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[PODCAST] EU Open Rundown 18th February 2019

  • Asian stocks kick-started the week on the front-foot as the region followed suit to last Friday’s gains on Wall St. where sentiment was buoyed by US-China trade talks
  • US President Trump tweeted that US-China trade talks are very productive, and progress is being made on many fronts
  • France and other European countries are reportedly ready to give the UK legally binding assurances that the Northern Irish backstop is temporary
  • Looking ahead, highlights include UK Brexit Secretary meeting EU’s Chief Negotiator, US President’s Day Holiday

ASIA-PAC

Asian stocks kick-started the week on the front-foot as the region followed suit to last Friday’s gains on Wall St. where sentiment was buoyed by US-China trade talks, which were said to have made progress and are to continue in Washington this week. ASX 200 (+0.4%) was led by higher by outperformance in the energy sector as oil prices hit fresh YTD highs but with upside in the index contained as financials and industrials lagged, while the Nikkei 225 (+1.8%) was among the biggest gainers with exporters boosted by a weaker currency. Elsewhere, Hang Seng (+1.7%) and Shanghai Comp. (+2.4%) benefitted from the trade-related optimism after US-China trade talks were extended into this week, while the latest lending data also provided encouragement as both Aggregate Financing and New Yuan Loans topped estimates in which the latter rose by the most on record. Finally, 10yr JGBs were higher despite the heightened risk appetite across the region, with prices supported by the BoJ’s presence in the market for nearly JPY 1tln of government bonds and after weak Machine Orders data which prompted the government to downgrade its relevant assessment.

PBoC skipped open market operations for a net neutral daily position. (Newswires)
PBoC set CNY mid-point at 6.7659 (Prev. 6.7623)

US President Trump tweeted that US-China trade talks are very productive, and progress is being made on many fronts. (Twitter)
 


UK/EU

France and other European countries are reportedly ready to give the UK legally binding assurances that the Northern Irish backstop is temporary. Senior EU diplomats said that the UK government would be given enough in the way of legal assurances to persuade Attorney General Cox to change his legal advice that the backstop could be used to trap the UK in a customs union. (Times) 

Pro-Brexit lawmakers reportedly could live with a five-year time-limit on the Irish backstop, according to sources familiar with the matter. (Newswires)

UK PM May is reportedly facing a fresh showdown with Brexiteers in the Tory party after a cabinet minister suggested she may put her Brexit deal to parliament again without changes to the withdrawal text. (Guardian)

UK PM May was informed that as many as seven cabinet members are prepared to quit if she fails to avert a no-deal Brexit. (Telegraph) Elsewhere, Labour sources stated that a small group of Labour MPs look set to announce their resignation from the party amid disagreement with the Labour leadership. (BBC)

A committee of MPs said UK PM May must launch an investigation into “foreign influence and voter manipulation” regarding the Brexit vote. (Independent)

UK PM May is reportedly bracing for “howls of rage” as ministers finalise no-deal tariffs, which will be published next week. (Times)

A BMG survey conducted by The Independent showed that almost two-thirds of people want MPs to have a free vote on the Brexit deal. (Independent)

CIPD said UK private sector employers plan to raise base pay by 2.5% on average this year which would be the largest increase since the survey began in 2012. (Newswires)

KPMG has warned that UK Chancellor Hammond may be forced to abandon his borrowing targets due to a combination of economic slowdown and political uncertainty. (Telegraph)

French Finance Minister Le Maire said the Yellow Vest protests are undermining the French economy and that he will present a plan within the next few days to help businesses. (Midi Libre)

ECB's Rehn (Neutral) said recent data points to weakening Euro zone economy and reiterated that interest rates will stay at current level until monetary policy targets have been reached, while there were also comments from ECB's Villeroy (Dovish) that the timing of rate hike depends on length of current slowdown. (Newswires)

S&P raised Hungary to BBB from BBB-; Outlook revised to Stable from Positive, while Fitch affirmed Russia at 'BBB-'; Outlook Positive. (Newswires)

UK Rightmove House Prices (Feb) M/M 0.7% (Prev. 0.4%). (Newswires)
UK Rightmove House Prices (Feb) Y/Y 0.2% (Prev. 0.4%)


FX

In FX markets, the DXY was subdued following its recent pullback to beneath the 97.00 level and with US participants on an extended weekend due to President’s Day, while its major counterparts added to their recent gains in which EUR/USD and GBP/USD reclaimed the 1.1300 and 1.2900 handles respectively. Elsewhere, antipodeans were firmer due to the lacklustre greenback, heightened risk appetite and recent strength across the commodities complex, while the broad positive sentiment also underpinned JPY-crosses although USD/JPY somewhat stalled amid USD-woes.


COMMODITIES

Commodities marginally extended on Friday’s rally as the heightened risk appetite continued to underpin the complex which saw WTI crude futures briefly break above USD 56.00/bbl to print fresh YTD highs. Elsewhere, gold was kept a float by a subdued greenback but with price action contained amid a lack of demand for safe-havens as well as the absence of Canada and US from the markets, while copper remained underpinned by the risk sentiment.

Baker Hughes US Rig Count (15 Feb): Oil rigs +3 to 857 and gas rigs -1 to 194; total rig count +2 to 1051. (Newswires)


US

T-notes gave back gains to finish four ticks lower going into the holiday weekend, though most of the action through US trading was horizontal. ECB’s Coeure hinted there could be further TLTROs in the pipeline, which saw the Bund tick lower, and the T-Note took its cue from that in thepre-market, before seeing positive ticks on soggy data. However, the UoM sentiment print was more positive, seeing the T-Note give up a couple of ticks. US T-note futures (H9) settled -4 ticks at 122-01+.

US Commerce Department sent its report on autos "section 232" tariff probe to the White House in which the contents were undisclosed and US President Trump is said to have 90-days to decide whether to take action, (Newswires)

Fed's Bostic (Non-voter, Dovish) sees one more rate hike this year and he stated does not have a hard number for the appropriate size of the Fed's balance sheet.  Bostic also commented that he has seen no evidence that the US economy is slowing faster than expected and expects 2.3% to 2.5% growth this year. (Newswires)

Fed's Daly (Non-voter, Neutral) said it is appropriate for the Fed to be patient and that no rate are hikes needed in 2019. (Newswires)

Legal experts noted that US President Trump will face a number of legal hurdles over his national emergency declaration for border wall funding. (Business Insider) 

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