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[PODCAST] US Open Rundown 1st March 2019

  • Major European indicies are in the green [Euro Stoxx 50 +0.8%], following from the positive sentiment in Asia
  • Dollar somewhat stronger, as safe havens suffer on risk sentiment
  • China’s Caixin Manufacturing PMI beat expectations, but remains in contraction
  • Looking ahead highlights include, US Core PCE, US ISM Manufacturing PMI, Canadian GDP, Fed’s Bostic

ASIA

Asian equities started the first trading day of the month on an optimistic note, despite a relatively downbeat session on Wall Street where the three main indices closed lower by around three-tenths of a percent. The Dow was weighed on by UnitedHealth shares which trimmed around 50 points off the index, meanwhile Nasdaq was pressured as heavyweights Facebook, Apple and Netflix all fell over 0.5%. In terms of February performance, Dow rose 3.7%, S&P gained 3.0% and Nasdaq advanced 3.4% in the month. ASX 200 (+0.4%) extended on opening gains as IT and healthcare names led the advances, whilst heavy-exporter Nikkei 225 (+1.0%) outperformed on the back of a weaker domestic currency. Elsewhere, Shanghai Comp (+1.8%) was choppy as the third straight month of contraction in China’s manufacturing sector capped upside in the index, despite MSCI quadrupling China A-share weightings in global benchmarks to 20%. Goldman Sachs estimates that the MSCI move would lead to a potential USD 70bln net buying in A-shares, skewed towards the healthcare and consumer sectors. Finally, Hang Seng (+0.6%) edged higher during the session as the index felt support from its heavy-weight financial and energy sectors.

PBoC set the CNY mid-point at 6.6957 (Prev. 6.6901) (Newswires)

PBoC drains a net CNY 40bln on the day

China Caixin Manufacturing PMI (Feb) 49.9 vs. Exp. 48.5 (Prev. 48.3); third month of contraction (Newswires)
China New orders 50.2 (Prev. 47.3); highest in three-months

MSCI are to boost China A-shares weighting in global benchmarks to 20% from 5% in three steps. (WSJ)

NORTH AMERICA

Fed Chair Powell (Neutral) said signs of upward pressure on inflation is muted whilst reiterating that the US economy is in a good place and that the Fed remains patient. Powell also urges policies to boost labour force participation and productivity and noted that the recent rise in productivity leaves room for wages to rise without increasing inflation concerns. (Newswires)

White House Economic Advisor Hasset said they are looking at 3% domestic growth rather than 2% due to the tax bill. (Newswires)

US President Trump said the Republicans who vote against the Mexican border wall are putting themselves in great jeopardy. (Fox News)

US President Trump said he will fight the Mueller report if it is not honest. (Fox News)

US President Trump reportedly commanded his former Chief of Staff, John Kelly, to grant Senior Presidential Advisor and son-in-law Jared Kushner a top-secret security clearance, ignoring concerns from intelligence officials; according to New York Times citing sources. (New York Times)

Canadian PM Trudeau is expected to announce a Cabinet reshuffle later today; according to local media. (Newswires)

GEOPOLITICAL

US President Trump said he believes a good deal with North Korea will happen and added that North Korea did not want to fully denuclearise. Meanwhile, North Korea Foreign Minister said if US lifts sanctions, North Korea will denuclearise, whilst adding that Pyongyang will not change its stance even if the US seeks further talks. US Secretary of State Pompeo said that North Korea basically asked for all sanctions to be lifted. (Newswires/BBC/Fox News)

US President Trump reportedly told North Korea to "go all in" on their commitment to denuclearise, but North Korea reportedly asked for all sanctions to be lifted apart from armaments; according to a senior state department official. (Newswires)

South Korean President Moon said the Trump-Kim Summit made meaningful progress. (Newswires)

Four Chinese navy ships have been spotted near the China-Taiwan-Japan disputed Senkaku islands; according to NHK. (NHK)

Pakistan's Foreign Minister states the downed Indian pilot will be released at the Wagah border on Friday. (Newswires)

UK/EU

UK Opposition Labour Party is reportedly moving towards a compromise plan which would allow PM May’s Brexit deal to pass but makes it clear that Parliament “withholds support” until the deal has been put to a public vote; according to multiple party sources. (The Guardian)

USTR Office said it will ensure "fair, balance and reciprocal trade" with the UK by reducing or eliminating tariffs. US seeks "comprehensive market access" for agricultural goods, and comprehensive duty-free market access to the UK for US industrial goods and address non-tariff barriers. (Newswires)

The Independent Group has named Chuka Umunna as its spokesman. (Sky News)

BoE’s Carney states that the UK business investment decline is huge, and that it is virtually essential to have a transition period. (Newswires)

Internal report by the German Parliament warns that a Brexit extension beyond the EU elections in May breaks EU laws, legal action against the UK is the only possible consequence; according to Welt's Bolzen. (Twitter)

In its annual report on the UK, the EU has accused Britain of enabling tax avoidance by large businesses, claiming the UK’s dividend tax arrangements may it attractive for “treaty shopping” and “aggressive tax planning”. (The Times)

EU Markit Manufacturing Final PMI (Feb) 49.3 vs. Exp. 49.2 (Prev. 49.2)

- German Markit/BME Manufacturing PMI (Feb) 47.6 vs. Exp. 47.6 (Prev. 47.6)

- French Markit Manufacturing PMI (Feb) 51.5 vs. Exp. 51.4 (Prev. 51.4)

EQUITIES

Major European equities are in the green [Euro Stoxx 50 +0.7%], as markets follow from the positive risk sentiment seen overnight in Asia. Dax (+1.0%) is the outperforming index with all components in the green on the positive risk sentiment following concerns over China’s economy being somewhat alleviated after Chinese Caixin manufacturing PMI came in stronger than expected; as such the Auto sector is outperforming its peers. Other notable movers include Rheinmetall (+7.3%) leading the Stoxx 600 after the Co’s FY18 revenue was in-line with expectations. WPP (+8.2%) are also firmly in the green in-spite of the Co’s outlook for 2019 being rather downbeat, particularly regarding the first half, as they reported results that marginally beat on expectations. Elsewhere, Man Group (-4.2%) are towards the bottom of the Stoxx 600 after stating that their funds under management fell in 2018.

FX

DXY- Although the Dollar has pared some of its post-GDP and Chicago PMI gains vs certain major counterparts, the index has rebounded further from sub-96.000 lows towards 96.400, largely at the expense of safe-haven currencies, and especially the Jpy.

JPY - No respite for the Yen after yesterday’s slide through 111.00 and accelerated losses below the 200 DMA as US Treasury yields continue to rally and the 10 year benchmark clears 2.70% in wake of the aforementioned stronger than forecast data and survey news. Usd/Jpy is now just a whisker away from the next big figure where more offers are touted, and with key Fib resistance residing not far above at 112.08.

CHF/GBP - Also victims of the broad Greenback revival, but the former unwinding more of its safe-haven premium as well, with the Franc back under parity vs the Buck and below 1.1350 against the Euro. Meanwhile, Cable’s pull-back from recent Brexit no deal highs has extended to 100+ pips and not far from Fib support around 1.3215, with little reaction or independent direction gleaned from a bang in line with consensus UK manufacturing PMI.

EUR - The single currency has pulled back further from best levels too (1.1400+), but holding up relatively well amidst mixed Eurozone data and perhaps with the aid of hefty option expiry interest at the 1.1350 level for today’s NY cut (2 bn) plus M&A news that has lifted Eur/Jpy very close to a key Fib. On that note, the 30 DMA in Eur/Usd at 1.1363 could also be influential on a closing basis along with 0.8593 in Eur/Gbp.

CAD/NZD/AUD - All on a firmer footing vs their US peer, and particularly the Loonie that has rebounded strongly from sub-1.3200 lows on Thursday ahead of Canadian GDP data and gleaning some traction from steadier oil prices. Usd/Cad is currently near the bottom of a 1.3132-77 range, and a big option expiry between 1.3140-50 may also have a bearing on trade given 1.4 bn rolling off later today. Meanwhile, the Kiwi and Aussie have both managed to regain composure and round number status after falling below 0.6800 and 0.7100, with some comfort drawn from the overnight Caixin Chinese manufacturing PMI that was sub-50 again, but not as weak as the official version.

FIXED INCOME

Several more twists and turns in bonds as debt markets kick off the new month rather indecisively, but with an offered tone for choice. Indeed, Gilts embarked on a deeper downturn from 125.87 Liffe highs in wake of the UK PMI and BoE data, albeit belatedly, to a marginal new intraday low of 125.67 before finding more underlying bids, while Bunds continue to meaner between 165.12-38 and the Eurozone semi-core/periphery underperform (slightly) in wake of France’s wider January budget shortfall and Spain joining Italy on the contractionary manufacturing PMI front. Elsewhere, it’s a bit deeper and steeper for the US Treasury curve as attention shifts to personal income, spending, the Fed’s preferred core PCE price measure, Markit/ISM manufacturing surveys and the final Michigan sentiment readings for February.

COMMODITIES 

Brent (U/C) and WTI (+0.1%) prices are essentially flat, in-spite of trading positively overnight and initially during the European session, although they are once again trading within a fairly narrow range of less than USD 2/barrel. Elsewhere, since the imposition of US sanctions on the 28th January on Venezuelan oil, Venezuela’s oil exports have dropped by 40% for the month to around 920k BPD. Separately, Lukoil have agreed to reach the OPEC+ targets in April, and Rosneft’s VP state that they fully comply with the pact.

Gold (-0.3%) is weaker as the USD moves higher recouping recent losses, with the yellow metal hitting a two-week low and currently trading around USD 1306/oz; however, analysts do highlight that the metal has strong support at the USD 1300/oz level. Elsewhere, copper weakened following China printing a 3rd month of contraction in their Caixin Manufacturing PMI, although the metal did recover as the figure was above expectations and risk sentiment remained positive. Separately, Goldman Sachs trade ideas include Long Dec’19 copper vs. Dec’19 zinc, Long jun’19 and short June’20 aluminium.

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Asia begins subdued amid headwinds from US where the majors pulled back from record levels as they digested the fir… https://t.co/2FoQ94zNdl