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RANsquawk EU Open Rundown 15.03.17

    • Asian equities traded mostly lower as markets remain cautious ahead of today’s FOMC policy announcement
    • A similar story has been seen in FX markets with USD relatively rangebound while GBP has found a bid heading into the European open
    • Looking ahead, highlights include FOMC rate decision, US CPI and Retail Sales, UK employment data and comments from ECB's Praet

    ASIA

    Asia equities traded mostly lower as global sentiment remained dampened by pre-FOMC caution. This weighed on Nikkei 225 (-0.2%) from the open, while ASX 200 (+0.3%) recovered amid resilience in commodity stocks, aside from the gold miners which suffered after the precious metal briefly dropped below USD 1200/oz. Shanghai Comp. (-0.1%) and Hang Seng (-0.2%) conformed to the lacklustre tone, although losses have been stemmed after the PBoC slightly upped its liquidity injections to a total CNY 60bln. 10yr JGBs are only marginally higher despite a subdued risk tone and the BoJ’s presence in the market for a total of JPY 1tln, with demand weak ahead of tomorrow’s BoJ announcement in which consensus is for the central bank to hold off on any policy tweaks.

    Chinese Premier Li concluded the NPC in which he stated that the GDP target of around 6.5% is not low and is not easy to reach. Premier Li also ruled out systemic risks in finance system which he described as generally safe and added that China has many policy tools to cope with risks. (Newswires)

    PBoC injected CNY 10bln in 7-day reverse repos, CNY 10bln in 14-day reverse repos and CNY 40bln in 28-day reverse repos. PBoC set CNY mid-point at 6.9115 (Prev. 6.9118). (Newswires)

    EUROPE/UK

    A French probe has been opened into 2016 Vegas trip by Macron, according to a judicial source. (Newswires) However, Macron's team later denied these allegations, saying he is not implicated in Las Vegas probe and the story is ‘in no way a story about Macron’. (AFP)

    DPA stated 3 polls suggested that Netherlands Liberal Party leader and PM Rutte is ahead with between 24-28 seats in the 150-seat parliament and Wilder's far-right Freedom party is seen with 20-24 seats, while as much as 40% are undecided. (Newswires)

    Scottish First Minister Sturgeon’s referendum plans are reportedly unravelling as it emerged she is to abandon the SNP’s policy of rejoining the EU immediately amid record Euroscepticism in Scotland. (Telegraph)

    The Bank of England should prepare the ground for an interest rate rise next month, according to The Times shadow monetary policy committee with 3/9 members voting for an immediate 25bps hike. (Times)

    FX

    FX markets were relatively quiet with USD remaining range bound as participants await an expected US rate hike and accompanying Fed dot plot for clues on the future path of rates. Elsewhere, USD/JPY and JPY crosses nursed some losses, albeit marginally as the BoJ kicked off its 2-day policy meeting, while INR continued its recent advances with USD/INR breaking below the 65.500 handle. Finally, GBP has seen a bid heading into the European open (note, yesterday’s drop in GBP at a similar stage of the session) with GBP/USD reclaiming 1.2200 to the upside in what has otherwise been a relatively light session overnight for FX markets.

    COMMODITIES

    WTI crude futures rebounded from 3-month lows with an unexpected drawdown in API crude oil inventories providing support for prices which have reclaimed the USD 48/bbl level. Copper prices were flat to hold on to yesterday’s gains as supply uncertainties remain after striking Escondida copper mine workers rejected a return to negotiations, while mild short covering was observed in gold (+0.3%) which helped the precious metal back above the USD 1200/oz level.

    US API Crude Oil Inventory Report (Mar 10) W/W -531K (Prev. 11600K). (Newswires)

    Saudi Energy Ministry said they are committed to working with OPEC and non-OPEC producers to stabilise the market; says Feb crude production cut to 9.9mln BPD from 9.99mln BPD. (Newswires)

    Escondida copper mine in Chile plans to restart operations in 2 areas which are unrelated to current talks, after workers rejected invitations to resume negotiations. There were also reports that the mine union estimated the cost of strikes at 122,500 tons of copper production. (Newswires)

    US

    US Treasuries closed the session higher although volumes were below average given Storm Stella which disrupted travel on the US east coast. Markets were mostly quiet ahead of the Fed decision with focus set to be on the rate path and comments from Yellen in the post-decision press-conference, given that a 25bps hike is almost fully priced in. Finally, Jun’17 10y T-notes settled at 122.28, up 2+ ticks.

    US President Trump's selection for US Trade Representative Robert Lighthizer vowed to crack down on China trade practices in response to questions regarding China overproduction of steel and other products. (Newswires)

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