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[PODCAST] EU Open Rundown 5th July 2019

  • Asian equity markets were mixed heading into US NFP data, Samsung’s operating profit fell 56% Y/Y
  • China reportedly wants Huawei clarification before making agricultural purchases from the US
  • DXY was flat, EUR/USD contained, GBP/USD remained near YTD lows and USD/JPY traded sideways
  • Looking ahead, highlights include German Industrial Orders, US & Canadian Jobs Reports, Canadian Ivey PMI, ECB's Coeure & de Guindos

 

ASIA-PAC

Asian equity markets were mixed following the non-existent lead from Wall Street where markets were shut due to Independence Day and with the region tentative heading into the key US Non-Farm Payrolls data. ASX 200 (+0.6%) was positive with the index led higher by strength in financials and real estate after APRA effectively relaxed guidance on mortgage lending in which banks will be able to review and set their own minimum rate floor in assessing serviceability, although gains were capped for most the session by weakness in the commodity-related sectors. Elsewhere, Nikkei 225 (+0.1%) was choppy as it failed to find inspiration from the highest growth in Household Spending since 2015, due to a humdrum tone in the currency and the KOSPI (+0.1%) traded cautious amid losses in index heavyweight Samsung Electronics which beat expectations in its preliminary earnings for Q2 but still showed oper. profit slipped by 56% Y/Y. Elsewhere, Hang Seng (+0.1%) and Shanghai Comp. (-0.2%) were subdued after further PBoC inaction resulted to a net weekly liquidity drain of CNY 340bln, while there were also recent mixed comments from China’s MOFCOM which confirmed US-China trade teams are in communication but also suggested that tariffs must be removed for a trade deal to occur. Finally, 10yr JGBs were marginally higher and briefly reclaimed the 154.00 level with mild support seen amid the lacklustre risk tone in Japan and BoJ’s presence in the market for JPY 555bln of JGBs.

PBoC skipped open market operations for a net weekly drain of CNY 340bln. (Newswires) PBoC set CNY mid-point at 6.8697 (Prev. 6.8705)

China reportedly wants Huawei clarification before making agricultural purchases from the US. (SCMP)

China’s Global Times Editor tweeted that China will fulfil its commitments once China and the US reach a deal and that the US shouldn’t set unfair conditions to prevent China breaking promises as Beijing will certainly reject those conditions. (Twitter)

 

UK/EU

UK PM candidate Johnson vowed to make Britain the greatest place on Earth and unite the country by delivering Brexit. In other reports, Johnson suggested he could maintain lavish spending promises even if in the event that a no-deal Brexit wiped out the scope for extra borrowing by instead using the GBP 38bln “divorce settlement” payment with the EU. (Telegraph/Guardian)

UK Justice Secretary Gauke said he thinks the House of Commons will ‘find mechanisms’ to prevent the UK leaving EU without a deal and criticised Boris Johnson’s ‘do or die’ pledge. (Independent)

Several Tory MPs stated that they were on standby in the event of a snap election in October. (FT)

UK opposition labour party leader Corbyn has been urged by one of the MPs within the party to consider if he is the ideal person to lead the party after it experienced its worst ever rating in the polls. (Independent)

 

FX

In FX markets, the DXY was flat and stuck within the prior day’s tight range due to the lack of US participants for the 4th July celebrations and as global investors awaited the upcoming US NFP jobs numbers for want of a better catalyst to spur price action. The greenback’s major counterparts were also uneventful with EUR/USD contained below the 1.1300 handle, within proximity to its 5- and 100-DMA levels at 1.1283 and 1.1262 respectively, while GBP/USD remained near YTD lows beneath 1.2600 with a newswire poll suggesting the currency could drop to a 1.1700 bottom range in the month following a no-deal Brexit scenario. Elsewhere, USD/JPY and JPY-crosses traded sideways alongside the tentative risk tone and antipodeans were also uneventful with the only glimmer of excitement coming from mild upside in AUD/NZD as it attempted to make headway above 1.0500. 

 

COMMODITIES

Commodities were mixed in which WTI crude futures remained below the USD 57.00/bbl level as prices hardly deviated from the prior day’s levels following the holiday-quietened conditions. Elsewhere, gold was choppy amid the tentative risk tone and as the greenback lacked conviction heading into the key US jobs data, while copper was subdued amid weakness in China and as iron ore prices continued to pullback from record levels.

China Iron & Steel Association urged the government to maintain order amid rising iron ore prices and wants prices to return to a reasonable level, while it was also reported that China regulators are to examine the drivers for the increase in iron ore prices. (Newswires)

 

GEOPOLITICS

Iran summoned the UK ambassador in Tehran after British Royal Marines seized a Panamanian-flagged tanker suspected of smuggling 2mln bbls of Iranian oil to Syria. (Newswires)

 

US

US was closed for Independence Day holiday.

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