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[PODCAST] EU Open Rundown 29th August 2018

  • Asia-Pac stocks traded mixed following the unconvincing performance on Wall St whereby the majors somewhat flatlined
  • In FX, CAD was underpinned by trade hopes on reports that Canada was said to be prepared to make concessions on dairy for NAFTA
  • UK and EU officials are said to view mid-November as the new Brexit deal deadline and are said to view an agreement by October as unlikely
  • Looking ahead, highlights include US GDP (2nd estimate), Pending Home Sales, DoEs, supply from Germany and the US

ASIA

Asia-Pac stocks traded mixed following the unconvincing performance on Wall St whereby the majors somewhat flatlined in which the S&P 500 and Nasdaq Comp. just about eked fresh record highs. ASX 200 (+0.4%) and Nikkei 225 (+0.3%) were positive with Australia led higher by resilience in financials and as earnings dominated news flow, while the Japanese benchmark was supported by mild JPY weakness and briefly reclaimed the 22900 level. Conversely, Shanghai Comp. (-0.4%) was negative and Hang Seng (+0.2%) traded indecisive following continued PBoC liquidity inaction and amid a slew of earnings including 3 of China’s big 4 banks which all posted growth in profits. Finally, 10yr JGBs were lower amid the heightened risk appetite in Japan and following a relatively paltry Rinban announcement by the BoJ.

PBoC skipped open market operations and are net neutral on the day. (Newswires)
PBoC set CNY mid-point at 6.8072 (Prev. 6.8052)


UK/EU

UK PM May refused to say whether she thinks the UK will be better or worse off in the event of a 'no-deal' Brexit and stated the government is working to make a success of leaving the EU "whatever the outcome of the negotiations". (Sky)

UK and EU officials are said to view mid-November as the new Brexit deal deadline and are said to view an agreement by October as unlikely. (Newswires)

UK PM May has announced she will defend herself against any potential leadership challenge from Boris Johnson and fully intends to lead the Conservatives into the next General election. (Newswires)

Remain-supporting Conservatives have reported an noticeable increase in applications to join their local parties, leading to fears that they are being targeted by Ukip supporters in a plot to unseat them and elect a Brexit-supporting PM to replace May. (Times)

Ireland’s Foreign Minister Coveney said chances of a no deal Brexit are very slim as no one would benefit and that it is possible to get a deal on Brexit well before the year-end, while Coveney added that talks of surviving a no deal Brexit is more of a negotiation tactic than a reality. (Newswires)

UK BRC Shop Price Index (Jul) Y/Y 0.1% (Prev. -0.3%). (Newswires)


FX

Price action across the FX space was mostly muted amid a lack of data points, although the greenback marginally extended on its rebound which recently dragged EUR/USD below the 1.1700 handle, while GBP/USD languished near the prior day’s lows. Elsewhere, USD/JPY and JPY-crosses were higher on safe-haven outflows amid strength in Tokyo stock markets, while CAD was underpinned by trade hopes on reports that Canada was said to be prepared to make concessions on dairy for NAFTA.


COMMODITIES

Commodities were lacklustre overnight in which WTI crude futures consolidated after the prior day’s decline which was triggered by a rebound in the greenback and surprise miniscule build in API inventories. Elsewhere, gold attempted to nurse some of its recent losses after having found support at the USD 1200/oz level, while copper was kept rangebound alongside the mixed risk tone.

US API Weekly Crude Stocks +38k vs. Exp. -700k (Prev. -5.170mln). (Newswires)

Iran oil shipments are reportedly declining at a faster-than-expected pace ahead of US sanctions which begin in November, while Iran reportedly expects crude exports to fall by a third in September. (WSJ)

Mexico's incoming government is mulling an 'indefinite' suspension of competitive auctions for oil and gas producers and Pemex venture partners and is to consider withdrawing IEA and forge closer ties with OPEC, according to a document. (Newswires)


GEOPOLITICAL

US Secretary of Defense Mattis suggested the US could resume military drills in the Korean peninsula which were suspended after the Trump-Kim summit, in which he stated that the US had no plans at this time to suspend any more exercises. (Axios)


US

Fed Discount Rate Minutes stated 2 Regional banks supported a hike at the July meeting and 10 backed no changes to the discount rate. Furthermore, the minutes noted that Kansas City (George) and Cleveland (Mester) urged raising discount rate by 0.25% due to the continued solid economic growth outlook, tight labour markets and inflation remaining near 2%, but the remaining 10 wanted to maintain as they felt it was appropriate during the current economic conditions. (Newswires)

US Senate confirmed Richard Clarida for Fed vice-chair. (Newswires)

Canada is said to be prepared to make concessions on dairy for NAFTA. In separate news, US-Mexico trade deal provides a potential cap on Mexican cars shipped to the US and would allow the US to impose punitive tariffs of as much as 25% on auto-related imports that exceed certain volumes according to sources. (Globe and Mail/Newswires)

US Commerce Secretary Ross said the US is asking Canada to consider joining the US-Mexico trade deal but also noted that Canada has made troubles in drugs and biologics for US firms, while he also stated that the US is not accusing Mexico of currency manipulation as the MXN has been falling which impacts US trade deficit. (Newswires)

Canadian PM Trudeau said his position on supply hasn't changed but looks forward to a NAFTA deal if it is good for Canada, while he added there has been progress on autos and Canada is studying the US-Mexico terms of the deal. Elsewhere, Canadian Foreign Minister Freeland said we are encouraged by progress between US and Mexico in which progress on autos and labor were particularly helpful, while Freeland later stated they had a very constructive meeting with US Trade Representative Lighthizer and will return on Wednesday to resume discussions. (Newswires)

White House Economist Hasset said the clock is ticking for Canada and that if Canada doesn’t sign on by Friday, “the train might start to leave the station”. (Newswires)

US Senate Majority Leader McConnell said the trade deal between US & Mexico is not a bad agreement and added the Senate has to wait until interactions with Canada are complete before making forward judgement. Elsewhere, US Senate Majority Leader McConnell is also said to hope to get the spending bill to President Trump by September. (Newswires)

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