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[PODCAST] EU Open Rundown 19th December 2018

  • Asian equities were mostly lower amid cautious trade ahead of the FOMC rate decision, and after the attempted rebound on Wall St
  • UK’s SNP, Liberal Democrats, Plaid Cymru and Greens have tabled a vote of no-confidence in the government
  • Italy's Government source said the EU Commission has accepted the 2019 budget deficit of 2.04%
  • Looking ahead, highlights include UK and Canadian CPI, US Existing Home Sales, DoEs, FOMC rate decision and press conference

ASIA-PAC

Asian equities were mostly lower amid cautious trade ahead of the FOMC rate decision, and after the attempted rebound on Wall St. where the S&P closed little above its 2018 low, while the Dow Jones was supported by gains in Goldman Sachs. ASX 200 (-0.2%) was pressured by oil names following the mass decline in the complex, while Nikkei 225 (-0.7%) initially traded with no firm direction amid a choppy JPY before digging deeper into losses and giving up the 21,000 handle. Sentiment across the region was also reflected by the 10% plunge in Softbank’s mobile business in its USD 24bln market debut. Elsewhere, Hang Seng (+0.2%) and Shanghai Comp. (-0.5%) were mixed as the former was supported by financial names with the four large banks in positive territory. Meanwhile, Mainland gains in real estates and utilities were offset by the decline in the energy and healthcare sectors. Finally, JGB futures posted the biggest intraday gain since 2016 on growing concerns over the global economy health, while futures purchases were also exacerbated after BoJ kept 5-10yr purchases steady at JPY 430bln.

China Commerce Ministry says China and US discussed trade and the economy on a Vice Minister level on Dec 19th. (Newswires)

China purchased an unspecified amount of US soybeans; according to traders. (Newswires)

PBoC set CNY mid-point at 6.8869 (Prev. 6.8854) (Newswires)
PBoC injected CNY 40bln via 7-day reverse repos and CNY 20bln via 14-day reverse repos; Net CNY 60bln.

Japanese Trade Balance Total Yen Nov -737.3B vs. Exp. -600.3B (Prev. -449.3B, Rev. -450.1B) (Newswires)
Japanese Imports YY Nov 12.5% vs. Exp. 11.5% (Prev. 19.9%)
Japanese Exports YY Nov 0.1% vs. Exp. 1.8% (Prev. 8.2%)


UK/EU

UK’s SNP, Liberal Democrats, Plaid Cymru and Greens have tabled a vote of no-confidence in the government. SNP’s Blackford is hopeful that they will be granted time by the government to debate the matter before the Christmas recess. (The Independent)

Business Insider's Political Reporter Payne tweeted "Labour source says the party's position is unchanged. It'll table its own confidence motion after the meaningful vote when the moment is right." (Twitter)

Former Brexit Secretary Raab has urged PM May to give businesses a tax break to help weather a no-deal Brexit, funded using the GBP 39bln the UK would save after no longer needing to pay the EU. (Telegraph)

The Times Shadow Monetary Policy Committee believes that households should be spared an interest rate rise until the current political uncertainty clears early next year, assuming it does. (Times)

Italy's Government source said the EU Commission has accepted the 2019 budget deficit of 2.04%. (Newswires) This comes after sources from PM Conte’s office said Italy has received only verbal assurances from the EU Commission over the budget deal and it is reasonable to expect a positive outcome at EU commission meeting on Wednesday. Later, Italian Economy Minister Tria's spokesperson said Italy has completed a deal with the EU commission over the budget. (Newswires)

Belgium PM Charles Michel has resigned after no confidence vote. (Newswires)

FX


FX markets were choppy in which the DXY remained sub-97.000 and retreated to lows of 96.830 in the run-up to the FOMC interest rate decision, which is widely expected to result in a dovish hike. As such, EUR/USD was pushed further above of 1.1350 while GBP/USD breached 1.2650 to the upside. Meanwhile, USD/JPY swung within a 40-pip range after printing fresh Dec lows at 112.19 amidst the undecisive risk tone, with traders also citing the downside to bearish technical indicators. Elsewhere, antipodeans were also bolstered by the softer greenback alongside firmer base metal prices, with AUD/USD re-testing resistance 0.7200 ahead of its 100DMA at 0.7219 and NZD/USD shrugged off downbeat current account data to march further north of 0.6850. Finally, the Loonie was subdued and failed to benefit from the weaker buck as the decline in crude prices kept USD/CAD little changed around 1.3450.
 

COMMODITIES

WTI and Brent traded sides-ways after the complex suffered its largest decline in over three weeks amid concerns of slower global growth and surging supplies from US and Russia. Prices were little changed after the release of the API crude inventories which showed a surprise build of almost 3.5mln barrels, focus is on the weekly DoE release where US production numbers will be closely watched as output surpassed 11mln BPD for almost two months. Elsewhere, gold mirrored the greenback and crawled higher ahead of the FOMC decision later today, while copper outperformed as prices consolidated after declining almost 3% yesterday.

US API Weekly Crude Stocks (14 Dec) +3.452mln vs. Exp. -2.4mln (Prev. -10.18mln) (Newswires)

US said it is monitoring the El-Sharara oil field situation after Libya’s NOC declared force majeure at the 315K BPD oil field. (Newswires)


GEOPOLITICAL

US Special Envoy for North Korea will visit South Korea this week to coordinated efforts to push North Korea to denuclearise. (Yonhap)

US

Treasuries drifted higher on Tuesday on the back of a volatile session for the equity market and as investors remained cautious ahead of tomorrow’s FOMC meeting. The curve saw some modest bull-steepening as most of the action was concentrated in the front end of the curve where yields were lower by c.5bps at settlement; longer date yields were lower by c.4bps. Spreads widened by less than 1bps with the exception of 10s30s which were slightly narrower. US T-NOTE FUTURES (Z8) SETTLE 7+ TICKS HIGHER AT 120-30+

US President Trump is said to have given the executive order for a Federal government shutdown on December 24th. (Washington Post)

US Press Secretary Sanders said the Fed is independent but US President trump has the right to state his opinion on its policy. (Newswires)

US Treasury Secretary Mnuchin said the yield curve is a poor economic indicator. (Newswires)

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Dominic Raab = The Turnip in Brussels via @Telegraph https://t.co/lf6JLRb6Pg