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[PODCAST] EU Open Rundown 23rd April 2019

  • Asian equity markets traded mixed as sentiment somewhat deteriorated from the mostly positive close in the US
  • UK Conservative Party activists are to hold an emergency summit for a vote of no-confidence in UK PM May
  • Oil prices extended on their gains overnight following the US announcement to end Iranian oil sanction waivers in an effort to push Iran oil imports to zero
  • Looking ahead, highlights include US New Home Sales, EZ Consumer Confidence (Flash), Supply from the US
  • Earnings: Verizon, P&G, eBay, State Street, Twitter, United Technologies, Lockheed Martin, Nextera

 

ASIA-PAC

Asian equity markets traded mixed as sentiment somewhat deteriorated from the mostly positive close in the US, where the energy sector surged after the US decided to end Iranian oil sanction waivers but with gains in the broader market capped ahead of this week’s heavy slate of earnings. ASX 200 (+0.8%) was led higher by the energy sector after crude prices rallied around 3% to 6-month highs and NZX 50 (+0.6%) topped the 10K level for the first time ever, while Nikkei 225 (-0.1%) failed to hold on to early gains and stumbled from the weight of a firmer currency. Hang Seng (-0.1%) and Shanghai Comp. (-0.4%) were subdued after PBoC inaction resulted to a net liquidity drain of CNY 40bln which pushed the Overnight SHIBOR higher by over 27bps and with Hong Kong tentative amid resistance ahead of the 30K level and as its reflected on the recent mainland underperformance on return from its 4-day closure. Finally, 10yr JGBs were relatively flat after having recovered from earlier weakness as risk sentiment in Tokyo soured, while weaker results at today’s 2yr JGB auction also ensured price action was drab.

PBoC skipped open market operations for a daily net drain of CNY 40bln. (Newswires) PBoC set CNY mid-point at 6.7082 (Prev. 6.7035) UBS raised China 2019 GDP growth forecast to 6.4% from 6.1%. (Newswires) 

UK/EU

UK Conservative Party activists are to hold an emergency summit for a vote of no-confidence in UK PM May after over 70 heads of local Conservative associations signed a petition calling for an extraordinary general meeting with PM May's position at the top of the agenda. Furthermore, reports added that the vote would be a non-binding vote but could pressure the 1922 Committee to take action to oust PM May. (Newswires/FT) A member of the 1922 committee stated that their leader Brady is set to meet the PM May this week to set a date for her departure with May 22nd or June 30th suggested, according to ITV's Brand. (Twitter)

Brexit discussions between government ministers and Labour are due to resume today amid limited expectations of a breakthrough. (Guardian)

ECB's Coeure said negative rates are not the biggest problem for the banking sector and that banks should instead pay attention to costs, while he currently doesn’t see any monetary policy reason for tiered interest rates. (Newswires) 

FX

 

In FX markets, the greenback was slightly firmer overnight following the mild bear-steepening in the yield curve during the prior session and as most major counterparts traded subdued. As such. EUR/USD was on the backfoot but with losses limited by a large option expiry of EUR 1.9bln at 1.1250 for today’s New York cut, while GBP/USD languished beneath 1.3000 as it braced itself for the resumption of Parliament and amid reports 1922 Committee Chairman Brady is to meet PM May this week to set a timeline for her departure. USD/JPY and JPY-crosses slipped to take out the prior day’s lows as price action began to pick up from the Easter lull and antipodeans were softer with AUD/USDdampened following the recent slip from its 200DMA, as well as ongoing consensus for looser RBA policy later in the year, but with downside stemmed by the oil price surge. 

COMMODITIES

 

Oil prices extended on their gains overnight with Brent Crude above USD 74.00/bbl and WTI Crudeapproached towards USD 66.00/bbl to print around 6-month highs following the US announcement to end Iranian oil sanctions waivers in an effort to push Iran oil imports to zero, while oil prices have also breached the 61.8% Fibonacci retracement level of the slide seen during Q4 last year. Elsewhere, goldwas less eventful with the precious metal constrained by a slightly firmer greenback, as well as an indecisive risk tone which also kept the rebound in copper limited.

US decided not to renew any Iranian oil import waivers in May according to a White House Statement with the decision intended to bring Iran exports to zero, while the US, Saudi Arabia and UAE agreed to take action to ensure global demand is met and Iraq also commented that it is ready to increase their oil exports by 250k BPD based on needs of the market. (Newswires)

US administration official said between 700-800k BPD of oil is affected by ending Iranian waivers and sees no need to consider tapping SPR in the aftermath of ending waivers. The US is also to look for ways to prevent Iranian attempts to bypass sanctions and stated that a retaliatory move by Iran to close the Strait of Hormuz would be unacceptable, while a State Department Official said the Iranian waiver wind-down period will be one-year. (Newswires)

Iran stated that Tehran is in touch with partners regarding the end of US waivers and that the expiry of US waivers have no value, while it was also reported that Iran is to close the Strait of Hormuz if prevented from using it. (Newswires)

Saudi Energy Minister Al-Falih said the Kingdom would like to reiterate its longstanding policy of working towards oil market stability and will cooperate with other oil suppliers to ensure adequate supply. Furthermore, he added that they will consult with other oil producers over the next few weeks, that oil supplies will be available to consumers and the oil market will not go out of balance. (Newswires)

Barclays sees upside risks of a minimum USD 5/bbl to its 2019 Brent Crude forecast of USD 70/bbl if Iran oil exports drop to zero. (Newswires)

Goldman Sachs sees tightening of Iran oil sanctions to have a limited impact on prices this time and although it acknowledged near-term upside risks to prices, it reiterated fundamentally derived Brent price range of USD 70-75/bbl for the year. (Newswires)

US

Action was thin, as players were away for the long-weekend. But the bias was towards bear-steepening, with shorter yields up around 1bps, while the long-end of the curve was up around 3bps by settlement. Reports suggested specs, day traders and dealers were sellers from the 10-year through the 30-year space, with HFs selling across the curve. Some had also suggested that the sharp rise in oil prices was applying upwards pressure on yields. US T-note futures (M9) settled 6+ ticks lower at 122-30.

US President Trump will conduct a state visit to the UK in June and will visit Buckingham Palace. (Sky News)

US President Trump said Herman Cain requested not to be nominated to the board of the Federal Reserve and that he will respect Cain’s wishes. (Newswires)

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