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[PODCAST] EU Open Rundown 24th October 2019

  • Asian equity markets traded mixed after having failed to fully sustain the positive lead from Wall St with global markets heavily focused on earnings releases
  • UK PM Johnson reportedly faces increasing revolt from within his party over the threat of holding an election before delivering the Brexit
  • EU Diplomats are to discuss the UK's extension on Friday and say that an extension until 31 January is most likely
  • US President Trump said Turkey told the US that they will make the ceasefire permanent and the US will remove all sanctions on Turkey
  • Looking ahead, highlights include Eurozone Markit PMIs, US Durables, Initial Jobless Claims and Markit PMIs, ECB, Norges Bank, Riksbank and CBRT policy decisions, ECB’s Draghi, Riksbank’s Ingves and Jansson, US 7yr supply
  • Earnings: Amazon, American Airlines, ComCast, Southwest Airlines, Raytheon, Intel, 3M, Visa, T-Mobile, Twitter, Xcel Energy, Roper Tech, Danaher, Gilead, Daimler, STMicroelectronics, BASF, Puma, Eni, Saipem, Nokia, Dassault Systemes, Boliden, Christian Dior, Scor, Equinor, AstraZeneca

ASIA-PAC

Asian equity markets traded mixed after having failed to fully sustain the positive lead from Wall St with global markets heavily focused on earnings releases. ASX 200 (+0.3%) and Nikkei 225 (+0.7%) were positive in which energy led the advances in Australia and with participants also engrossed in corporate updates, while sentiment in Tokyo was propped up by recent currency weakness and with double-digit percentage gains seen in Japan Display after Apple further extended an olive branch for the troubled screen manufacturer through shorter payment terms. Hang Seng (+0.5%) and Shanghai Comp. (-0.2%) were mixed after the PBoC continued with its liquidity efforts albeit at a reduced amount and with China dismissing reports of replacing Hong Kong Chief Executive Lam as political rumours, while the KOSPI (flat) underperformed its regional peers for a bulk of the session following a miss on Q3 GDP. Finally, 10yr JGBs were flat as they took their cue from the lacklustre trade in T-notes, with demand restricted by the upbeat risk sentiment Japanese stocks and following mixed results at the 20yr JGB auction.

PBoC injected CNY 60bln via 7-day reverse repos for a net daily injection of CNY 60bln. (Newswires) PBoC set CNY mid-point at 7.0727 vs. Exp. 7.0701 (Prev. 7.0752)

South Korea GDP (Q3) Q/Q 0.4% vs. Exp. 0.5% (Prev. 1.0%). (Newswires) South Korea GDP (Q3) Y/Y 2.0% vs. Exp. 2.1% (Prev. 2.0%)

UK/EU

UK PM Johnson reportedly faces increasing revolt from within his party over the threat of holding an election before delivering the Brexit. (The Sun) Opposition leader Corbyn has been urged to prevent an election until Spring 2020, as Labour claimed yesterday it could not trust PM Johnson over the date of a poll. (Telegraph)

EU Diplomats are to discuss the UK's extension on Friday and say that an extension until 31 January is most likely, while it was separately reported that EU27 are in favour of a written procedure, meaning no emergency meeting although France and some others still prefer a short extension. EU's Verhofstadt said the Steering Group is of the opinion that a flextension, not going beyond the 31st January, is the only way forward. (Newswires/BuzzFeed) French President Macron is reportedly demanding a new Brexit deadline of 15th November, while a UK lawmaker source said PM Johnson told MPs that he had asked French President Macron to block the extension request. (Telegraph/BBC)

UK Chancellor Javid suggested that he could name BoE Governor Carney’s successor prior to holding a snap election. (Times)

UK retailers shed 85k jobs in the past year as weak consumer demand, increasing costs and switch to online shopping has added to the pressures for business. (Guardian) ECB said they have no objection to the appointment of Italy's Panetta to the Governing Council who once appointed, will succeed ECB's Coeure. (Newswires)

FX

DXY was subdued and trickled to a sub-97.50 level amid mild strength in its major counterparts in which EUR/USD maintained recent gains ahead of today’s ECB where President Draghi is unlikely to provide any fireworks in his last hurrah at the helm of the central bank. GBP/USD was also slightly firmer and reclaimed the 1.2900 handle as prospects of a no-deal Brexit continued to shrink with EU diplomats set to discuss the extension on Friday and a delay until January 31st seen as the most likely outcome. Elsewhere, USD/JPY mildly retraced some of yesterday’s advances but with the pullback limited by the positive risk tone and antipodeans were mixed as the recent upside in commodities provided a floor for AUD/USD, while NZD/USD underperformed and tested 0.6400 to the downside where there is a mid-size option expiry for today’s New York cut.

COMMODITIES

Commodities were uneventful with a mild pullback seen in WTI crude futures as the advances following a surprise draw in EIA crude stockpiles, was eventually stalled by resistance at the USD 56.00/bbl level and as Asia markets failed to fully sustain the optimism from US. Elsewhere, gold prices were steady with a subdued greenback keeping prices afloat, while copper was off yesterday’s best levels but with downside limited amid the mixed risk tone and early strength in Chinese commodity prices.

GEOPOLITICS

 

US President Trump said Turkey told the US that they will make the ceasefire permanent and the US will remove all sanctions on Turkey, unless something happens that the US is not happy with. (Newswires)

North Korea said its leader Kim and US President Trump continue to have close relations and trust, but added contrary to Trump, US political circles remain hostile to North Korea and noted it will see how wisely US will pass end of the year. (KCNA)

US

T-Notes failed to show any conviction on either side throughout Wednesday trade despite the US 5-year auction appearing solid as it stopped through 0.4bps with a B/C of 2.41, higher than the 6-auction average of 2.37x. Indirect’s took a large portion of 65.7%, above the average 58%. Directs took 11.5% lower than the average take of 16.7%, which left dealers taking a rather small 22.8% in comparison to the 25.3% 6-auction average. At settlement yields were fractionally lower. US T-note (Z9) settled 1+ ticks higher at 129.27+.

NY Fed increased the amount offered in its overnight repo-operations to at least USD 120bln from USD 75bln starting Thursday and the term repos on the 24th and 29th will be at least USD 45bln. (Newswires)

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