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[PODCAST] EU Open Rundown 30th October 2019

  • Asian equity markets traded mostly negative after the cautious tone rolled over from Wall St
  • A Chinese Foreign Ministry spokesperson said team members will make continuous and stepped-up efforts on the trade consultation
  • US President Trump’s insistence that China commits to large purchases of US agricultural products has reportedly become a negotiating sticking point
  • UK lawmakers approved the early election bill with 438 votes and 20 against for an election on December 12th
  • Looking ahead, highlights include French GDP (Prelim), German Jobs & CPI (Prelim), US GDP (Advanced), FOMC and BoC Rate Decisions & Press Conferences, ECB's Lautenschlager, supply from Italy and Germany
  • Earnings: Apple, Facebook, General Electric, Bayer, Volkswagen, Total, Deutsche Bank, Iberdrola

ASIA-PAC

Asian equity markets traded mostly negative after the cautious tone rolled over from Wall St, with global sentiment dampened by mixed US-China trade rhetoric and tentativeness ahead of the FOMC. ASX 200 (-0.8%) was dragged by early underperformance in consumer staples amid losses in Woolworths despite reporting stronger revenue figures, while Nikkei 225 (-0.7%) mirrored a lacklustre currency but with declines cushioned by firm Retail Sales data which printed its highest growth since 2014 due to front-loading of purchases before the sales tax hike. Hang Seng (-0.3%) and Shanghai Comp. (-0.4%) conformed to the downbeat tone following an additional CNY 200bln liquidity drain and after a US official triggered doubts on whether the US-China phase 1 deal would be ready in time for the Chile APEC meeting. Finally, 10yr JGBs were higher with prices supported by the risk averse tone and with the BoJ present in the long-end of the market, although upside was limited as the central bank kick-started its 2-day policy meeting.

 

PBoC skipped open market operations for a net daily drain of CNY 200bln. (Newswires)

PBoC set CNY mid-point at 7.0582 vs. Exp. 7.0572 (Prev. 7.0617)

 

US Commerce Department noted there is no estimate to the timing of responses of license requests to sell to Huawei and that requests continue to be in process. (Newswires)

 

US President Trump’s insistence that China commits to large purchases of US agricultural products has reportedly become a negotiating sticking point; an official from a Chinese state-owned Co. states they do not wish to purchase lots of products that they do not need/no demand for. (CNBC)

China envoy to UN said US criticism of Beijing policy regarding Xinjiang region is not helpful for a good solution to trade talks. China Foreign Ministry spokesperson said team members will make continuous and stepped-up efforts on the trade consultations, in response to media questions whether the deal would be signed ahead of schedule. (Newswires/Global Times)

 

BoJ will start lending shares in ETF's to brokerages as early as next spring to try to restore some of the liquidity it has drained out of the market via its massive monetary easing program. (Nikkei) Japanese Retail Sales (Sep) Y/Y 9.1% vs. Exp. 6.9% (Prev. 2.0%, Rev. 1.8%); largest increase since 2014. (Newswires)

UK/EU

UK lawmakers approved the early election bill with 438 votes and 20 against for an election on December 12th with the date for Parliament dissolution set on November 6th. Proposals for lowering the voting age or allowing EU citizens to vote were not included for debate, while amendment to change the election date to December 9th was selected for debate but voted against by Parliament. (Newswires)

Sources in the Brexit Party suggest they are looking to wipe out Labour’s heartlands in the north east of England and Wales as it prepares to campaign for a 'clean break Brexit', however, has left the door open to a pact with the Tories. (Telegraph)

UK government reportedly began restoring the whip to 10 of the Tory 21 group on Tuesday. (Times/Twitter)

EU Council President Tusk tweeted the EU27 has formally adopted the extension and that it may be the last one, while he added to please make the best use of this time. (Twitter) EU Chief Brexit Negotiator Barnier has stated that British companies will be at risk of trade barriers via a ‘proportional’ response, if a new UK government attempts to abandon EU standards on worker rights and environmental protections. (Guardian)

UK PM Johnson and Chancellor Javid are said to favour former BoE Deputy Governor Tucker as next BoE Governor. (ITV)

UK BRC Shop Price Index (Oct) Y/Y -0.4% (Prev. -0.6%). (Newswires)

 

FX

DXY was steady and continued to bide time ahead of today’s FOMC with markets pricing in over a 95% chance of the Fed lowering rates by 25bps to 1.50%-1.75%. The greenback’s transatlantic counterparts were also uneventful as EUR/USD held on to recent gains back above the 1.1100 level and GBP/USD stabilized after lawmakers approved UK PM Johnson’s bill for an election to be held on December 12th, with betting markets suggesting a 50-50 chance on whether the PM can achieve a majority government at the polls. USD/JPY and JPY-crosses were lacklustre amid the cautious risk tone and antipodeans traded choppy with early pressure in AUD/USD briefly reversed after inline Australian CPI data which, alongside the recent reiterations by RBA Governor Lowe, suggested a lack of urgency to cut rates again at next week’s meeting. TRY was also active overnight with slight pressure to currency after the US House voted in favour of legislation seeking to impose sanctions on Turkey for its offensive in Syria and voted for a resolution recognizing Armenian genocide in 1915, viewed as a rebuke of Turkey.

 

Australian CPI (Q3) Q/Q 0.5% vs. Exp. 0.5% (Prev. 0.6%). (Newswires)

Australian CPI (Q3) Y/Y 1.7% vs. Exp. 1.7% (Prev. 1.6%)

Australian RBA Trimmed Mean CPI (Q3) Q/Q 0.4% vs. Exp. 0.4% (Prev. 0.4%)

Australian RBA Trimmed Mean CPI (Q3) Y/Y 1.6% vs. Exp. 1.6% (Prev. 1.6%)

COMMODITIES

Commodities were subdued overnight amid the broad cautious sentiment with resulted to marginal losses for WTI crude futures with an ambiguous API release not doing much help prices as initial reports suggested a slightly higher than expected build of 590k bbls, although other sources later suggested a draw of 1.7mln bbls and the major newswires were quiet on the subject. Elsewhere, gold prices proceeded sideways below the USD 1500/oz level with participants tentative ahead of today’s FOMC and copper was slightly pressured amid the downbeat tone across the region.

API Energy Inventories Crude +0.59mln (exp. +0.5mln, Prev. +4.51mln), although other social media reports suggested contradicting figures of a 1.7mln bbl drawdown to crude inventories and newswires have not confirmed any figures. (Newswires)

China September YTD gold consumption declined 9.6% Y/Y to 768.3 tons. (Newswires)

 

GEOPOLITICS

 

US House overwhelmingly voted in favour of resolution recognizing Armenian genocide in 1915 which is seen as a rebuke of Turkey and it also voted in favour of legislation seeking to impose sanctions on Turkey for its offensive in Syria. Turkey’s Foreign Ministry later responded that it strongly condemns the adoption of a draft bill that envisages sanctions against Turkey and stated the US administration should take steps to prevent further deterioration of relations. (Newswires)

US

 

Albeit thin ranges, the TPLEX made headway as investors grew cautious amid talk of a delay to the US-China Phase 1 deal. The (small) lion’s share of the move came in the European session when major equity bourses began their trundle lower in anticipation of key risk events. There was a ramp up of corporate issuance on Tuesday, with ten issuers scheduled to hit the primary IG market - including a USD 4bln M&A bond from Danaher (DHR) - potentially providing resistance to the wider debt complex. At settlement the curve was fractionally flatter with the 10-year yield down 1.8bps and the 2-year yield down 0.8bps, with participants now looking towards the FOMC on Wednesday. US T-notes (Z9) settled 3+ ticks higher at 129-08+. Acting White House Chief of Staff Mulvaney's aide Robert Blair is expected to testify in impeachment probe on Friday. (Newswires)

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