[PODCAST] EU Open Rundown 07.06.18
- Asian stocks traded higher as the regional bourses took impetus from the gains in their US counterparts
- USD was weaker with the DXY stuck around the 93.50 level to the benefit throughout the session
- US President Trump is said to be planning on adopting a confrontational tone at G7 in response to the other 6 nations collectively pressuring him regarding tariffs
- Looking ahead, highlights include Turkish rate decision, US weekly jobs, BoE’s Ramsden, supply from France and Spain
Asian stocks traded higher as the regional bourses took impetus from the gains in their US counterparts in which the S&P 500 and Nasdaq notched a 4th consecutive win streak, while the DJIA atoned for Tuesday’s underperformance and led the advances to surmount the 25K level. ASX 200 (+0.6%) and Nikkei 225 (+0.8%) both opened higher on the tailwind from Wall St and with commodity related sectors leading Australia higher, while the Japanese benchmark continued to benefit as the recent weak JPY-risk appetite dynamic remained intact despite the currency attempting to nurse losses overnight. Elsewhere, Shanghai Comp. (+0.1%) and Hang Seng (+0.7%) conformed to the optimism seen across global stock markets with trade concerns placed on the back burner, although gains in the mainland were capped following a net drain by the PBoC. Finally, 10yr JGBs were initially lacklustre amid similar price action in T-notes and due to the broad appetite for risk, although prices later saw mild gains on reopen from the break and following an enhanced liquidity auction in the super-long end which attracted a higher b/c than prior.
China Mofcom reiterated China doesn't want trade tensions with US to escalate and that China is willing to raise imports from US and other countries. Furthermore, Mofcom stated some specific progress was made in just completed trade talks with US which included discussions on agriculture and energy. (Newswires)
PBoC injected CNY 20bln via 7-day and CNY 20bln via 28-day reverse repos for a net daily drain of CNY 70bln. (Newswires)
PBoC sets CNY mid-point at 6.3919 (Prev. 6.4040)
UK PM May and Brexit Secretary Davis reported to be at loggerheads regarding EU customs split, which sparked some rumours that Davis was close to resigning, according to reports. (The Sun) The “Temporary Customs Arrangement” was expected to be published today, however facing the resistance from Brexit Secretary David Davis, the publication could now be delayed until the end of the week. (BBC) In other news, UK PM May was accused of keeping Brexiteers in the dark regarding her backstop plans to avert a harder border in Northern Ireland (The Times), while there were also reports UK PM May is said to have compromised with Tory rebels with ministers believing that the rebels will be won over on Customs Union amendment to EU withdrawal bill next week. (Twitter)
Italian PM Conte won his confidence vote in the Lower House (as expected) and thus has confirmed the appointment of his government. (Newswires)
In FX markets, USD was weaker with the DXY stuck around the 93.50 level to the benefit throughout the session. This benefited its major counterparts in which EUR/USD eyed 1.1800 to the upside ahead of next week’s ‘live’ ECB meeting, while GBP/USD was also firmer after support held at 1.3400. Elsewhere, mild profit taking was seen in USD/JPY and JPY-crosses following this week’s gains, in which AUD/JPY led the pullback as AUD underperformed in a delayed reaction to the slightly narrower than expected Australian Trade Surplus and contraction in Exports.
Australian Trade Balance (AUD)(Apr) 977M vs. Exp. 1,000M (Prev. 1,527M, Rev. 1,731M). (Newswires)
Australian Exports (Apr) M/M -2.0% (Prev. 1.0%)
Australian Imports (Apr) M/M 0.0% (Prev. 1.0%)
Commodities were mostly range-bound during Asia trade with WTI crude futures indecisive around the USD 65.00 bbl level, which it has since reclaimed after nursing some of the losses from yesterday’s surprise DoE crude stockpile build. Elsewhere, gold was flat as headwinds from the risk appetite was counterbalanced by a weaker greenback, while the broad optimistic tone ensured copper prices extended on the advances which began last week.
Iraq Oil Minister Luaibi said production increase is not on the table at the June meeting, while the oil minister added that prices are good, the market is stable and there is no need for a production increase. (Newswires)
Yields were moving higher during yesterday’s US session, although 10-year yields failed to test the 3% level. The prevailing wisdom is that the level will give way, though yields have been stubborn in doing so just yet ahead of next week’s FOMC meeting, where it will update its growth projections. At settlement, most of the actions was in the belly and long-end of the curve where yields were higher by c.6bps. 2s10s and 2s30s were wider by c.2bps. US 10YR T-Notes futures (Sep 2018) settled 13+ ticks lower at 119-08+.
US President Trump is said to be planning on adopting a confrontational tone at G7 in response to the other 6 nations collectively pressuring him regarding tariffs. In related news, France joined Germany in warning US President Trump that they will not sign a joint statement at the G7 summit, with President Macron stating that progress must be made on tariffs, Iran agreement and Paris climate accord for him to be willing to sign a joint statement. (Newswires)
NEC Director Kudlow said story that Treasury Secretary Mnuchin requested exemption for Canada is ‘patently false’, while he also stated there will be discussions on trade at G7 meeting as well as a bilateral meeting with Canadian PM Trudeau. Furthermore, Kudlow also commented that there are currently no deals with China and that no decision has been reached on both sides for ZTE. (Newswires)
White House is to release plans in the approaching weeks for reorganizing the federal government which involves consolidating welfare programs and renaming the Health and Human Services Department, while they will also seek reductions for USAID and the State Department. (Politico)
US House will vote on rescission package today. (Politico)
US Senate Banking Committee will vote on June 12 regarding nomination of Clarida for Fed Vice Chair and Bowman to join the Board of Governors. (Newswires)
White House Deputy Chief of Staff Hagin is said to be planning to leave the administration soon. (Washington Post)