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[PODCAST] EU Open Rundown 4th September 2018

  • Asian equities were choppy with the region indecisive as trade-related concerns lingered and after a non-existent lead from the US
  • In FX, the greenback was slightly firmer overnight. AUD was initially pressured by a wider than expected Current Account Deficit, but later found support following the RBA rate decision
  • Rees-Mogg claims that he and Barnier, bonded in a meeting over their shared view that May’s Chequers plan is “complete rubbish”.
  • Looking ahead, highlights include UK construction PMI, ISM manufacturing, BoE’s Carney, Haldane, Tenreyro and Saunders, ECB’s Nowotny

ASIA

Asian equities were choppy with the region indecisive as trade-related concerns lingered and after a non-existent lead from the US which was shut for Labor Day holiday. ASX 200 (-0.4%) was negative and fell below the 6300 level as weakness in tech, energy and financials dragged, while Nikkei 225 (-0.2%) swung between gains and losses amid currency fluctuations. Elsewhere, Hang Seng (Unch.) and Shanghai Comp. (-0.1%) also see-sawed as participants contemplated over the potential fresh US tariffs this week and amid CNY price swings, as well as continued liquidity inaction by the PBoC. Finally, 10yr JGBs were marginally higher amid the indecisive trade in riskier assets. However, upside was also capped as participants digested the BoJ’s Rinban announcement in which it upped its purchases of JPY 1-5yr by a total JPY 100bln, which would suggest monthly purchases of those maturities are on track to be reduced to JPY 3.25tln from JPY 3.30tln M/M if the purchase amounts are maintained, considering the recently announced reduction in the number of buying operations for this month.

PBoC skipped open market operations for a net neutral daily position. (Newswires)
PBoC set CNY mid-point at 6.8183 (Prev. 6.8347)


UK/EU

Jacob Rees-Mogg claims that he and the EU’s chief negotiator, Michel Barnier, bonded in a meeting in Brussels over their shared view that Theresa May’s Chequers plan is “complete rubbish”. (Guardian)

The majority of voters in the Conservatives' most marginal constituencies believe PM May's Chequers plan is "bad for Britain", a new poll has found, (Telegraph)

UK Chancellor Hammond could reportedly unveil the budget as soon as next month in order to avoid clashing with last stages of Brexit discussions. (Times) As a reminder, the Treasury has originally wanted to release the budget at the end of November

As a reminder, BoE Governor Carney will be questioned by MPs today over whether he plans to extend his term as governor of the BoE as concerns mount that the uncertainty is damaging its credibility. (Times)

Italian Deputy PM Salvini said widening bond spreads are due to speculators and Italy's government reforms will provide all the answers. (Deutsche Well)

UK BRC Retail Sales YY Aug 0.2% (Prev. 0.5%). (Newswires)
UK Barclaycard Consumer Spending in Aug rose 4.5% Y/Y (Prev. 5.0%)

FX

In FX markets, the greenback was slightly firmer overnight amid softness in its major counterparts across the pond in which EUR/USD tested 1.1600 to the downside and as GBP/USD languished firmly below 1.2900 on the ongoing Brexit-related bickering which has led to increased worries of the UK crashing out of the EU without a deal. USD/JPY traded choppy around the 111.00 level alongside the indecisive risk tone and China’s currency firmed after the PBoC strengthened the fix which pushed USD/CNY and USD/CNH briefly below 6.8100 and 6.8200 respectively. Elsewhere, AUD/USD was initially pressured by a wider than expected Current Account Deficit, but later found support following the RBA rate decision which didn’t provide any major surprises, although the central bank gave an upbeat tone on the economy and inflation while price action also coincided with levels being broken in AUD/USD and related crosses.

RBA kept the Cash Rate Target unchanged at 1.50% as expected and reiterated that low rates are supporting the economy and that progress on inflation is expected to be gradual, but that it sees inflation higher in 2019. Furthermore, the RBA stated that the labour outlook remains positive and the economy seems to have grown above trend (Newswires)

Australian Current Account Balance (AUD)(Q2) -13.5B vs. Exp. -11.5B (Prev. -10.5B, Rev. -11.7B). (Newswires)
Australian Net Exports Contribution (Q2) 0.1% vs. Exp. 0.1% (Prev. 0.3%)


COMMODITIES

Commodities were uneventful overnight in which WTI crude futures traded sideways throughout the session with prices stuck around the USD 70/bbl level amid a lack of North American participants or fresh catalysts. Elsewhere, gold was also range-bound at the psychological USD 1200/oz level with price action contained by slight firmness in the greenback, while copper was subdued as it mirrored the lacklustre risk appetite and in conformity to the general tone across the complex.

Venezuelan President Maduro announced to begin charging under new gasoline pricing regime in border areas beginning today. (Newswires)


GEOPOLITICAL

US President Trump warned Syrian President Assad to not recklessly strike the Idlib province in Syria, while Trump also said that Iran and Russia would be making a grave humanitarian error and that hundreds of thousands could be killed if they attack Idlib. (Twitter/Newswires)


US

Outgoing Mexican President Pena Nieto stated that they didn’t accept quotas or restrictions in the deal with US and that they will participate in trilateral discussions with NAFTA partners, while he added it is important for Canada to remain in NAFTA. (Newswires)

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