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[PODCAST] EU Open Rundown 7th August 2018

  • Asian equity markets traded mostly higher following the positive performance in their US counterparts. RBA stood pat on rates as expected
  • GBP/USD continued to languish amid reports suggesting that UK PM May is losing support due to her Chequers plan and some see her departure as essential
  • Looking ahead, highlights include US APIs, US 3yr note auction, BoE’s McCafferty and further large-cap earnings


Asian equity markets traded mostly higher following the positive performance in their US counterparts where the Nasdaq led the advances and the S&P 500 notched a 3rd consecutive gain to move to within 22 points from all-time highs. Nikkei 225 (+0.6%) was higher as focus remained on earnings with SoftBank and Rakuten among the top gainers in the index after both reported solid profit growth, while ASX 200 (-0.3%) lagged its regional peers with the index dragged by weakness in telecoms and miners. Elsewhere, Hang Seng (+1.0%) and Shanghai Comp. (+1.4%) were positive with property developers underpinned by strong guidance including Country Garden and Evergrande Real Estate, although price action was far from smooth with a bout of intraday volatility in Chinese bourses after the PBoC continued to withhold from liquidity operations and amid lingering trade uncertainty. Finally, 10yr JGBs were little changed with only minimal losses seen amid gains in stocks and as the Japanese 10yr yield remained above 0.11%, while participants the 10yr inflation-indexed bond auction also failed to spur demand as b/c and lowest accepted price declined from prior.

PBoC skipped open market operations and are net neutral on the day. (Newswires)
PBoC set CNY mid-point at 6.8431 (Prev. 6.8513).

China is to soon adopt policies to boost credit and investment, according to Chinese press reports. (Newswires)


Discussions suggested PM May is losing support due to her Chequers plan and some see her departure as essential to salvaging the Brexit, according to Twitter reports which cited Conservative Party activists. (BuzzFeed/Twitter)

UK PM May has been blamed for the disorganised preparations for a no-deal Brexit as businesses need to be advised on how to get ready for the possibility. Civil servants have been ordered to compile 70 “technical notices” by month-end to explain to businesses how to prepare for no-deal scenario. (Telegraph)

UK Police leaders have warned a no-deal Brexit is posing a risk to the public as the UK would lose access to EU-wide security powers and databases. (BBC)

Germany reportedly wants the authority to intervene if non-EU investors take a 15% stake or more in German companies, according to press reports. (Die Welt)

UK BRC Sales Like-For-Like (Jul) Y/Y 0.5% vs. Exp. 1.5% (Prev. 1.1%). (Newswires)
UK Barclaycard Consumer Spending in July rose 5.0% Y/Y (Prev. 5.1%)


In FX markets, the major currencies remained uneventful with the DXY sideways above the 95.00 level, while EUR/USD was stuck within the prior day’s range and GBP/USD languished following its slip below 1.3000 amid ongoing Brexit disarray. According to recent reports, discussions suggested PM May is losing support due to her Chequers plan and some see her departure as essential to salvaging the Brexit, although these reports cited Conservative Party activists. Elsewhere, AUD/USD was steady heading into the RBA rate decision - which proved to be a non-event - before moving higher to test 0.7400, while TRY went on a roller-coaster ride in which it initially extended on its record lows with another 7% decline before paring some of the losses on reports US and Turkey reached a pre-agreement on certain issues and with a delegation of Turkish officials planning to visit the US in 2 days.

RBA kept Cash Rate Target unchanged at record low 1.50% as expected and reiterated that it judged steady policy was consistent with growth and inflation targets, while it RBA repeated that low rates are supporting the economy. RBA also stated that wage growth remains subdued which is likely to continue for a while and that it sees headline CPI to be lower than expected this year. (Newswires)


Commodities saw mild gains overnight in which WTI crude and Brent crude futures just about reclaimed the USD 69.00/bbl level and USD 74.00/bbl to the upside respectively, although price action was extremely light and oblivious to Chinese crude futures hitting limit up or the US re-imposing the first wave of Iranian sanctions which will cover the auto sector, gold and key metals, while crude sanctions are not anticipated until November. Elsewhere, gold and copper prices were marginally higher as prices nursed some of the prior day’s losses, although upside was capped as the greenback held on to recent gains.

BHP is said to seek a 5-day mediation by Chile government in contract discussions to avoid a strike at the Escondida copper mine, while there were also reports the union at Chile's Escondida copper mine was preparing a strike contingency plan as it awaited the final response from the Co. (Newswires)


US and Turkey are said to have reached a pre-agreement on certain issues and a delegation of Turkish officials are planning to visit US in 2 days. (Newswires)

White House National Security Advisor Bolton said if Iran block the strait of Hormuz it would be their worst mistake although he does believe it is a bluff. (Newswires)

Iranian President Rouhani said Iran is open to negotiations as long as the US is sincere, while he added that talks alongside sanctions are meaningless and that the US must prove it is willing to solve problems through talks. Furthermore, Rouhani commented that practical actions are required from the EU to save the JCPOA and also warned the US will regret placing sanctions on Iran. (Newswires)


Treasuries remained in a tight range on Monday amid thin volumes across the complex, as the dog days of summer set in. Yields were mixed across the curve, but ultimately, close to the unchanged mark. The US Treasury will auction a total of USD 78bln in 3-year (USD 34bln, Tuesday), 10-year (USD 26bln, Wednesday) and 30-year (USD 18bln, Thursday), all to settle on 15 August; analysts at TD Securities note that USD38.2bln matures at the mid-month settlement, implying net supply of USD 33.8bln in new cash.

Jesus (SPX) has risen, happy easter from the RANsquawk desk! Live long and prosper https://t.co/DfPJczdnhU