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[PODCAST] US Open Rundown 21st December 2018

  • Dollar proffers from the plight of others, while oil continues to toil
  • European stocks spooked by global rout, and quadruple witching
  • Looking ahead, highlights include US Durables, GDP, PCE, Canadian, GDP, Retail Sales and Quadruple Witching

ASIA

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 (+0.5%) 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.

China are to fine-tune monetary policy in a pre-emptive way; drops neutral reference. According to state media; adding that China are to deepen reform on state-owned firms, market access and land. Will also allow more wholl-owned foreign firms in more sectors. (Newswires)

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

Japan Vice Finance Minister Okamoto says the economy is moving in a favourable direction, that they Japanese economy is no longer in deflation. Also that increased tax revenue helps to improve the primary budget balance and lower bond issuance. BoJ has many policy tools and expects the BoJ to examine its options and act as is appropriate, adding that sudden forex moves are undesirable. (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%)

US

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)

GEOPOLITICAL

Russian missile frigate is heading towards the Azov sea; according to witnesses. (Newswires)

EQUITIES

Main European Indices are in the red [Euro Stoxx 50 -0.7%] with equity markets following the losses seen in Asia. Outperformance is seen in the FTSE 100 (-0.2%) after Anglo American (+1.6%) are up after resuming operations in their Minas-Rio iron ore plant; with other mining names such as Antofagasta (+2.3%), Glencore (+1.2%) and Rio Tinto (+1.0%) also in the green. Sectors are similarly in the red, with some outperformance seen in the materials sector.

Other notable movers include Just Eat (+3.9%) who are up in sympathy after Delivery Hero (+9.0%) sold their German assets to takeaway.com. Danske Bank (-1.8%) firmly in the red after issuing their second profit warning for 2019.

FX

DXY - The Greenback has rebounded from overnight lows and the index appears to be forming a firmer base above 96.000, albeit thanks in part to counterpart currency weakness as broad risk sentiment remains bleak ahead of the festive break. Indeed, the DXY has ventured back over 96.600 vs 96.241 at one stage and a post-FOMC low of 96.163 ahead of a packed release schedule on the final full trading session of the year.

NZD/AUD - The Kiwi has extended losses vs its US peer in wake of Thursday’s much weaker than expected NZ GDP data, news that the RBNZ is mulling a 2-fold increase in bank reserve holdings of high grade assets and a call by one prominent regional bank for the OCR to be cut by 25 bp late next year. Nzd/Usd is hovering around 0.6725 and Aud/Nzd is holding above 1.0500 even though the Aussie Dollar has fallen in sympathy and under the weight of broader risk aversion, not to mention another US-China spat that could derail efforts to resolve trade issues. Aud/Usd is pivoting 0.7100 with a hefty 2.1 bn option expiry at the strike perhaps exerting a gravitational pull.

CHF/CAD/EUR - All succumbing to the latest Usd revival, as the Franc slips back below 0.9900 and Loonie hits fresh, albeit marginal new 2018 lows circa 1.3535 against the backdrop of still precarious crude prices, ahead of top tier and potentially pivotal Canadian data in the form of GDP and retail sales. Meanwhile, the single currency continues to mirror Dollar moves and perhaps respect more technical/flow-related levels with another fade ahead of 1.1500 and the 100 DMA at 1.1482 culminating in a drift back towards 1.1400 where 1.4 bn expiries reside.

JPY/GBP - Both holding up relatively well, if not quite bucking the overall trend, although the Jpy is displaying its characteristic greater allure in risk-off climes and trades near the top of a 111.05-45 range. Cable is also pretty restrained between 1.2700-1.2645, with a raft of UK data largely shrugged off in the Brexit hiatus and consolidation in vogue before Xmas and New Year.

SEK/NOK - The Scandi Crowns are somewhat mixed as Eur/Sek rebounds from post-Riksbank rate hike lows and a key chart level at 10.2400 even though Swedish retail sales were firmer than forecast, while Eur/Nok has eased back from near 9.9500 highs and the Norwegian Krona sees some respite from the ongoing rout in oil.

FIXED INCOME

Not a great deal of deviation in core debt as the upcoming holidays really begin to crimp trade and dampen the enthusiasm to implement new positions. Gilts did manage another minor new Liffe peak in wake of the UK data raft, at 123.21 (-9 ticks vs -36 ticks at one stage), but could not muster much more from the smaller than anticipated PSNB shortfalls before topping out. Bunds have also firmed up a bit and are back near their Eurex highs, as BTPs reverse from 127.77 to just below 127.00 after latest Italian sentiment indices revealing deeper declines in consumer and business confidence than forecast. Elsewhere, US Treasuries are narrowly mixed after some bear re-steepening on Thursday and eyeing a data deluge alongside Senate and White House decisions on funding to avert a Government shutdown.

COMMODITIES 

Brent (-2.0%) and WTI (-1.0%) have seen a further decline in prices amidst ongoing concerns over global growth and excess supply. Recent news flow has seen comments from Russian Energy Minister Novak that they are sticking to plan to cut oil production by 228,000 BPD with Russian oil producers confirming their readiness to cut output. Separately, IEA’s Birol has commented that US oil production will equal the combined production of Russia and Saudi Arabia by 2025. El Sharara oil field is still closed, contradicting earlier reports that the filed had reopened; as NOC the state oil firm is resisting pressure from some officials to pay off the protestors which initially caused the field to close.

Gold prices which remained steady for much of the session have dropped into the red as the dollar has strengthened, although the yellow metal is still within a narrow USD 5/oz range on the day. Elsewhere, Chinese aluminium producers are estimated to cut more than 800,000 tonnes of capacity each year according to Antaike although no specific time period is given; for reference Chinese smelters have closed over 3.2mln tonnes of capacity in 2018. As according to the International Copper Study Group global refined copper market had a 168,000 tonnes deficit in September compared to 43,000 tonnes in August.

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