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[PODCAST] US Open Rundown 26th April 2019

  • Major European indices are little changed with the markets focus remaining firmly on earnings
  • On the trade front it has been reported that if a deal is finalised, Chinese President Xi could sign the deal in the US as early as June
  • Brent and WTI prices have extended on losses this morning, with some citing this to technical factors
  • Looking ahead, highlights include, US GDP (Advance)
  • Earnings: Exxon Mobil, Colgate, Chevron, American Airlines

ASIA-PAC

Asia-Pac risk sentiment was mostly downbeat as markets remained heavily focused on earnings releases and following the lacklustre performance of counterparts stateside. ASX 200 (Unch.) and Nikkei 225 (-0.2%) were both subdued with underperformance seen in Australia’s energy sector after a pullback in oil prices although losses in the broader market were only marginal and the index eventually recovered, while the Japanese benchmark was pressured amid a slew of earnings and following disappointing Industrial Production figures with participants also reducing exposure ahead of a 10-day closure for Golden Week. Elsewhere, Hang Seng (+0.2%) and Shanghai Comp. (-1.2%) opened lower as PBoC inaction resulted to a CNY 300bln liquidity drain for the week but with losses in Hong Kong later pared amid earnings including China Life Insurance which almost doubled its Q1 net from the prior year. Finally, 10yr JGBs are higher with prices underpinned by the mostly risk-averse tone and BoJ presence for JPY 480bln of JGBs in the belly.

PBoC skipped open market operations for a net weekly drain of CNY 300bln vs. last week's CNY 300bln net injection. (Newswires) PBoC set CNY mid-point at 6.7307 (Prev. 6.7307)

US President Trump suggested that Chinese President Xi will be visiting the White House soon. In other news, the US is considering concessions on drug protection in talks with China after the latter was said to offer 8 years of IP protections for biologics data vs. 12 years under current US law. (Newswires) Subsequently reported that, Chinese President Xi could travel to the US to sign a trade deal as soon as June; if the two sides finalise a trade deal., SCMP citing sources. (SCMP)

Chinese President Xi said China will open its market up to more firms and continue to erode backward as well as outdated capacity, while he also stated that China will increase imports and will not pursue CNY depreciation that harms others. (Newswires)

Japanese Industrial Production (Mar) M/M -0.9% vs. Exp. -0.1% (Prev. 0.7%). (Newswires) Japanese Industrial Production (Mar) Y/Y -4.6% vs. Exp. -3.8% (Prev. -1.1%)

Japanese Tokyo CPI (Apr) Y/Y 1.4% vs. Exp. 1.1% (Prev. 0.9%). (Newswires)

Japanese Tokyo CPI Ex. Fresh Food (Apr) Y/Y 1.3% vs. Exp. 1.1% (Prev. 1.1%) Japanese Tokyo CPI Ex. Fresh Food & Energy (Apr) Y/Y 0.9% vs. Exp. 0.7% (Prev. 0.7%)

RBNZ Governor Orr said not particularly worried by slower pace of growth and pointed to a strong labour market, while he added that there is room to cut rates if needed. (Newswires) New Zealand Trade Balance (Mar) M/M 922M vs. Exp. 131M (Prev. 12M, Rev. -68M). (Newswires) New Zealand Exports (Mar) 5.70B vs. Exp. 5.30B (Prev. 4.82B, Rev. 4.71B) New Zealand Imports (Mar) 4.77B vs. Exp. 5.15B (Prev. 4.80B, Rev. 4.78B)

 

US

White House Economic Adviser Kudlow said he sees the Fed moving towards cutting rates and reiterated support for Stephen Moore to the Fed. (Newswires)

UK/EU

UK officials have conceded that UK PM May does not have enough time to ger her Brexit deal passed by Parliament and avoid taking part in EU elections. (Newswires) 

UK PM May spokesperson says that more talks will happen with Labour next week. (newswires)

UK Chancellor Hammond says he has a "productive" meeting with his labour counterpart in a meeting, and optimistic they can reach a common ground albeit necessitating compromise from both sides. (Newswires)

French President Macron said he wants to significantly cut income tax which will be funded by closing tax loopholes, spending cuts and making the French work more. Furthermore, Macron said the tax cuts would be worth EUR 5bln and that the French must work longer because they live longer but doesn't want to push back the retirement age beyond 62. (Newswires)

SNB's Jordan says they stand ready to use negative rates and intervention on FX market as and where appropriate. (Newswires)

ECB's Rehn states that long-lasting slow inflation may have lowered inflation targets, markets may see that in current conditions monetary policy measures are not sufficient to accelerate inflation, decline in inflation expectations may be attributed to asymmetry in the ECB's definition of price stability. (Newswires)

EQUITIES

Major European indices are mixed but little changed overall [Euro Stoxx 50 +0.1%], with sectors portraying a similar scene; notably, the Oil & Gas sector is underperforming in-line with the recent downturn in oil prices and with sector heavyweights Total’s (-0.4%) broadly as expected earnings unable to counter the downward pressure. After an earning fuelled morning the FTSE 100 (-0.3%) is somewhat lagging its peers with the index weighed on predominantly by RBS (-4.4%) in-spite of the Co’s beat on Q1 profit before tax, as the Co. stated that the ongoing impact of Brexit uncertainty is likely to impact income growth in the near term. Glencore (-3.0%) and Just Eat (-3.2%) are also weighing on the FTSE 100 after the CFTC stated they are investigating if the Co’s units violated CFTC regulations and as UK Q1 orders increased by only 7.4% respectively. Other notable movers include Deutsche Bank (-3.0%) are lagging the Dax (+0.1%) after the Co. cut their FY19 sales outlook and they expect FY19 revenue to be flat. Elsewhere, Renault (+3.0%) posted Q1 revenue in-line with expectations and confirmed their guidance for FY19.

Another FAANG member showed their teeth after yesterday’s blowout number from FB, wherein Amazon beat EPS expectations by over USD 3 and didn’t sacrifice this gain in their revenue print, which came in marginally above expectations. This came as web services revenue increased by over 40% with the company reporting their most profitable quarter ever. Clouds remain on the horizon after the bright earnings, however, as the company warned of a slower Q2. In the pre-market AMZN are trading with gains of 1%.

On the flipside, Intel short-circuited and reported shockingly bad earnings guidance despite top and bottom line printing inline with expectations. The hardware maker cut their FY guidance and forecast a weak Q2 as Chinese data centre sales remain soft, as the region is consuming fewer microchips than expected, and follows on from a similar warning sign eschewed from Texas Instruments.  As a result of the terrible results INTC are trading with losses of 7% in the pre-market.

FX

NZD/SEK - The Kiwi and Swedish Krona are leading a comeback of sorts vs a still solid Greenback that is holding above the 98.000 handle in DXY terms and Fib support just shy of the big figure (97.961), with data providing respite for both G10 currencies in the form of NZ trade and Swedish retail sales. Nzd/Usd has subsequently extended its rebound through 0.6600 to just over 0.6650, with the added impetus of relatively upbeat rhetoric from RBNZ Orr overnight, while Eur/Sek has retreated further from post-Riksbank peaks and back below 10.6000 as the single currency lags amidst dovish remarks from ECB’s Rehn.

AUD - Another major beneficiary of short covering and position paring in advance of US growth and PCE price gauges, as the Aussie recovers more ground from sub-0.7000 levels vs its US peer towards 0.7040, albeit still trading heavily on a Aud/Nzd cross basis under 1.0600 following weak Q1 CPI data earlier in the week that ramped up RBA easing expectations.

EUR - As noted above, the Euro has been hampered to a degree by Rehn comments adding a bit more credence to sourced reports suggesting that some GC members are inclined towards shifting guidance on rate normalisation out further than the current end of 2019 or later to a BoJ-style next year. Hence, Eur/Usd’s bounce from yesterday’s new ytd low (circa 1.1116) has been stymied ahead of 1.1150 and decent option expiries stretching to 1.1160 (1.5 bn), while residual bids above 1.1100 may also be supplemented by hedging or buying interest linked to a total of 1 bn running off at the strike.

GBP/CHF/CAD/JPY - All narrowly mixed vs the Usd as Cable pivots 1.2900 awaiting more Brexit developments and eyeing next week’s super BoE Thursday, while the Franc continues to straddle 1.0200 and meander between 1.1375-50 against the single currency in wake of yet another reminder from the SNB that NIRP and FX intervention are still warranted. The Loonie is still managing to hold above post-BoC lows and above 1.3500 even though crude prices are recoiling further from best levels in the run up to Canadian budget balances for February. Elsewhere, Usd/Jpy remains rangebound below 112.00 and just over chart support sub-111.40 in the form of the 30 DMA and a 61.8% Fib (at 111.37 to be precise), with the upside also capped by 1.1 bn option expiries from 112.00-20, and the impending long Japanese holiday still drawing attention as a potential hazard given the so called flash crash in currency and other markets when Japan was absent earlier this year.

EM - A double-whammy for the Rouble on the aforementioned pronounced downturn in oil and with speculation that the CBR could take a lead from other Central Banks along a dovish policy path. Usd/Rub currently trading closer to the top of 64.8310-5630 parameters.

FIXED INCOME

Bonds remain firmer and curves flatter (just) as the focus shifts to the US open and first look at growth in Q1, with Bunds, Gilts and US Treasuries all holding light gains. However, the 10 year benchmarks are all some distance from best levels of 165.92, 127.80 and 123-17+ respectively as the next/nearest set of chart resistance levels stalled further advances towards 166.00, 128.00 and 2.50% in yield terms in the case of T-notes. Note also, the US curve has also absorbed more 2-30 year spread widening flow.

COMMODITIES

Brent (-1.3%) and WTI (-1.3%) prices are firmly in the red with prices dropping below the USD 75/bbl and USD 65/bbl levels; notably, Brent had only reached the USD 75/bbl level yesterday for the first time this year. Iran’s crude oil exports from their Southern Ports have reportedly increased so far in April to 3.56mln BPD; specifically, regarding the Iranian oil waivers, Turkey are attempting to convince the US to allow Turpas to continue the purchase of oil from Iran. For reference, under the import waivers Turkey was permitted to import around 60kBPD of oil from Iran, and in December a total of around 54k BPD of oil was imported by Turkey from Iran. Elsewhere, following reports that a number of refineries had suspended the import of Russian oil from the Druzhba pipeline (1.2mln BPD) due to contamination issues, Russia has stated that the issues will be resolved from April 29th. However, reports indicate that some of the refineries that have suspended imports believe the problem will continue for another one or two weeks.

Gold (+0.4%) prices have gradually moved higher across the session, benefitting from the cautious risk tone and concern ahead of Japan’s Golden Week holiday where markets will be closed for 10-days. Elsewhere, due to the softer dollar ahead of today’s GDP data, metal prices have retraced some of the prior session’s losses; and there were reports this morning of an explosion at Port Talbot, which is the UK’s largest steelworks. Tata Steel, who own the site, stated that there were no serious injuries and an investigation is ongoing.

Iranian Oil Minister Zanganeh states that the UAE and Saudi Arabia are overstating their oil reserves., according to state news. (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