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[PODCAST] EU Open Rundown 15th April 2019

  • Asian indices are predominantly positive, following on from Friday’s upbeat start to US earnings season and strong Chinese data
  • US-China trade hopes bolstered on reports that an agreement has been reached on currency manipulation & US softening demands surrounding subsidies
  • Looking ahead, highlights include New York Fed Manufacturing, Fed’s Evans, BoE’s Haskel
  • Earnings: IBM, Johnson & Johnson, UnitedHealth Group, Netflix, CSX, Kinder Morgan, Bank of America

 

GLOBAL

IMF stated that global expansion continues but at a weaker pace than anticipated in October last year, while it added that risks remain tilted to the downside but sees global growth firming next year. (Newswires) 

ASIA-PAC

Asian equity markets began the week mostly positive as the region took impetus from last Friday’s gains on Wall St. where sentiment was underpinned by a strong start to earnings season and encouraging Chinese data. Nonetheless, ASX 200 (-0.1%) was the exception with the index dampened amid tentativeness ahead of key earnings and underperformance in gold miners, as well as trade-related news including a further decline of Chinese imports and dispute at the WTO on Australia's restriction on Chinese 5G technology. The rest of the major Asia-Pac indices were firmly higher as recent advances in USD/JPY fuelled the upside in Nikkei 225 (+1.4%), while Hang Seng (+0.6%) and Shanghai Comp. (+1.2%) were also boosted as most of the recent Chinese data surpassed estimates including New Yuan Loans, Aggregate Financing, Trade Balance and Exports with the latter at a 5-month high. Furthermore, reports the US softened its demands on China for reducing state industrial subsidies and that both sides have agreed to measures to avoid China currency manipulation, added to the hopes for a looming trade deal. Finally, 10yr JGBs were softer as they tracked the recent losses in T-notes and with demand also dampened by gains in riskier assets as well as a lack of BoJ presence in the market today.

PBoC skipped open market operations for a net neutral daily position. (Newswires) PBoC set CNY mid-point at 6.7112 (Prev. 6.7220)

US reportedly softened demands on China for reducing state industrial subsidies as condition for a trade deal according to sources. In related news, US Treasury Secretary Mnuchin commented that both US and China are making commitments and that they are close to the final round, while he also noted also noted that imbalances must be addresses across Europe. (Newswires)

China officials told the WTO that Australia's restriction on Chinese 5G technology is discriminative and appear to violate WTO rules. (Newswires)

UK/EU

UK Chancellor of the Exchequer Hammond said the government is prepared to talk about a customs union, while he also reportedly hinted that PM May could stay on as PM until October. (Newswires/PoliticsHome)

UK Cabinet Office Minister Lidington said would like government and Labour to agree on a binding mechanism for a way forward, while he added there is still a possibility for customs union compromises and that the government remains against a second referendum. Lidington adds that the two sides would ‘take stock’ in 10 days and that the process could not drag out. (BBC) ’10 days’ would approximately align with April 23rd when MPs are to return from Easter Break. (Newswires)

Former Conservative Party leader Iain Duncan Smith has called on UK PM May to resign next month and said that her timetable to resign should stand even though she has so far failed to pass the withdrawal agreement. (Guardian)

40% of CFOs expect BoE to hike rates over next 12 months vs. Prev. 58% in the prior quarter, according to a Deloitte survey. (Newswires)

ECB's Villeroy said monetary policy must stay accommodative and that there is no global recession in sight. (Newswires)

ECB's nowcasting model signalled 0.2% growth in Q1 and a possible slight slowdown in Q2, according to sources. (Newswires)

Finland Social Democrats and Nationalist Finns Party are almost tied in first place following the final results of the general election with 17.7% and 17.5% of votes respectively. (Newswires)

S&P affirmed Germany at AAA, Outlook Stable. (Newswires)

UK Rightmove House Prices (Apr) M/M 1.1% (Prev. 0.4%). (Newswires) UK Rightmove House Prices (Apr) Y/Y -0.1% (Prev. -0.8%)

FX

In FX markets, the DXY was softer after its recent failure to hold on to the 97.00 level and as the mostly positive risk tone weighed on haven demand, while President Trump also renewed his criticism on the Fed. As such, the greenback’s major counterparts benefitted in which GBP/USD tested 1.3100 to the upside and EUR/USDextended on gains after having found support at the 1.1300 level and its nearby 50DMA at 1.1301, while Nordea also went long on the single currency with a target of 1.1650 and considers a stop loss at 1.1187. Elsewhere, the firm risk appetite kept USD/JPY near YTD highs around 112.00 and antipodeans were also underpinned by the risk tone, albeit to a lesser extent for AUD/USD following the decline in Chinese imports.

SNB Chairman Jordan said he sees no reason to alter monetary policy but added that they are still willing to intervene if required. (Newswires)

COMMODITIES

Commodities were mixed overnight in which WTI crude futures failed to benefit from the mostly positive risk tone with prices at the lower end of last week’s tight range below the USD 64.00/bbl level as the support from recent supply side risks wane. Elsewhere, gold languished beneath USD 1300/oz with the safe haven weighed as the recent Chinese data helped ease global slowdown concerns, while copper held on to most of the Friday’s China data-driven gains as Dalian iron ore futures remained near record highs on dwindling Chinese stockpiles which fell the most since 2015 according to SteelHome data.

Baker Hughes (April 12): oil rigs +2 at 833, gas rigs -5 at 189, total rigs -3 at 1022. (Newswires)

GEOPOLITICS

US President Trump tweeted that he agrees that his personal relationship with North Korea leader Kim remains very good and that a 3rd summit between the leaders would be good. (Newswires). 

US

Following an upbeat set of China data, that reassured investors about the stabilisation seen in the World’s second largest economy, the risk tone became constructive, although the reaction was somewhat delayed. The result was selling of the Treasury curve, and yields are higher by between 4bps and 6.5bps at settlement. The selling saw a pause after a soft Michigan survey, which lifted the T-Note off of lows. Major curve spreads were mixed into a quiet close. US T-note futures (M9) settled 15 ticks lower at 123-03.

US President Trump suggested the stock market would have been higher by 5000-10000 points and GDP would be well above 4% instead of 3% if the Fed had done its job correctly, while he added quantitative tightening was a killer and the Fed should have done the opposite. (Twitter)

 

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