v $26.0B prior; Wellbeing Fund: $90.9B v $90.2B prior
– (US) ICSC/GS weekly chain store sales w/e Feb 26th: -0.5% w/w; +3.3% y/y
– (CZ) Czech Budget Balance (CZK): -22.9B v +10.6B prior
– (BR) Brazil Feb PMI Manufacturing: 54.6 v 53.1 prior
– (SI) Singapore Feb Purchasing Managers Index: 52.3v 50.0e; Electronics Sector Index: 52.6 v 50.5e
– (US) Redbook Retail Sales w/e Feb 26th: +2.6% y/y; MTD: +1.6% v Jan
– (BR) Brazil Feb Trade Balance: $1.2B v $1.8Be; Exports $16.7B v $17.1Be; Imports: $15.5B v $15.3Be
– (CA) Bank of Canada leaves interest rate unchanged at 1.00%; As Expected
– (US) Jan Construction Spending M/M: -0.7% v -0.4%e
– (US) Feb ISM Manufacturing: 61.4v 61.0e; Prices Paid: 82.0v 83.0e
– (MX) Mexico Jan Remittances: $1.4B v $1.6Be

– Oil prices were lower heading into the US session and European equity markets were in positive territory thanks to some mildly positive inflation and employment data and no new developments in the volatile Middle East situation. Then rumors made the rounds that Saudi tanks were headed to Bahrain, sending front-month WTI crude back above $98 and shaking confidence. Later reports denied the Saudis were doing anything of the sort, however US equity indices fell into negative territory in the first hour of trading. The Feb ISM Manufacturing report met expectations and came just short of hitting a 27-year high. The index is now near the highs seen in May 2004, near the peak of the last economic cycle. In testimony before the Senate, Fed Chairman Bernanke warned that a sustained rise in oil and commodity prices could damage the economic recovery, while also dismissing fears of near-term inflation. Treasury Sec Geithner is before the House Financial Services Committee discussing the administration’s GSE reform plan. Geithner warned that under any proposal for reforming Fannie and Freddie, the cost of mortgages will be higher. Treasury yields have been backing up for much of the session, though some buying was seen following the initial Saudi tank headlines and the release of Bernanke’s testimony. The benchmark 10-year note is down more than a quarter of a point pushing the yield back above 3.45%.

– In its annual report, Fifth Third said the SEC has subpoenaed information on commercial loan accounting and reporting matters. Shares of FITB are down nearly 7% on the news, while other regional banks are down in line with broader markets. Menthol king Lorillard gained nearly 6% after materials prepared for an upcoming FDA tobacco committee meeting stated there was insufficient evidence on whether menthol smoking creates a different risk than non menthol smoking. Las Vegas Sands disclosed that it received a subpoena related to violations of the foreign corrupt practices act. The firm didn’t disclose much more on the matter, and shares of LVS are down 4%. In earnings, AutoZone gained 25 on a relatively strong Q2 report. Fresh Del Monte fell 8% after widely missing earnings and revenue expectations in its fourth quarter. In deal news, shareholders of J. Crew Group approved a buyout by the TPG/Leonard Green consortium at $43.50 a share.

– There was choppy price action in FX trading as Middle East tensions drove sentiment. EUR/USD continued to probe critical resistance at 1.3862 as dealers discussed a think tank report that which forecasted that the ECB would ramp up its language and warn of heightened inflation risks with an extended hump in CPI. Then the Russian Central Bank (CBR) widened the ruble trading band to 5 from 4 against the USD. Recall that last week dealers were saying that recent dollar softness might prompt the CBR to again take measures to slow the trend as the USD/RUB pair threatened the 29.00 level. The Canadian Central Bank left rates unchanged at 1.00% (as expected) and reiterated that future decisions must be carefully considered.

***Looking Ahead***

– 11:00 (US) Fed to purchase $1.5-2.5B in Notes/Bonds
– 11:30 (US) Treasury to sell 4-Week Bills
– 11:30 (EU) EU’s De Gucht Speaks at Brussels Think Tank
– 12:00 (EU) Erdogan Opens Turkey’s New EU Mission in Brussels
– 12:00 (IT) Italy Feb New Car Registrations Y/Y: No est v -20.7% prior
– 13:00 (IT) Italy Feb Budget Balance: No est v -€2.0B; Budget Balance YTD: No est v -€2.0B prior
– 16:30 (US) API Energy Inventories
– 17:00 (US) Feb Domestic Vehicle Sales: 9.70Me v 9.59M prior; Total Vehicle Sales: 12.67Me v 12.54M prior
– 23:15 (IN) Trade ministers of Asean nations and India inaugurate fair

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