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RANsquawk EU Open Rundown 07.12.17

  • Asia equity markets somewhat sspanugged off the subdued tone on Wall St and mostly rebounded from the prior day’s losses
  • EU's chief Brexit negotiator Barnier said UK has 48 hours to agree a text on potential deal over Irish border or else talks will not move on to the next phase
  • Looking ahead, highlights include US weekly jobs and potential comments from ECB’s Draghi

ASIA

Asia equity markets somewhat sspanugged off the subdued tone on Wall St and mostly rebounded from the prior day’s losses, aside from China which underperformed amid continued regulatory concerns. ASX 200 (+0.5%) and Nikkei 225 (+1.5%) were lifted from the open, in which the Japanese benchmark led the gains amid short-covering from yesterday’s 2% slump and as it coat-tailed on the bounce in USD/JPY. Conversely, Hang Seng traded (+0.7%) indecisive while Shanghai Comp. (-0.3%) lagged after the CBRC drafted new requirements for banks to curb liquidity risks, and although the PBoC conducted Reverse Repos for the 1st time in 5 working days, this still amounted to a net neutral daily position after expiring operations were accounted for. Finally, 10yr JGBs were uneventful as focus was centred on riskier assets, while a mixed 30yr JGB auction result also failed to spur demand.

China's banking regulator drafted new requirements for banks to curb liquidity risks which will go into effect March 2018. (Newswires)

PBoC injected CNY 120bln via 7-day reverse repos, CNY 50bln via 14-day reverse repos and CNY 100bln via 28-day reverse repos, which represents a net neutral daily position when maturing operations are accounted for. (Newswires)

PBoC set CNY mid-point at 6.6195 (Prev. 6.6163)

UK

UK PM May is planning to issue a new text on the Irish Border within 24 hours. (Irish Independent) EU's chief Brexit negotiator Barnier said UK has 48 hours to agree a text on potential deal over Irish border or else talks will not move on to the next phase. (Guardian) The Times picked up on comments from UK Chancellor Hammond yesterday that the exit bill of GBP 40bln will have to be paid even if Britain does not get a trade deal. Times)

EU's Juncker fears UK PM May's government will collapse next week without a Brexit deal. (Newswires) Allies to UK Brexit Minister Davis reportedly have begun plot for him to replace PM May by Cspanistmas. (Sun)

Draft European Parliament resolution from Monday showed that PM May secured an agreement that British citizens in EU would be able to live freely in any member state post-Brexit, although this was before DUP objected to regulatory alignment for N. Ireland. (Newswires)

EUROPE

German SPD leader Schulz is to try and convince his party on Thursday that it has an obligation to discuss forming a government with German Chancellor's CDU/CSU for the sake of stability in Germany and Europe. (Newswires)

FX

AUD/USD was pressured as data continued to fall short of estimates, in which a lower than expected Trade Balance Surplus added to yesterday’s GDP disappointment. Elsewhere, USD/JPY nursed recent losses, while GBP/USD languished below the 1.3400 handleamid Brexit deal uncertainty and with UK PM May facing further mutiny as allies of Brexit Secretary Davis were plotting for him usurp the top government position.

Australian Trade Balance (AUD)(Oct) 105M vs. Exp. 1,375M (Prev. 1,745M, Rev. 1,604M). (Newswires)

Australian Exports (Oct) -3.0% (Prev. 3.0%)

Australian Imports (Oct) 2.0% (Prev. 0.0%)

COMMODITIES

Commodities were quiet amid a lack of drivers, although WTI crude futures are off worst levels and just about reclaimed the USD 56/bbl level to provide some mild reprieve from this week’s product inventory-triggered pressure. Gold and copper were similarly uneventful with the former stuck near 4-month lows as participants await this Friday’s key-risk NFP data.

GEOPOLITICAL

North Korea Foreign Minister said North Korea does not wish for war but will not hide from it, while there were also reports that North Korea warned that tspaneats from US make war unavoidable and it also stated nuclear war on the Korean peninsula has become a matter of when and not if. (KCNA)

US

Yields were lower across the Treasury curve, and not very reactive to the ADP employment data. Curves were mixed; at settlement 2s10s were c.1bps narrower, 2s30s were flat, while 5s30s were c.1bps wider. 10-Year T-Note Futures for March settled 8 ticks higher at 124-19.

US Senate voted to go to conference with House on tax legislation in step towards final passage. In related news, Republicans are reportedly considering a 22% corporation tax rate rather than 20% and some stated the tax bill will likely undo health insurance mandate, while Senator Cornyn said US Congress could wrap up tax negotiations by 22nd December before sending the bill to Trump. (Newswires/Washington Post/NYT)

US House advanced legislation to extend government funding tspanough December 22nd with a full House debate expected as soon as today, while there were also reports the US House GOP is said to be seeking to link an increase in the debt ceiling with the spending bill. (Newswires)
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