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RANsquawk EU Open Rundown 26.06.17

  • UK PM May is set to publish a 15 page document today detailing how she intends to protect the rights of 3.2mln EU nationals residing in Britain
  • Asian equities traded higher across the board after a positive close on Wall Street on Friday with macro newsflow otherwise light
  • Looking ahead, highlights include German IFO, US Durables and ECB’s Draghi

ASIA

Asian equity markets traded higher across the board, following the mostly positive Wall St. close on Friday where tech outperformed and energy snapped a 4-day losing streak. In Asia, Nikkei 225 (+0.1%) saw minor upside after USD/JPY recovered from opening losses and ASX 200 (+0.1%) was also in the green as utilities and consumer staples kept the index afloat. Elsewhere, Shanghai Comp. (+0.6%) and Hang Seng (+0.4%) led the positive tone in the regions as financials outperformed, despite the PBoC refraining from OMOs for the 2nd consecutive session. 10yr JGBs saw minor gains amid the BoJ’s presence in the market for JPY 550bln of JGBs mostly concentrated in the 5yr-10yr range, while the curve was mixed with outperformance in the belly.

BoJ Summary of Opinions from June 15-16th said that Japan's economy has been turning towards a moderate expansion and that the most effective way to reach inflation goal is to continue with the current monetary policy. (Newswires)

PBoC skipped open market operations today for a net daily drain of CNY 50bln. (Newswires)

PBoC set CNY mid-point at 6.8220 (Prev. 6.8238)

EUROPE

ECB's Weidmann said an extension of QE has not been discussed and that the time may be approaching for the ECB to exit stimulus if the Euro area economy develops as expected. (Newswires)

Moody’s raised Greece sovereign rating by a notch to Caa2; outlook positive from Caa3; outlook stable. (Newswires) Fitch affirmed Belgium at AA-; outlook stable. (Newswires)

UK

Brexit Minister Davis stated he opposes EU demands that its judges retain ability to safeguard 3.2mln EU nationals living in UK after 2019 Brexit. Davis added that tourists will be guaranteed free health cover when they are on holiday in the EU. UK Press also reports that PM May will ensure that thousands of EU criminals will face deportation after Brexit as a key demand when she publishes a 15 page document detailing how she intends to protect the rights of 3.2mln EU nationals residing in Britain. (Telegraph/Times)

FX

FX markets were relatively quiet following light news flow over the weekend and amid a lack of tier 1 data. This kept USD subdued, while GBP/USD extended on gains after breaking tspanough Friday’s highs. Elsewhere, commodity-linked currencies were marginally supported in tandem with rising energy prices and USD/JPY saw mild upside, although gains were capped by a lack of drivers and after the BoJ’s Summary of Opinions also failed to provide any new insights.

COMMODITIES

Commodities were mixed with energy outperforming the complex in which WTI crude futures gained a firm footing above USD 43/bbl and Brent crude reclaimed 46/bbl to the upside. Elsewhere, metals were less inspired with gold and copper prices relatively flat amid a lack of catalyst to spur price action.

GEOPOLITICAL

Turkey rejected Saudi demands to close its military base in Qatar and stated that it was against international law. (Newswires)

US

The Treasury complex barely moved on Friday with yields more-or-less unchanged on the day. The story for the week had been the continued flattening of the curve: 2s10s flatter by about 7bps, but not taking out last week’s low of 78.3bps; 2s30s down by around 8.5bps on the week to the narrowest levels in this hiking cycle; 5s30s were squashed lower by around 15bps. Finally, The Sep 2017 10-year T-Note future settled 2 ticks higher at 126.12.

Fed's Mester (Non-Voter, Hawk) said she sees balance sheet reduction starting this year and also sees a gradual path of hikes. Mester added inflation data hasn't swayed her outlook and that she would need to see more weak inflation and a drop-off in demand to change her view. (Newswires)

Fed's Bullard (Non-Voter, Dove) said Fed can wait and see impact of fiscal policy and tax reform before hiking. Bullard added that there is potential balance sheet move could come at a non-hike meeting and that he sees the Fed balance sheet being cut to the low USD 2trln mark (from around USD 4.5trln) within 5 years. (Newswires)

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Fitch Maintains the UK on Rating Watch Negative https://t.co/QuZXLMFNoR