DAILY EUROPEAN OPENING NEWS: UK PM May is reportedly against the EUR 20bln Brexit divorce bill

17th October 2017


Asia equity markets eventually traded mostly higher following the momentum from their counterparts on Wall St, where all major indices edged fresh record levels once again. The positive lead provided an early bid tone in ASX 200 (+0.8%) which was also led by materials names as Rio Tinto rose to its highest in around 6 years on strong Q3 iron ore shipments, while Nikkei 225 (+0.4%) was also higher but saw some intraday pressure in which participants took heed of a strengthening JPY and booked profits. Elsewhere, Hang Seng (+0.1%) and Shanghai Comp. (+0.1%) were choppy despite a substantial liquidity operation by the PBoC, with participants tentative in the midst of earnings season and ahead of China’s 19th National Congress. Finally, 10yr JGBs were subdued amid a somewhat positive risk tone in Japan and after softer 20yr bond auction results in which the amount sold, b/c and accepted prices all declined from prior.

PBoC injected CNY 100bln via 7-day reverse repos and CNY 90bln via 14-day reverse repos. (Newswires)
PBoC set CNY mid-point at 6.5883 (Prev. 6.5839)


Greece PM Tsipras said it is in Greece's interest to complete the 3rd bailout review and that the domestic economic recovery is gaining traction, while IMF's Lagarde commended Tsipras on notable progress. (Newswires)

Irish PM Varadkar said the EU is prepared to provide enormous flexibility towards Northern Ireland over Brexit and is willing to create a new solution if required. (Newswires)


UK PM May is reportedly against the EUR 20bln Brexit divorce bill. (Newswires)

Germany plans for post-Brexit UK/EU ties in which plans include an EU free trade deal, but is tied to progress in Brexit talks. (Newswires)


In FX markets, USD extended on the gains against its major counterparts in which EUR/USD slipped further away from the 1.1800 handle where it had earlier met resistance, while GBP/USD failed to make any significant recovery from yesterday’s Brexit-impasse related weakness. Antipodeans were in focus with NZD/USD initially lifted by stronger than expected Q3 CPI, before the pair gave up gains and then some amid USD strength, ongoing political uncertainty and with analysts suggesting the RBNZ sectoral factor core inflation remained subdued. Elsewhere, AUD was also pressured after the RBA minutes suggested the central bank remained steadfast and stated that rate hikes abroad do not have any mechanical implications for Australian rates.

RBA minutes from October 3rd meeting stated that rate hikes abroad do not have any mechanical implications for Australian rates and any shift in rates depends on the domestic economy. RBA minutes reiterated that the central bank judged steady policy is consistent with growth and inflation goals, while it also commented that further strength in AUD would result to slower growth and inflation. (Newswires)

New Zealand CPI QQ (Q3) 0.5% vs. Exp. 0.4% (Prev. 0.0%). (Newswires)
New Zealand CPI YY (Q3) 1.9% vs. Exp. 1.8% (Prev. 1.7%)

New Zealand First Party leader and kingmaker Peters said no decision has been made yet regarding the government and plans further talks with both National and Labour party leaders. (Newswires)


Commodity prices consolidated overnight in which WTI crude futures traded sideways below the USD 52/bbl after a pull-back from yesterday’s gains. Gold prices languished near the prior session’s lows where it slipped below USD 1,300/oz amid a firmer greenback and positive risk tone, while copper was rangebound and at its best levels in 3 years. 

IEA's Birol said if current policies are maintained oil market may rebalance next year, subject to upset from geopolitical factors. (Newswires)


North Korea's Deputy UN Ambassador Kim said on Monday that the situation in the Korean peninsula has hit a touch-and-go point and a nuclear war may break out any moment. (Fox News)

US diplomats may meet with North Korean diplomats in Moscow this week according to initial reports, although it was later reported that North Korea is to reject any diplomacy with the US at this point. (Newswires/IFX/CNN)

US Deputy Secretary of State Sullivan said to not rule out possibility of direct talks eventually between US and North Korea. (Newswires)


US Treasuries were lower on Monday, with Fed chair Janet Yellen’s optimism on inflation driving a mild sell-off; the selling gained traction in the US afternoon on news that President Trump was leaning towards nominating John Taylor as the next Fed chair. At settlement, 5s30s was around 4bps steeper, while 2s5s were slightly flatter. US 10-Year T-Note futures settled 9 ticks lower at 125-13+.

Fed Chair candidate John Taylor reportedly made a favourable impression on President Trump in an interview last week, according to sources. (Newswires)

US President Trump is to meet with Fed Chair Yellen this week as he interviews candidates for the next Fed Chair position, in which an interview with Yellen may be conducted on Thursday. (FT)


17 Oct 2017 - 06:25- Research Sheet- Source: RANsquawk

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