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[PODCAST] EU Open Rundown 3rd January 2019

  • Asia-Pac equities were mixed following the slide in US equity futures after tech-giant Apple fell in excess of 8% after-market following a cut in guidance
  • An overnight surge in JPY rattled FX markets with AUD/JPY plummeting from around 75.50 to a low print of 70.50 amid thin trade and global growth fears
  • Looking ahead, highlights include US ADP, weekly jobs, construction spending, ISM manufacturing, supply from Spain

ASIA-PAC

Asia-Pac equities were mixed following the slide in US equity futures after tech-giant Apple fell in excess of 8% after-market following a cut to its Q1 2019 revenue guidance to USD 84.0bln, from previous guidance in the range of USD 89.0-93.0bln. ASX 200 (+1.4%) was lifted by the energy names and gold miners amid yesterday’s spike higher in oil and the Apple-triggered bid in the yellow metal, meanwhile Nikkei 225 was closed again due to a public holiday. Elsewhere, Hang Seng (-0.7%) and Shanghai Comp. (unch) swung between gains and losses with the former weighed on by tech names as Apple suppliers ACC Technologies and Sunny Optical slumped over 5% after Apple’s guidance cut. Meanwhile the Mainland was underpinned by financial names after reports that the PBoC may lower the RRR for banks that lend to small businesses. Of note: China CICC Research stated that the PBoC’s RRR criteria easing could release up to CNY 400bln in liquidity.

PBoC set CNY mid-point at 6.8631 (Prev. 6.6842) (Newswires)
PBoC drained a net CNY 90bln

US President Trump said that trade negotiations with China are coming along very well and “we'll see what happens”. (Newswires)

China is said to be considering a new package of measures to boost consumption. (Newswires)                  

UK/EU

UK PM May has been urged to delay the meaningful vote on her Brexit deal for a second time as government whips failed to persuade enough MPs to back it over the Christmas. (The Telegraph) As a reminder, the vote is currently scheduled for January 14th.

UK PM May is to press EU leaders for Brexit concessions starting from today with the aim of gaining legally binding assurances that a so-called backstop plan will be time-limited. (FT)

Labour leader Corbyn will defy calls to alter the course of the party’s Brexit policy ahead of parliament’s meaningful vote, insisting that the government should secure a new deal with the EU if MPs reject Theresa May’s agreement. (Guardian)

UK Chambers of Commerce said services sales growth in Q4 2018 was at a two-year low. (Newswires)

French President Macron's Head of Communications is reportedly resigning; according to French Press. (Newswires)

FX

FX markets were rattled in thin liquidity amid fresh global growth fears after Apple cut its Q1 revenue forecast, citing weaker Chinese sales. This spurred safe-haven demand into the JPY while simultaneously pressuring the trade-sensitive AUD, hence AUD/JPY plummeted from around 75.50 to a low print of 70.50, tripping several stops along the way which led to an algo-triggered flash-crash. Shortly after the stops were taken-out, AUD/JPY pared back a bulk of the move and stabilised just under 74.50. Furthermore, USD/JPY slid sharply below 109.00 to test 105.00 at one point, while AUD/USD declined further below 0.7000 to touch levels last seen a decade ago. The pairs then recouped some losses to trade just above 107.00 and 0.6930 respectively throughout most of the session.

Meanwhile, Aussie and Yen crosses reacted in tandem with the sharp swing, the Pound was hit as GBP/JPY fell through 137.00 to levels just shy of 131.50 and as such, Cable lost the 1.2600 handle and briefly clipped 1.2450 before recovering to around 1.2550. Elsewhere, the NZD initially popped higher as the AUD/NZD cross briefly reached parity, however, gains in the Kiwi were short-lived as the currency conformed to the risk-averse tone and moved lower in sympathy to its antipodean counterpart. Finally, amidst all the above, the Dollar index declined further below 97.000 and tested 96.500 to the downside ahead of the psychological 96.000 level and its 100 DMA at 95.987.

COMMODITIES

WTI futures declined by almost a dollar per barrel overnight as renewed slowing global growth fears sent the benchmark back below USD 46.00/bbl, ahead of the holiday-delayed API inventory release later today. Elsewhere, gold was bid amid safe-haven demand alongside a weaker greenback as the yellow metal climbed higher to test USD 1290/oz to the upside, while copper underperformed and fell victim to the soured risk sentiment.  
 

GEOPOLITICAL

US President Trump said he received a great letter from North Korea Leader Kim Jong Un; he added he has established a good relationship with him and never emphasized speed of denuclearisation. (Newswires)

China said the two Canadian citizens are still detained and under probe for violating Chinese law. (Newswires)

US

The Treasury complex was bid overnight after Apple’s guidance cut (citing weaker Chinese sales) gave further fuel to the notion of slowing global economic momentum. This comes following some selling emerged in the prior session after US equities stabilised after the open, and the risk mood became more constructive. By yesterday’s close, the short-end of the curve was a touch negative, while longer-dated yields were lower by around 5bps; the result was a flatter yield curve on the first trading day of the year. * US T-NOTE FUTURES (H19) SETTLE 5+ HIGHER AT 122-06.

Congressional leaders failed to strike a deal to end the partial US government shutdown. US President Trump has asked the leaders to return for negotiations on Friday regarding government funding and border security; according to US Republican Representative McCarthy. (Newswires)

US President Trump when asked if he would accept a government funding deal with less than USD 5bln for a wall, said that the figure is a very small amount. The President later tweeted that he remains ready to work with Democrats. Regarding the recent stock rout, US President Trump said there was a glitch in the stock market last month, but it has a long way to go and will go up once trade deals are settled. (Newswires)

US Senate Republican Leader McConnell said Senate will not consider the legislation that is expected to be presented by Democrats to end the government shutdown. (Newswires)

US House Democratic Leader Pelosi said they are not willing to give any money for US President Trump's border wall. (Newswires)

Apple (AAPL) cut its Q1 revenue guidance to USD 84.0bln vs. Exp. USD 91.3bln (Prev. guidance USD 89.0-93.0bln); citing weak China sales, emerging market challenges, and lower anticipated iPhone revenue. (Newswires)

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