US Market Update

***Economic Data***

– (CL) Chile Feb Trade Balance: $1.2B v $1.4Be
– (CL) Chile Feb Copper Exports: $3.2B v $3.7B prior
– (CL) Chile Jan Economic Activity Y/Y: 5.8% v 5.9%e
– (PD) Poland Feb Total Official Reserves: $ 103.6Bv 95.7B prior
– (CA) Canada Jan Building Permits M/M: -5.1% v +0.5%e

– Further turmoil in Libya and sustained high oil prices is holding back equities again this morning. Front-month WTI crude is down from pre-market levels, but still above $105. Spot gold is not far from all-time highs, around $1,440. There were unconfirmed reports from an Arab press source that Gaddafi had begun negotiations with rebels to step down and leave the country, although US officials note the reports are not very credible. In the US Fed hawk Fisher said that he may vote to halt further bond purchases before the June deadline. Non-voter Lockhart said he would be very cautious about extending QE2 beyond June, although he also mentioned that the Fed would consider more easing if oil prices strongly impacted the US economy. Treasury prices opened lower but have pared back losses as equity markets have declined led by the NASDAQ. The US benchmark 10-year yield remains near 3.5%.

– Western Digital agreed to buy Hitachi Ltd’s hard disk drive operations for about $4.3B in cash and stock. Hitachi had been looking for a US listing for its drive unit, which was the third largest player in the industry behind Western Digital and market leader Seagate. Shares of WDC are up more than 16% on the news, while STX is up more than 12%. In other deal news, Accuray said it will acquire TomoTherapy, a smaller rival in the radiation therapy system market, for about $277M in a cash and stock deal. Share of CIENA Corp are down more than 6% after the company guided revenue for its Q2 below consensus, despite better-than expected results in its Q1.

– The dollar has come off its worst levels of the session with some dealers noting that EUR/USD might be vulnerable to correction due to recent over positioning in a quiet market. EUR/USD dipped back below the 1.40 handle after testing fresh four-month highs at 1.4036 earlier today.

***Looking Ahead***

– 11:00 (HU) Hungary Feb YTD Budget Balance (HUF): No est v -122.8B prior
– 11:00 (US) Fed to purchase $5-7B in Notes/Bonds
– 11:30 (US) Treasury to sell 3-Month and 6-month Bills
– 12:00 (EU) MEPs vote on short-selling law in Strasbourg
– 15:00 (US) Jan Consumer Credit: $3.4Be v $6.1B prior
– 18:50 (JP) Japan Jan Trade Balance: -¥371.8Be v+ ¥768.8B prior; Current Account: ¥470.0Be v ¥1.2T prior

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