DAILY EUROPEAN OPENING NEWS: Asian stocks traded mostly higher as the region sustained the momentum from Wall St where all major indices staged a recovery

 

TRADE TARIFFS

US trade official said the US does not have a firm deadline for a final tariff list against China and that there may continue to be talks over trade with China, while the official refused to comment on specific action. (Newswires)

White House said there will be a couple of months before China tariffs are implemented, while it noted the review period is ongoing and if China does not make changes, the US will go ahead with their tariffs. In related news, the White House also said there is no new big trade initiative directed at China planned at this time which has not already been announced but said new actions could come in time. (Newswires)

White House Economic Adviser Kudlow thinks China will "back down" and "play ball" regarding trade. Furthermore, Kudlow also added that President Trump's tariffs on China are all proposals. Furthermore, Kudlow had earlier suggested that US measures could be a form of trade negotiation tactics and that back-channel talks with China were occurring. (Newswires)
 

ASIA

Asian stocks traded mostly higher as the region sustained the momentum from Wall St where all major indices recovered from the initial losses seen after US and China’s tit-for-tat tariff announcements, with fears later soothed as the US hinted at a willingness for negotiations. The improvement in sentiment was helped by comments from White House economic adviser Kudlow who stated that the US measures were a form of trade negotiations and that Trump’s tariffs on China are all proposals, while he added that back-channel talks with China were occurring. Furthermore, the White House noted there will be a couple of months before China tariffs are implemented with the review period ongoing, and some analysts also viewed the impact from proposed tariffs to be manageable. As such, ASX 200 (+0.7%) and Nikkei 225 (+1.9%) were higher with strength in Australia’s largest weighted financials sector leading the local index, and the Japanese benchmark was among the outperformers as exporters cheered a weaker JPY. Elsewhere, KOSPI (+1.6%) also advanced and Straits Times Index (+1.8%) saw its largest intraday gain in over a year alongside the rising tide across stocks, while mainland China, Hong Kong and Taiwan remained shut for holidays. Finally, 10yr JGBs were subdued following losses in T-notes and with safe-havens shunned amid the heightened risk appetite, while an enhanced-liquidity auction in the super-long end also kept participants side-lined during early trade and after results showed weaker demand.

UK/EU

UK Security services believe that they have pinpointed the location of the covert Russian laboratory that manufactured the weapons-grade nerve agent used in Salisbury. (Times)


FX

USD/JPY and JPY-crosses extended on their upside amid the heightened-risk appetite in which the pair eyed the 107.00 level to the upside, while CHF was also subdued by the safe-haven outflows with USD/CHF above the 0.9600 handle. Elsewhere, the other majors traded range-bound amid a flat greenback and several holiday closures, while AUD/USD pulled back and failed to benefit from a wider than expected trade surplus as the data also showed a downward revision to the prior and that exports flattened.

Australian Trade Balance (AUD)(Feb) 825M vs. Exp. 725M (Prev. 1,055M, Rev. 952M). (Newswires)
Australian Exports (Feb) M/M 0.0% (Prev. 4.0%)
Australian Imports (Feb) M/M 0.0% (Prev. -2.0%)


COMMODITIES

Commodities were mixed overnight with WTI crude future marginally extending on its post-DOE rebound in which an unexpected drawdown to headline crude stockpiles underpinned prices back above USD 66/bbl and with prices also propped up amid the improvement in risk sentiment. Conversely, gold loss some shine and weakened on safe-haven outflows, while copper traded sideways during Asia hours with its largest consumer China shut for the rest of the week due to holidays.

SocGen said it sees a 70% chance of Iran oil sanctions coming back into effect by May 12th which would remove 500K bpd of Iranian crude supply from the market. SocGen added that sanctions will take 2-3 months for implementation and sees a price impact of USD 10/bbl, of which half is already priced in. (Newswires)
 

GEOPOLITICAL

US plans to sanction Russian oligarchs this week as it targets Moscow for alleged election meddling. (Newswires)
 

US

There was modest bear-steepening along the Treasury curve, after the pre-market risk-averse sentiment was shaken-off. Again, block trades in TYM8 helped some of the selling bias, as yesterday. Decent ADP employment data (beat expectations, prior revised up) has raised hopes of a stellar NFP report on Friday, seeing Tsys back-off highs, though analysts offered the usual caution about reading too much into the ADP data as a guide for the official NFP data. Additionally, risk sentiment was stoked in the US morning after constructive comments by US NEC Director Kudlow, where he intimated that the US and Chinese were in discussions over trade, and the market shouldn’t over-react to the initial, small steps taken to fight against China’s alleged theft of US intellectual property. T-Note futures (June 2018) settled half a tick lower at 120-26+.

US President Trump signed order to deploy the National Guard to its southern border, while there were earlier reports that Mexico Senate rejected US President Trump's border militarization plan and asked the government to halt migration cooperation with the US. (Newswires)

There were reports that President was said to soften NAFTA autos proposal and lower 85% demand on some auto parts, while White House Economic Adviser Kudlow said that NAFTA negotiations are proceeding rather well. (Newswires)

NAFTA negotiators are said to be reviewing alternatives on origin rules for autos, with US officials showing a more flexible approach to the issue according to sources. In related news, Canadian NAFTA negotiators are said to be open to US ideas on agreeing on a deal but are skeptical on completing the remaining chapters in the next 2 weeks as big gaps remain. However, they think a symbolic agreement in principle showing consensus on some important issues is possible, according to sources. (Newswires)

US Ambassador to Canada Craft said they have every confidence that US and Canada will fix NAFTA, while Canada Ambassador to the US MacNaughton, said 'a lot of issues' remain on NAFTA but noted that he is pleased with the positive tone of discussions. (Newswires)

05 Apr 2018 - 06:21- Research Sheet- Source: ransquawk

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