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[PODCAST] EU Open Rundown 30th April 2019

  • Asian equity markets traded mostly lower following weaker than expected Chinese PMI data and as the region digested a heavy slate of earnings
  • UK PM May is reportedly facing a grassroot vote demanding her resignation while cross party talks are said to have been better
  • Looking ahead, highlights include German Gfk, Import Prices & CPI (Prelim), Canadian GDP, US Chicago PMI & Consumer Confidence, BoE’s Ramsden, BoC’s Poloz & Wilkins, Supply from Italy & Germany
  • Earnings: Apple, Amgen, Arconic, Pfizer, McDonalds, Airbus, BP

 

ASIA-PAC

Asian equity markets traded mostly lower following weaker than expected Chinese PMI data and as the region digested a heavy slate of earnings. ASX 200 (-0.5%) was negative in which commodity names led the declines seen across a broad range of sectors due to its high exposure to China and the disappointing factory activity, while KOSPI (-0.6%) suffered amid losses in index heavyweight Samsung Electronics after the Co.’s final Q1 results showed operating profit fell around 60% Y/Y. Elsewhere, Hang Seng (-0.5%) and Shanghai Comp. (+0.4%) diverged with Hong Kong dampened after Chinese Official Manufacturing, Non-Manufacturing and Caixin Manufacturing PMIs all fell short of estimates which overshadowed the earnings releases including the profit growth amongst the Big 4 banks, while the mainland remained afloat on month-end and pre-holiday position squaring as well as the increased hopes for more accommodative policy in the aftermath of the weak Chinese data.

PBoC skipped open market operations for a net neutral daily position. (Newswires) PBoC set CNY mid-point at 6.7286 (Prev. 6.7310)

Chinese Manufacturing PMI (Apr) 50.1 vs. Exp. 50.5 (Prev. 50.5). (Newswires) Chinese Non-Manufacturing PMI (Apr) 54.3 vs. Exp. 55.0 (Prev. 54.8) Chinese Composite PMI (Apr) 53.4 (Prev. 54.0) Chinese Caixin Manufacturing PMI (Apr) 50.2 vs. Exp. 51.0 (Prev. 50.8)

UK/EU

UK PM May is said to be facing a grassroots vote demanding her resignation with Conservative party local chairman and activists calling for an extraordinary meeting with PM to demand her resignation. (The Sun) May’s office thereafter downplayed the significance of the meeting, suggesting that it would not be legally-binding and the outcome of the meeting wouldn’t necessarily be passed. Furthermore, there will have to be a 28-day wait until such a meeting is held. (Newswires)

PM May’s official spokesman insisted that she believes it is still possible to avoid holding EU elections on May 23rd, as the Commons is yet to ratify her Brexit deal. Insiders report that Conservative campaign leaders have pencilled in May 7th for the official launch of their European Parliament campaign. (Times)

The tone of Monday's Brexit talks was reportedly better and there are grounds to continue cross-party talks. (Huffington Post) However, UK Foreign Secretary Hunt has stated that cross part talks risk alienating conservative MP’s, resulting in a scenario where you lose more Tories than you gain in Labour MP’s. And that he does not expect cross party talks to lead to a ‘rose garden moment’. (Telegraph)

UK opposition Labour party may include in its manifesto that there could be a second referendum or confirmatory referendum on any Brexit deal proposed by the government, according to ITV's Peston. (Twitter) This comes as the party’s governing body is to meet today to determine its EU election manifesto.

UK GfK Consumer Confidence* (Apr) -13 vs. Exp. -12.0 (Prev. -13.0). (Newswires) UK Lloyds Business Barometer (Apr) 14 (Prev. 10)

S&P said severe downgrade of Italy is unlikely and that an early election would not necessarily be a negative. (Newswires)

FX

In FX markets, the DXY was subdued and trickled further away from the 98.00 level after the prior day’s softer than expected Core PCE data which is the Fed’s preferred measure for inflation. This benefitted the greenback’s major counterparts across the pond with EUR/USD eyeing the 1.1200 handle in which some also attributed the recent upside to relief from the lack of surprises in the Spanish elections and after Italy avoided a downgrade, while GBP/USD was firmer after having found support around 1.2900 and with the tone in cross-party talks said to have improved. Elsewhere, antipodeans staggered following the weak Chinese PMI data which also briefly pressured CNH, although AUD/USD has since moved off session lows and there were also comments from notorious RBA watcher Terry McCrann that a rate cut next week is possible but remains most unlikely.

COMMODITIES

Commodities have been rangebound so far this week in which WTI crude futures consolidated above USD 63.00/bbl level ahead of the latest inventory reports and key risk events, while Citi have suggested that market could experience some book squaring as June Brent, May heating oil, and May RBOB gasoline futures all expire today. Elsewhere, gold nursed losses as the greenback remained lacklustre and copper was also restrained in the aftermath of the disappointing Chinese PMI data.

US

The US Treasury curve bear-steepened on Monday, ahead of key event risk in the week (including FOMC, NFP, ISM, as well as key data on the other side of the Atlantic). While the M/M Personal Spending data came in ahead of expectations, the PCE components - the Fed's preferred gauge - disappointed and has softened for the third straight month going into Wednesday's FOMC. Meanwhile, the US Treasury has cut its borrowing estimate for Q2, and now expects to issue USD 30bln in net marketable debt in Q2 (prev. estimate was USD 83bln), and also says it expects to issue 160bln in net marketable debt in Q3. It borrowed USD 374bln in Q1. Overnight China PMIs will be looked at for further stabilisation out of the world's second largest economy, while EZ Q1 advanced data will be the focus in early trade. US T-note futures (M9) settled 7+ ticks lower at 123-14.

NEC Director Kudlow said slowing inflation opens the door for possible rate cuts and that the White House still backs Stephen Moore for Fed Board role. Kudlow also commented that USMCA is in good shape for passage and that the US has massive infrastructure needs which must be met with "substantial, real and new revenue". (Newswires)

US Senator Shelby said there are some problems regarding President Trump's Fed nominee Stephen Moore. (Newswires)

 

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