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[PODCAST] EU Open Rundown 21st December 2018

  • Asia-Pac stocks were lower across the board as the global stock rout continued into the region following the losses in US amid fears of a government shutdown
  • FX markets were quiet amid a sparse overnight calendar, and as the DXY traded within a narrow range for most of the session before testing 96.500 to the upside
  • Looking ahead, highlights include UK GDP, US Durables, GDP, PCE, Canadian, GDP, Retail Sales and Quadruple Witching

ASIA-PAC

Asia-Pac stocks were lower across the board as the global stock rout continued into the region following the losses in US amid fears of a government shutdown. The DJIA posted a fifth consecutive session in the red as the index fell to a 14-month low, while the Nasdaq briefly dipped into bear market territory amid weakness in Amazon and Apple, meanwhile the S&P printed its sixth day of back-to-back losses. ASX 200 (-0.7%) hovered at a two-year low as the index felt pressured by financial names as the “Big Four” banks sat firmly in the red, alongside insurance names (ASX 200 Insurance Index -0.8%) amid a large number of claims after severe thunderstorms in Sydney. Nikkei 225 (-1.3%) fell deeper into bear market as regional shares were poised for the worst week since October, with downside exacerbated by the firmer JPY. Elsewhere, Shanghai Comp. (-1.1%) opened with firm losses and extended the decline as the Mainland suffered from losses in financials and real estate names. Hang Seng (-0.1%) rebounded off intraday lows after heavyweight Tencent spiked higher by over 4% after the Chinese government hinted at lifting a nine-month long block on the release of new online games.

China Foreign Ministry said US accusations regarding economic espionage hurts US-Sino relations; according to a statement. (Newswires) This follows reports via Washington Post that US, UK, Australia, Canada, Japan and Germany plan to openly accuse China about its economic espionage activities. US Treasury Secretary Mnuchin said DoJ actions are separate from trade talks with China. (Newswires)

US Secretary of State Pompeo and Homeland Security's Nielsen said China violates 2015 cyber-security commitments. (Newswires)

EU, US and Japanese officials are said to be considering a ministerial-level trade meeting in January; according to Japanese Press. (Newswires)

PBoC injected a net CNY 600bln for the week via OMO. (Newswires)
PBoC sets CNY mid-point at 6.8825 (Prev. 6.8936)

Japanese CPI, Overall Nationwide Nov 0.8% vs. Exp. 0.8% (Prev. 1.4%) (Newswires)
Japanese CPI, Core Nationwide YY Nov 0.9% vs. Exp. 1.0% (Prev. 1.0%)
Japanese CPI, Super Core Nationwide YY Nov 0.3% vs. Exp. 0.4% (Prev. 0.4%)
 

UK/EU

UK GfK Consumer Confidence* Dec -14 vs. Exp. -14.0 (Prev. -13.0) (Newswires)


FX

FX markets were quiet amid a sparse overnight calendar, and as the DXY traded within a narrow range for most of the session before testing 96.500 to the upside. As such, EUR/USD held onto most its recent gains with the pair hovering just under 1.1450, ahead of its 100 DMA at 1.1484. Similarly, GBP/USD traded around 1.2650 after moving in tandem with the USD, and as Brexit headlines start to ease with the UK Parliament now on Christmas recess (20th Dec to 7th Jan).  Elsewhere, USD/JPY was mostly dictated by the risk tone as the pair briefly dipped below 111.00 before rebounding from its 200 DMA at around 110.90.

Mexican Central Bank hiked rates by 25bps to 8.25% as expected. The vote was unanimous, while Members highlighted the risk to growth continues to be tilted to the downside. Members added that the MXN exchange rate has continued to reflect uncertainty surrounding the policies of the new administration and the Central Bank will adjust monetary policy in opportune and a manner to bring inflation to target. USD/MXN saw indecisive and volatile trade upon the decision as the pair fluctuated within a range of 19.8700-9400. Mexican Central Bank Governor later noted that the exchange rate and interest rates remain at relatively high levels. (Newswires)

COMMODITIES

WTI and Brent prices consolidated with the former reclaiming the USD 46.00/bbl level following the prior day’s decline amid the ongoing supply glut concerns as global growth slows, along with investors questioning the impact of the OPEC+ output cut commencing next month. Elsewhere, gold was uneventful amid a rangebound sub-96.500 DXY, while copper was choppy within a tight range and prices continued to retrace this month’s sell-off.

Libya's NOC said El-Sharara oilfield remains closed; according to a statement. (Newswires) This contradicts earlier reports from two Libyan sources that the oilfield has restarted production.


GEOPOLITICAL

The Canadian detained in China, Michael Kovrig, is being held at an undisclosed location with no right to an attorney or bail; according to FT citing sources. (FT)

US

Treasuries ended Thursday session in negative territory falling to a eight-month low in the aftermath of the FOMC meeting; investors also moved away from equities amid worries of a slowdown in global growth. The complex extended gains after US President Trump announced he would not sign a bill unless border security is considered which means the government will partially close on Friday. The yield curve flattened and most of the actions was concentrated in the front end of the curve where yields were higher by c.3bps. Spreads widened across the curve with 2s10s and 2s5s wider by c.1bps. * US T-NOTE FUTURES (Z8) SETTLE  3+ TICKS AT 120-02.

US President Trump announced that US Secretary of Defence Mattis will be retiring at the end of February. In his resignation letter, Mattis said he is stepping down, so President Trump can have a defence secretary better aligned with his views. Senior White House official then said that Mattis resigned during a meeting with US President Trump on Thursday due to differences of opinion on some issues. CNN then reported that other US officials are reportedly leaving Trump admin beside US Defence Secretary Mattis. (Twitter/Newswires/CNN)

US House passes the bill to fund Federal agencies through to February 8th while providing the USD 5bln for US President Trump's border wall. (Newswires) This sets up a clash with the Senate as their bill does not have the funding for the border wall. US House Speaker Ryan said US President Trump wouldn't sign senate-approved funding bill, adding that Trump he wants to see an agreement that protects the border. (Newswires)

White House Economic Advisor Hassett said fundamentals of US economy are strong, very low chance of GDP growth below 2% next year given the economy. (CNBC)

US Treasury Secretary Mnuchin said he is still confident we can deliver 3% growth in 2019, think we will see rebalancing out of bonds into equities. (Newswires)

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