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[PODCAST] EU Open Rundown 29th October 2019

  • Asian equity markets trade mostly higher as the region just about took impetus from Wall St where the S&P 500 and NASDAQ 100 notched record highs
  • USTR office is to consider extensions of certain tariff exclusions on USD 34bln of Chinese goods from November 1st
  • UK lawmakers rejected PM Johnson's request for an early election with 299 MP's voting in favour, short of the two-thirds (434) majority needed
  • UK PM Johnson will now give notice of a short bill (requires a simple majority but can be subject to amendments) for an election on December 12th
  • Looking ahead, highlights include US Consumer Confidence & Pending Home Sales, BoE's Carney
  • Earnings: Pfizer, Amgen, AMD, Mastercard, BP, Fresenius SE, Fresenius Medical

ASIA-PAC

Asian equity markets trade mostly higher as the region just about took impetus from Wall St where the S&P 500 and NASDAQ 100 notched record highs after US-China trade optimism was further fuelled by comments from US President Trump that suggested a signing of the phase 1 deal could be ahead of schedule. ASX 200 (+0.1%) was lifted at the open although some of the gains were later faded amid losses in commodity stocks due to lower oil prices and after the precious metal gave up the USD 1500/oz level, while Nikkei 225 (+0.4%) briefly reclaimed the 23000 milestone for the first time in over a year as it benefitted from a more favourable currency. Conversely, Hang Seng (-0.5%) and Shanghai Comp. (-0.6%) were the laggards despite the current backdrop of heightened trade optimism, as participants digested a slew of earnings and after the PBoC refrained from liquidity operations which resulted to a substantial CNY 250bln liquidity drain. Finally, 10yr JGBs tracked the losses in T-notes amid gains in stocks and with the Japanese benchmark at a yearly high, although some of the losses were recouped following a predominantly stronger than previous 2yr JGB auction results.

PBoC skipped open market operations for a net daily drain of CNY 250bln. (Newswires)

PBoC set CNY mid-point at 7.0617 vs. Exp. 7.0604 (Prev. 7.0762)

USTR office is to consider extensions of certain tariff exclusions on USD 34bln of Chinese goods from November 1st, while it added the exclusions on certain tariffs are set to expire on December 28th and an extension would be for a year. (Newswires)

US FCC will vote in November to prohibit companies from using government programme funds to purchase equipment from companies deemed as a national security risk, while reports added the FCC will designate Huawei and ZTE as such companies which would give them 30 days to contest the designation. (Newswires) Tokyo CPI (Oct) Y/Y 0.4% vs. Exp. 0.7% (Prev. 0.4%). (Newswires) Tokyo CPI Ex. Fresh Food (Oct) Y/Y 0.5% vs. Exp. 0.7% (Prev. 0.6%) Tokyo CPI Ex. Fresh Food & Energy (Oct) Y/Y 0.7% vs. Exp. 0.7% (Prev. 0.5%)

UK/EU

UK PM Johnson said in a letter to EU Council President that the UK has accepted the EU's extension offer (as mandated by the Benn Act) and expressed that it is against his wishes. (Newswires)

UK lawmakers rejected PM Johnson's request for an early election with 299 MP's voting in favour, short of the two-thirds (434) majority needed. Following the defeat, UK PM Johnson said we will not allow this paralysis to continue and will give notice of a short bill (requires a simple majority but can be subject to amendments) for an election on December 12th, while the government confirmed it will not try again to bring the WAB back and that it did not agree on the Liberal Democrats date on the 9th as they are not sure they can get the bill through in time. (Newswires/BBC) Liberal Democrat Leader Swinson said the reason for seeking a December 9th election is to ensure Brexiteers have no time to push through the Brexit deal; adding, even if PM Johnson gave assurances not to reintroduce the WAB during the election bill period she would not trust this. (BBC/Newswires) BBC political correspondent Nick Eardley tweeted that he is hearing the government will attempt to force election bill through various commons stages today. (Twitter/BBC) 

FX

DXY was flat and stuck to within the thin range from the prior US session with a non-committal tone seen as we approach closer to this week’s blockbuster risk events stateside, while its major counterparts were also uneventful in which EUR/USD treaded water around 1.1100 and with GBP/USD partially reversed some of the support from the EU’s approval of the 3-month Brexit “flextension”. USD/JPY and JPY-crosses held on to recent gains amid the mostly positive risk tone and after softer than expected Tokyo inflation despite this month’s sales tax increase, while antipodeans were firmer as they benefit from their high-beta properties and after the PBoC strengthened the CNY reference rate setting.

New Zealand Treasury sees risk of S&P removing positive Outlook on its rating following increased social spending in recent “Wellbeing Budget”. (Newswires) COMMODITIES

Commodities were subdued in which WTI crude futures languished firmly below the USD 56.00/bbl level after the prior day’s losses where oil prices failed to benefit from the heightened trade optimism and instead gave back some of its recent gains on book squaring heading into month end and expiry of Brent Dec. 2019 options yesterday, while focus now shifts to the inventory reports beginning with APIs later where a narrow build in crude stockpiles of 0.7mln bbls is anticipated. Elsewhere, gold traded lacklustre after its retreat below the USD 1500/oz with the looming FOMC restricting price action, and copper also reflected the despondent tone across the complex, as well as the underperformance in China.

Saudi Energy Minister Prince Abdulaziz bin Salman and Nigeria Energy Minister Sylva discussed oil markets and joint cooperation between the OPEC+ members to maintain market stability. (Newswires)

GEOPOLITICS

Israeli military increased its readiness and adjusted air defences in preparation for a potential Iranian cruise missile or suicide drone attack. (ELINT News)

US The pick-up in risk appetite saw rates continue to backup to start the week. The TPLEX trundled lower throughout the European session and remained at lows in the US session whilst participants pushed US equity bourses to new ATHs. The US Treasury announced it expects to issue USD 352bln (Prior estimate 381bln) in net marketable debt in Q4 19, and USD 389bln in Q1 20, saying it borrowed USD 440bln in Q3 19. By settlement the curve had mainly bear steepened, with both 2s10s and 2s30s 2.5bps wider, with the 2-year yield up by 2bps. US T-note (z9) settled 12 ticks lower at 129-05.

US House Speaker Pelosi announced in a letter to Democrats that the House will vote to formalize the procedures related to impeachment inquiry of President Trump. (FT)

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