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[PODCAST] EU Open Rundown 6th November 2019

  • Asian equities traded lacklustre following a flat finish on Wall St where the major indices remained near record highs
  • Participants await the next developments in the trade saga and whether the US succumbs to China’s demands to roll-back tariffs
  • Brexit Party leader Farage is reportedly in discussions with certain Eurosceptic Conservatives over withdrawing rival Brexit Party candidates at the upcoming general election
  • DXY slightly eased back from the 98.00 level but held on to the majority of the spoils from this week’s rally
  • Looking ahead, highlights include EZ Services & Comp PMI and Retail Sales, US Labour Costs, Productivity and DoEs, Canadian Ivey PMI, ECB’s de Guindos, Mersch and Holzmann, Fed’s Evans, Williams and Harker, supply from the US
  • Earnings: Qualcomm, CVS Health Corp, Fiserv, EOG Resource, Humana, Baidu, WEC Energy, Adidas, BMW, Ahold Delhaize, SocGen, Sampo, Hannover Re, Wirecard, CRH Industrial, Dialog Semiconductor, Marks & Spencer

ASIA-PAC

Asian equity markets traded lacklustre following a flat finish on Wall St where the major indices remained near record highs on US-China trade optimism, but with some caution seeping through amid Chinese demands for the removal of tariffs which is seen as a sticking point for the 'phase one' deal. ASX 200 (-0.6%) and Nikkei 225 (+0.2%) were mixed with underperformance in Australia’s gold miners after the precious metal slipped below the psychological key USD 1500/oz level, while trade in Tokyo was stable amid a mixed currency and as the local benchmark took a breather from the prior day’s surge to a fresh yearly high. Hang Seng (+0.1%) and Shanghai Comp. (-0.3%) were tentative after the PBoC refrained from open market operations and as participants await the next developments in the trade saga such including whether the US succumbs to China’s demands to roll-back tariffs. Finally, 10yr JGBs declined significantly overnight as the benchmark 10yr JGB yield rose to its highest in around 5 months, while the pressure in JGBs was later exacerbated following mixed 10yr auction results and after prices collapsed through a key support area around 153.60 which previously held up during the last 3 months.

PBoC skipped open market operations for a net neutral daily position. (Newswires) PBoC set CNY mid-point at 7.0080 vs. Exp. 7.0090 (Prev. 7.0385)

US Senate Finance Committee Director said the Phase One China trade deal will "possibly" be signed in Iowa. (FBN)

US imports of Chinese goods subject to tariffs fell by USD 35bln in H1 2019 according to a UN study, which stated that Taiwan, Mexico and the EU are main beneficiaries of the trade war, replacing some Chinese exports to the US. (Newswires)

BoJ minutes from September meeting stated it is appropriate to persistently continue with powerful easing and that Japan's economy had been on a moderate expanding trend although exports, production and business sentiment have been impacted by overseas slowdown. Furthermore, most members shared the view that it was becoming increasingly necessary to pay closer attention to chance momentum to reaching price target would be lost, while some members stated comprehensive examination needed on possibility financial institutions profits could decline further and that more banks could take excessive risks due to low rate environment. (Newswires)

UK/EU

Officials in Downing Street are reportedly divided over whether or not to include “no deal” in their party manifesto ahead of the upcoming election. (Teleggraph)

Brexit Party leader Farage is reportedly in discussions with certain Eurosceptic Conservative candidates over withdrawing rival Brexit Party candidates at the upcoming general election after PM Johnson refused his nationwide pact. (Telegraph)

UK PM Johnson spoke with US President Trump today in which he asked him to remove tariffs on UK goods including scotch whisky and urged him to refrain from imposing tariffs on autos. (Newswires) 

FX

DXY slightly eased back from the 98.00 level but held on to the majority of the spoils from this week’s rally helped by the improving trade climate, stronger than expected ISM Non-Manufacturing and a subdued performance in its major counterparts in which EUR/USD and GBP/USD slipped below the 1.1100 and 1.2900 handles respectively. USD/JPY and JPY-crosses traded mixed amid the non-committal risk tone and after an outdated BoJ minutes release failed to spur prices. Elsewhere, AUD/USD and NZD/USD were subdued by the recent broad strength in the greenback and after weaker than expected New Zealand jobs data, while antipodeans also failed to benefit from the recent strength in CNY which breached below the 7.0000 level against USD due to the recent trade optimism and following a firmer than expected reference rate setting.

New Zealand Employment Change (Q3) Q/Q 0.2% vs. Exp. 0.3% (Prev. 0.8%). (Newswires) New Zealand Unemployment Rate (Q3) 4.2% vs. Exp. 4.1% (Prev. 3.9%)

COMMODITIES

Commodities traded mostly subdued in which oil gave back some of the prior day’s gains with WTI crude futures pulling back to briefly below the USD 57.00/bbl with pressure seen following a larger than expected build in headline API crude inventories. Gold prices were also lacklustre overnight with the precious metal despondent after its fall from the USD 1500/oz level amid the recent strength in the greenback, while copper mirrored the uninspired trade across the complex and tentative overnight risk tone.

API Crude Inventories: +4.26mln vs. Exp. +1.5mln (Prev. +0.59mln). (Newswires)

GEOPOLITICS

Iran's Nuclear Chief Salehi stated Tehran will begin enriching Uranium to 5% at the Fordow plant and that it can enrich uranium to 20% if needed. (Newswires)

US

The Treasury curve bear-steepened as havens saw outflows with traders noting the positive run of headlines on the US/China trade front, while ISM data also surprised to the upside, resulting in yields rising between 6-7bps across the curve. The Treasury’s 3-year auction was solid, stopping through the screens by 0.1bps, with cover above recent averages; the breakdown showed dealer participation the smallest since August 2017, while direct bidding was in line. T-note futures (Z9) settled 21 ticks lower at 128-29+.

Fed's Kashkari (2020 voter, Dove) said US interest rates are now modestly accommodative and stated the US economy is not at full employment yet. (Newswires)

Democrats have won both chambers of the Virginia General Assembly from the Republicans which previously had a 1-seat majority in both the state Senate and House of Delegates. In related news, Democrat candidate Beshear defeated Republican and incumbent Bevin in the Kentucky Gubernatorial Election, while Republican Lieutenant Governor Reeves won the election in Mississippi in what was a fairly tight race against Democrat Attorney General Hood. (Newswires)

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