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[PODCAST] EU Open Rundown 24th April 2019

  • Asian equity markets traded mixed after the region failed to sustain the tailwinds from Wall St after the S&P 500 and Nasdaq posted fresh record closes
  • UK PM May is preparing to challenge the opposition Labour Party to support the Brexit bill before European Parliamentary elections if cross-party discussions fail
  • AUD/USD slumped as Australian inflation data missed expectations across all components, which spurred the likes of Citi, JP Morgan and RBC all calling for a cut at the next meeting
  • Looking ahead, highlights include German Ifo, BoC Rate Decision & Press Conference, Supply from Germany, US and Italy
  • Earnings: Boeing, Caterpillar, Microsoft, Facebook, Tesla, AT&T, SAP, ABF, Novartis, Credit Suisse

 

ASIA-PAC

Asian equity markets traded mixed after the region failed to sustain the tailwinds from Wall St where strong blue-chip earnings propelled the S&P 500 and Nasdaq to fresh record closes. ASX 200 (+0.9%)resumed this week’s outperformance as soft CPI data brought forward various expectations for a rate cut to as early as next month, while gains in the Nikkei 225 (-0.5%) were later pared on detrimental currency moves. Elsewhere, Hang Seng (-1.0%) and Shanghai Comp. (-0.9%) also failed to sustain opening gains as White House confirmation that US-China trade talks will resume next week and the PBoC announcement of CNY 267bln in targeted MLF, was overshadowed after the PBoC dismissed rumours related to a potential targeted RRR cut for rural banks and refrained from Reverse Repo operations. Finally, 10yr JGBs saw mild gains as sentiment in the region soured and after similar upside in T-notes amid bull-steepening in the US, while the BoJ were also active in the market today for a respectable JPY 950bln of JGBs and focus now shifts towards the conclusion of the central bank’s 2-day policy meeting tomorrow.

 

PBoC skipped open market operations but announced CNY 267.4bln 1yr targeted MLF at 3.15% (Prev. 3.15%). (Newswires)

PBoC set CNY mid-point at 6.7205 (Prev. 6.7082)

 

White House said US Treasury Secretary Mnuchin and Trade representative Lighthizer will travel to Beijing for trade discussions beginning on April 30th, while China's Vice Premier will lead a delegation to Washington for talks on beginning May 8th. Furthermore, the White House noted that next week's discussions will cover issues such as IP, forced tech transfers, non-tariff barriers, agriculture, services, purchases and enforcement. (Newswires)

 

US NEC Director Kudlow said they moved closer on US/China trade deal and he is cautiously optimistic of securing a deal. (Newswires) 

UK/EU

UK PM May is preparing to challenge the opposition Labour Party to support the Brexit bill before European Parliament elections if cross-party discussions fail, while she is considering introducing the bill that would make the withdrawal agreement effective within weeks and could decouple the withdrawal agreement from the plan regarding the future relationship as well as bypass the meaningful vote. (The Times) This comes in the context of reports suggesting that Labour has accused PM May of failing to offer any substantive changes to her Brexit deal in cross-party talks. (Guardian)

UK cabinet ministers are reportedly urging PM May to end cross-party talks with Labour and force a 4th Commons showdown on the Brexit deal next week. (The Sun)

1922 committee meeting of backbench MPs ended yesterday with no conclusion sought and was said to be a preliminary discussion, according to Sky News's Beth Rigby. (Twitter)

REC survey showed that British employers were the most concerned regarding the economy since the 2016 Brexit referendum but also showed employers were planning to hire additional staff. (Newswires)

UK PM May gave Huawei the greenlight to help build Britain's new 5G network. (Newswires)

Italy's coalition government has found a compromise related to the Rome-debt relief, according to sources. (Newswires)

FX

 

In FX markets, the DXY consolidated near 2-year highs and held on to the spoils from the prior session’s onslaught against its major counterparts in which EUR/USD briefly dipped below 1.1200. GBP/USD was subdued after its failure to hold above 1.3000 with PM May facing increased pressure to step down, while USD/JPY was lacklustre after sentiment in the region soured. Antipodeans underperformed in which AUD/USD slumped as Australian inflation data missed expectations across all components with headline Y/Y CPI matching its softest since Q3 2016, which spurred the likes of Citi, JP Morgan and RBC all calling for a cut at the next meeting. Elsewhere, the PBoC weakened its reference rate and KRW was another fallout of the USD strength as it declined to its lowest in more than 20 months which some also attributed to repatriations related to stock dividends.

 

Australian CPI (Q1) Q/Q 0.0% vs. Exp. 0.2% (Prev. 0.5%). (Newswires)

Australian CPI (Q1) Y/Y 1.3% vs. Exp. 1.5% (Prev. 1.8%)

Australian RBA Trimmed Mean CPI (Q1) Q/Q 0.3% vs. Exp. 0.4% (Prev. 0.4%)

Australian RBA Trimmed Mean CPI (Q1) Y/Y 1.6% vs. Exp. 1.7% (Prev. 1.8%) COMMODITIES

Commodities traded lacklustre as sentiment in the region soured in which WTI crude futures pulled back from its best levels in around 6 months and slipped below the USD 66.00 following a larger than expected build in API headline crude stockpiles, while RBOB underperformed as a gasoline stockpiles were also bearish. Elsewhere, gold prices languished as the greenback remained firm and copper mirrored the subdued tone across the complex amid underperformance in its largest buyer China.

US API weekly crude stocks (15 Apr) 6.9M vs. Exp. 1.3M (Prev. -3.1M). (Newswires)

IEA expects global spare oil production capacity at 3.3mln BPD and said it is ready to act to ensure the oil market is well supplied if necessary. (Newswires)

US President Trump is said to consider waiving US ship mandate related to transportation of natural gas. (Newswires)

GEOPOLITICS

US launched air strikes targeting 32 oil tankers attempting to enter government-held territory in Syria, according to reports citing Syrian military. (Al Arabiya)

North Korea leader Kim is visiting Russia today to meet with Russian President Putin, while a Russian government official said President Putin will suggest restarting six-party talks to North Korea leader Kim. (Newswires)

US

Monday's price action saw the curve bear-steepen; that steepening continued on Tuesday, but it was in a bull steepening fashion; most major curve spreads widened. An auction of 2s came in on the screws, with cover slightly softer than recent averages, and the internals weren't particularly great, with indirect bidders falling, seeing direct bidder participation rising - dealers were also larger participants than the prior auction. Ahead of tomorrow's 5s auction, the sector is set up and trades cheap on the curve compared with 2s and 10s, according to SocGen notes; it also trades cheap in asset swap versus older 5s. "While the dealer holdings of the 3-6y sector are the highest since December 2018, the current 5y benchmark trading special on repo (indicating a short base) is likely to help in the takedown of the auction," the bank says. It also notes that at pixel time, the WI trades above the stop-out rate of the previous auction, which could be supportive, and SocGen generally holds a positive bias going into the auction. US T-note futures (m9) settled 6 ticks higher at 123-04.

US Treasury Secretary Mnuchin sent a letter to House Way and Means chair Neal which stated the Treasury Department will decide by May 6th whether to release Trump's tax returns which effectively ignored yesterday's deadline. (Newswires)

US NEC Director Kudlow said the Fed target rate should be lowered, while he also commented that US decision to end Iranian oil waiver will not increase prices and markets are well supplied. (Newswires)

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China's Agriculture team getting as far away from the NYSE, just like us!! Hope you all have a good weekend, we'll… https://t.co/NsIJqCDJFE