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[PODCAST] US Open Rundown 4th April 2019

  • European indices have traded lackluster this morning [Euro Stoxx 50 U/C] as markets await US-China updates and ahead of key risk events
  • MPs marginally approved a bill preventing a no-deal Brexit, but rejected restricting extension date to before May 22nd & further indicative votes
  • Looking ahead, highlights include ECB Minutes, US Initial Jobless Claims, Fed's Williams, Mester & Harker

 

ASIA-PAC

Asian equity markets traded cautiously with the region tentative ahead of looming risk events and after a positive lead from Wall St. where US-China trade optimism kept stocks afloat despite poor ISM & ADP data. ASX 200 (-0.8%) and Nikkei 225 (Unch.) were subdued with broad weakness seen across all sectors in Australia as the post-budget euphoria faded and profit-taking set in following a 7-day win streak, while the Japanese benchmark was indecisive amid a choppy currency. Chinese markets were mixed ahead of an extended weekend in which the Hang Seng (-0.2%) stalled after it briefly rose above 30k for the first time since June last year, while the Shanghai Comp. (+0.9%) was boosted on hopes US and China are nearing a trade deal and with reports also suggesting a Trump-Xi meeting date to sign off on a deal could be announced as early as today. Finally, 10yr JGBs were lower as prices tracked the recent weakness in T-notes and as Japanese stock markets held above water for most the session, while mixed results at the 30yr auction also failed to spur demand.

PBoC skipped open market operations and are net neutral for the week vs. last week's CNY 110bln net drain. (Newswires) PBoC set CNY mid-point at 6.7055 (Prev. 6.7194)

Chinese Vice Premier Liu He will meet with US President Trump after the trade discussions today, while it was also reported that US and Chinese officials are still discussing when their leaders can meet to sign off on a trade deal and that a meeting date could be announced as soon as Thursday according to sources familiar with the plans. (Newswires/WSJ)

China MOFCOM spokesman states that China & the EU are increasing the pace of bilateral investment talks. Will initiate measures to support car imports and markets for used cars. (Newswires)

US Agriculture Secretary Perdue says US-China trade talks are down to the last few days. Perdue also commented that the US wants binding China pledges which are enforced by tariffs with a target of 2025 for China to meet trade pledges, while the US also wants a timetable for China purchases and market access. (Newswires)

Indian Repo Rate 6.00% vs. Exp. 6.00% (Prev. 6.25%); RBI retained “neutral” stance. One member wanted to change stance to “accommodative”. RBI says output gap remains negative, domestic economy facing headwinds on a global front. (Newswires)

Fitch affirm India at BBB-, and state that outlook is stable. (Newswires)

US

Some on Special Counsel Mueller's team reportedly view their findings as more damaging for President Trump than Attorney General Barr revealed according to New York Times. Elsewhere, there were also reports that US House Ways and Means Committee Chairman Neal sent a letter to the IRS seeking President Trump's tax returns. (Newswires/NYT)

Fed's Kashkari (non-voter, dove) said he doesn't believe US economy is overheating or that the Fed needs to tap the brakes, while he added that the Fed should not react to noisy data by cutting interest rates now. (Newswires)

UK/EU   

UK lawmakers voted (313 ayes vs. 312 noes) to approve the EU Withdrawal Bill which requires UK PM May to seek an extension of Article 50 to prevent a no-deal Brexit. In terms of the key amendments, UK parliament rejected the Benn Amendment which would have held indicative votes on Monday after a tie of (310 vs. 310) and rejected Amendment 1 (123 ayes vs. 488 noes) which was tabled by Brexiteers and would have seeked to ensure Brexit occurs before May 22. (Newswires)

UK PM May could request a 9-month extension to Brexit during upcoming EU summitaccording to The Sun. In addition, it was also reported that 15 more Brexiteer Ministers including 5 from the Cabinet are said to be on the edge of resigning in a mass protest against PM May's softer Brexit bid, according to The Sun's Political Editor Tom Newton Dunn. (Newswires/The Sun)

UK Chancellor Hammond said Brexit delay will inevitably be long and UK will have to prepare to take part in European elections, while he added that the Cabinet is hoping UK will be allowed to leave the EU earlier if a deal is passed in the coming months. Furthermore, Hammond said there is a credible case for a confirmatory referendum which deserves to be voted on in Parliamentbut added that he is unsure if there is a majority for a second referendum, according to ITV's Peston. (Newswires/ITV)

DUP MP Donaldson seemed to hold out the prospect of the DUP backing a customs union, according to BBC's Northern Ireland correspondent. (BBC)

UK MPs are reportedly ready to sit as long as they need to force the Cooper bill on extending Article 50 through this week, there are suggestions that some may filibuster it in the House of Lords, according to BBC's Eardley. (Twitter)

Italy are to cut 2019 GDP forecast to 0.1% (Prev. 1.0%) and budget deficit set to rise to 2.30-2.40% (Prev. 2.04%) this year; according to sources. (Newswires)

German Construction PMI (Mar) 55.6 (Prev. 54.7)

German Industrial Orders MM Feb -4.2% vs. Exp. 0.3% (Prev. -2.6%, Rev. -2.1%)

Turkish Central Bank has hiked swap sale limit to 40% (Prev. 30%) for transactions that are not matured. Turkish Central Bank has quadrupled the swap sales limit in 2 weeks. (Newswires)

EQUITIES

A subdued start to the fourth European session of the week with stocks treading water thus far [Eurostoxx 50 U/C] following a mixed Asia-Pac session, ahead of key risk events including the ECB minutes and US-Sino trade talks. The FTSE 100 (-0.6%) marginally lags in the equity-space as a slew of ex-divs [Direct Line (-5.0%), St James’ Place (-3.4%) and DS Smith (-2.4%)] coupled with a firmer Pound pressure the index. Broad-based losses are seen across European sectors, although energy names are faring slightly worse amidst marginal downside in the oil complex. In terms of individual movers, Commerzbank (+2.4%) trades near the top of the Stoxx 600 amid reports that UniCredit (-1.4%) may bid on the German bank if a Deutsche Bank (-1.7%) deal fails. Meanwhile, Software AG (+3.0%) shares were bolstered by a broker upgrade at UBS. On the flip side, Maersk (-11.2%) shares declined following the separate listing of its drilling unit.

Boeing (BA): In the preliminary Ethiopian crash report anti-stall software is not explicitly mentioned; Chief investigator says they cannot yet say if there is a structural problem with Max 8's. (Newswires)

Tesla (TSLA) Q1 vehicle output was approximately 77.1k vehicles vs. Prev. 86.6k Q/Q, Q1 deliveries 63.0k vehicles vs. Prev. 90.7k Q/Q. (Newswires)

FX

DXY - The Dollar index is holding around the 97.000 level within an extremely narrow 97.013-225 range, and symptomatic of the listless tone in the G10 currency markets overall after choppy trade from Monday through Wednesday amidst fluctuating risk on, off and on again sentiment. However, today and Friday offer some prospect of more decisive moves or at least price action if not clear direction, with the ECB Minutes, Fed speakers and NFP on the agenda.

GBP - The Pound remains underpinned as UK Parliament passed another motion to avoid a no deal Brexit and request that PM May go back to the EU seeking a further A 50 extension if no alternative is found to the WA by April 12 or May 22 (assuming no sudden change of heart and the current proposal with Brussels is accepted as the better of evils vs a CU). Cable has rebounded from yesterday’s sub or circa 1.3120 lows to retest 1.3200, but not quite as near the big figure this time as 21/30 DMA convergence around 1.3165 continues to exert some gravitational influence. Similarly, Eur/Gbp has retreated through 0.8550 towards 0.8500 again, though has not managed to get as close as it did on Wednesday.

JPY/EUR - Both firmer vs the Greenback, albeit fractionally given the relatively constrained trade noted above, with the Jpy inching higher within a 111.50-35 band and potentially capped by decent option expiry interest from 111.50-60 (1.3 bn) and the 200DMA (111.49). Meanwhile, the single currency continues to meet resistance around 1.1250 and has not been helped by abysmal German industrial orders data or confirmation that the country’s group of Economic Institutes has become the latest to slash the 2019 GDP to under 1%.

CHF/NZD/AUD/CAD – All underperforming, but again in context only marginally. Indeed, the Franc is meandering between 0.9987-72, Kiwi hovering from 0.6800 to 0.6773 and Aussie just keeping its head above 0.7100, and at this stage not looking likely to arouse expiry interest at 0.7140-50 in 1 bn. For choice, the Loonie is lagging against the backdrop of softer crude prices and back below 1.3350 ahead of Canada’s Ivey PMI.

EM - Literally no respite for the Lira it seems, as economic, fiscal and political issues continue to weigh on the currency and Turkish assets in general. Indeed, Usd/Try has nudged up to 5.6600 again after Wednesday’s mixed inflation data and another hike in swap limits, as investors eye next week’s Economic Program conscious of the fact that the CBRT may not be able to loosen its grip on the monetary policy reins given that headline CPI remains so high.

FIXED INCOME

Following a relatively lengthy phase of largely sideways trade, Bunds are looking perky again and leading fellow core bonds to fresh or a test of intraday highs. The 10 year German benchmark just topped out at 165.66, +26 ticks vs -21 ticks at one stage and Gilts are back to within a few ticks of their 128.50 Liffe best, while US Treasuries are also nudging overnight session peaks with the curve a tad flatter. In terms of a catalyst, marginal underperformance in Italian BTPs on the back of latest reports about a drastic cut in projected 2019 GDP and a wider deficit accordingly? Ahead, more pre-NFP proxies and a trio of Fed speakers including NY’s Williams.

COMMODITIES

The energy complex had consolidated following yesterdays advances and was edging lower for the majority of the session, though WTI & Brent futures have recently reverted much of this downside and are now just edging into positive territory for the day. Brent and WTI are currently trading around sesson highs of USD 69.34 and USD 62.50 respectively. Earlier in the session, Brent prices edged lower after hitting resistance at its 200 DMA around USD 69.60/bbl, meanwhile WTI remains north of its 200 DMA (USD 61.40/bbl). Elsewhere, spot gold (+0.1) trades lacklustre as markets are tentative ahead of the ECB minutes, US-China trade talks and NFP. It is also worth noting that investors are pulling money out of gold ETFs with around USD 153mln removed out of the USD 10bln VanEck Vectors Gold Miners ETF over the last five days. Meanwhile, copper (-0.3%) succumbs to the cautious risk tone but remains above its 100 WMA of just under USD 2.90/lb. Finally, Dalian iron ore futures saw its best day in seven-weeks, extending its record-breaking rally, as supply-side woes (largely from cyclones in Western Australia) and a pick-up in demand (steel mills replenishing stocks) boosted the base metal to a new peak of USD 103.49/tonne.

CME lowered NatGas Henry Hub futures margins by 10.8% to USD 1650/contract. (Newswires)

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