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[PODCAST] US Open Rundown 22nd February 2019

  • All quiet on the western front ahead of US President Trump’s scheduled talks with Chinese Vice-Premier Liu He at at 1430EST
  • Clouds clear downunder for the AUD as Aussie-Dailan coal import story categorically denied
  • UK Official notes that it is very unlikely a Brexit deal will be voted on next week
  • Looking ahead, highlights include, Canadian Retail Sales, Fed's Bostic, Williams, Daly, Clarida, Bullard & Harker, ECB's Draghi & Villeroy

ASIA

Asian stocks were mixed following the weak lead from their peers on Wall St. where all US major indices declined and the Nasdaq snapped its 8-day win streak, with sentiment weighed by uninspiring data. ASX 200 (+0.5%) and Nikkei 225 (-0.2%) were mixed with the Australian benchmark resilient as participants took a breather from the recent deluge of earnings and as financials remained afloat, but with upside capped by weakness in Energy following similar underperformance by the sector stateside and with Woodside Petroleum shares down by over 4% as it traded ex-dividend. Conversely, Japanese stocks were lacklustre after the recent flows into the JPY, while Hang Seng (+0.6%) and Shanghai Comp. (+1.9%) initially conformed to the indecisive tone but with losses in the mainland eventually reversed after a tepid liquidity injection by the PBoC and as focus remained on US-China trade talks with President Trump set to meet China Vice Premier Liu He later today. Finally, 10yr JGBs were initially underpinned by the weak risk sentiment and BoJ’s presence in the market for a total JPY 685bln of JGBs, but then pared a majority of the gains after hitting resistance at 153.00 and as the regional stock markets bounced off intraday lows.

PBoC injected CNY 40bln in 7-day reverse repos for a net weekly injection of CNY 60bln vs. Prev. CNY 680bln drain. (Newswires)
PBoC set CNY mid-point at 6.7151 (Prev. 6.7220)

US President Trump is expected to meet with China Vice Premier Liu He today at 1430EST, while there were separate reports that the decision on China tariff increase due on March 1st needs to be made by Tuesday. In related news, China trade talks are said to be positive and the Trump administration is counting on Vice Premier Liu He to get Beijing to accept tough new strictures. (Newswires/CNBC/WSJ)

Chinese House Prices (Jan) Y/Y 10.0% (Prev. 9.7%). (Newswires)

China's foreign ministry says reports that some China ports have halted Australian coal imports are false, adding that Chinese customs are strengthening their quality and environment checks regarding coal. (Newswires)

Japanese National CPI (Jan) Y/Y 0.2% vs. Exp. 0.2% (Prev. 0.3%). (newswires)
Japanese National CPI Ex. Fresh Food (Jan) Y/Y 0.8% vs. Exp. 0.8% (Prev. 0.7%)

Japanese National CPI Ex. Fresh Food & Energy (Jan) Y/Y 0.4% vs. Exp. 0.4% (Prev. 0.3%)

US

China Global Times Chief Editor tweets "Iran bans importing Apple [AAPL] products and other American goods, and the US also prohibits exporting them to Iran. But there are Apple stores in Tehran that openly sell iPhones". (Twitter)

UK/EU

EU Trade Commissioner Malmstrom says a limited EU-US trade deal is possible the the end of October. (Newswires)

EU's Barnier says that he cannot exclude that Britain's EU withdrawal is postponed, but that it is not up to him to decide. Adding that more discussions are needed, not time. (Newswires)

An EU spokesperson commented that EU's Juncker and UK PM May agreed work will focus on guarantees relating to the backstop that underline its temporary nature, while EU and UK Brexit talks are to continue next week. (Newswires)

UK's Downing Street will reportedly delay its no-deal tariffs report to avoid uproar before a crunch Brexit vote next week. (The Sun)

Parliamentary Under-Secretary of Communities and Local Government Percy told the BBC more than 30 MPs may try block a no-deal. (BBC) Furthermore, The Telegraph reported that PM May has been warned by a group of 100 moderate Tory MPs that they are prepared to rebel against the Government to force her to delay Brexit if she cannot reach a deal. (Telegraph) Opposing this, Eurosceptic Conservative MPs have warned they will seek to “end the government” if PM May delays the UK’s departure from the EU, as the HoC prepares to vote on proposals to try to avert a no-deal Brexit. On the other side of the aisle, UK Opposition Leader Corbyn has been warned that he faces another exodus of MPs unless he backs a plan to put Theresa May’s Brexit deal to a second referendum. (Times)

EU expects PM May to be forced to request a 3-month extension to the Brexit according to 2 EU officials. (Newswires)

UK Official says it is very unlikely that a Brexit deal will be voted on next week. (Newswires)

UK Shadow Chancellor McDonnell states that Labour is ‘moving towards’ a second referendum on Brexit, which would provide a second chance to stay in the EU; Evening Standard. (Newswires)

European Council President Tusk is said to have a bilateral meeting with UK PM May in Egypt; according to sources. Furthermore, EU official says "there will be no Brexit deal in the Desert" referring to Brexit talks in Egypt. (Newswires)

ECB's Nowotny (Hawk) says the resumption of the ECB's Asset Purchase Program is not necessary, and adds that the ECB has no conclusions yet on TLTRO and if the slowdown is driven by one-offs, TLTRO may not be needed. Nowotny expects a TLTRO decision to come later than March. He sees a discrepancy between ECB guidance and market expectation. (Newswires)

German Ifo Curr Conditions New (Feb) 103.4 vs. Exp. 103.9 (Prev. 104.3, Rev. 104.5)d

German Ifo Expectations New (Feb) 93.8 vs. Exp. 94.2 (Prev. 94.2, Rev. 94.3)

German Ifo Business Climate New (Feb) 98.5 vs. Exp. 99 (Prev. 99.1, Rev. 99.3)

German GDP Detailed QQ SA Q4 0.0%

German GDP Detailed YY NSA Q4 0.9% vs. Exp. 0.9% (Prev. 0.9%)

EU HICP Final MM Jan -1.0% vs. Exp. -1.1%

EU HICP Final YY Jan 1.4% vs. Exp. 1.4% (Prev. 1.4%, Rev. 1.5%)

EQUITIES

All major European indices are seeing mild gains [Euro Stoxx 50 +0.3%] after a mixed Asia session which took the lead from the US where all US major indices declined. Sectors are mixed, there is some slight outperformance in material names, with the likes of Thyssenkrupp (+2.0%) and Anglo American (+2.7%) in the green. Other notable movers include Wirecard (+3.4%) at the top of the Dax (0.4%) after the Co’s CEO stated that business remains strong. Sartorius (-2.3%) are towards the bottom of the Stoxx 600 after being downgraded to sell. Elsewhere, firmly in the green are Telecom Italia (+3.0%) after the Co. reported earnings with revenue broadly in-line with expectations; the Co. have also announced that they are to launch a partnership with Vodafone (+1.2%) to share their 5G mobile network. Nestle (-0.5%), the largest Co. in the Stoxx 600 which has a 3% weighting, in the red due to Kraft-Heinz being down 20% in the pre-market following downbeat earnings, a USD 15.4bln write-down and being subpoenaed by the Securities and Exchange Commission.

FX

AUD,NZD,SEK More volatile trade down under, as the Aussie receives a welcome reprieve from China that has now categorically refuted reports that it blocked coal imports having initially claimed no knowledge rather than issuing a firm denial. However, Aud/Usd still seems top heavy amidst recent more dovish RBA calls, even though the Kiwi has been rattled by similar RBNZ impulses, and from the horse’s mouth as it were given comments from Bascand overnight about proposed rises in bank capital requirements heightening easing prospects, in time. Aud/Nzd has rebounded further from sub-1.0400 lows in response, as Nzd/Usd reversed through 0.6800 to circa 0.6760 at one stage. Conversely, Eur/Sek is around 10.6000 in wake of Riksbank minutes and accompanying statements from Governor Ingves in the main, playing down weaker than forecast Swedish inflation in January and keeping guidance for H2 tightening in place, albeit conditional on economic developments and unless downside risks (largely due to external factors) do not materialise.

EUR,GBP The single currency and Sterling remain relatively rangebound on the 1.1300 and 1.3000 handles vs the Dollar respectively, but both currencies are getting indirect support from the Greenback’s failure to muster/sustain any positive momentum of its own. Eur/Usd continues to hit resistance above 1.1350 and a downbeat German Ifo survey has not helped, while Brexit is a constant weight for the Pound along with related fall-out on the domestic political front. From a tech perspective, 1.3000 is obvious support, especially as the 200 DMA is just 2 pips below, while for Eur/Usd a decent 1.6 bn expiry at the 1.1300 strike may underpin vs a 1.1362 Fib and the 30 DMA in close proximity at 1.1369.

CAD, JPY Not much action in the Loonie or the Japanese currency, though the former is marginally benefiting from gains in the oil complex, mostly driven by market sentiment. Similarly, risk appetite has marginally weakened the JPY, with USD/JPY currently residing just below the top of the 110.65-90 intraday range. Back to the CAD, retail sales may spur some action in the Loonie with the headline expected at -0.3%, up from the prior -0.9%.

FIXED INCOME

10-year Bund futures continue to track higher in European trade. This comes after minimal reaction to more disappointing German data from IFO (business climate 98.5 vs. exp. 99.0), who pointed out that the weak economic phase in German is set to continue; with 10-years also unreactive to the EZ CPI prints which came in essentially in line across the board. The German benchmark is hovering circa session peaks of 166.36 and awaiting further direction from ECB’s Draghi and Villeroy who are set to speak later in the day. Debt markets in the UK have also begun the day firmer, with 10-year paper breaking the 124.00 handle to the upside amidst growing suggestions of an extension to Britain’s withdrawal date from the EU, and another resignation from the opposition party. In a technical sense, traders are eyeing the 124.29 February 19th high to the upside as the next resistance level.

In the US, debt futures are essentially unchanged across the curve after some pressure was offered to US fixed income markets yesterday following a significant slate of investment grade deals (including Boston Scientific’s USD 4.3bln issuance) and a block trade of 18k+ THY19 nearer to the close. Traders will now be looking forward to a huge speaker schedule for the day, with 7 Fed speakers on the docket including the increasingly influential voter Bullard who stated that a cut is possible yesterday.

COMMODITIES 

Brent (+0.5%) and WTI (+0.5%) prices are firmer after a lacklustre overnight session, ahead of US President Trump meeting with Chinese Vice Premier Liu He at 19:30GMT. Of note Goldman Sachs have revised their 2019 US oil supply growth expectations to 1.4mln BPD from 1.2mln BPD. Looking ahead, we have the Baker Hughes rig count which last week saw oil rigs increase by 3 to 857, as such the total rig count figure was 1051 from the prior 1049.

Gold (U/C) has been largely unchanged taking the lead from an uneventful dollar ahead of multiple key Fed speakers today, including Federal Reserve Vice Chair Clarida at 17:00 GMT. Elsewhere, recent newsflow has seen China’s foreign ministry denying reports that some ports in China have halted Australian coal imports; stating that Chinese customs are quality and environmental checks surrounding coal. Barrick Gold is reportedly considering a hostile bid for Newmont Mining Corp, at around USD 19bln in stock; which has the possibility of being one of the largest mining-deals ever. 

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EU Mid-Session Update: Attack sees crude prices pop as Saudi crude output drops https://t.co/IAoChFglPp