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[PODCAST] EU Open Rundown 22.06.18

  • Asian stocks mixed; DJIA closed lower for 8th consecutive trading session
  • WTI and Brent crude higher amid uncertainty ahead of today’s OPEC meeting
  • Looking ahead, highlights include Eurozone PMIs, Canadian CPI, and the OPEC meeting

ASIA

Asia stocks were somewhat mixed with the region cautious as trade concerns lingered and following a weak lead from Wall St where all major US indices closed negative and the DJIA declined for an 8th consecutive day to post its longest losing streak in over a year. As such, Nikkei 225 (-0.9%) saw early underperformance amid recent JPY strength, while ASX 200 (-0.2%) bucked the trend for most the session amid strength in financials led by ANZ Bank which announced to double its share repurchase. Elsewhere, trade concerns continued to cloud over the Hang Seng (-0.2%) and Shanghai Comp. (+0.2%) from the open, although stocks then recovered as participants also digested another net weekly liquidity injection from the PBoC. Finally, 10yr JGBs were relatively unchanged with prices sitting near 2-week highs, while the latest CPI data from Japan was largely ignored despite the headline being a tad firmer than expected as inflation remained far from the 2% price goal. In addition, today’s BoJ Rinban announcement also failed to spur demand as the central bank maintained all purchase amounts.

PBoC injected CNY 40bln via 7-day reverse repos and CNY 30bln via 14-day reverse repos, for a net weekly injection of CNY 140bln vs. last week's CNY 240bln net injection. (Newswires)
PBoC set CNY mid-point at 6.4804 (Prev. 6.4706)

Some US administration officials are reportedly pushing for resuming talks with China due to a split opinion among the Trump trade team in which 'high level' talks would take place before July 6th, according to three people familiar with the matter. However, the report also noted chances of near term negotiations are slim and that Trump shows no sign of backing down. (Newswires)

Japanese National CPI (May) Y/Y 0.7% vs. Exp. 0.6% (Prev. 0.6%). (Newswires)
Japanese National CPI Ex. Fresh Food (May) Y/Y 0.7% vs. Exp. 0.7% (Prev. 0.7%)
Japanese National CPI Ex. Fresh Food & Energy (May) Y/Y 0.3% vs. Exp. 0.3% (Prev. 0.4%)

UK/EU

Germany BDI industry body said UK is on course for a disorderly exit from the EU and that UK must accept staying in customs union and EU market are the only solutions to the Irish border issue. (Newswires)

Greece’s creditors agreed on a debt relief package which includes a 10yr EFSF loan extension, while Greece is to receive EUR 15bln as a final bailout disbursement. Furthermore, Eurogroup President Centeno said there will be no follow up programme with Greece after exit of the current bailout and that they also agreed to a 10yr deferral on interest and amortisation, while he added this will allow Greece to issue bonds across the curve. (Newswires)

Italy’s EU affairs minister Savona said he has always maintained that Italy needs the Euro and single market. (Newswires)

FX

FX markets were quiet during Asia trade, although the greenback found some mild reprieve from the prior day’s weakness in which the DXY attempted to recover lost ground below the 95.00 level. Elsewhere, EUR/USD briefly pulled back to test 1.1600 to the downside and GBP/USD maintained the momentum from the prior day’s more-hawkish-split-surprise at the BoE, while commodity-linked currencies coat-tailed on overnight gains in oil prices.

COMMODITIES

Oil prices outperformed in commodities overnight in which WTI reclaimed the USD 66/bbl level ahead of today’s OPEC meeting. Furthermore, the upside coincided with the reopen of Brent futures which were underpinned following reports that the OPEC+ committee were backing a 1mln bpd increase which they stressed was nominal and could effectively be only 600k bpd once distributed due to current over compliance. Elsewhere, the metals complex was less eventful with gold and copper prices sideways amid cautious risk tone and attempts by the greenback to nurse losses.    

OPEC+ committee is said to support 1mln bpd output increase "on paper". Iraq Oil Minister Al-Luaibi said OPEC+ Committee has reached a preliminary decision and that a majority backed the output increase which would be gradual and nominal. Saudi Energy Minister Al Falih also commented that the output increase proposal is nominal which means it would be actually smaller once distributed, while a delegate suggested the OPEC+ proposal would result to a real increase of 600K bpd. Furthermore, Iraq and Oman Oil Ministers reportedly think Iran can agree on the output increase. (Newswires)

Iran Oil Minister said he doubts OPEC can reach consensus on supply cut deal, after leaving the monitoring committee meeting abruptly. (Platts)

A third oil storage tank at Ras Lanuf refinery was set on fire at the clashes at the Libyan oil port. (Newswires)

GEOPOLITCAL

US President Trump said North Korea is blowing up its test sites, while a spokesperson stated that US Secretary of State Pompeo will meet North Korean officials 'at the earliest possible date' to outline the outcomes of the Trump-Kim summit. (Newswires)

US

Treasuries were higher on Thursday, following the move lower in equities, as risk sentiment deteriorated throughout the session ahead of OPEC+ meeting tomorrow and as trade war fear returns in the market and amid disappointing Philly Fed data. Yields were lower by c.3bps across the curve, 2s5s and 2s20 narrowed by c.2bps. 2s30s narrowed by c.1bps. The US Treasury sold $5bln in 30yr TIPS stopping through by 0.6bps at a high yield of 0.934%. The bid-to-cover came in at 2.62x. Dealers were awarded the smallest portion of the latest 30yr TIPS supply at 14.6% while indirects/directs took a share well above average, at 80.8% and 4.6% respectively. US 10YR T-notes futures (Sep 2018) finished 8 ticks higher at 119-27+.

US President Trump noted there may be a little pain on Canada but added that it will work out. (Newswires)

Fed annual stress test results showed all 35 largest US banks exceed minimum capital requirements. (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)