DAILY EUROPEAN OPENING NEWS: Asian equities traded broadly higher. Upside was capped following the latest mixed Chinese trade figures

ASIA

Asia-Pac equity markets shrugged off the pullback in US stocks from record levels, although upside was somewhat capped as the region digested the latest Chinese trade figures. ASX 200 (+0.4%) and Nikkei 225 (+1.2%) were mildly positive with Australia underpinned by defensive stocks, while Nikkei 225 tested 21,200 and was led by strength in index heavyweight Fast Retailing after the Co. reported its FY net more than doubled. Elsewhere, Shanghai Comp. (+0.2%) and Hang Seng (Unch.) traded indecisive after the PBoC skipped open market operations but then offered funds via its MLF facility and as participants mulled over mixed Chinese trade data. Finally, 10yr JGBs were initially subdued with demand sapped amid a positive risk tone in Japan, before an improved enhanced liquidity auction result for longer-dated JGBs supported in late trade.

PBoC refrained from market operations today, but offered CNY 498bln through 1yr MLF operations. (Newswires)
PBoC set CNY mid-point at 6.5866 (Prev. 6.5808)

Chinese Trade Balance (CNY)(Sep) 193.0B vs. Exp. 266.05B (Prev. 286.50B). (Newswires)
Chinese Exports (CNY)(Sep) Y/Y 9.0% vs. Exp. 10.9% (Prev. 6.9%)
Chinese Imports (CNY)(Sep) Y/Y 19.5% vs. Exp. 16.5% (Prev. 14.4%)

Chinese Trade Balance (USD)(Sep) 28.47B vs. Exp. 38.00B (Prev. 41.99B). (Newswires)
Chinese Exports (USD)(Sep) Y/Y 8.1% vs. Exp. 10.0% (Prev. 5.5%)
Chinese Imports (USD)(Sep) Y/Y 18.7% vs. Exp. 14.7% (Prev. 13.5%)

MAS kept the appreciation of SGD NEER unchanged at 0%, while it also maintained the width and level of the policy band. MAS made a reference to neutral policy being appropriate for an extended period of time from the October 2016 Monetary Policy Statement and said that it sees Singapore economy likely to expand at a steady, but slightly slower pace in 2018 compared to 2017. (Newswires)

Singapore GDP (Q3 P) Q/Q 6.3% vs. Exp. 3.7% (Prev. 2.2%). (Newswires)
Singapore GDP (Q3 P) Y/Y 4.6% vs. Exp. 3.8% (Prev. 2.9%)

EUROPE

ECB is reported to mull reducing QE to EUR 30bln/month from January and extending it until at least September 2018, while sources also stated policymakers are in agreement of extending asset purchases at the October meeting but still debate on the size of purchases. (Newswires)

ECB's Coeure said the central bank must be wary of the risks from non-standard policy tools. (Newswires)

German Finance Minister Schaeuble said he is optimistic that Germany will have a new coalition government before Christmas holidays, while he also commented that a soft Brexit is the way to minimise damage to Britain and Europe. (Newswires)

Italy have avoided the possibility of an early election after the Italian PM won a parliamentary vote on electoral reform. (Newswires)

UK

UK BCC said Q3 manufacturing domestic and export sales rose slightly Q/Q, while it added that it is extraordinary the BoE is considering hiking rates. (Newswires)

Lord Lawson of Blaby, the former Conservative chancellor, has demanded that Philip Hammond be sacked. (Times)

EU's Barnier reportedly could offer the UK a two-year transitional deal, with the offer tied to the UK meeting exit obligations to the EU. (Handelsblatt)

EU leaders to block Brexit trade talks at October summit. (FT)

FX

Major currencies were relatively range-bound to provide a breather from the prior session’s moves, especially in GBP/USD which fluctuated amid an ongoing impasse and chatter regarding Brexit negotiations. USD mildly weakened across the board as DXY gave up the 93.00 level, which coincided with USD/JPY testing 112.00 to the downside. Elsewhere, AUD was mildly higher following mixed Chinese trade data where Trade Balance and Exports disappointed but Imports surpassed estimates, while SGD was choppy with early strength from a stellar Q3 GDP report instantly reversed after the MAS kept its FX based policy unchanged.

New Zealand First Party leader Peters confirmed unlikely there will be a decision on which party to back to form the next government before Saturday and then later added that NZ First board is to meet on Monday. (Newswires)

COMMODITIES

Commodity prices saw marginal gains with gold mildly supported amid a weaker greenback and with focus turning towards today’s US CPI release, especially after recent FOMC minutes highlighted concerns regarding weak inflation. Elsewhere, WTI crude futures extended on yesterday’s post-settlement rebound and approached the USD 51/bbl level, while copper holds onto the prior day’s gains amid Chinese trade data which also showed September iron imports rose to 102.8mln tons vs. Prev. 88.7mln tons M/M and that Coal imports were at the highest since December 2014.  

GEOPOLITICAL

US President Donald Trump will deliver an address on Friday regarding the Iran nuclear deal. Trump is expected to refuse to recertify the deal but not abandon it (Newswires)

US

US yields edged lower, after the cautious Fed rhetoric and a solid 30-year bond auction. Bullish short term Eurodollar option positions have also been noted in-lieau of the FOMC meeting minutes, released yesterday. US Dec’17 10y T-note futures settled at 125.03, up 2 ticks on the day.

The latest Fed Primary Dealers survey foresees a hike in December & 3 hikes in 2018, which is in line with the FOMC's dot plot. (Newswires)

Fed’s Brainard (Voter, Dove) suggested that US inflationary headwinds now look a little more structural than cyclical and noted that a persistently low neutral rate has big implications. (Newswires)

Fed's Rosengren (Non-Voter, Soft Hawk) said a December hike is appropriate and that 3 rate hikes next year seems appropriate, while he added that low inflation gives the Fed the luxury of being gradual. (Newswires)

Fed's Bullard (Non-Voter, Soft Dove) said hiking whilst inflation is falling risks policy mistake that could push inflation lower and potentially trigger a recession. (Newswires)

Fed's Bostic (Non-Voter, N/A) repeated he is unsure if Fed will hike rates in December and said US is moving quickly towards full employment. (Newswires)

US President Trump is planning to stop critical subsidies to insurers offering Obamacare cover. (Politico)

 

 

13 Oct 2017 - 06:15- Research Sheet- Source: RANsquawk

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