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RANsquawk EU Open Rundown 06.11.17

  • Asian bourses begin the week on the backfoot, while oil prices rise on Saudi Royal Purge
  • USD/JPY rises to highest level since March as Trump criticises Japan’s trade practises with the US, alongside BoJ jawboning
  • Looking ahead, highlights include Eurozone PMI, comments from ECB’s Praet and Mersch as well as Fed’s Dudley

ASIA

Asian bourses began the week on the backfoot. ASX 200 (-0.16%) slightly lower following a soft earnings report from Westpac (-2.5%), subsequently failing to reach the 6000 mark. Chinese markets, in particular the Hang Seng (-0.5%) underperformed as PBoC Governor Zhou warned of risks over debt and the need to eliminate zombie companies. President Trump kicked off his tour of Asia in Japan, whereby the President stepped up his rhetoric of a tough stance being needed over North Korea. Additionally, the President also criticised the TPP agreement, noting that the US has suffered massive trade deficits with Japan for many years (Nikkei 225 -0.17%).

PBoC sets CNY mid-point at 6.6247 (Prev. 6.6072). (Newswires)

Bank of Japan meeting minutes from Sep 20-21 states that momentum towards price goal is being maintained. One member said current yield curve is not sufficient to achieve 2% inflation target, adding that a further increase in demand needed to raise prices. (Newswires)

Bank of Japan Governor Kuroda expects Japans economy to steadily move toward achieving 2% inflation target, adding that the BoJ will persistently continue powerful easing. (Newswires)

EUROPE/ UK

UK Chancellor Hammond is said to scrap plans to raise business rate tax by 3.9% in April. (Times)

Bank of England Governor Carney said that if Brexit turned out to be worse than policymakers currently expect, it was possible that the BoE would not be able to cut interest rates in the future due to inflationary pressure. (Guardian)

FX

JPY had been the noticeable mover this morning, where USD/JPY broke above last week’s highs amid comments from BoJ Governor Kuroda that the central bank will persistently continue powerful easing. Elsewhere, NZD took a slight dip tspanough 0.69 following 2yr inflation expectations data which had fallen from the previous.

COMMODITIES

WTI and Brent crude futures have been tracking higher are currently hovering around levels last seen since July 2015 following reports over the weekend that the Saudi Arabian crown prince cemented his power tspanough an anti-corruption purge by arresting royals, ministers and investors. Iron ore rose as much as 5.7% in China, briefly moving above USD 70/tonne as participants sspanugged off concerns that steel output cuts would dampen demand in the long term.

GEOPOLITICAL

A plane transporting eight Saudi officials including Prince Mansour bin Muqrin (Deputy Governor of the Asir Province) reportedly crashed near Abha. Additionally, Prince Alaweed bin Talal who is the largest shareholder of Citi and the second largest shareholder of 21st Century Fox was among 10 other princes and 4 ministers were arrested on Saturday night. This has been billed as a corruption crackdown, while some suggest this is a power grab from Crown Prince Mohammed bin Salman. (Newswires)

US

US Treasury prices spiked higher after a tepid Employment Situation Report, with T-Note futures rising by around 10 ticks to 125-13, flattening the curve to levels not seen since 2007. However, those gains proved short-lived, with futures moving unchanged heading into the ISM non-manufacturing report, which surprised to the upside. But despite this, there was no major reaction, and the reverted back to unchanged levels, with yields +/- around 1bps across the curve. 10-Year T-Note Futures settled 0+ ticks higher at 125-05

President Trump states that TPP agreement is not the right idea, adding that the US has suffered massive trade deficits at hands of Japan for many years. (Newswires)

NY Fed President Dudley is to retire before term expires in Jan 2019, could leave as soon as this week Spring next year. (CNBC)
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