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[PODCAST] US Open Rundown 24th September 2019

  • UK Supreme Court deem PM Johnson’s parliament suspension as unlawful, GBP and Gilt whipsawed
  • EU Court rules that Alphabet's Google (GOOG) does not have to apply the right to be forgotten globally
  • US President Trump said he will discuss Iran in his UN speech today at 10:15ET
  • Looking ahead, highlights include US Consumer Confidence, New Zealand Trade, UN General Assembly begins, ECB’s de Guindos, Norges Bank’s Matsen and BoE’s Carney. Supply from the US

ASIA-PAC

Asian equity markets traded indecisively following a similar close on Wall St where the major indices spent the day steadily recouping the opening losses brought on by weak Eurozone PMI data. ASX 200 (U/C) was choppy as outperformance in gold stocks and resilience in financials were counterbalanced by losses across the broader market, while Nikkei 225 (+0.1%) remained afloat on return from the extended weekend but with gains capped by a choppy currency and as officials scrambled to finalize a US-Japan trade deal amid uncertainty regarding auto tariffs. Elsewhere, Hang Seng (+0.2%) and Shanghai Comp. (+0.3%) traded positively after continued PBoC liquidity efforts and as the central bank suggested there was still ample monetary policy tools, although advances were initially limited by the trade-related overhang as participants mulled over the recent ebbs and flows of the US-China trade saga ahead of next month’s high level talks. Finally, 10yr JGBs gained on return from the holiday closure amid the recent temperamental US-China trade headlines and indecisive risk tone in the region, while the BoJ were also present in the market today for JPY 810bln of JGBs in the belly to the short-end.

PBoC injected CNY 40bln via 14-day reverse repos. (Newswires)

PBoC set CNY mid-point at 7.0729 vs. Exp. 7.0838 (Prev. 7.0734)

PBoC said interest rate levels are appropriate and that China has ample monetary policy tools as well as relatively big policy room. There were also comments from PBoC Governor Yi Gang that China will maintain prudent monetary policy and will not resort to flood-like stimulus, while he added there is in no rush to take big policy easing steps. (Newswires)

China’s Finance Minister Liu Kun said they will adjust policies on tax and fee cuts based on assessments, while he added China is aiming to allocate all local government bond proceeds to projects by end of next month. In related news, China NDRC Vice Chairman Ning stated that China will step up efforts to stabilize growth. (Newswires)

China has given new waivers to several domestic state/private companies for tariff free US soybean purchases. (Newswires)

US Treasury Secretary Mnuchin confirmed the Chinese delegation visit to US farm states was delayed at request of US and stated that China Vice Premier Liu He will visit next week for discussions, although Mnuchin later commented that he thinks talks with China will resume in 2 weeks. However, US Agriculture Secretary Perdue said the US asked China to purchase more than 20mln tonnes of soybeans but noted there were no commitments from China last week and that he did not know why the farm visits were cancelled. (Newswires/Fox Business News)

Japan’s Foreign Minister Motegi said trade deal negotiations with US finished and that he doesn't see much delay from goal of signing deal by end of the month, while a Foreign Ministry spokesman also said there is still have time to agree to a trade deal with US by end of the month. However, earlier reports suggested a deal may be delayed due to a disagreement regarding the auto tariffs and that an agreement will not be ready to sign when Japanese PM Abe meets US President Trump on Wednesday as it is still undergoing legal checks with the sides to sign separate documents confirming a final agreement. (Newswires)

US

House Democrat leaders have reportedly called for a caucus meeting today at 1600ET to discuss questions of impeachment. (Newswires)

GEOPOLITICS

US President Trump said we're getting along well with North Korea and maybe we will be able to make a deal or maybe not. South Korea spy agency said US-North Korea working level talks will take place in 2-3 weeks and a summit is possible by year-end, while it added North Korea’s leader Kim could attend Korea-ASEAN summit in Busan in November. (Newswires)

US President Trump said he will discuss Iran in his UN speech today, while he added the US have a lot of pressure on Iran and that he is not looking for a mediator on Iran – Trump is scheduled to speak at 10:15ET (Newswires)

Iran President Rouhani said our message to the world is peace and stability, although there were earlier comments from a senior official that Iran will never yield to the US and the US should lift sanctions if it wants to reduce tensions. (Newswires)

UK/EU

UK Supreme Court has ruled that the poroguation of parlimanet is a legal matter, and that the poroguation was unlawful. As such, the poroguation is void and it is up to Parliament as to the next step. Subsequently, House of Commons speaker Bercow says the House should reconvene as a matter of urgency and he will therefore be consulting party leaders shortly. (Newswires)

UK PM Johnson has reportedly not ruled out proroguing parliament and has repeated that he will not resign; note, these repors were prior to the Supreme Court decision. (Newswires/Times)

UK Opposition Labour Leader Corbyn won three votes at the Parties annual conference; as such, the Labour Party are now committed to opposing a general election, renegotiating a Brexit deal with the EU and then putting the deal to the public via a referendum. The party will determine whether to support the deal or not after negotiations have concluded. (Newswires/Times)

UK PM Johnson is to tell US and Canadian business leaders that post-Brexit Britain will roll out the red carpet for investors and will take advantage of post-Brexit freedoms including new tax allowances on investment, according to speech extracts. (Newswires)

UK government official said PM Johnson was clear in meeting with EU's Tusk that a Northern Ireland only backstop was not a solution the UK could accept, while the official added we believe we have put forward detailed proposals to get the process moving along and want to see that the EU are ready to engage seriously with the ideas we put forward. (Newswires)

German Ifo Business Climate New (Sep) 94.6 vs. Exp. 94.4 (Prev. 94.3)

- German Ifo Expectations New (Sep) 90.8 vs. Exp. 91.8 (Prev. 91.3)

- German Ifo Curr Conditions New (Sep) 98.5 vs. Exp. 97 (Prev. 97.3; Revised 97.4)

German Economy Minister Altmaier says the growth forces in the German economy have deteriorated but it is not in a recession. (Newswires)

EQUITIES

Major European Bourses (Eurostoxx 50 +0.2%) are modestly firmer, albeit off highs, in tentative trade, following a mixed AsiaPac session. The FTSE 100 is the underperformer, under pressure from sterling strength after the UK Supreme Court ruled UK PM Johnson’s decision to prorogue parliament unlawful and, as such, prorogation voided. While stocks are mostly higher, the more defensive Utilities (+1.0%), Health Care (+0.9%) and Consumer Staples (+0.5%) sectors outperform, indicative of continued apprehension in wake of yesterday’s weak EZ PMI data, although the more risk sensitive IT and Financial are also higher. Materials (-0.5%) and Energy (-0.4%) are the laggards, with the latter pressure by lower crude prices. In terms of individual movers; Aviva (+0.8%) is higher on reports the Co. is looking to sell its Singapore and Vietnam businesses in a deal which could be valued at USD 2.5bln. Ryanair (+2.7%) is up, as the airline sector continues to gain in wake of Thomas Cook’s collapse and with the news that the co.’s cabin crew have voted in favour (approx. 80%) for a four-year Collective Labour Agreement. K+S (-4.3%) is lower after being downgraded at SocGen after the co. cut guidance yesterday, while Royal Mail (-2.8%) is under pressure after a downgrade at Liberum Capital. Finally, Volkswagen (-2.6%) sunk on the news thatGerman Prosecutors had indicted CEO Diess, Chairman Poetsch and the former CEOrelating to the Diesel emissions scandal.

Alphabet's Google (GOOG) does not have to apply the right to be forgotten globally, according to an EU court ruling. (Newswires)

Uber (UBER) - Co. have been granted a two-month operator licence from TFL, reportedly the shortest ever operators licence., LBC's Usherwood. (Twitter)

FX

GBP, EUR - GBP firmer after the UK Supreme Court dealt a blow to UK PM Johnson after it ruled the decision as a court matter before announcing that the suspension was unlawful. With prorogation defeated, UK MPs will return to their seats and the parliamentary session will continue as Speaker John Bercow expectedly stated that the HoC should reconvene immediately. GBP/USD touched an intraday high of 1.2487 ahead of its 21 WMA at 1.2490, although the pair then returned to pre-announced levels of around 1.2450 amid unclarity regarding the next steps alongside some profit taking. It is worth nothing that, with parliament back in session, an anti-no deal majority could continue to frustrate government efforts to find a deal with the EU/try to force a no deal. Meanwhile, the Euro had relatively uninspiring day thus far as EUR/USD remains within a tight 1.0984-97 parameter with little impetus derived from the Ifo measures which mostly topped estimates (ex-expectations), although the institute noted that the outlook for the coming months has deteriorated and the domestic economy is likely to shrink in Q3 and stagnate in Q4, a similar comment mate by IHS yesterday. In terms of option expiries, EUR/USD sees 1.3bln at strike 1.10 and 1.1bln at strike 1.1025-30 for today’s NY cut.

AUD - Governor Lowe has aided the AUD to gain a 0.68+ status after noting that fundamental factors underpinning the longer-term outlook for the Australian economy remain strong and economy has reached a gentle turning point, a comment made at the last speech which signals that the Central Bank could stand pat on at the next meeting on October 1st. The Governor reiterated that the Board is prepared to ease monetary policy further if needed to support sustainable growth in the economy, make further progress towards full employment, and achieve the inflation target over time whilst inflation is expected to pick up, but to remain below the midpoint of the target range for some time to come. AUD/USD immediately spiked higher from 0.6784 to 0.6805 ahead of resistance at 0.6810 before consolidating around the 0.6800 mark.

SEK - The Swedish Crown currently stands as the G10 laggard amid slightly more dovish comments from Riksbank’s Governor Ingves who noted that rates are likely to increase at a “very slow” rate over the period ahead (vs. prior “should be possible to slowly raise rates”) whilst also acknowledging low interest rates and weaker sentiment abroad. First Deputy Governor Jansson added further to the dovish fire by highlighting low Swedish inflation numbers and worrying inflation expectations, whilst adding that he sees no appreciable upside for Swedish prices. EUR/SEK, in wake of the governor’s comments, bounced further from its 100 DMA (10.66) to an intraday high of 10.71 (ahead of resistance at 10.73) before retreating below the 10.70 mark.

EM - The Lira is staging another recovery with strength attributed to media reports that the US is said to make a new offer to Turkey regarding F-35s and Patriots system after the two Presidents’ phone call over the weekend. USD/TRY fell from an intraday high of 5.7208 to a current low of 5.6782 ahead of its 55 and 50 DMAs at 5.6779 and 5.6705 respectively. Later, Turkish President Erdogan will make a speech at the UNGA before meeting with his French counterpart Macron and UK PM Johnson and UN Secretary General Guterres

BoJ’s Kuroda says they will ease without hesitation if there is a chance the economy will lose its momentum towards achieving price target; economy is sustaining momentum towards hitting their price goal. (Newswires)

RBA Governor Lowe says fundamental factors underpinning the longer-term outlook for the Australian economy remain strong, economy has reached a gentle turning point. (Newswires)

FIXED

The fixed income complex is subdued thus far, ahead of further Central Bank speakers and the UNGA. Core European debt is softer this morning, though not excessively so with the Bund trading with a 30 tick range vs. yesterdays +100 tick range. In terms of newsflow this morning saw the Ifo release which was a slightly mixed release and as such did not garner much of a response; comments around the release, while interesting, were largely in-line with yesterday’s IHS comments on the prospect of a Q3 stagnation. Elsewhere, UK debt is the main mover of the day on the Supreme Court’s ruling that the prorogation of parliament was unlawful and as such is void, on this ruling Gilts dropped to a low of 133.12 (-60 ticks) before pairing back most of the move and in fact surpassing pre-announcement levels, as the next steps are very unclear. Following the ruling House of Commons speaker Bercow has stated that the House should convene immediately, and other political parties are capitalising on the opportunity to call for Johnson’s resignation. Looking ahead the session for Gilts will likely remain dominated by the parliamentary back-and-forth, though BoE’s Carney is due to speak late doors for the European session. Stateside, focus will be on the UNGA and Trump’s comments, particularly those pertaining to Iran. Elsewhere, a relatively quiet US session with a few data prints scheduled and the first of this weeks’ supply in the form of USD 40bln 2-year auction.

COMMODITIES

WTI and Brent prices are weaker this morning on a rather tentative session thus far on a lack of specific newsflow for the complex, but notably ahead of the UNGA where US President Trump has stated he is to discuss Iran in his speech. He has also added that the US has lots of pressure on Iran, which does follow from the instigation of sanctions on the Iranian Bank by the US; as such, focus today will be on the remarks from Trump and if there is any reference to further sanctions or the prospect of more forceful action. In terms of scheduling proceedings at the UN are to formally begin at around 13:00BST with President Trump scheduled to arrive at the UN headquarters around 14:30BST. Elsewhere, focus turns to tonight’s API release where expectations are form a 0.6mln/bbl draw; though, ING note that the result may surprise market expectations due to the number of storm related refinery disruptions that have occurred recently. In terms of metals, Gold is little changed hovering around the USD 1520/oz mark within a tight USD 1.0/oz range for the session; ahead of risk factors including the UNGA and a number of Central Bank speakers. Separately, copper prices are overall little changed, retaining their non-committal tone from the Asia-Pac session; though the metal does remain comfortably above the USD 2.62/lb mark.

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