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[PODCAST] EU Open Rundown 08.06.18

  • Asian stocks traded with a subdued tone following a lacklustre performance on Wall St. DXY has languished below the 93.50 level
  • Trump launched a tweet-tirade against EU and Canada ahead of the G7, in which Trump accused EU & Canada of using massive trade tariffs and trade barriers against US
  • Looking ahead, highlights including the Canadian jobs report and the beginning of the G7 summit

 

ASIA

Asian stocks traded with a subdued tone following a lacklustre performance on Wall St, where the major indices finished mixed as tech underperformed and the Nasdaq pulled back from record levels, although the energy sector was underpinned on oil gains. In addition, lingering tensions concerning US tariffs which threatens to isolate US President Trump at the G7, as well as a Trump tweet tirade against EU and Canada, added to the gloom. ASX 200 (Unch.) traded indecisive as upside in energy and financials were counterbalanced by weakness in miners, while Nikkei 225 (-0.3%) was downbeat as participants digested weaker than expected GDP data which printed at a contraction and in-line with the preliminary reading. Elsewhere, Shanghai Comp. (-1.3%) and Hang Seng (-1.3%) were the laggards after PBoC operations resulted to a weekly net liquidity drain of CNY 300bln and with participants cautious in anticipation of the Chinese trade data which turned out to be mostly better than expected, although by then the selling had already taken its toll. Finally, 10yr JGBs were flat despite the cautiousness in Japan, while the BoJ’s Rinban operation was also largely ignored with the total amount at a relatively reserved JPY 360bln.

PBoC skipped open market operations for a weekly net drain of CNY 300bln vs. last week's CNY 410bln net injection. (Newswires)
PBoC set CNY mid-point at 6.4003 (Prev. 6.3919)

Chinese Trade Balance (CNY)(May) 156.5B vs. Exp. 243.0B (Prev. 182.8B)
Chinese Exports (CNY)(May) Y/Y 3.2% vs. Exp. 1.9% (Prev. 3.7%)
Chinese Imports (CNY)(May) Y/Y 15.6% vs. Exp. 9.4% (Prev. 11.6%)

Chinese Trade Balance (USD)(May) 24.9B vs. Exp. 33.8B (Prev. 28.8B)

Chinese Imports (USD)(May) Y/Y 26.0% vs. Exp. 18.8% (Prev. 21.5%)

Chinese Exports (USD)(May) Y/Y 12.6% vs. Exp. 11.3% (Prev. 12.9%)

Japanese GDP (Q1 F) Q/Q -0.2% vs. Exp. -0.1% (Prev. -0.2%). (Newswires)
Japanese GDP Annualized (Q1 F) Y/Y -0.6% vs. Exp. -0.4% (Prev. -0.6%)

UK/EU

UK PM May reaffirms that she ‘expects’ to have a state customs plan in place by December 2021 at the latest, while she also says UK is working to ensure EU response to US tariffs is proportionate and adheres to WTO regulations. (Newswires)

UK Foreign Minister Johnson criticised UK PM May’s Brexit Plan and stated that Britain should adopt an approach similar to that of US President Trump. (Newswires)

UK’s CBI has warned that Britain risks being left in the economic “slow lane” compared with other developed nations amid the impact of Brexit unless the government and business step up efforts to lift investment and productivity. (Times)

US President Trump may not hold formal discussions with UK PM May at the G7 summit. (Telegraph)

SNB's Jordan said the current economic situation is very good and that it is very unlikely they will leave the Eurozone. (Newswires)


FX

In FX markets, the USD was flat with the DXY languishing below the 93.50 level amid concerns Trump policies may isolate the US. This was not helped by Trump’s tweet-tirade against EU and Canada ahead of the G7, in which Trump accused EU & Canada of using massive trade tariffs and trade barriers against US, and warned both nations to remove them or they will be matched. The rest of major currencies lacked drivers with EUR/USD stuck around 1.1800 and with GBP/USD virtually unchanged throughout the entire session. Elsewhere, USD/JPY’s attempts to nurse losses were thwarted by the cautious risk tone and AUD remained pressured from the prior day’s disappointing Australian trade data.


COMMODITIES

Commodities were quiet overnight in which WTI crude futures were marginally higher and just about reclaimed the USD 66.00/bbl level, after the prior day’s rebound amid ongoing Venezuelan supply concerns. Elsewhere, gold conformed to the uneventful tone seen across the commodities complex and copper also languished due to the aversion for risk in the region.


GEOPOLITICS

US President Trump said summit with North Korea is ready to go, while he also commented that US could sign an agreement with Kim during the summit and that the US would certainly like to see normalisation of ties with North Korea. However, US President Trump also stated he would be willing to walk away from talks with North Korea, but that he does not want this to be the case and that if talks go well he will invite Kim Jong Un to the US. (Newswires)

US Secretary of State Pompeo said North Korea confirmed to the US its willingness to denuclearise but also commented that North Korea's programmes threaten the US. (Newswires)
 

Satellite images suggested China removed or hid its missile systems from disputed South China Sea island, although its Foreign Ministry said it will not bow to threats of US ramping up patrols. (Newswires)
 

Russian President Putin has asked Austrian leader to set up a summit with US President Trump. (WSJ)


US

Treasuries began to rise as the North America session got underway -- contrary to the price action in Bunds (which edged lower over as European political risks abate, and the ECB prepares to signal policy normalisation next week) whose price action Treasuries have tended to track in early trade -- on the back of increasing tensions between the US and its major trade partners, ahead of the G7 summit. The Tplex got more of an aggressive bid in afternoon trade, after US President Trump once again stipulated that NK must denuclearise fully in order for any peace deal to be reached, while contentious rhetoric between trade partners continued to aid the upside, seeing Treasury futures move higher. There was a further boost to the Tplex in afternoon trade: reportedly fat fingers pushed large buy orders through in the 10yr space, eventually triggering stops, which saw yields spike lower, before paring back; the EM complex was under pressure at the time, and some suggest that CTA/momentum accounts accelerated selling of EMFX against the USD, selling equities in general (nudging the VIX higher), ultimately supporting the Treasury bid. The yield curve bull-flattened on Thursday with shorter dated yields lower by c.4bps and longer dated yields lower by c.6bps; 2s30s and 2s20s were narrower by c.2bps at settlement. US 10YR T-Notes futures (Sep 2018) settled 10 ticks higher at 119-90.

US President Trump tweeted EU & Canada doesn't inform public that for years they have used massive trade tariffs and non-monetary trade barriers against US, which is unfair to US farmers, workers & companies, while he warned them to take down their tariffs & barriers or the US will match them. (Twitter)

White House stated that US President Trump is to leave the G-7 earlier than had previously scheduled. (Newswires)

US House voted 210-206 to pass the rescission bill to cut around USD 15bln in previously approved spending. (Newswires)

Source: RANsquawk

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