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[PODCAST] US Open Rundown 19th March 2019

  • European indices are firmer [Euro Stoxx 50 +0.5%] shrugging off a indecisive lead from Asia
  • Sterling respite on ONS data & Brexit updates, while the dollar remains subdued ahead of FOMC
  • UK PM May to reportedly request a 9-12 month delay to Brexit, EU leaders are reportedly planning a contingent offer on Brexit extension to be finalised in days before March 29th
  • Looking ahead, highlights include, US Durable Goods (Revised) & Factory Orders, New Zealand Current Account, Riksbanks' Skingsley

 

ASIA  

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 (+0.2%) andShanghai Comp. (-0.2%) 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.

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)

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)

US

China are said to be considering excluding the Boeing (BA) 737 Max from a US 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 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)

UK Brexit Secretary Barclay says the speaker raised the bar with his ruling, a shift from lawmakers is required to bring it back again, adding that Brexit will be discussed this morning at the cabinet, speaker has previously stated we should not be bound by precedent. Also states that DUP talks have been very constructive, both sides want to see our work continuing. (Newswires)

Separately, reports indicate that UK PM May’s talks with the DUP have stalled, Huffington Post.

EU leaders are unlikely to grant a Brexit delay this week, instead request clarity on what a delay is for, ITV's Peston citing sources. (Twitter) While French Europe Minister Loiseau says if there is no decision from Britain then we will have a no-deal on March 29th. (Newswires)

Downing Street is suggesting that they will not be attempting to bring back UK PM May's deal for a third time before Brussels summit; Daily Mirror's Crerar. (Twitter)

EU source stating that they are unsure if UK PM May will send a letter tomorrow or make an oral request for an extension at Thursday's EU Council meeting may even be an extra summit around 28/29th March, as cited by Waterfield of The Times.

EU leaders planning a contingent offer on Brexit extension, would be finalised in days before March 29th, according to sources. (Newswires)

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

UK Employment Change 222k vs. Exp. 120k (Prev. 167k)

- UK ILO Unemployment Rate Jan 3.9% vs. Exp. 4.0% (Prev. 4.0%)

- UK Avg Earnings (Ex-Bonus) Jan 3.4% vs. Exp. 3.4% (Prev. 3.4%)

German ZEW Economic Sentiment Mar -3.6 vs. Exp. -11.0 (Prev. -13.4)

- ZEW says the significant increase in the in the indicator of economy sentiment shows that major economic risks are considered less dramatic than before. (Newswires)   

GEOPOLITICAL

US Senior Arms Control Officia sates that Iran's missile programme destabilises the region and increases the risk of a regional arms race, US Official says it will aggressively counter Iran's proliferation of ballistic missiles are unlawful arms transfers. Adding that the only way for North Korea to achieve security and development is to abandon all weapons of mass destruction along with all ballistic missile programmes. (Newswires)

EQUITIES

Major European equities are firmer [Euro Stoxx 50 +0.5%] following a relatively indecisive overnight session, where main Asian indices finished essentially flat ahead of this weeks key risk events. Notable movers this morning include Antofagasta (+4.0%) after FY earnings and the Co. stating they expect 2019 to be another record setting year, as such the Materials sector is higher by around 0.7%; more broadly all sectors are in the green. Towards the bottom of the Stoxx 600 are Deutsche Bank (-2.5%) and Commerzbank (-2.5%), likely affected by some retracement from yesterdays gains on conformation of merger discussion and Fitch stating that the talks highlight challenges and pressures of both banks to improve profitability. Commerzbank are also hampered by being downgraded at RBC. Elsewhere, following reports of a cyber attack, the impact of which is still being assessed, Norsk Hydro (-1.6%) are in the red; subsequent reports indicate that only the Co. has been affected by the attack.

FX

DXY - The broad Dollar remains depressed in advance of FOMC day 1 amidst widespread anticipation that the March policy meeting will culminate in a further dovish shift via downgraded SEP forecasts and more details about the earlier end to QT. Indeed, the index has probed a fraction deeper beneath recent lows and is currently below key technical support at 96.434 (50% Fib retracement of the prior move from 95.157 to 97.711), which could be telling on a closing basis even before the Fed pronouncements tomorrow and Chair Powell’s presser.

G10 - Notwithstanding the generally soft Greenback, ranges are relatively tight with only marginal deviations around data for the likes of the Pound and Aussie. Cable has recovered from yesterday’s Brexit upset with the aid of an almost universally strong ONS labour market report to retest offers and resistance ahead of the 1.3300 level, while in contrast Aud/Usd has lost more momentum above 0.7100 after RBA minutes underlining the neutral stance and house price data compounding weakness in the economy overall. Elsewhere, Usd/Jpy has pulled back a bit further towards 111.00 having retreated through the 200 DMA at 111.45, but Eur/Usd is still butting up against upside chart hurdles above 1.1350, including a Fib at 1.1373, which represents a 50% reversal from 2019 high to low. The Franc is attempting to breach parity again following a solid Swiss trade surplus and pre-SNB, while the Loonie is also eyeing 1.3300 peaks vs its US counterpart against the backdrop of firmer crude prices. Back down under, the Kiwi is pivoting 0.6850 ahead of NZ Q4 current account data and the latest GDT auction.

Note, some BIG OPTION EXPIRIES could factor in the absence of anything more directional ahead of the NY cut today, with 1 bn in Cable at 1.3290-1.3300, 1.2 bn in Usd/Jpy between 11.30-40 and 1.3 bn in Aud/Jpy from 79.35-50 as the cross hovers just shy of 79.00.

FIXED INCOME

More volatile and edgy trade in Gilts and Bunds after upbeat UK data and German survey releases, but more so on ever-changing and fluid Brexit related reports, with the former back down to intraday lows and latter down in sympathy having carved out a marginal new Eurex peak of 164.35 at one stage (+8 ticks vs -9 ticks at the trough). However, US Treasuries remain fractionally firmer and the curve incrementally flatter, with little if no contagion from any moves in counterpart EU benchmarks as the countdown to the FOMC kicks off in earnest. Ahead, revisions to durable goods that were better than expected in the preliminary report, headline, and factory orders.

COMMODITIES

WTI (+0.4%) and Brent (+0.5%) are somewhat firmer after a quiet overnight session, although WTI prices are inching closer to USD 60/bbl having surpassed the USD 59.50/bbl mark to the upside; as oil closed at its highest level YTD yesterday. News flow for the complex continues to be quiet after OPEC cancelled the April meeting and are to decide on output cuts in June. Looking ahead we have the US API Weekly release, which previously indicated a crude stocks draw of 2.6M.

Gold (+0.2%) is largely unchanged, trading around the middle of the day’s range on a lack of catalysts and a subdued dollar ahead of this weeks key events. Elsewhere, spot Palladium has passed USD 1600/oz for the first time this morning following reports that Russia are considering a ban on the exports of precious metal scrap, in an attempt to promote domestic refining. Russian are one of the worlds top Palladium exporters, responsible for around 21% of total palladium exports in 2017 by value.

Libya's El Sharara oil field pumps around 270k BPD, output may rise to 290k BPD; following the completion of well-maintenance. (Newswires)

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)