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[PODCAST] EU Open Rundown 7th February 2019

  • Asian equity markets were somewhat mixed with the region cautious following the subdued performance on Wall St
  • UK Parliament is now said to be planning a 2nd Brexit vote at the end of the month, ministers believe an extension of Article 50 is now inevitable
  • In FX markets, the DXY stayed firm and held near 2-week highs as its counterparts languished. NZD/USD heavily pressured on poor employment data
  • Looking ahead, highlights include German Industrial Output, BoE Rate Decision, Press Conference & QIR, US Initial Jobless Claims, Fed's Powell, Kaplan & Clarida, UK PM May meeting European Commission President Juncker & Council President Tusk, Spanish, French & US Auctions
  • EARNINGS: Cardinal Health, Kellog, Yum! Brands, Tyson Foods, Expedia, ice, Western Union, Phillip Morris, Marathon Petroleum, Twitter, T-Mobile, Vestas Wind System, L’Oreal, Pernod Ricard, SocGen, Total, UniCredit, Fiat, Sanofi, ArcelorMittal, Smith & Nephew, Swisscom

ASIA-PAC

Asian equity markets were somewhat mixed with the region cautious following the subdued performance on Wall St, where all majors posted mild losses and the S&P 500 snapped a 5-day win streak. Nikkei 225 (-0.7%) was negative with sentiment dampened by a firmer currency and as participants digested a slew of earnings, although the index was not short of success stories as Mazda was buoyed after an upward revision to guidance and SoftBank surged over 17% on higher profits and the announcement of a JPY 600bln buyback. Elsewhere, KOSPI (+0.1%) traded indecisively and struggled to maintain the early exuberant tone on return from the Lunar New Year holidays, while ASX 200 (+1.1%) outperformed its peers with broad-based gains as sentiment continued to get a lift from RBA Governor Lowe’s recent dovish shift to a more evenly balanced view on rates. Finally, 10yr JGBS failed to benefit from the risk averse tone in Japan with demand kept subdued amid a similar picture seen in T-notes, while firmer results at today’s 30yr JGB auction were also ineffective in spurring prices.

US Senator Grassley said the China deal will be done by “executive agreement” but what happens to the tariffs on March 1st is “not definitive” after a briefing with USTR Lighthizer, according to a CNBC correspondent. (Twitter)


UK/EU

UK Parliament is now said to be planning a 2nd Brexit vote at the end of the month, ministers believe an extension of Article 50 is now inevitable; vote will now likely be held on the week commencing Feb 25th. (Telegraph)

UK government is said to be considering new legislation to get Labour MPs on board for the Brexit deal amid hopes that Employment Bill might tempt some over, according to BBC’s political correspondent. (Twitter)

UK opposition Labour Party leader Corbyn sent a letter to PM May in which he made 5 legally binding Brexit demands in return for Labour support behind her deal. (Guardian)

A “permanent and comprehensive UK wide customs union” and a future say in trade deals

Close alignment with the single market

“Dynamic alignment on rights and protections

Clear commitments on future British participation in EU agencies and funding programmes

Agreements on future security arrangements
 

There was said to be a serious ERG split on Malthouse as one faction hardened its position in which it used to support a time-limit but now said that It was not enough, according to BuzzFeed’s Political Correspondent. (Twitter)


FX

In FX markets, the DXY stayed firm and held near 2-week highs as its counterparts languished with EUR/USD despondent following its recent slip below the 1.1400 handle, while GBP/USD was subdued amid ongoing Brexit uncertainty and as participants look ahead to the BoE’s Policy Meeting and QIR. Elsewhere, antipodeans remained subdued in which AUD/USD breached 0.7100 to the downside with the pair down almost 250 pips since the release of RBA Governor Lowe’s dovish comments, while NZD/USD was heavily pressured on poor employment data in which Employment Change missed estimates and the Unemployment Rate jumped to 4.3% from 3.9%, which also coincided with a decline in the Participation Rate.

New Zealand Employment Change (Q4) Q/Q 0.1% vs. Exp. 0.3% (Prev. 1.1%). (Newswires)
New Zealand Unemployment Rate (Q4) 4.3% vs. Exp. 4.1% (Prev. 3.9%)
New Zealand Participation Rate (Q4) 70.9% vs. Exp. 71.0% (Prev. 71.1%)

COMMODITIES

Commodities were mostly uneventful in which WTI crude futures traded sideways throughout the session amid a lack of drivers and after the support from a smaller than expected build in headline DoE crude inventories petered out. Elsewhere, gold prices trickled lower towards the USD 1300/oz level as the greenback remained firm, while copper was kept rangebound by the mixed risk tone and continued absence of its largest buyer China.

Transcanada Keystone oil pipeline was shut due to a potential leak in St. Louis, Missouri area, although it was unsure if the leak was from Keystone. Elsewhere, an evacuation was ordered in a San Francisco neighbourhood after a PG&E gas line explosion engulfed some buildings in flames. (Newswires)

CME lowered March 2019 NYMEX crude oil futures margins to USD 3900 per contract from USD 4275 per contract. (Newswires)
 

US

Treasuries ended the session mixed and close to the unchanged mark on Wednesday. The complex remained bid for most of the European session, moving in tandem with Bunds, but caught a leg lower following a soft 10yr auction. Losses however were quickly pared back and pushing treasuries in flat territory. Yields were mixed across the curve and moves were less than 1bpsm spreads towards a steepening bias. The US sold USD 27bln of 10-year notes on Wednesday at 2.689%, the lowest yield since January 2018. However, demand was fairly weak, the auction tailed by 0.8bps and the bid/cover came in at 2.35x, both worse than average. The composition of buyers pointed to weaker demand too, where primary dealers took the biggest allocation since October 2018. US T-note futures (H9) settled half a tick higher at 121-28+.

Fed Chair Powell said the US economy is now in a good place, while he also commented that surveys have showed this is a good time to find a job for workers which is a sign of a very healthy labour market but added that lagging labour force participation is a concern. (Newswires)

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Morning all! - Asian stocks were mixed as the region struggled for firm direction following yesterday’s rally and… https://t.co/Z4rnzsUd0k