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[PODCAST] EU Open Rundown 12th February 2019

Asian equity markets traded mostly higher amid cautious optimism regarding US-China trade talks and hopes of averting a government shutdown

UK House of Commons leader Leadsom commented that there was no chance UK PM May will accept Labour Party’s customs union proposal

In FX, the greenback remained firm following the prior day’s strength in which the DXY rose above the 97.00 level and posted its best levels YTD

Looking ahead, highlights include ECB’s Nowotny & Lautenschlaeger, Fed’s Powell & Mester, BoE’s Carney, UK PM May Updating House of Commons on Brexit, OPEC Monthly Oil Report

ASIA-PAC

Asian equity markets traded mostly higher amid cautious optimism regarding US-China trade talks and hopes of averting a government shutdown, as negotiators were said to have reached an agreement in principle in which the border bill will include some funds for a barrier. ASX 200 (+0.3%) and Nikkei 225 (+2.6%) were positive with outperformance in the Japanese benchmark on return from the extended weekend as exporters were underpinned by favourable currency moves, although Toshiba was the notable laggard after it confirmed reports it could reduce FY profit guidance by half. Elsewhere, Shanghai Comp. (+0.3%) and Hang Seng (Unch.) were kept afloat but with upside limited by indecision as participants await the outcome of trade discussions and after the PBoC refrained from open market operations which resulted to a daily net drain of CNY 100bln. Finally, 10yr JGBs were lower amid outperformance of Tokyo stock markets and following a reduction of the BoJ’s Rinban amounts in which it lowered its purchases of 10yr-25yr JGBs by JPY 20bln.

PBoC skipped open market operations for a net daily drain of CNY 100bln. (Newswires)
PBoC set CNY mid-point at 6.7765 (Prev. 6.7495)


UK/EU

UK PM May is reportedly calling on former European Council President Van Rompuy to help break the Brexit deadlock. (Sky News)

UK PM May will today urge MPs to "hold our nerve" to get the changes needed to get a Brexit deal through Parliament. (BBC)

UK PM May would win a working majority if a general election were held today, according to YouGov modelling for The Times. (Times)

UK Cabinet ministers reportedly believe UK PM May is preparing to resign in the summer so she can influence who becomes her successor in an effort to stop Boris Johnson from getting the PM role. (The Sun)

UK House of Commons leader Leadsom commented that there was no chance UK PM May will accept Labour Party’s customs union proposal. (ITV)

EU Chief Brexit Negotiator Barnier said meetings with UK Brexit Secretary Barclay were "constructive", while a UK spokesperson said both parties have agreed to more talks to find a breakthrough. (Newswires)


FX

In FX markets, the greenback remained firm following the prior day’s strength in which the DXY rose above the 97.00 level and posted its best levels YTD, while its counterparts were subdued as EUR/USD struggled to nurse recent losses and with GBP/USD despondent from the recent data-induced decline to below the 1.2900 handle. Elsewhere, antipodeans were mixed as AUD benefited from stronger NAB Business Confidence data and with NZD lacklustre which in turn helped AUD/NZD reclaim the 1.0500 level, while USD/JPY firmed whilst the PBoC also adjusted its reference rate in light of the recent broad USD strength.

Australian Housing Finance (Dec) -6.1% vs. Exp. -2.8% (Prev. -0.9%). (Newswires)
Australian NAB Business Confidence Jan 4 (Prev. 3.0)
Australian NAB Business Conditions Jan 7 (Prev. 2.0)


COMMODITIES

Commodities were mixed in which crude prices continued on the intraday rebound seen during US hours with prices marginally supported by the cautiously optimistic risk tone. Elsewhere, gold traded flat with price action restricted as the greenback remained firm, while copper was also rangebound amid a somewhat tentative tone in China and as the rally in Dalian iron futures stalled.

Eastern Libyan forces are said to have gained full control of El Sharara oilfield. (Newswires)


Italy's League party drafted a proposal that would allow the state to sell its gold reserves by changing the constitution. (Newswires)


US

US Treasury futures sold off on Monday as investors await on Wednesday’s crucial CPI data for January, where a strong print could tilt a data-dependent Fed to a more hawkish stance. The sell-off was exacerbated going into the US equity open, with positive China-US trade comments from White House Advisor Kelly Conway and a block sale of 8k+ TUH9 by a real money account. Treasuries continued selling off through the session where nine investment grade issuances flooded the market. Looking at the curve on the close, most of the actions was concentrated in the belly of the curve where yields were higher by c.3bps. Spreads were mixed where there was steepening in the front-end with 2s/5s widening by 0.8bps, whilst spreads at the belly to long-end flattened. US T-note futures (H9) settled 8 ticks lower at 122-04.

US President Trump said we are going to make great deals on trade and don't want China to have a hard time. President Trump also commented that we probably have some good news regarding border deal but added he didn’t know what they meant regarding progress and affirmed the US would build the wall anyway. (Newswires)

US Senator Shelby said an agreement in principle was reached on shutdown talks and that staff will work on the deal. Senator Shelby also commented that he hopes the White House will back the deal and that the border bill will have some money for a barrier, while US Rep. Lowey said staff could work out the full details of border security deal by Wednesday. (Newswires)

US congressional aide said the tentative US border security deal provides USD 1.375bln to build 55 miles of border fence but does not contain any funds for a border wall and does not include Democrats’ demand for capping number of immigrant detention beds. (Newswires)

US Treasury official Malpass who is part of the US delegation in Beijing for deputy level talks, said that March 1st deadline will not be extended. (SCMP)

Fed's Bowman (Voter) said US economy and Fed's policy are in a good place and that she is comfortable with the current stance of policy, while she also continues to see great job numbers and solid wage growth. (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