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[PODCAST] EU Open Rundown 27th March 2019

  • Asian equity markets were mixed as the region somewhat failed to maintain the broad positive momentum from US where all majors finished in the green
  • Opposition Leader Corbyn is preparing to whip his MPs to back a move today that would keep Britain in the single market and customs union
  • Note, House Speaker Bercow is set to name the options for indicative votes around 1500GMT today
  • Looking ahead, highlights include US and Canadian trade, DoEs, ECB’s Draghi, Praet, Lautenschlaeger, de Guindos, Mersch, de Galhua, Fed’s George

 

ASIA-PAC

Asian equity markets were mixed as the region somewhat failed to maintain the broad positive momentum from US where all majors finished in the green with the gains led by outperformance in energy and financials. ASX 200 (+0.1%) and Nikkei 225 (-0.4%) were both negative throughout the day although the Australian benchmark just about recovered at the close, while Tokyo stocks underperformed amid currency effects and mass ex-dividend day involving over 1000 stocks including blue-chips Mitsubishi UFJ, SoftBank and Sony. Elsewhere, Hang Seng (+0.5%) and Shanghai Comp. (+0.3%) were initially indecisive amid continued PBoC liquidity inaction and as participants mulled over another deluge of earnings, as well as discouraging data in which February YTD Industrial Profits slumped by the most in nearly a decade. However, sentiment in China then improved with energy names boosted by the recent advances in oil, while there was also reports confirming that China and Italy signed an MOU to make Italy the first western European country to join the Belt & Road initiative. Finally, 10yr JGBs were slightly higher as they tracked the marginal gains seen in T-notes and as the subdued risk appetite in Japan kept prices afloat.

PBoC skipped open market operations for a net neutral daily position. (Newswires) PBoC set CNY mid-point at 6.7141 (Prev. 6.7042)

Chinese Industrial Profits YTD (Feb) Y/Y -14.0% (Prev. -1.9%) widest decline since May 2009. (Newswires)

UK/EU

UK lawmaker Benn proposed a motion for today’s indicative votes that any Brexit deal must at least include a commitment to negotiate a permanent UK-wide customs union with the EU, whilst UK lawmaker Boles proposed a common market 2.0 motion for Wednesday's parliamentary vote. Furthermore, MPs also proposed a motion to compel the government to negotiate a new UK-EU customs union after the UK leaves the EU and also proposed an EEA-EFTA Norway option as well as a motion to revoke A50 if the UK does not get a deal. (Newswires) Note, House Speaker Bercow is set to name the options for indicative votes around 1500GMT today

UK PM May will be urged by her own MPs to name the date of her departure today as the price of getting her Brexit deal through Parliament. (Telegraph) Note, PM May will be meeting with the 1922 Committee at 1700GMT today, according to Sky News.

Opposition Leader Corbyn is preparing to whip his MPs to back a move today that would keep Britain in the single market and customs union. (Times)

UK government rejected the petition to revoke Article 50 which was signed by 5.78mln people. (Newswires)

Brexiteer lawmakers wrote in a letter to PM May that her move to delay Brexit raises "serious legal doubts" and asked the PM to fully explain the government's recent actions to delay Brexit. (Newswires)

Former UK Foreign Minister Johnson suggested that if we vote down UK PM May's Brexit deal again there is an appreciable and growing sense that we will not leave at all, although he added that he was 'not there yet' on backing the deal. (Newswires)

FX

In FX markets, the DXY was firmer overnight and edged its way closer towards the 97.00 level as its major counterparts traded subdued in which EUR/USD extended on the recent data-driven weakness before it found support at 1.1250. GBP/USDwas also softer overnight and slipped below the 1.3200 handle as it continued to range ahead of today’s indicative votes in Parliament where MPs are said to have tabled at least 16 proposals on alternative Brexit options. Elsewhere, the indecisive risk tone weighed on JPY-crosses but with the pressure on USD/JPY alleviated by a firmer greenback and support around 110.50 where several key DMA levels are closely located, while antipodeans underperformed with NZD/USD heavily weighed after the dovish surprise by the RBNZ which kept rates unchanged as expected but deviated from its past outlook for rates to move in either direction and now sees it more likely for the next OCR move to be a cut. This spurred an adjustment to forecasts in which ANZ Bank now sees a cut in November this year with the risk of a sooner reduction, while money markets were seen to price OCR cuts in November this year and in June next year. As such, NZD/USDfell below the 0.6900 handle and later breached 0.6800 to the downside, while AUD/USD suffered in sympathy to test support levels around 0.7100.

RBNZ kept the OCR on hold at 1.75% as expected and stated it is more likely the direction of next OCR move is down.

Furthermore, the RBNZ said the balance to inflation risk have shifted to the downside and global economic outlook has continued to weaken, although it added that low rates as well as increased government spending and investment is to support growth this year. (Newswires)

COMMODITIES

Commodities were relatively uneventful overnight amid the mixed risk sentiment which saw WTI crude futures remain near YTD highs around the 60.00/bbl level after oil prices were supported this week by supply-side factors. These include the temporary closure of the Houston ship channel and with operations at Venezuela’s main oil port Jose halted following a blackout. Furthermore, Russian Energy Minister Novak also affirmed they are in the process of achieving planned oil output cuts, while a surprise build in headline API crude inventories did little to dent oil’s recent performance which is on track for its best 3-month start to the year since 2002. Elsewhere, gold prices were constrained by strength in the greenback, while copper eked mild gains amid some resilience in risk appetite of its largest buyer China.

US API Weekly Crude Stocks (22 March) +1.9mln vs. Exp. -1.2mln (prev. -2.133mln). (Newswires)

Venezuela's crude upgraders are still not able to restart operations following the recent electricity blackout in the country, according to sources. (Newswires)

US

Soft European data helped put a floor beneath prices in early trade, though a constructive risk environment helped stocks move higher, seeing some selling. Real money reportedly scooped up intermediates, and range trading ensued as dealers sold into supply and there was some rate locking on investment grade issuance including an 8-tranche bond offering from Mars Inc, IGM said. Uninspiring US data helped contribute some positive ticks. The 2yr note auction was decent, stopping through the screens by 1.2bps; cover was above recent averages. The decent auction helped stabilise the TPLEX, but subdued trade resumed into the close. Once again, a lot of attention on the 3m/10yr curve, which remains inverted, though analysts have seemingly become more sanguine about the whole affair. US T-note futures settled 2+ ticks higher at 124-13.

Fed's Daly (non-voter, dove) said the Fed Funds Rate is now at neutral and reiterated patience as well as data-dependency, while she also commented the current appropriate policy is to be patient and the US economy is in a good place. (Newswires)

US President Trump's Fed board nominee Mooresaid the Fed should immediately cut rates by 50bps, while he added he is not a ‘sycophant’ for President Trump and is not dovish on monetary policy. (NYT)

US trade judge recommended an import ban on some Apple (AAPL) phones over a patent infringement of Qualcomm (QCOM), although Apple managed to avoid an import ban in a 2nd infringement case at the US International Trade Commission. (Newswires)

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Well, this week has had us all bamboozled! Team RAN tapping out for the weekend to reload, ECB quite possibly abo… https://t.co/n0fsbPLwFp