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[PODCAST] US Open Rundown 28th June 2019

  • European Equities are just into positive territory [Euro Stoxx 50 +0.3%], with the Fed having approved all 18 banks capital plans in their Comprehensive Capital Analysis Review
  • US President Trump says he will be meeting with Chinese President Xi tomorrow and thinks the meeting will be productive at a minimum; it will ultimately work out, though he did not promise a 6-month tariff reprieve
  • FX and Fixed remain tentative and rangebound ahead of the weekend’s G20 and as month/quarter & half year end occurs
  • Looking ahead, highlights include US Core PCE, Chicago PMI & University of Michigan Sentiment, Canadian GDP, G20 Meeting, and Fed’s Daly

 

ASIA-PAC

Asian equity markets were subdued amid book squaring heading into the end of H1 and ahead of the upcoming Trump-Xi meeting at the G20. ASX 200 (-0.7%) was led lower by mining names with BHP pressured as it is expected to pay AUD 250mln as settlement in the royalty dispute with Western Australia, although downside for the broader market was limited by outperformance in tech and financials, while Nikkei 225 (-0.3%) also suffered losses in the commodity-related sectors and with exporters weighed by detrimental flows into the currency. Hang Seng (-0.3%) and Shanghai Comp. (-0.6%) weakened amid continued PBoC inaction and as trade uncertainty remained rife heading into the US-China showdown at the G20. Finally, 10yr JGBs tracked the upside in their US counterparts with prices lifted by safe-haven flows and amid the BoJ presence in the market for JPY 720bln of government bonds in the belly to super-long end. 

PBoC skipped open market operations and were net neutral for the week vs. Prev. CNY 285bln injection last week. (Newswires) PBoC set CNY mid-point at 6.8747 (Prev. 6.8778)

US President Trump said he and India PM Modi will have very big trade deals to announce, while India PM Modi commented that wants to discuss Iran, 5G, as well bilateral and defense relations with US President Trump. (Newswires)

Japanese PM Abe said tensions over trade and geopolitical risks are increasing, while he added that trade restriction measures do not benefit any country and that any trade steps should be in line with WTO rules. (Newswires)

BoJ Summary of Opinions from June 19th-20th Meeting stated it is necessary to persistently continue with the current powerful monetary easing as the momentum toward 2% inflation is maintained. The summary added that the BoJ needs to consider measures that enhance sustainability of easing and that all policy measures including adjustments in short- and long-term interest rates, an acceleration in the pace of expansion in the monetary base, and an increase in the amount of assets to be purchased should be deliberated when considering additional easing. (Newswires)

Chinese Global Times Editor says from senior officials to ordinary people are increasingly believing since the trade war that hurts the economy can't persist under US political system, as long as China insists, the US will back down eventually. (Twitter)

Chinese Foreign Minister are hopeful that the US and China can meet halfway and ensure the meeting is a success. (Newswires) 

US

US President Trump says he will be meeting with Chinese President Xi tomorrow and thinks the meeting will be productive at a minimum, ultimately it will work out, added that he did not promise President Xi a 6-month reprieve of tariffs. (Newswires)

Japan Economy Minister Motegi says that as early as next month the US and Japan are to hold working-level trade talks; which will be at accelerating progress on Japan-US trade discussions. (Newswires)

Fed approved all 18 banks capital plans in its Comprehensive Capital Analysis Review, although Credit Suisse received conditional approval and must address weaknesses. (Newswires)

GEOPOLITICS

US President Trump said there is absolutely no time pressure on Iran issue and that he thinks it will work out but added 'if it doesn't you will hear about it'. (Newswires)

US President Trump says a lot of positive things will come out of his "very very good relationship" with Russian President Putin. (Newswires)

US Trade Representative Lighthizer, Treasury Secretary Mnuchin and Chinese Vice Premier Lui are meeting to discuss trade war, according to sources. (Newswires)

EU's Tusk said need to keep communication channels open with Iran and that the EU is committed to the deal as long as Iran is committed to uphold it. Furthermore, EU’s Tusk strongly urges Iran to fully implement all commitments and stated that the EU takes any breach seriously. (Newswires)

UK/EU

UK PM candidate Boris Johnson is preparing an emergency budget for no-deal which includes aggressive tax cuts and overhaul of stamp duty if he becomes PM, while there were separate reports that Boris Johnson's allies stated he offered Home Secretary Javid the role of Chancellor of the Exchequer. (The Times/Newswires)

UK GDP YY (Q1) 1.8% vs. Exp. 1.8% (Prev. 1.8%)

- UK GDP QQ (Q1) 0.5% vs. Exp. 0.5% (Prev. 0.5%)

EU HICP Flash YY (Jun) 1.2% vs. Exp. 1.2% (Prev. 1.2%)

- EU HICP-X F&E Flash YY (Jun) 1.2% vs. Exp. 1.0% (Prev. 1.0%)

- EU HICP-X Food, Energy, Alcohol & Tobacco Flash YY (Jun) 1.10% vs. Exp. 1.00% (Prev. 0.80%)

EQUITIES

Major European indices are just into positive territory after a tentative and mixed/flat open [Euro Stoxx 50 +0.3%] as the G20 summit gets underway and markets move into month, quarter and half end. Within the bourses the SMI (-0.2%) is the modest underperformer as we approach the Sunday expiry of temporary measures introduced by the EU which allow Swiss Co’s to be traded on EU exchanges; most recently the Swiss Government stated they will block trading of Swiss shares in the EU following the Commission stating they do not see reason to extend the measures beyond June. In terms of this morning notable movers, significantly outperforming at the top of the Stoxx 600 are Merlin Entertainment (+14.0%) after reports that the Co. had received a GBP 6bln offer from the Lego Family, Blackstone & a Canadian fund. On the back of yesterday’s Fed stress tests where all banks capital plans were approved Deutsche Bank (+3.7%) are the outperforming financial name; however, Credit Suisse (-1.0%) are lagging their peers after receiving only conditional approval and being the Co. must now address the relevant weaknesses.

Fed approved all 18 banks capital plans in its Comprehensive Capital Analysis Review, although Credit Suisse (CSGN SW) received conditional approval and must address weaknesses. (Newswires)

Tesla (TSLA) finds no systematic flaws in vehicles following investigation into vehicle fire in Shanghai. (Newswires)

FX

DXY, CNH - The broad Dollar and Index remain in a relatively confined 96.05-25 range as markets gear up for tomorrow’s US-Sino showdown. US President Trump said that he believes the meeting with his Chinese counterpart (at 0330BST tomorrow) will be “productive at minimum”. The comments somewhat reaffirmed market expectations for a restart in talks, but no breakthrough. The index currently hovers closer to the bottom of the intraday range ahead of the psychological 96.00 and its 200 WMA at 95.97, while to the upside, technicians will be eyeing resistance at 96.37 (50 WMA). Meanwhile, US Core PCE and comments from Fed’s Daly are unlikely to sway the Buck ahead of the weekend’s risk event. In a similar vein, CNH is caged within a tight 6.86-88 range vs Greenback but is ultimately flat, having briefly dipped below its 50 DMA at 6.8675.

EUR, GBP, NZD, AUD, JPY, CHF - All largely benefitting from a marginally softer USD, albeit the EUR also feels tailwind from touted month-end EUR/GBP buying, which aided the pair climb to levels last seen in January. EUR was little moved by the release of overall encouraging inflation data in which the core and super-core figures topped estimates while the headline matched expectations. EUR/USD remains near the top of a 1.1360-90 intraday band with around 1bln in options scattered around strikes 1.1375-85. Meanwhile, the GBP is benefiting slightly less from a softer USD amid the aforementioned EUR/GBP buying as Cable remains within a tight band under 1.2700. Elsewhere the AUD and NZD have similarly jumped on the back of a softer Buck and over close to HODs of 0.7017 and 0.6710 respectively, albeit off best levels. Finally, the safe heaven FX follow suit from the tentative tone in the FX market, although positioning before the end of the trading day may sway the currencies. USD/JPY hovers just above the near the bottom of a 107.57-83 range with 2.1bln in options expiring at 107.50 at today’s NY cut.

NOK, SEK - The Swedish Crown has pared back recent losses vs. the EUR after dismal retail sales extended the pair’s intraday upper bound to 10.5850, albeit the SEK has since pared back those losses and trades flat on the day thus far. Meanwhile, the NOK was little fazed by the regional unemployment figures and fares slightly worse but ultimately on the back of softer energy prices.

FIXED INCOME

A tentative and little changed end to the week for Core bonds thus far, as markets are afflicted by compounding month, quarter and half year end effects as well as the ever-looming Trump-Xi G20 meeting finally upon us. No significant updates on the trade rhetoric since yesterdays WSJ piece on the 3 Chinese preconditions, Trump and Xi are currently scheduled to hold talks at 03:30 BST on Saturday. A relatively busy session thus far with several notable releases on the data slate, though none have been sufficient in magnitude/print to divert bonds from their current holding pattern. Bunds are at the centre of a slim 30 tick range for the day at 172.58, and largely unreactive to the firmer German import data and EZ Core CPI, the session low of 172.46 printed around the cash equity open and shortly after the firmer French Prelim CPI (1.4% vs. Exp. 1.1%). Elsewhere, and having stayed within an even narrower range than their EU counterparts, Gilts are in the middle of the days range and were unsurprisingly unreactive to the unrevised GDP figure. In a continuation of the trend from their European peers USTs are also rangebound at 127-24+, which is just shy of their opening print. Looking ahead the data slate stateside may generate some inspiration, with the Core PCE, University of Michigan and Chicago PMI figures likely to be closely watched for any further data-input on the proability and magnitude of upcoming Fed cuts.

COMMODITIES

WTI and Brent futures are cautious ahead talks between US President Trump and his Chinese counterpart. The benchmarks found supports USD 59/bbl and USD 66/bbl respectively but remain subdued on the day. Post-G20, the energy market will be looking forward to the delayed OPEC+ meeting in which the oil producers are expected to roll over the output curbs but still seem split on potential revisions to the pact. Russia still remains the unknown, despite Energy Minister Novak stating that consensus will be found in July, however “the potential downside risk in the market in the event of a no deal will likely be enough to persuade Russia to continue” ING says. Back to G20, analysts remind us that talks between Russian President Putin and Saudi Crown Prince Mohammed Bin Salman will also be monitored as it may influence the cartel’s decision. Elsewhere, gold is marginally firmer on the day as a function of a weaker Dollar. In light of the recent gold rally, UBS has raised its 3-month gold forecast to USD 1430/oz from USD 1380/oz. Meanwhile, Copper remains above the USD 2.7/lb as the softer USD outweighs the supply resumptions from the end of strikes at the Coldeco Chuquicamata mine. The workers, after 14 days, have accepted the latest offer and miners returned to work today.

Codelco's Chuquicamata Mine workers unions are said to accept pay offer ending a 2-week strike. (Newswires)

Russian Energy Minister Novak says they have consolidated the position with Russian oil companies concerning future global oil output deals., Tass. (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