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[PODCAST] EU Open Rundown 05.06.18

  • Asian equity markets traded slightly indecisive after the momentum somewhat petered out from Wall St.
  • RBA kept rates unchanged as expected and reiterated its prior statements which continued to suggest a prolonged pause by the central bank
  • UK PM May reportedly abandoned plans to present UK-EU blueprint before this month's summit in Brussels and will now postpone its release to after the summit
  • Looking ahead, highlights include EZ, UK and US services PMI, US ISM non-manufacturing, APIs, BoE’s Cunliffe and ECB’s Weidmann

 

ASIA

Asian equity markets traded slightly indecisive after the momentum somewhat petered out from Wall St, where all majors extended on gains and the Nasdaq Comp. posted a record close. ASX 200 (-0.3%) was negative with the index weighed by the energy sector after oil prices briefly slipped to below USD 65.00/bbl and with Retail Food Group the worst performer in the index after it flagged a statutory net loss due to termination payments. Elsewhere, Nikkei 225 (+0.2%) remained afloat following the recent currency weakness, while Shanghai Comp. (+0.2%) and Hang Seng (+0.2%) were choppy as participants mulled over a mild liquidity drain as well as inconclusive Chinese Caixin Services and Composite PMI data which were unchanged from the prior month. Finally, 10yr JGBs were flat amid similar quiet trade in T-notes and the indecisiveness in the region, while the10yr JGB auction failed to provide a catalyst as the results were mixed which added to the sombre tone.

Chinese Caixin Services PMI (May) 52.9 vs. Exp. 52.9 (Prev. 52.9). (Newswires)
Chinese Caixin Composite PMI (May) 52.3 (Prev. 52.3)

PBoC injected CNY 70bln via 7-day and CNY 50bln via 28-day reverse repos, for a net daily drain of CNY 30bln. (Newswires)
PBoC set CNY mid-point at 6.4157 (Prev. 6.4208)


UK/EU

BoE’s Tenreyro (Neutral) said a few rate increases are needed and that timing is an open question, while she expects gradual tightening of monetary policy will be needed over the next three years. Furthermore, Tenreyro added that future policy changes can act as substitutes for immediate change and that weakness in UK economy in Q1 likely to be erratic but does raise the possibility of some underlying subdued demand. (Newswires)

UK PM May reportedly abandoned plans to present UK-EU blueprint before this month's summit in Brussels and will now postpone its release to after the summit. (FT) Elsewhere, there were separate source reports which stated UK PM May and ministers was said to have told business leaders a decision on the preferred customs option post-Brexit was 'imminent'. (Newswires) Business executives have warned UK PM May that clarity is needed on the government’s post-Brexit plans to help them prepare their companies after UK departs from the EU. Leading firms including Tesco (TSCO LN), GlaxoSmithKline (GSK LN) and BAE Systems (BA/ LN) said more information was needed on issues such as customs arrangements. (The Guardian)

UK PM May has a week to forge a compromise with Conservative party backbenchers that are threatening to defeat the government on post-Brexit customs arrangement legislation which are to be voted on next Tuesday. (The Times) There were also separate reports that UK PM May is under fire regarding attempts to overturn all 15 House of Lords defeats of the EU withdrawal bill in a single day when the bill returns to the House of Commons next week. (Independent)

UK Trade Minister Liam Fox said the response to US steel and aluminium tariffs must be measured and that the UK is to take safeguard measures to prevent steel dumping on the UK, which could be in place by the middle of July. (Newswires)

UK BRC Retail Sales YY (May) 2.80% (Prev. -4.20%). (Newswires)


FX

Most major pairs have been range-bound overnight and the DXY flat around the 94.00 level. As such, EUR/USD and GBP/USD traded sideways in which the latter languished in proximity to retest the prior day’s lows around the 1.3300 level. This was amid the usual Brexit-related toing and froing, as the latest reports stated that PM May scrapped plans to present the UK-EU blueprint before this month's summit in Brussels and is also said to be under fire over attempts to overturn all 15 House of Lords defeats of the EU withdrawal bill next Tuesday. Elsewhere, antipodeans have held on to most of the prior day’s gains although AUD/USD is off best levels following a miss on Current Account and Net Exports of GDP data, as well as an unsurprising RBA rate decision in which the central bank kept rates unchanged as expected and reiterated its prior statements which continued to suggest a prolonged pause by the central bank.

RBA kept the Cash Rate unchanged at 1.50% as expected and reiterated that low level of rates continues to support the economy and that the board judged policy is consistent with sustainable economic growth and reaching the inflation target. Furthermore, the RBA also repeated that inflation and wage growth likely to remain low for a while and that a strengthening currency would result in slower pick up of growth and inflation.

Australian Current Account Balance (Q1) -10.50B vs. Exp. -9.95B (Prev. -14.00B, Rev. -14.70B). (Newswires)
Australian Net Exports Contribution (Q1) 0.30% vs. Exp. 0.50% (Prev. -0.50%)


COMMODITIES

Commodities were mixed overnight in which WTI crude futures nursed the prior day’s losses in which prices briefly slipped to below USD 65.00/bbl in a continued pullback from multi year highs, while participants now await the latest stockpile counts with API inventories due after-hours later. Elsewhere, gold was flat amid an uneventful greenback and copper saw mild profit taking alongside a predominantly indecisive overnight risk tone.

US partially eased sanctions against Deripaska's EN+ Group. (FT)


GEOPOLITICS


Iran nuclear official Kamalvandi said Tehran will inform the UN atomic agency regarding beginning of capacity increase for uranium gas production. (Newswires)

US

Treasuries were lower on Monday as political turmoil settled in Europe following last week’s events in Italy and Spain. Yields were higher but off their multi-year peaks as trade fear remains in investors’ minds. Volume in the complex was average in a quiet session; the yield curve saw some modest bear flattening with 2yr and 5yr yields higher by c.4bps and 30yr higher by c.3bps, but major spreads across the curve were pretty much unchanged at settlement. US 10yr T-notes futures (Sep 2018) settled 11 ticks lower at 119-26+.

Mexico is to impose a 20% tariff on pork legs and shoulder from US as part of its retaliation to US metal tariffs, while there were earlier reports that Mexico will start a dispute settlement process at the WTO regarding US tariffs on steel and aluminium. (Newswires)

US Special Counsel Mueller alleged that former Trump campaign manager Manafort attempted to tamper with a potential witness. (Newswires)

 

Source: RANsquawk

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