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[PODCAST] EU Open Rundown 19th March 2019

  • Asian stock indices traded indecisively amid a lack of key drivers for the region and with participants cautious ahead of the upcoming risk events
  • UK PM May is said to request a 9-12 months delay to Brexit, according to The Sun
  • In FX markets, USD was subdued, whilst the greenback’s major counterparts struggled for direction
  • Looking ahead, highlights include UK Employment Data, German ZEW Survey, US Durable Goods (Revised) & Factory Orders, New Zealand Current Account, ECB's Praet & Riksbanks' Skingsley

 

ASIA-PAC

Asian stock indices traded indecisively amid a lack of key drivers for the region and with participants cautious ahead of the upcoming risk events. ASX 200 (-0.1%) was choppy as strength in mining names vied with the weakness in energy and financials in Australia, while jittery trade in the Nikkei 225 (-0.1%) largely reflected currency fluctuations. Elsewhere, sentiment in China was also fickle in which the Hang Seng (-0.1%) and Shanghai Comp. (-0.4%) swung between gains and losses as focus centred on earnings and after the continued but tepid liquidity effort by the PBoC. Finally, 10yr JGBs were initially quiet amid the indecisive risk sentiment in the region, although prices later found support following a 20yr auction in which all metrics improved from the previous month.

PBoC injected CNY 50bln via 7-day reverse repos. (Newswires) PBoC set CNY mid-point at 6.7062 (Prev. 6.7088)

US Agricultural Secretary Perdue said China could as much as triple the amount of US farm goods it buys as part of a trade deal. (Newswires)

UK/EU

UK PM May is said to request a 9-12 months delay to Brexit, according to The Sun, while reports in the Guardian suggested that the EU will formally agree on Brexit delay this week. (The Sun/Guardian)

UK Brexit minister Kwarteng said PM May will write to EU's Tusk setting out possible extensions the UK is seeking at the EU council and that it will be either a technical extension or a longer one. (Guardian)

EU official has said Bercow's announcement, which essentially prevents a third meaningful vote unless there are changes, has made an extension "more likely", with the focus on the political declaration, according to BuzzFeed's Alberto Nardelli. (BuzzFeed)

UK Solicitor General Buckland said there are ways around House Speaker Berclow’s ruling, with prorogation (discontinuing Parliament, without dissolving it) being an option for the government, while he also commented that the UK is in a constitutional crisis. (Newswires)

UK Conservative MPs reportedly demand a departure date from PM May in return for them passing her Brexit deal, while there were also reports that hardline Tory Brexiteers were said to have threatened to strike if PM May goes ahead with idea to delay Brexit by 1 year. (Newswires/FT)

 

S&P said it affirmed EU at AA; Outlook Stable following revised criteria. (Newswires)

 

FX

In FX markets, USD was subdued with the DXY contained slightly below the 96.50 level as the upcoming FOMC remained at the forefront of investor anticipation, with the Fed expected to cut growth, inflation and dot plot forecasts, as well as confirm the end of the balance sheet runoff this year. The greenback’s major counterparts somewhat struggled for direction with EUR/USD little changed in the midst of a cluster of MA levels ranging from its 5DMA-100DMA, while GBP/USD continued to pick itself up from the prior day’s Brexit-related disarray after UK House Speaker Bercow blocked a third meaningful vote unless the government makes changes to PM May’s deal, which some analysts later suggested provides PM May more time to garner support. Elsewhere, USD/JPY and JPY-crosses were pressured by the temperamental risk appetite, while AUD/USD is on thin ice at the 0.7100 handle as weaker than expected House Price data added to Australia’s streak of soft releases and after the 3yr yield briefly slipped below the RBA’s 1.50% Cash Rate Target for the first time since 2016. In addition, the RBA minutes provided very few surprises as the central bank reiterated its view of no strong case for a near-term rate changes and a more evenly balanced view, although the meeting was prior to the Q4 GDP miss and Westpac suggested the minutes emphasized uncertainty regarding a slowdown in output data.

RBA Minutes from March 5th meeting reiterated that the board sees no strong case for near-term move and that scenarios are more evenly balanced than last year. Furthermore, the board noted significant uncertainties regarding the economic outlook and that trade tensions remain source of uncertainty for global outlook but added that the labour market continued its improvement and that unemployment is seen to decline to 4.75%. (Newswires)

 

Australian Home Price Index (Q4) Q/Q -2.4% vs. Exp. -2.0% (Prev. -1.5%). (Newswires)

Australian House Price Index (Q4) Y/Y -5.1% vs. Exp. -0.4% (Prev. -1.9%)

COMMODITIES

Commodities were quiet overnight with price action hampered by the indecisive risk tone, although WTI crude futures remained above the USD 59.00/bbl and near the prior day’s fresh YTD highs following the OPEC+ JMMC meeting. The statement from producers noted they will exceed their voluntary output adjustments in the coming months, while Saudi Energy Minister Al-Falih was also pessimistic of a balanced market during H1 2019 and noted they will swing production if needed. Elsewhere, gold prices and copper eked mild gains overnight but with upside limited amid rangebound trade across the complex, a subdued greenback and lacklustre risk appetite.

EIA sees US total shale regions production up by 85k BPD at 8.593mln BPD in April (vs 90k projected rise in March). (Newswires)

US

Yields were little changed on Monday, ahead of the FOMC on Wednesday, which is expected to be a dovish update, where forecasts are cut, the central bank announces the end of QT, while reiterating data-dependence and patience. The curve was biased towards small flattening, at settlement, having traded a lot of the early part of the session slightly steeper. There was little on the data docket or speakers, with the focus on flows; some had suggested that CTAs sold the uptick, though the move lower couldn’t gain traction after real money buyers came in on at the long-end. Strengthening equities tried to influence the action, though volumes were low, and even equities themselves were subject to choppy trading at times.

Categories:
MOC: * SPX 850mln to sell (vs at 650mln to sell at 1549 EDT) * Dow 50mln to sell (vs 100mln to buy at 1549 EDT)