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10Mar2016 Pre-Market Commentary: ECB Cuts Rates, Euro Falls, US Dollar Rises, WTI Crude Prices About To Climb Higher, US Futures Climb Past 1%, Markets To Open Sharply Higher

Written by Gary

U.S. stock future indexes jumped to 1.0% after ECB cut its key refi rate to zero from 0.05% and cut its deposit rate to a negative 0.40%. Chinese stocks fell 2% overnight as investors interpreted data showing consumer inflation rising faster than forecast as being largely negative. Saudi Arabia is seeking a bank loan of between $6B-$8B, to help plug a record budget shortfall caused by low oil prices. WTI crude is still pecking away at its resistance (~38.33).

Here is the current market situation from CNN Money

European markets are broadly higher today with shares in France leading the region. The CAC 40 is up 2.54% while Germany's DAX is up 2.44% and London's FTSE 100 is up 0.62%.

What Is Moving the Markets

Here are the headlines moving the markets.

ECB cuts rates, increases assets buys more than expected

FRANKFURT (Reuters) - The European Central Bank cut all three of its interest rates and expanded its asset-buying program on Thursday, delivering a bigger-than-expected cocktail of actions to boost the economy and stop ultra low inflation becoming entrenched.

Futures rise sharply after ECB cuts rates

(Reuters) - U.S. stock index futures rose sharply on Thursday after the European Central Bank cut key interest rates to boost the euro zone economy.

Discount retailer Dollar General same-store sales beat estimates

(Reuters) - Discount retailer Dollar General Corp reported a higher-than-expected growth in quarterly sales at established stores as demand increased for items such as candy and snacks, perishables, tobacco and food.

Krispy Kreme UK eyes London debut: Sky News

(Reuters) - The owner of Krispy Kreme's British operations is planning a London flotation for the maker of glazed doughnuts, Sky News reported on Thursday.

Twitter doles out stock, cash bonuses to retain talent: WSJ

(Reuters) - Twitter Inc has been sweetening employee compensation packages to retain talent as the company's user growth stalls and it stock price slides, the Wall Street Journal reported.

Exclusive: China to ease commercial banks' bad debt burden via equity swaps - sources

(Reuters) - China's central bank is preparing regulations that would allow commercial lenders to swap non-performing loans of companies for stakes in those firms, two people with direct knowledge of the new policy told Reuters.

Oil prices ease off multi-month highs

LONDON (Reuters) - Oil prices dipped on Thursday, after hitting three-month highs this week, with analysts warning that larger gains would be unwarranted as refineries enter seasonal maintenance and a global glut weighs.

In Houston, oil workers may face the ax but employment still grows

BAYTOWN, Texas (Reuters) - Plunging energy prices robbed the Texas economy of an estimated 60,000 jobs last year, as oil and gas companies put the brakes on production and slashed investment, throwing engineers and geologists out of work.

Deutsche Boerse to sell ISE options exchange to Nasdaq

NEW YORK/FRANKFURT (Reuters) - Deutsche Boerse is selling U.S. options exchange operator International Securities Exchange for $1.1 billion to Nasdaq , potentially strengthening its hand in a proposed merger with London Stock Exchange (LSE).

Bunds, Euro Tumble As Super Mario Sends Stocks, Credit Soaring

"Whatever it takes" has morphed to "throw everything at it and pray." In a bigger-than-expected bazooka, Mario Draghi sent EURUSD tumbling, Bund yields rising, and stock prices surging (along with considerable bond spread compression). Bank stocks are limit up in various regions but the real question is - what happens if this "doesn't work"?

EUR tumbles (but only to one week lows)

Despite the uber QE, Bunds are disappointed with only a 10bps cut...

DAX is surging...

Bank stocks are soaring (led by limit-up moves in Italy)

Credit spreads are collapsing...

And of course, US ...

Draghi Delivers The Bazooka: ECB Announces Surprise Refi, Marginal Rate Cuts; Boosts QE To ‚¬80BN, Adds IG Bonds

Well, the people wanted a "bazooka-sized" surprise from Draghi, and they got it.

Moments ago the ECB announced not only a 10 bps cut to the deposit rate expected pushing it to -40%, but also announced a 5 bp rate cut to the refinance (pushing it to 0.00%) and the marginal lending rate (now at 0.25%), and also boosted QE by ‚¬20bn to ‚¬80 billion per month, the addition of afour new targeted TLTROs each with a maturity of 4 years, but the most surprising announcement was that the ECB would also for the first time include investment grade euro-denominated bonds issued by non-bank corporations along the list of assets that are eligible for regular purchases.

In other words, Draghi finally delivered his bazooka.

Full announcement:

Monetary policy decisions

At today's meeting the Governing Council of the ECB took the following monetary policy decisions:

(1) The interest rate on the main refinancing operations of the Eurosystem will be decreased by 5 basis points to 0.00%, starting from the operation to be settled on 16 March 2016.

(2) The interest rate on the marginal lending facility will be decreased by 5 basis points to 0.25%, with effect from 16 March 2016.

(3) The interest rate on the deposit facility will be decreased by 10 basis points to -0.40%, with effect from 16 March 2016.

(4) The monthly purchases under the asset purchase programme will be expanded to ‚¬80 billion starting in April.

(5) Investment grade euro-denominated bonds issued by non-bank corporations established in the euro area will be included in the list of assets that are eligible for regular purchases.

(6) A new ser ...

For Deutsche Bank This Is "The Most Challenging Central Bank Meeting In Living Memory"

For Deutsche Bank's Jim Reid, there is - to put it mildly - a lot riding on what the ECB announces in just about 10 mintues. Recall it was DB just a month ago when, with its stock plunging to near record lows, the bank issued an appeal to the ECB: "Stop Easing, You Are Crushing Us." As it later turned out, all Deutsche did not want is more negative rates, and was perfectly ok with more QE or a two-tier system, but more NIRP by Draghi seems unavoidable. Which is why as Reid asks, "is today's the most challenging central bank meeting in living memory."

From Deutsche Bank's Early Morning Reid

Is today's the most challenging central bank meeting in living memory? The reason we say this is that up until now virtually all meetings have rested on will they or won't they ease and if they do by how much? Even in a crisis central banks have generally been able to get bang for their buck by easing more than expected. However there seems to be more at stake for today's ECB get-together. It's the type of easing that matters. Easing in standard post-GFC manner (i.e. further rate cuts and more QE) may not meet expectations. To beat expectations they may need to find some way of easing credit conditions for banks. However as markets have recovered in recent weeks and with the ECB reluctant to be seen to be writing a cheque to the banks it's an incredibly difficult meeting to call for economists and strategists or get right for the ECB.

DB thinks we'll see a two-tier system producing a cumulative fall in the Eonia rate of about 10bps. Note that this implies a much larger cut on the rate attached to the lowest tier. Secondly new TLTRO auctions until the end of 2017 is expected. To further incentivise lending the ECB could decide to introduce a dedicated negative refi rate only for the TL ...

Frontrunning: March 10

Pressure Is on Mario Draghi to Show ECB Has Tools to Boost Low Inflation (WSJ)

Euro dips as ECB sets sights on deeper negative rates (Reuters)

Ohio's 'dirty little secret': blue-collar Democrats for Trump (Reuters)

Irish Economy Expanded 7.8% in 2015, Fastest Pace Since 2000 (BBG)

Too Many Boats for Too Little Cargo Leaves Shippers High and Dry (BBG)

Abe pledges to boost tourism in tsunami-ravaged region, maintains nuclear policy stance (Xinhua)

Amazon Finds Air Freight Partner (WSJ)

Obama committed to Pacific trade deal, even as opposition spreads (Reuters)

Dividend Cuts Show Pain of Cheap Oil in Emerging Markets (BBG)

Norway's Big Bet on London Property (BBG)

At least five killed, several hurt in shooting near Pittsburgh (Reuters)

Men's Wearhouse ...

ECB Cuts Main Rates, Expands Asset Purchases

The European Central Bank announced a package of six measures to revive inflationary pressure in Europe, cutting all of its key interest rates and increasing its monthly bond purchases under its asset-buying program.

Stocks Extend Gains, Euro Slides After ECB Cuts Rates

Stocks gained and the euro fell against the dollar Thursday after the European Central Bank announced additional stimulus measures to boost sagging eurozone inflation.

Tracking the Mortgage-Crisis Settlements

The largest U.S. banks paid fines totaling about $110 billion for their role in inflating a mortgage bubble that helped cause the financial crisis. Who got that money? A Journal analysis.

05 March 2016 Initial Unemployment Claims Rolling Average Again Improves.

Weekly Initial Unemployment Claims

The market expected (from Bloomberg) were 270,000 to 278,000 (consensus 272,000), and the Department of Labor reported 259,000 new claims. The more important (because of the volatility in the weekly reported claims and seasonality errors in adjusting the data) 4 week moving average moved from 270,000 (reported last week as 270,250) to 267,500. The rolling averages generally have been equal to or under 300,000 since August 2014.

Economic Report: Jobless claims fall to 5-month low of 259,000

The number of Americans who applied for unemployment benefits in early March fell by 18,000 to a five-month low of 259,000, reflecting the low rate of layoffs in an economy growing steadily if not spectacularly.

Currencies: Euro slides as ECB delivers bold stimulus package

The euro drives sharply lower against other major currencies on Thursday, as investors stay cautious ahead of the closely watched European Central Bank meeting.

Europe Markets: European stocks rally, euro slammed as ECB ramps up fight against deflation

European stocks surged while the euro is being shoved down after the European Central Bank went beyond expectations for adding more stimulus for the eurozone economy.

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