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RANsquawk EU Open Rundown 29.03.17

  • Asian equities traded mostly higher amid a positive Wall Street lead, with stocks supported by upside in energy and financial names
  • USD held on to the prior session’s gains with the USD-index closer to the 100 level and USD/JPY above 111.00
  • Looking ahead, highlights include UK PM May invoking Article 50 and the DoE Crude oil inventory report

ASIA

Asia equities traded mostly higher following the rebound on Wall St. where stocks were led by strength in financials and energy sectors, as well as encouraging data with consumer confidence at a 16-year high. ASX 200 (+0.9%) outperformed with broad-based gains and was similarly led by strength in the aforementioned sectors, while Nikkei 225 (Unch.) failed to benefit from a weaker JPY, as poor retail sales data overshadowed sentiment. Financials outperformed in the Hang Seng (+0.3%) after AgBank kick-started the Big 4 earnings reports with an encouraging result, while upside in the Shanghai Comp. (+0.1%) was limited after the PBoC refrained from open market operations for the 4th consecutive day which resulted to a daily net drain of CNY 70bln. 10yr JGBs were flat despite an indecisive tone seen in Japanese stocks, while underperformance was observed in the 5yr after the BoJ’s Rinban announcement in which it reduced buying in 3yr-5yr maturities to JPY 380bln from JPY 400bln.

PBoC refrained from open market operations today, for a net daily drain of CNY 70bln. (Newswires)

PBoC set CNY mid-point at 6.8915 (Prev. 6.8782)

EUROPE

French Magistrates have placed the wife of Presidential candidate Fillon under formal investigation in fake jobs probe, according to a judicial source. (Newswires)

UK

UK PM May signed the Article 50 letter, in preparation to hand to Europe. (Newswires) The letter is expected to be handed to EU President Tusk later today at 1230BST. PM May’s debrief to UK lawmakers will take place at the same time.

Scottish lawmakers voted 69 to 59 in favour for a second independence referendum. However, the UK government did state that it will not be entering in negotiations on the Scottish Government's proposal for new independence referendum. Stating that it will be unfair to the people of Scotland to make a crucial decision on Independence without the necessary information about the UK's future relationship with the EU. (Newswires)

BoE's McCafferty stated that the BoE will be raising rates when the economy is strong enough and he personally does not know if he will vote for a hike soon. However, he did later state that he only has a limited tolerance for inflation overshoot. (Newswires)

FX

USD held on to the prior session’s gains with the USD-index closer to the 100 level and USD/JPY above 111.00, while GBP/USD took centre stage and briefly fell below the 1.2400 handle as Asia reacted to reports that UK PM May signed the Article 50 letter to be sent to the EU and formally initiate the Brexit process. Elsewhere, antipodeans diverged with AUD/NZD breaking above 1.0900, while CNY was pressured following a weaker reference rate by the PBoC.

SNB's Maechler stated the CHF remains overvalued, as much as 10% over historical levels. (Newswires)

COMMODITIES

WTI crude futures marginally extended on yesterday’s gains with prices unaffected by an API Crude Inventory build of 1.9mln bbls. Elsewhere, gold (-0.3%) was mildly pressured amid a firmer greenback, while copper saw a slight pullback but remained close to yesterday’s highs following the rebound seen across most of the commodities complex.

US API Crude Oil Inventory Report (Mar 24) W/W 1909K (Prev. 4529K). (Newswires)

Libya National Oil Company (NOC) has declared a force majeure at the Wafa Oil Field, according to sources. (Newswires)

US

Fixed Income markets grinded lower into the settlement as a late selloff was clear along the curve as the 10y and 30y followed the 5y post auction, which saw selling pressure despite a solid result, with the 10y Jun’17 future settling down 10 ticks at, 124.11.

Fed's Kaplan (Voter, Neutral) reiterated the Fed should be taking the steps to hike rates in a patient and gradual manner. (Newswires)

Fed's Fischer (Voter, Neutral) stated that two more rate hikes in 2017 seems to be about right and he has been considering staying on as vice-chair of the Fed for a second term.

Fed’s Powell (Voter, Neutral) stated that the Fed should be moving slowly towards a more neutral stance and that rate hikes are not anticipated to significantly impact government borrowing costs. (Newswires)

Fed's George (Non-Voter, Hawk) said that we're not interested in tight monetary policy and it is important to hike in a gradual but deliberate fashion. (Newswires)

US President Trump is said to meet with Chief Economic Adviser Gary Cohn on Thursday to discuss tax overhaul, in which the President will be briefed on GOP plans including border tax. In other news, US President trump stated at a White House reception for senators that we are all going to strike a deal on health care very quickly. (Newswires)

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