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[PODCAST] EU Open Rundown 7th November 2019

  • Asian equity markets traded indecisively as they took their cue from the similar performance of their US peers
  • US President Trump meeting with Chinese President Xi to sign a trade deal could be delayed until December as discussions over terms and venue continue
  • Senior US administration official said that the US is mulling a Trump-Xi meeting to sign an interim trade deal after the NATO summit in London in early December (3rd-4th)
  • Looking ahead, highlights include German Industrial Output, Chinese FX Reserves, US Initial Jobless Claims and Consumer Credit, BoE Rate Decision, MPR & Press Conference with Governor Carney, Riksbank’s Skingsley, Fed’s Kaplan, ECB’s Lagarde, supply from the US and France
  • Earnings: Walt Disney, Booking Holdings, Zoetis, Air Products and Chemical, Activision Blizzard, Johnson Controls International, Monster Beverage, Fox Corp, Siemens, Deutsche Telekom, Zurich Insurance, Siemens Healthineers, Generali, UniCredit, Vestas Wind Systems, ArcelorMittal, HeidelbergCement, Telecom Italia, Lufthansa, Leonardo, Rheinmetall

7th November 2019 

·        Asian equity markets traded indecisively as they took their cue from the similar performance of their US peers

·        US President Trump meeting with Chinese President Xi to sign a trade deal could be delayed until December as discussions over terms and venue continue

·        Senior US administration official said that the US is mulling a Trump-Xi meeting to sign an interim trade deal after the NATO summit in London in early December (3rd-4th)

·        Looking ahead, highlights include German Industrial Output, Chinese FX Reserves, US Initial Jobless Claims and Consumer Credit, BoE Rate Decision, MPR & Press Conference with Governor Carney, Riksbank’s Skingsley, Fed’s Kaplan, ECB’s Lagarde, supply from the US and France

·        Earnings: Walt Disney, Booking Holdings, Zoetis, Air Products and Chemical, Activision Blizzard, Johnson Controls International, Monster Beverage, Fox Corp, Siemens, Deutsche Telekom, Zurich Insurance, Siemens Healthineers, Generali, UniCredit, Vestas Wind Systems, ArcelorMittal, HeidelbergCement, Telecom Italia, Lufthansa, Leonardo, Rheinmetall

ASIA-PAC

Asian equity markets traded indecisively as they took their cue from the similar performance of their US peers and with sentiment clouded by trade uncertainty after reports suggested the signing of the US-China phase 1 deal could be pushed back to December. ASX 200 (+1.0%) was underpinned by outperformance in tech and the top-weighted financials sector with shares in NAB lifted despite a decline in full year profits, as the big 4 bank maintained its dividend unchanged from the interim and also announced top level executives will not receive short-term bonuses this year. Conversely, Nikkei 225 (-0.1%) was pressured by a firmer currency and amid a slew of earnings including SoftBank which posted its first quarterly operating loss in 14 years due to the WeWork fiasco, while Hang Seng (-0.4%) and Shanghai Comp. (-0.2%) were choppy amid a lack of clarity on the timing and location for the signing of the US-China phase 1 trade deal and after the PBoC skipped liquidity operations again, with gaming stocks also pressured after Galaxy Entertainment and Wynn Macau posted softer revenue figures. Finally, 10yr JGBs were slightly subdued following the recent downturn in prices and amid the lack of BoJ buying today, but with downside stemmed by the inconclusive risk tone and support ahead of the 153.00 level.

PBoC skipped open market operations for a net neutral daily position. (Newswires) PBoC set CNY mid-point at 7.0008 vs. Exp. 7.0044 (Prev. 7.0080)

US President Trump meeting with Chinese President Xi to sign a trade deal could be delayed until December as discussions over terms and venue continue, while it is still possible a deal may not be reached although a deal is more likely than not according to a US official. The official added that China pushing for more tariff rollbacks is not seen as derailing the progress and that Europe is seen as a likely venue for a Trump-Xi meeting with Switzerland and Sweden among possible choices, while Iowa is not likely.

Senior US administration official said that the US is mulling a Trump-Xi meeting to sign an interim trade deal after the NATO summit in London in early December, but no decision has been made yet. US is said to have asked for Chinese President Xi Jinping's travel schedule to see where and when a possible phase one deal could be signed. (Newswires/Fox/Twitter)

Falling corporate profits in China are said to flash a warning sign of a deepening economic slowdown and easier credit can only do so much to support growth as bad loans have already reached alarming level at some lenders, according to an article. (Nikkei)

UK/EU

Latest Sky News/YouGov poll: Conservative: 36% (Prev. 38%), Labour 25% (Prev. 25%), Lib Dems 17% (Prev. 16%), Brexit Party 11% (Prev. 11%), Green Party 5% (Prev. 5%), SNP 4% (Prev. 4%), Plaid Cymru 1% (Prev. 1%). (Sky News)

Liberal Democrats, Plaid Cymru and the Green Party have formed an electoral pact, details to be announced Thursday; reports indicate the pact will cover between 60-70 constituencies, specifically, 49 seats in England and 11 in Wales. (BBC/Guardian)

EU Trade Commissioner Malmstrom said the US is still not ready for talks on industry duty reactions and that the EU still faces threat of US auto tariffs, while she reiterated that the EU would retaliate against any US tariffs. (Newswires)

 

FX

In FX markets, a sturdy greenback remained the state of play in which the DXY tested the 98.00 level as its major counterparts EUR/USD and GBP/USD extended on this week’s lows around the mid-1.1000 and 1.2800 handles respectively. Nonetheless, overnight price action, as well as pertinent news flow was relatively light for the greenback and its transatlantic peers. Elsewhere, USD/JPY was subdued by the vague risk tone and with the flows into the Japanese currency facilitated by rising JGB yields, while antipodeans have ceded further ground against USD which coincided with a weaker CNY as the trade uncertainty overshadowed a firmer reference rate setting.

Australian Trade Balance G&S (AUD)(Sep) 7.2B vs. Exp. 5.0B (Prev. 5.9B, Rev. 6.6B). (Newswires) Australian Exports (Sep) 3% (Prev. -3.0%) Australian Imports (Sep) 3% (Prev. 0.0%)

COMMODITIES

Commodities were subdued in which WTI crude futures languished firmly below the USD 57.00/bbl after the losses seen in the prior session where oil slipped around 2% in the aftermath of a bearish EIA crude inventory report, while the ongoing trade-related uncertainty has also hampered any recovery for energy prices. Elsewhere, gold traded sideways throughout the session below the USD 1500/oz level with the precious metal restricted by a robust USD, and copper conformed to the dreary performance across the complex due to the indecisiveness across overnight markets.

 

GEOPOLITICS

North Korea called upcoming US military exercises extremely provocative and a dangerous act, while it added that dialogue with the US is on the verge of extinction, according to BNO News. (Twitter)

 

Turkish officials said President Erdogan and US President Trump spoke on the phone and reconfirmed they will meet in Washington on November 13th. (Newswires)

US

 

After this week’s sharp rise in yields, the Treasury curve bull-flattened on Wednesday, though major spreads only narrowed modestly. An early dip after better than expected Germany factory orders was short-lived, and the complex continued to rally amid caution on US/China trade talks, where there are still some concerns that the deal might fall apart. A solid 10-year auction added to the rally, after the sale stopped through the screens by 1bps (recently, the auctions have tailed frequently), with cover above recent averages, and indirect bidder participation picking up – the well-received auction reveals that there is still demand for medium-dated US paper, and as such, providing validation to the analysts who have this week talked about how the complex has run out of fresh reasons for yields to continue rising; this view was encapsulated by a hefty trade in the TYZ9 131-00 strike (which analysts said looks for an implied 10-year yield of 1.6% vs the current 1.82%), where paper paid 3 ticks 100k times (50k on the screens, 50k blocked). T-note futures (Z9) settled up 13 ticks at 129.10+.Asian equity markets traded indecisively as they took their cue from the similar performance of their US peers

  • US President Trump meeting with Chinese President Xi to sign a trade deal could be delayed until December as discussions over terms and venue continue
  • Senior US administration official said that the US is mulling a Trump-Xi meeting to sign an interim trade deal after the NATO summit in London in early December (3rd-4th)
  • Looking ahead, highlights include German Industrial Output, Chinese FX Reserves, US Initial Jobless Claims and Consumer Credit, BoE Rate Decision, MPR & Press Conference with Governor Carney, Riksbank’s Skingsley, Fed’s Kaplan, ECB’s Lagarde, supply from the US and France
  • Earnings: Walt Disney, Booking Holdings, Zoetis, Air Products and Chemical, Activision Blizzard, Johnson Controls International, Monster Beverage, Fox Corp, Siemens, Deutsche Telekom, Zurich Insurance, Siemens Healthineers, Generali, UniCredit, Vestas Wind Systems, ArcelorMittal, HeidelbergCement, Telecom Italia, Lufthansa, Leonardo, Rheinmetall

7th November 2019 

·        Asian equity markets traded indecisively as they took their cue from the similar performance of their US peers

·        US President Trump meeting with Chinese President Xi to sign a trade deal could be delayed until December as discussions over terms and venue continue

·        Senior US administration official said that the US is mulling a Trump-Xi meeting to sign an interim trade deal after the NATO summit in London in early December (3rd-4th)

·        Looking ahead, highlights include German Industrial Output, Chinese FX Reserves, US Initial Jobless Claims and Consumer Credit, BoE Rate Decision, MPR & Press Conference with Governor Carney, Riksbank’s Skingsley, Fed’s Kaplan, ECB’s Lagarde, supply from the US and France

·        Earnings: Walt Disney, Booking Holdings, Zoetis, Air Products and Chemical, Activision Blizzard, Johnson Controls International, Monster Beverage, Fox Corp, Siemens, Deutsche Telekom, Zurich Insurance, Siemens Healthineers, Generali, UniCredit, Vestas Wind Systems, ArcelorMittal, HeidelbergCement, Telecom Italia, Lufthansa, Leonardo, Rheinmetall

ASIA-PAC

Asian equity markets traded indecisively as they took their cue from the similar performance of their US peers and with sentiment clouded by trade uncertainty after reports suggested the signing of the US-China phase 1 deal could be pushed back to December. ASX 200 (+1.0%) was underpinned by outperformance in tech and the top-weighted financials sector with shares in NAB lifted despite a decline in full year profits, as the big 4 bank maintained its dividend unchanged from the interim and also announced top level executives will not receive short-term bonuses this year. Conversely, Nikkei 225 (-0.1%) was pressured by a firmer currency and amid a slew of earnings including SoftBank which posted its first quarterly operating loss in 14 years due to the WeWork fiasco, while Hang Seng (-0.4%) and Shanghai Comp. (-0.2%) were choppy amid a lack of clarity on the timing and location for the signing of the US-China phase 1 trade deal and after the PBoC skipped liquidity operations again, with gaming stocks also pressured after Galaxy Entertainment and Wynn Macau posted softer revenue figures. Finally, 10yr JGBs were slightly subdued following the recent downturn in prices and amid the lack of BoJ buying today, but with downside stemmed by the inconclusive risk tone and support ahead of the 153.00 level.

PBoC skipped open market operations for a net neutral daily position. (Newswires) PBoC set CNY mid-point at 7.0008 vs. Exp. 7.0044 (Prev. 7.0080)

US President Trump meeting with Chinese President Xi to sign a trade deal could be delayed until December as discussions over terms and venue continue, while it is still possible a deal may not be reached although a deal is more likely than not according to a US official. The official added that China pushing for more tariff rollbacks is not seen as derailing the progress and that Europe is seen as a likely venue for a Trump-Xi meeting with Switzerland and Sweden among possible choices, while Iowa is not likely.

Senior US administration official said that the US is mulling a Trump-Xi meeting to sign an interim trade deal after the NATO summit in London in early December, but no decision has been made yet. US is said to have asked for Chinese President Xi Jinping's travel schedule to see where and when a possible phase one deal could be signed. (Newswires/Fox/Twitter)

Falling corporate profits in China are said to flash a warning sign of a deepening economic slowdown and easier credit can only do so much to support growth as bad loans have already reached alarming level at some lenders, according to an article. (Nikkei)

UK/EU

Latest Sky News/YouGov poll: Conservative: 36% (Prev. 38%), Labour 25% (Prev. 25%), Lib Dems 17% (Prev. 16%), Brexit Party 11% (Prev. 11%), Green Party 5% (Prev. 5%), SNP 4% (Prev. 4%), Plaid Cymru 1% (Prev. 1%). (Sky News)

Liberal Democrats, Plaid Cymru and the Green Party have formed an electoral pact, details to be announced Thursday; reports indicate the pact will cover between 60-70 constituencies, specifically, 49 seats in England and 11 in Wales. (BBC/Guardian)

EU Trade Commissioner Malmstrom said the US is still not ready for talks on industry duty reactions and that the EU still faces threat of US auto tariffs, while she reiterated that the EU would retaliate against any US tariffs. (Newswires)

 

FX

In FX markets, a sturdy greenback remained the state of play in which the DXY tested the 98.00 level as its major counterparts EUR/USD and GBP/USD extended on this week’s lows around the mid-1.1000 and 1.2800 handles respectively. Nonetheless, overnight price action, as well as pertinent news flow was relatively light for the greenback and its transatlantic peers. Elsewhere, USD/JPY was subdued by the vague risk tone and with the flows into the Japanese currency facilitated by rising JGB yields, while antipodeans have ceded further ground against USD which coincided with a weaker CNY as the trade uncertainty overshadowed a firmer reference rate setting.

Australian Trade Balance G&S (AUD)(Sep) 7.2B vs. Exp. 5.0B (Prev. 5.9B, Rev. 6.6B). (Newswires) Australian Exports (Sep) 3% (Prev. -3.0%) Australian Imports (Sep) 3% (Prev. 0.0%)

COMMODITIES

Commodities were subdued in which WTI crude futures languished firmly below the USD 57.00/bbl after the losses seen in the prior session where oil slipped around 2% in the aftermath of a bearish EIA crude inventory report, while the ongoing trade-related uncertainty has also hampered any recovery for energy prices. Elsewhere, gold traded sideways throughout the session below the USD 1500/oz level with the precious metal restricted by a robust USD, and copper conformed to the dreary performance across the complex due to the indecisiveness across overnight markets.

 

GEOPOLITICS

North Korea called upcoming US military exercises extremely provocative and a dangerous act, while it added that dialogue with the US is on the verge of extinction, according to BNO News. (Twitter)

 

Turkish officials said President Erdogan and US President Trump spoke on the phone and reconfirmed they will meet in Washington on November 13th. (Newswires)

US

 

After this week’s sharp rise in yields, the Treasury curve bull-flattened on Wednesday, though major spreads only narrowed modestly. An early dip after better than expected Germany factory orders was short-lived, and the complex continued to rally amid caution on US/China trade talks, where there are still some concerns that the deal might fall apart. A solid 10-year auction added to the rally, after the sale stopped through the screens by 1bps (recently, the auctions have tailed frequently), with cover above recent averages, and indirect bidder participation picking up – the well-received auction reveals that there is still demand for medium-dated US paper, and as such, providing validation to the analysts who have this week talked about how the complex has run out of fresh reasons for yields to continue rising; this view was encapsulated by a hefty trade in the TYZ9 131-00 strike (which analysts said looks for an implied 10-year yield of 1.6% vs the current 1.82%), where paper paid 3 ticks 100k times (50k on the screens, 50k blocked). T-note futures (Z9) settled up 13 ticks at 129.10+.

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