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[PODCAST] EU Open Rundown 3rd May 2019

  • Asian equity markets were mixed with the region cautious ahead of the looming US NFP data and after losses on Wall St
  • A report suggested that US and China trade talks may have hit an impasse. However, comments from US Commerce Secretary Ross suggested the two nations are in the end-game of negotiations
  • Latest UK local council election results show Labour Party councillors dropped by 53 to 601 and Conservative party councillors dropped by 117 to 512 in England
  • Looking ahead, highlights include UK Services PMI, EZ CPI (Flash), US Jobs Reports, US ISM Non-Manufacturing, Fed's Evans, Clarida, Williams & Bowman, BoE's Broadbent
  • Earnings: Berkshire Hathaway, American Tower, Adidas, BASF, Fiat, Societe Generale, HSBC

 

ASIA-PAC

Asian equity markets were mixed with the region cautious ahead of the looming US NFP data and after losses on Wall St where the fallout from the FOMC disappointment persisted and the energy sector underperformed on weaker oil prices. ASX 200 (+0.1%) swung between gains and losses with notable weakness seen in energy names after WTI crude declined by more than 3% and with financials subdued after Macquarie’s full-year results which improved from the prior year although it flagged a decline for FY20. KOSPI (-0.7%) and Hang Seng (-0.1%) were negative with South Korea heavily focused on earnings and with risk appetite in Hong Kong sapped by poor GDP data which showed its economy grew at the slowest pace in nearly a decade. However, the Hang Seng is well off intraday lows as trade related news provided a glimmer of optimism with Chinese Foreign Minister Wang to travel to the US on Tuesday and is expected to close the trade deal next week, while US Commerce Secretary Ross suggested they are in the end-game of trade negotiations. As a reminder, mainland China and Japan remained closed for holidays.

 

A report suggested that US and China trade talks may have hit an impasse as this week’s negotiations had fewer details about specific discussions and results, although some analysts suggested that fewer details mean they are closer to a deal and the report also noted that both sides voiced commitment to the talks. (Global Times/PTI) However, later comments from US Commerce Secretary Ross suggested the two nations are in the end-game of trade negotiations and both sides continue to make progress on a range of issues. Furthermore, Ross said the US is not likely to get the desired commitments from China to cut back on industrial subsidies and expects US govt to continue to use Section 301 despite potential US-China trade deal (Newswires)

UK/EU

Latest UK local council elections results show Labour Party councillors dropped by 53 councillors to 601 and Conservative party councillors dropped by 117 to 512 in England. (BBC) Instead, voters turned to alternative parties which saw a significant swell in support for the Liberal Democrats, the Greens and independent candidates. (Sky News)

ECB's Rehn commented that the ECB shouldn't jump the gun after the first sign of stronger data. (Newswires)

EU's Juncker said ECB's Weidmann is a suitable candidate for the ECB president position. (Handelsblatt)

FX

 

FX markets were relatively quiet amid continued holiday closures and with participants sidelined ahead of the key US jobs data. As such, the DXY was rangebound around the 97.50 level as it held on to post-FOMC gains and after better than expected Factory Orders added to the support for the currency, while its major counterparts were subdued in which EUR/USD languished below 1.1200. GBP/USDconsolidated overnight post-BoE, while elections results overnight showed both Tories and Labour suffered losses but failed to impact the currency given that the elections were at the local council level. Elsewhere, antipodeans were lacklustre amid softer commodity prices and ahead of next week’s central bank meetings which are seen as ‘live’ for potential rate cuts from both the RBA and RBNZ, while weaker than expected Building Approvals also briefly weighed on AUD/USD.

Australian Building Approvals (Mar) M/M -15.5% vs. Exp. -14.0% (Prev. 19.1%). (Newswires) Australian Building Approvals (Mar) Y/Y -27.3% vs. Exp. -25.1% (Prev. -12.5%)

COMMODITIES 

Commodities were lacklustre overnight with WTI crude despondent after the prior day’s drop of over 3% and brief test of the USD 61.00/bbl level to the downside where it eventually found support. The weakness in prices was attributed to a firmer greenback and the subdued risk appetite in the aftermath of the FOMC, while some also suggested a deepening of the correction to this year’s rally and Citi cited Russia production keeping output levels above the OPEC+ target. Elsewhere, gold was restrained as the greenback held on to its gains and participants tentative ahead of the key US jobs data, while copper’s attempts to nurse losses were kept feeble by the absence of Chinese participants and subdued price action across the complex.

US is considering sanctioning businesses involved in Iran petrochemical trade and is stepping up efforts to sever Iran's non-USD trade, while it is also looking at sanctioning banks doing business with Iran. In other news, Iran Oil Minister Zanganeh said they will not remain silent if other OPEC members threaten its interests and commented that an OPEC collapse is likely. (Newswires/WSJ)

Venezuela opposition lawmaker Lopez says it is clear there are more military movements to come. (Newswires)

Valero Memphis, Tennessee refinery was knocked out of production due to a pipeline malfunction, while there were also reports of a fire at the Phillips 66 Carson, California refinery. (Newswires)

US

US Treasuries once again had a slow start to the session in Asia-Pac, but as the Europeans returned from holiday, some selling was noted after poor German data. Henceforth the selling stalled after stellar US factory orders (MM 1.9% vs. prev. -0.3% & exp. 1.6%) that detracted from some weekly claims ticking up, and durable goods revisions. Thereafter, while the day’s headline grabber came from source reports suggesting an impasse on US-Sino trade-talks, little follow through was seen in USTs, which diverged on Thursday from a declining stock space. As such the block flattener noted following the US data (12k+ in TYM9 vs. 3k+ Ultra Longs) set the tone for the day with 10yr yield approaching its 50DMA towards the close and T-note futures settled -13 ticks at 123-13+.

US President Trump suggested no more costly and time-consuming investigations, while he called on parties to work together on immigration, infrastructure and much lower drug prices. (Twitter)

US President Trump announced that Fed Nominee Steven Moore has withdrawn from nomination process. (Newswires)

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Asia equity markets begin the week with a non-committal tone amid a lack of risk drivers and with some major global… https://t.co/Ql6QPbjkPH