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RANsquawk EU Open Rundown 14.03.17

  • Asia equity markets traded mixed following a similar indecisive lead from Wall St. as a non-committal tone persisted ahead of key risk events.
  • UK House of Lords passed the Brexit bill without the EU citizen rights or final vote amendments
  • Looking ahead, highlights include German ZEW, US PPI and API Inventories

ASIA

Asia equity markets traded mixed following a similar indecisive lead from Wall St. as a non-committal tone persisted ahead of key risk events. ASX 200 (Unch.) closed relatively flat with outperformance seen in commodity related sectors after copper and iron ore prices rose by around 1% and 2% respectively, while Nikkei 225 (-0.1) was subdued by a firmer currency with USD/JPY failing to reclaim 115.00. Shanghai Comp. (+0.1%) and Hang Seng (-0.1%) were choppy after the PBoC slightly increased its liquidity injections and as participants digested mixed data in which Chinese Industrial Production beat expectations to print a 6-month high, although Retail Sales disappointed and showed the weakest start since 2002. The Nifty (+1.6%) outperformed to hit a fresh all-time high as India returned from a long weekend and reacted to state election results in which the ruling BJP party won a landslide victory in the country’s largest state of Uttar Pradesh, which highlighted political stability and confidence in PM Modi's government. 10yr JGBs were mildly higher amid a subdued tone in riskier Japanese assets and after a mixed 20yr auction where the b/c slightly declined, but prices rose from the prior month.

Chinese Industrial Production (Jan-Feb) Y/Y 6.3% vs. Exp. 6.2% (Prev. 6.0%);6-monthhigh

Chinese Retail Sales (Jan-Feb) Y/Y 9.5% vs. Exp. 10.6% (Prev. 10.4%);weakestgrowth in February since 2002.

PBoC injected CNY 10bln in 7-day reverse repos, CNY 10bln in 14-day reverse repos and CNY 20bln in 28-day reverse repos.

PBoC set CNY mid-point at 6.9118 (Prev. 6.8988).( Newswires)

EUROPE

Former French PM Valls is planning to endorse Macron, according to press reports. (Newswires)

Latest IFOP poll from France: Le Pen 26.5%, Macron 25%, Fillon 19%; second round Macron 60.5%, Le Pen 30.5%. (Newswires)

UK

UK House of Lords passed the Brexit bill without the EU citizen rights or final vote amendments after House of Commons rejected amendments, with reports stating that Parliament also granted UK PM May permission to start Brexit. Furthermore, it is now expected that the UK will trigger Article 50 in the last week of March rather than this week, with UK Brexit Minister Davis stating Article 50 will be triggered by the end of this month as planned. (Newswires)

UK PM May is preparing to reject Scottish First Minster Sturgeon's demand for a 2nd Scottish Independence referendum in next the 2 years, according to a government source. (Times)

UK British Chambers of Commerce raised 2017 GDP outlook for UK to 1.4% from 1.1%, but reduced 2018 GDP forecast to 1.3% from 1.4%. (Newswires)

FX

USD was rangebound with participants tentative heading closer to a possible Fed rate hike, while GBP/USD remained subdued as it broke below the 1.2200 handle after parliament gave permission for PM May to begin the Brexit process. AUD was mildly pressured with EUR/AUD briefly climbing above 1.4100 after weak NAB Business Confidence and Conditions data, while INR pared some gains after rallying to its strongest in 11-months with the RBI said to have intervened via state-run banks to purchase USD.

Australian NAB Business Confidence (Feb) M/M 7 (Prev. 10)

Australian NAB Business Conditions (Feb) M/M 9 (Prev. 16)

COMMODITIES

WTI crude futures traded sideways overnight which provided some respite after prices declined to 3-month lows the prior day. In terms of metals, copper extends on its gains from the previous session amid the ongoing supply disruptions occurring in some of the world’s largest copper mines, while gold (-0.1%) traded choppy as participants await the 2-day Federal Reserve meeting and a widely anticipated rate hike.

US

In the treasury complex the state of play was much the same as stocks, with low volume weak trade tspanoughout the session and underperformance observed in the long end tspanoughout. All focus is now on the FOMC rate decision, where the spotlight will be on the dot-plot and Yellen presser – in particular any updates than are demonstrative of a steeper rate hike path. 10y T-note Jun’17 futures closed lower by 7 ticks at 122.25+.

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