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RANsquawk EU Open Rundown 04.08.17

Asian equities traded with little in the way of direction despite the Russian probe in Washington intensifying

AUD/USD took centre stage and saw choppy trade after better than expected Retail Sales was briefly offset by the RBA Statement on Monetary Policy

Looking ahead, highlights include US and Canadian jobs reports

ASIA

Asian equity markets traded mixed, with the region indecisive ahead of key risk NFP data and after a lacklustre close in US where energy underperformed and the Russian probe seemed to have stepped up a notch. This saw early losses in ASX 200 (-0.2%) and Nikkei 225 (-0.3%), with financials the underperformer in Australia after big 4 bank CBA was accused of breaches to anti-money laundering and counter-terrorism regulations. Shanghai Comp (+0.2%) and Hang Seng (+0.1%) were slightly positive after the PBoC upped its daily liquidity operations, although upside was capped as this still amounted to a net weekly liquidity drain. 10yr JGBs are higher amid the cautious risk sentiment in Japan and after BoJ’s Rinban announcement for JPY 910bln in JGBs across the curve. Finally, 10yr JGBs were range-bound and failed to benefit from the cautious risk sentiment in Japan and BoJ’s Rinban announcement for JPY 910bln of JGBs across the curve.

PBoC injected CNY 90bln 7-day reverse repos and CNY 30bln in 14-day reverse repos, for a net weekly drain of CNY 40bln vs. last week's net injection of CNY 280bln. (Newswires)

PBoC set CNY mid-point at 6.7132 (Prev. 6.7211)

EUROPE/UK

BoE's Deputy Governor Broadbent said UK inflation is nearing its peak and that Brexit uncertainty is pressuring investment, while he added that a weaker GBP is the main reason for the increase in inflation. Additionally, Broadbent added that markets should not overdo concerns about rate rises. (Newswires) Note, that these comments are in-fitting with yesterday’s QIR release.

FX

AUD/USD took centre stage and saw choppy trade after better than expected Retail Sales was briefly offset by the RBA Statement on Monetary Policy, in which the central bank noted the detrimental effects from a firmer currency and reduced its 2017 GDP growth forecast. The rest of the FX majors traded relatively uneventful as the key risk US jobs data looms with GBP/USD languishing from post-BoE losses, while USD/JPY and JPY-crosses attempted to nurse recent declines.

RBA Statement on Monetary Policy stated that recent AUD rise had a modest effect on GDP and inflation forecast and that further strength in the currency would reduce economic growth and inflation. RBA also maintained its inflation forecast tspanough to 2019, but lowered its GDP forecast for 2017 by 50bps to between 2.0%-3.0% from 2.5%-3.5%. (Newswires)

Australian Retail Sales (Jun) M/M 0.3% vs. Exp. 0.2% (Prev. 0.6%). (Newswires)

Australian Retail Sales (Q2) Q/Q 1.5% vs. Exp. 1.2% (Prev. 0.1%, Rev. 0.2%)

COMMODITIES

Gold (-0.1%) traded eventful overnight with the precious metal remaining near its best level in 7 weeks, amid a subdued dollar and as focus turns to the approaching US NFP release. WTI crude futures were also range-bound in which prices failed to gain a footing above the USD 49/bbl level, while copper was choppy amid indecisive risk tone in the region.

US

Treasuries ran higher following an early Chicago morning block buyer in the Ultrabond futures (for the second consecutive day), with a similar trade seen later in the day, and garnered further support from the soft ISM release and the Mueller story. Sep’17 10y T-note futures settled at 126.11+, up 8 ticks.

US Special Counsel Mueller impanelled a Washington grand jury in the Russia probe, which suggested the investigation is intensified rather than cooled down. (Newswires)
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Morning all! - Asian equity markets partially resumed the momentum from last Friday’s record-setting performance on Wall St.