DAILY EUROPEAN OPENING NEWS: Asian equity markets traded mixed as sentiment settled down from the bullishness seen yesterday

ASIA

Asian equity markets traded mixed as sentiment settled down from the bullishness seen from President Xi Jinping’s conciliatory tone on Tuesday which resulted to a solid performance on Wall St, while attention turned to the geopolitical climate with a possible announcement on Syria said to be imminent. ASX 200 (-0.3%) failed to sustain mild opening gains as softer Australian consumer sentiment data and weaker than expected Chinese inflation figures clouded the upside seen in commodity related sectors. Nikkei 225 (-0.3%) was also lacklustre with J Front the worst off amongst the retailers on expectations of weaker profits this year, while SoftBank outperformed on M&A hopes after reports its unit Sprint and T-Mobile renewed merger talks. Hang Seng (+0.7%) and Shanghai Comp. (+0.9%) were initially choppy as participants digested the miss on Chinese CPI and PPI data, although stocks gradually found some comfort from efforts by PBoC Governor Yi Gang to build upon the momentum from President Xi at the Boao forum in which the PBoC Governor talked about opening up and announced to increase stock connect quotas. Finally, 10yr JGBs were flat as prices lacked direction amid an indecisive risk tone in the region, while the BoJ also kept the amounts of its Rinban announcement unchanged at just over JPY 1tln of JGBs in 1yr-10yr maturities.

PBoC Governor Yi Gang said China will implement financial market opening up steps and that China will remove foreign ownership caps on banks, while he added that trade between US and China should balance out in the future. Governor Yi further commented that China will not allow CNY to depreciate and will permit domestic and foreign financial companies to compete on an equal playing field. (Newswires)

PBoC Governor Yi Gang also announced to increase daily quota limits for the stock connect with Hong Kong and that China targets launching the Shanghai-London stock connect within this year, while the CSRC later stated that daily quotas for stock connect scheme are to be expanded as of May 1st. (Newswires)

China Vice Finance Minister said China will continue to announce more tax cuts and conduct personal income reforms, while the official added that China will implement tariff cuts ASAP and that the announcement to reduce tariffs was based on its own decision. (Newswires)

Chinese CPI (Mar) Y/Y 2.10% vs. Exp. 2.60% (Prev. 2.90%). (Newswires)
Chinese PPI (Mar) Y/Y 3.10% vs. Exp. 3.30% (Prev. 3.70%)

PBoC skipped open market operations. (Newswires)
PBoC set CNY mid-point at 6.2911 (Prev. 6.3071)
UK/EU

ECB’s spokesperson said recent comments by ECB’s Nowotny are his own views and they do not represent the ECB’s governing council view. (Newswires)

FX

FX markets were relatively flat overnight in which most majors remained at levels seen during late US trade. This kept the DXY near 2-week lows, while EUR/USD held on to most the upside seen following previous hawkish comments from ECB’s Nowotny on rate hikes, which a central bank spokesperson later clarified was Nowotny’s own view and did not represent the ECB governing council. Elsewhere, USD/JPY was off best levels amid the indecisive risk tone, while commodity-linked currencies remained firm after the prior day’s advances which were aided by 3.7% gains in oil prices, although AUD/USD marginally pulled back following lacklustre data.

Australian Westpac Consumer Sentiment Index (Apr) 102.4 (Prev. 103.0). (Newswires)

COMMODITIES

Commodities were mixed overnight with oil prices taking a breather following the prior day’s rally which was fuelled by risk sentiment and OPEC rhetoric including reports that Saudi is said to seek prices near USD 80/bbl. This eventually resulted to 3.7% gains in WTI on Tuesday and supported Brent to its highest since December 2014, although prices have pulled back from best levels on mild profit taking and after a surprise build in API crude inventories. Elsewhere, copper was initially firmer alongside early gains in Chinese metals trade amid restocking demand amid expectations of increased construction activity in the upcoming months, before prices gradually retreated, and gold prices remained afloat as the DXY languished.

US API weekly crude stocks (6 Apr) +1.758M vs. Exp. -0.200M (Prev. -3.280M). (Newswires)

EIA raised 2018 & 2019 world oil demand growth forecasts, while it cut view on 2018 production but raised view on 2019 production. (Newswires)

Saudi Energy Ministry said Saudi Arabia plans to keep crude oil exports below 7.0mln bpd for May and that it sees Saudi Arabia’s March crude production at 9.91mln bpd. Furthermore, the ministry reiterated its commitment to restore inventories to their normal levels and there were also comments from Energy Minister Al-Falih that he is happy with the oil market at present. (Newswires)

UAE Energy Minister said long-term ties with Russia will allow OPEC to react more effectively in changing oil markets fundamentals, while reports added that it is too early for OPEC to discuss oil cut extension or replacing falling Venezuela output. (PlattsOil)

Iran Oil Minister Zanganeh said current oil prices are acceptable and that all are comfortable with the price. (Newswires)

Canada’s Energy Minister said the government is fully supportive of the Kinder Morgan Pipeline and that it is not a matter of whether it will go ahead but rather how it will proceed. (Newswires)

GEOPOLITICAL

US military officials said the US ready to attack Syria upon order from Trump which could come at any time, while there were also separate reports that the announcement on US action in Syria was said to be imminent. (i24 News/Fox)

US-led coalition reportedly asked all Middle East flight companies to change itineraries for the next 48 hours amid a possible strike. (Kurdistan24)

Russia vetoed US bid at UN Security Council to present a new inquiry to lay blame for chemical weapons over the attacks in Syria, while there were also reports that Russia is jamming US drones over Syria airspace impacting military ops. (Newswires)

US

Bear-flattening was the theme, with short-end yields higher by around 3bps, while the longer-end of the curve was more or less unchanged at settlement. President Xi’s speech overnight was the catalyst, helping to drive decent overnight volumes. However, as we entered the European day, the tplex was happy to range trade, with 10-year T-Notes patrolling the 120-24 to 120-29 bracket. There was some attention on the 5s30s part of the curve, which flattened to the narrowest since 2007. In the late part of the European afternoon, Treasuries were for a short while dictated by Bund action, which caught a bid after the ECB backtracked from Nowotny’s hawkish comments, made earlier in the day. However, the effect was short lived. The US sold $30bln of 3yr notes, which tailed by 0.1bps, with the yield the highest at auction since May 2007. Cover was more-or-less in line with recent averages, though indirect participation dropped to the lowest since September; dealers took the most since September 2017. This week’s $64bln of 3s/10s/30s will see a net paydown of around $12.5bln by the US Treasury, given the $74.5bln of maturities at the mid-month settlement. US 10y T-notes futs settled down 4+ ticks at 120-24+.

White House said it sees encouragement in Chinese President Xi’s words but added it wants to see concrete actions. (Newswires)

11 Apr 2018 - 06:20- Research Sheet- Source: RANsquawk

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