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[PODCAST] US Open Rundown 27th March 2019

  • European equities have been choppy [Euro Stoxx 50 -0.4%], following the significant downturn seen in risk sentiment after a somewhat mixed lead from Asia
  • House of Commons Speaker Bercow is to select indicative vote options around 15:00GMT/11:00EDT & voting is to begin around 19:30GMT/15:30EDT
  • Dollar has conceded some ground against G10 currencies, with the exception of antipodeans after the RBNZ providing a more dovish outlook on the rate path
  • Looking ahead, highlights include US and Canadian trade, DoEs, ECB’s, Mersch, de Galhua & Fed’s George

 

ASIA  

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 (-0.2%) 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 (+0.6%) and Shanghai Comp. (+0.8%) 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)

RBNZ kept their OCR on hold at 1.75% as expected and said more likely direction of next OCR move is down. (Newswires)

US

US President Trump's Fed board nominee Moore said 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)

UK/EU   

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. UK PM May's team are debating a potential timetable for her to stand down, which might not necessarily see her make the announcement before MV3, according to the FT. (FT)

UK Cabinet Minister now not expecting free votes for tonight's indicative votes as some demanded, risking further resignations; according to Sky News' Faisal Islam. BBC’s Nick Eardley added, however, that no decision has been made as of yet. (Newswires) 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)

ECB’s Draghi says the ECB are now seeing a more persistent deterioration of external demand, adding that current data suggests that there are some signs that external demand may be effecting investment via manufacturing value chains within the Euro Area. (Newswires)

ECB's Praet says that In any case, we stand ready to adjust all of our instruments, as appropriate, to ensure sustained inflation convergence towards levels below, but close to, 2% over the medium term. (Newswires)

Bank of Italy's Visco says that they must guarantee financial stability with a clear strategy to lower public debt. (Newswires)

Italy's Confindustria hikes 2019 deficit forecast to 2.6% of GDP from 2.0% and see flat GDP growth of 0.9%. (Newswires)

EQUITIES

A relatively choppy session for European equities thus far [Eurostoxx 50 -0.4%] as sentiment soured after a mixed lead from Asia. Sectors are mostly lower although the consumer discretionary sector (+0.2%) is driving the gains amid the slew of positive news-flow for the auto sector. Renault (+3.4%) shares spiked higher at the open amidst fresh merger talks with Nissan ahead of a bid for Fiat Chrysler (+3.3%), whilst Daimler (+1.2%), BMW (+0.5%), and Volkswagen (+0.4%) shares also march in tandem. Reports stated Daimler was close to selling its 50% “Smart” stake to Geely, meanwhile Volkswagen struck a multi-year partnership with Amazon. Elsewhere utilities underperform despite its defensive properties with Centrica (-1.3%), National Grid (-1.4%), E.ON (-1.6%) all near the foot of their respective bourses. In terms of notable movers, Wirecard (-4.5%) shares shed some of yesterday’s gains after the company announced that some of its Singapore employees may face criminal liability regarding the ongoing accounting scandal. Finally, Swedbank (-7.8%) shares declined after the company confirmed that a search is currently underway at the head office, following on from reports that an internal investigation has been initiated by the Swedish Economic Crime Authority.

FX

NZD/AUD - The Antipodean Dollars are back on the rack, with the Kiwi sharply underperforming in wake of OCR cut revelations from the RBNZ overnight after an unexpected switch from neutral to easing mode amidst a bleaker assessment of the economy and heightened risks of a more pronounced downturn. Nzd/Usd slumped over a big figure in response and is clinging to 0.6800, as the Aud/Nzd cross extended recovery gains well beyond 1.0300 to circa 1.0450 before consolidating, and with Aud/Usd retreating to sub-0.7100 at one stage on the back of worrying Chinese data in the form of industrial profits (-14% y/y and weakest in almost 10 years).

NOK - Another G10 laggard following a rise in Norwegian unemployment vs the consensus for an unchanged jobless rate, with Eur/Nok back up above 9.6500 vs a more stable SEK around 10.4200 vs the single currency amidst mixed Swedish sentiment indicators, a wider trade surplus and 2019 GDP forecast upgrade via the NIER.

JPY/CHF/EUR - Relative outperformers and all firmer vs the Greenback as the Jpy benefits from renewed safe-haven positioning within a 110.70-30 range and moves further away from decent option expiry interest sitting between 110.70-75 (1.4 bn). Similarly, the Franc is benefiting from another downturn in risk sentiment and revisits recent highs around 0.9900 and through 1.1200 against the Euro, which looked vulnerable independently when testing Tuesday’s lows vs the Buck around 1.1250 before some timely support from ECB President Draghi who contended that a more sustained downturn in external demand and other factors have merely hampered rather than scuppered Eurozone inflation convergence towards target. Eur/Usd has subsequently rebounded relatively firmly to challenge Fib resistance at 1.1280, but could be capped ahead of 1.1300 given hefty expiries spanning 1.1255-65 (1.5 bn).

GBP/CAD - The Pound remains rangebound around 1.3200 vs the Usd awaiting the next chapter of Brexit and up to 16 amendments to be voted on in Parliament after the Letwin approval – see our headline feed for a situation update and detailed analysis of all the motions tabled that could be selected by the HoC Speaker later today. Note, Cable survived an early downside attempt, and like Eur/Usd held around yesterday’s base, but is likely to face some offers around 1.3250 by the same token. Elsewhere, the Loonie is losing some support from oil prices with Usd/Cad towards the top of a 1.3407-1.3376 band ahead of trade data from Canada and the US.

DXY - The index has come up against some psychological and chart resistance just shy of 97.000, with a Fib at 96.956 only marginally and briefly breached. Moreover, the broad Dollar has conceded ground to the aforementioned comeback in rival currencies.

FIXED INCOME

Some post-auction consolidation perhaps, but certainly no sign of any indigestion or reticence to snap up 10 year German debt and pay for the privilege. However, Bunds have drifted back down from their fresh/latest contract best (166.25) and the equivalent yield has nudged off circa -6 bp lows, with Gilts and US Treasuries largely following their lead, but the former bouncing again from a marginally lower Liffe low (129.38) and latter still well bid amidst further marked flattening. Back to Eurex, Italian BTPs bucking the bull trend on 2019 growth downgrades and fiscal implications that will lift the deficit further from 2%.

COMMODITIES

The oil complex is extending losses as the risk-off sentiment took the wheel. WTI (-0.8%) futures gave up the recently claimed USD 60/bbl and flirts closer to USD 59.50/bbl whilst Brent futures (-0.3%) rests just below USD 68.00/bbl. Last night’s APIs showed a surprise build of 1.9mln barrels (vs. Exp. draw of 1.2mln) with trader eyeing the release of this week’s DoEs as a fresh catalyst. Further supply side news-flow may also be contributing to the downside as sources stated that Russian oil output in March (so far) stood at 11.30mln BPD, only marginally lower from February’s 11.34mln BPD. Finally, oil officials noted that crude loading operations have resumed in Iraq’s Southern Terminals following a stoppage. Elsewhere metals are largely benefiting from the marginal pullback in the buck with gold (-0.2%) gains also exacerbated by safe-haven demand. However, dollar-induced upside in copper is capped by the risk averse sentiment as the red metal trades sideways. Finally, the majority of miners and port operators in Australia have resumed after 4-6 days of disruption following cyclone activity.

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

Saudi oil export value rose 0.5% Y/Y, according to reports. (Newswires)

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