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RANsquawk EU Open Rundown 01.08.17

Asian equities traded higher across the board as upbeat Chinese data and firmer commodity prices lifted sentiment

USD remained weak following further political upheaval in Washington. RBA kept rates on hold as Exp.

Looking ahead, highlights include German jobs report, Eurozone GDP, US PCE, ISM Mfg. and APIs

ASIA

Asian equities traded higher across the board as Chinese data took focus once again after Caixin Manufacturing PMI beat expectations and printed its highest since March. ASX 200 (+0.9%) was led higher by commodity-related stocks after iron ore extended on yesterday’s over 7% gains and WTI settled above USD 50/bbl for the first time since May. Nikkei 225 (+0.3%) was kept afloat after the prior session's JPY weakness, while Shanghai Comp (+0.4%) and Hang Seng (+0.8%) conformed to the positive tone after the aforementioned Chinese PMI data coupled with the PBoC’s CNY 170bln injection into the interbank market. Finally, 10y JGBs were flat with a lack of demand seen amid broad positive risk sentiment and following the uninspiring 10yr JGB auction in which the results were mixed and relatively similar to the prior month.

Chinese Caixin Manufacturing PMI (Jul) 51.1 vs. Exp. 50.4 (Prev. 50.4). (Newswires)

PBoC injected CNY 100bln in 7-day reverse repos and CNY 70bln in 14-day reverse repos. (Newswires)

PBoC set CNY mid-point at 6.7148 (Prev. 6.7283)

EUROPE/UK

UK Chancellor Hammond said the future relationship with European Union remains under discussion and that Brexit will not be postponed or delayed. (Newswires) In other news, UK Chancellor Hammond is reported to be preparing to acknowledge that the UK will not have a balanced budget before 2027. (Times)

FX

USD remained weak following the latest political farce in Washington where President Trump fired White House Communications Director Scaramucci. As such, the DXY languished below the 93.00 level which kept its major counterparts firm, with EUR/USD above 1.1800 and GBP/USD printed its highest in around 11 months after it reclaimed the 1.3200 handle. Elsewhere, JPY pared yesterday’s losses as USD/JPY took out support around 110.20, while AUD/USD outperformed after strength in commodities and the Chinese data. Choppy price action was later seen after the RBA kept rates unchanged as expected and mentioned the detrimental effects of a higher AUD, but stopped short of significantly jawboning the currency.

RBA kept the Cash Rate at 1.50% as expected and stated that it judged steady policy steady was in line with policy target.

RBA also stated that higher AUD weighing on price pressures and would slow the economy, but added that growth is expected to pick up to around 3%. (Newswires)

COMMODITIES

Commodities traded quiet overnight with WTI crude futures taking a breather after yesterday’s advances which saw prices settle above USD 50/bbl for the 1st time in 2 months. Gold was also flat with minor upside observes as the green back remained weak, while copper was also relatively uneventful and edged only minimal gains despite Dalian iron ore gaining another 3% today.

US

US 10-year yields operated in a narrow range in a day of quiet news. As a result, Sep’17 10y T-note futures settled at 125.28+, down 2 ticks.

US President Trump removed Scaramucci from the White House Communications Director role. (Newswires)

US Senator Paul stated Trump admin is mulling executive action on healthcare and that it would be legal for an executive order to be used to establish health associations. (Newswires)

US Senate Finance Committee Chairman Hatch said that senators are too divided to keep working on healthcare overhaul legislation now. (Newswires)

The White House have outlined an ‘aggressive’ timetable for putting a tax overhaul in place before the year-end. (Newswires)
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