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RANsquawk EU Open Rundown 08.05.17

  • French Presidential Candidate Macron became the President Elect after he won the 2nd round run-off
  • Asian equities traded mostly higher with outperformance in the Nikkei 225 as Japanese participants returned from holiday
  • Looking ahead, highlights include potential comments from Fed’s Bullard and Mester

ASIA

Asia equity markets traded mostly higher as the region digested stronger than expected US jobs data and the French Presidential election results where Macron triumphed as expected. ASX 200 (+0.6%) was led by commodity-related sectors after oil rebounded from last Friday’s lows to approach USD 47/bbl to the upside, while Nikkei 225 (+2.3%) surged as it made up for lost ground following its 5-day weekend. Elsewhere, Shanghai Comp (-0.9%) and Hang Seng (+0.3%) were mixed as the mainland underperformed after the PBoC refrained from open market operations and following the latest Chinese trade data in which Exports and Imports fell short of expectations. Finally, 10yr JGBs were lower amid a mostly positive risk sentiment in the region, while the BoJ’s Rinban announcement was also for a relatively paltry total amount of JPY 370bln.

Chinese Trade Balance (CNY)(Apr) 262.3bln vs. Exp. 197.20bln (Prev. 164.34bln). (Newswires)

- Exports (CNY)(Apr) 14.3% vs. Exp. 16.8% (Prev. 22.3%)

- Imports (CNY)(Apr) 18.60% vs. Exp. 29.30% (Prev. 26.30%)

Chinese Trade Balance (USD)(Apr) 38.05B vs. Exp. 35.50B (Prev. 23.93B). (Newswires)

- Exports (USD)(Apr) Y/Y 8.00% vs. Exp. 10.40% (Prev. 16.40%)

- Imports (Apr) Y/Y 11.9% vs. Exp. 18.0% (Prev. 20.3%)

Chinese FX Reserves (USD) (Apr) 3.03tln vs. Exp. 3.02tln (Prev. 3.01tln). (Newswires)

PBoC skipped open market operations. (Newswires)

PBoC set CNY mid-point at 6.8947 (Prev. 6.8884).

BoJ Governor Kuroda said the BoJ is facing a challenging situation as inflation is still close to zero. (Newswires)

EUROPE

French Presidential Candidate Macron became the President Elect after he won the 2nd round run-off, with the current count showing Macron at 66.06% vs. Le Pen 33.94%. French President Elect Macron is not expected to announce his choice for PM until next week, according to French media. Kantar survey suggested that French President-elect Macron's party is to get 26%, Republicans at 22% and National Front at 21% of votes at upcoming Parliamentary Elections. (Newswires)

German Chancellor Merkel’s CDU party secured 33.3% of the vote in German state of Schleswig-Holstein with the SD party winning just 26.5%. (Newswires)

S&P affirmed Italy at BBB-; outlook stable and affirmed Turkey at BB; outlook negative. DBRS affirmed Norway at AAA; stable trend. (Newswires)

UK

Visa stated that UK April consumer spending rose 0.5% Y/Y vs. Prev. 1.0% in March. (Newswires)

German government officials have proposed giving the UK single market access in return for a fee. (Focus Magazine)

Fitch affirmed the UK at AA; outlook negative. (Newswires)

FX

EUR/USD initially rose above the 1.1000 level in reaction to the firm win by Macron. However, gains were short-lived with ‘buy the rumour sell the fact’ in play which saw EUR/USD give back the 1.1000 handle. This in turn benefitted the greenback considering the single currency’s majority weighting in the USD-index, while GBP/USD and AUD/USD also pulled back from Friday’s gains, with the latter retreating below 0.7400 after disappointing Building Approvals.

Australian Building Approvals (Mar) M/M -13.4% vs. Exp. -4.0% (Prev. 8.3%). (Newswires)

- Building Approvals (Mar) Y/Y -19.9% vs. Exp. -10.0% (Prev. -4.9%)

COMMODITIES

WTI crude futures recovered from last week’s slump, with prices up nearly 7% from the lows seen on Friday to approach USD 47/bbl to the upside. Gold (+0.2%) initially declined to 7-week lows in tandem with the risk on sentiment in markets following the French Presidential election result, although markets then reversed course as investors “sold the fact” of Macron’s widely expected win which participants had already bought into late last week. Elsewhere, copper is negative amid the risk averse tone in China and after weaker than expected Chinese Imports and Exports data which also showed April YTD Copper imports decline 22.9% Y/Y.

US Baker Hughes Total Rig Count (May) W/W 877 (Prev. 870)

Saudi's Energy Minister Al-Falih stated markets were recently impacted by slow seasonal demand and growth in non-OPEC supply. Al-Falih added that the worst is clearly behind us and market is moving into re-balancing, while he further commented that he confident the production deal will be extended in the second half and possibly beyond. (Newswires)

Iran oil minister Zanganeh said OPEC and non-OPEC producers are likely to extend output curbs to support prices and added that USD 55/bbl is a suitable price for crude oil. (SHANA)

China April YTD iron ore imports rose 8.6% Y/Y to 353mln tons, while April YTD copper product imports fell 22.9% Y/Y to 1.45mln tons. (Newswires)

GEOPOLITICAL

Iran tspaneatened they will leave no area untouched except Mecca and Medina if the Saudis do anything ignorant. This followed comments last week from the Saudi Deputy Crown Prince that warned of "moving battle to Iran". (Newswires)

US

Nonfarm payrolls took precedent on the final trading day of the week and the report was strong enough for markets to fully price in a 25bps rate hike from the Fed at the June meeting. The headline printed at 211K (above the expected 185K) although average hourly earnings were slightly softer than expected. T-notes were choppy post the release and saw a bounce on short-covering and real money bids due to higher yields, although were then dragged lower as Bunds tumbled ahead of the French presidential election second round of voting. Jun’17 10y T-notes settled at 125.07, up 1+ ticks.

Fed's Bullard (non-voter, dovish) said the Fed need to incorporate bond buying into its permanent arsenal of tools. Bullard added that the balance sheet could sspanink to USD 2tln. (Newswires)

Fed's Rosengren (non-voter, soft-hawk) said he wants to continue to remove accommodation and his preference is to reduce the balance sheet gradually and relatively soon. (Newswires)

Fed’s Williams (non-voter, soft-hawk) repeated that he expects 2 or 3 more hikes this year. (Newswires)

Senate Republicans are said to be planning a version of healthcare bill that is radically altered from the bill the House passed, which would include keeping some of the Obamacare provisions. (Newswires)

Categories:
MOC: * SPX 850mln to sell (vs at 650mln to sell at 1549 EDT) * Dow 50mln to sell (vs 100mln to buy at 1549 EDT)