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[PODCAST] EU Open Rundown 10.07.18

  • Asian equity markets traded mostly higher on the momentum from Wall St where the DJIA notched its best performance in a month
  • The head of the Conservative 1922 Committee indicated that he did not receive the 48 letters required for a leadership challenge
  • Looking ahead, highlights include Norwegian CPI, UK monthly GDP, output, trade, German ZEW, APIs, ECB’s Lautenchlaeger

ASIA

Asian equity markets traded mostly higher on the momentum from Wall St where the DJIA notched its best performance in a month, and financials outperformed on optimism heading into earnings season. ASX 200 (-0.3%) and Nikkei 225 (+0.9%) initially took impetus from US and both opened higher although the Australia index later pared gains amid losses in its largest weighted financials sector, while Tokyo stocks remained firm on a weaker currency. Elsewhere, Hang Seng (+0.4%) conformed to the overall positive tone but the Shanghai Comp. (-0.1%) was choppy after continued inaction by the PBoC resulted to a CNY 30bln liquidity drain, while participants also digested CPI and PPI figures which either printed inline or firmer than expected. Finally, 10yr JGBs were subdued with demand weighed by the overall positive risk appetite and after the 5yr auction failed to support prices despite showing stronger interest with both b/c and accepted prices firmer than prior.

PBoC skipped open market operations for a net daily drain of CNY 30bln. (Newswires)
PBoC set CNY mid-point at 6.6259 (Prev. 6.6393)

Chinese CPI (Jun) Y/Y 1.90% vs. Exp. 1.90% (Prev. 1.80%). (Newswires)
Chinese PPI (Jun) Y/Y 4.70% vs. Exp. 4.50% (Prev. 4.10%)

China Mofcom announced measures to mitigate impact of trade dispute with US, in which new tax income from countermeasures against US will mainly be utilized to ease impact to companies and workers. (Newswires)
 

UK/EU

There were some initial rumours that suggested pro-Brexit lawmakers have the necessary 48 'letters' to force a confidence vote on UK PM May. However, the head of the Conservative 1922 Committee indicated that he did not receive the 48 letters required for a leadership challenge, while there were comments from UK Conservative Party chairman Lewis and Eurosceptic lawmaker Rees-Mogg that they didn’t expect a confidence vote against PM May. (Newswires)

UK PM May spokesperson stated that there is no question of revisiting the Brexit position agreed by the Cabinet on Friday, while the UK named Jeremy Hunt as the new Foreign Secretary to replace Boris Johnson following his resignation. (Newswires)


UK BRC Retail Sales YY (Jun) 1.10% (Prev. 2.80%). (Newswires)
UK Barclaycard Consumer Spending (Jun) 5.1% Y/Y (Prev. 5.1%)

FX

FX markets were mostly uneventful although the DXY edged mild gains and held above the 94.00 level, which ensured its major counterparts were contained in which EUR/USD oscillated around the 1.1750 level and GBP/USD took a breather from the prior tumultuous day triggered by cabinet resignations and threat of a no-confidence vote against UK PM May. The slightly firmer greenback and increased risk appetite helped USD/JPY just reclaim the 111.00 handle, while antipodeans were also mildly supported following the Chinese inflation figures and as CNH extended its gains with USD/CNH briefly testing 6.6000 to the downside. Elsewhere, TRY weakened after President Erdogan announced his new cabinet in which he appointed his son-in-law Berat Albayrak for the newly created Treasury and Finance Minister role which will replace the roles held by Deputy PM Simsek and Finance Minister Agbal who were both viewed as market friendly and were also seen as key advocates for higher rates.


COMMODITIES

Commodities saw mild upside overnight in which WTI gained a firmer footing on the USD 74.00/bbl level where it consolidated for most the session and with focus turning to today’s API inventory report and on any potential impact from oil drillers striking in Norway. Elsewhere, gold was rangebound with price action relatively calm in comparison to the prior day’s USD-driven swings, while copper is also marginally higher alongside the overall tone in the complex but has pared some of its gains as risk appetite in mainland gradually waned.

UAE Energy Minister and OPEC President Al-Mazrouei said he doesn't foresee a need for an extraordinary meeting before December and that OPEC focus is on supply and demand balance, not targeting price. Furthermore, Al- Mazrouei had earlier commented that time is needed for extra supply to come into the market, that OPEC has enough capacity to offset output shortfalls and that OPEC doesn't want to overdo efforts to boost supply. (Newswires)

Norway oil drillers are said to strike following failure of wage mediation discussions. (Newswires)
 

US

Treasury yields rose across the curve ahead of this week’s supply, with traders citing an easing of concerns regarding trade wars, as well as a ‘Goldilocks’ labour market report on Friday; rallying stock futures and a slightly higher yuan also were contributing. The long-end led the sell-off, with 10yr yields rising by c.3bps (seeing 2s10s rise a touch, taking it to just under 30bps), resulting in a modestly steeper curve. US 10YR T-notes futures (u8) settled 7 ticks lower at 120-04.

San Francisco Fed economic letter noted economic upside from tax cuts may not meet analysts' overly optimistic expectations. (Newswires)

US President Trump nominated judge Brett Kavanaugh for US Supreme Court Justice. (Newswires)

Source: RANsquawk

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