DAILY US OPENING NEWS: EU bourses firmer this morning with auto names racing away amid a positive note from Goldman Sachs

21st November 2017

ASIA-PACIFIC

Asian equity markets were higher across the board as the region took the impetus from the mostly positive close on Wall St, with Nikkei 225 (+0.9%) underpinned as exporters benefitted from JPY weakness. The benchmark Japanese index briefly broke above the 22,500 level as stocks coat-tailed on the rebound in USD/JPY, with Toshiba reprieved from yesterday’s slump to sit among the biggest gainers. ASX 200 (+0.3%) also traded with broad-based optimism across its sectors albeit to a lesser extent and Chinese markets completed the upbeat picture following another significant liquidity operation by the PBoC, with the Hang Seng (+1.5%) leading on continued gains in its largest weighted stock Tencent which recently became a member of the exclusive USD 500bln market-cap-club. Finally, 10yr JGBs were relatively flat throughout the session with demand subdued by the broad positive risk tone and a tepid longer-dated enhanced liquidity auction, although a mild uptick was seen in late trade as prices broke above 151.00.

PBoC injected CNY 130bln in 7-day reverse repos, CNY 40bln in 14-day reverse repos and CNY 10bln in 63-day reverse repos. (Newswires)

PBoC set CNY mid-point at 6.6356 (Prev. 6.6271)

 

Japanese Government to cut 30 and 40 year JGB supply in FY 2018/2019 – sources. (Newswires)

 

CENTRAL BANKS

Bank of England: BoE Deputy Governor Cunliffe says inflation has been a bit lower than BoE forecast in Autumn and that it’s possible to wait before tightening policy until there is clear evidence that pay growth is responding to unemployment level.
 

Reserve Bank of Australia: RBA minutes from November 7th meeting stated that any further appreciation in AUD would slow expected pick-up in inflation and the economy. The minutes also stated that there is considerable uncertainty on how fast wages might pick up and add to inflation, while it added that a pass through to inflation may be delayed by many factors. (Newswires)

RBA's Lowe stated that there is 'not a strong case' for near-term change in interest rates with the bank paying attention to soft wage growth. (Newswires)

 

 

EQUITIES

European equities modestly higher this morning, with positive notes out from Goldman Sachs, who are overweight European automakers. Additionally, Imperial Brand shares rallied after their CEO change, as analysts speculate that this could increase the likelihood that the company will be taken over by Japan Tobacco. Airliner, easyJet, are flying high this morning following strong financial results.

 

FIXED INCOME

Bunds are taking another look at 163.00+ levels having faded rallies above the big figure on several occasions recently. The bullish fundamentals and flow/positioning motives are well known and documented, but chart-wise market contacts note that support around 162.86 (rising trendline and Monday’s late Eurex base) held on the downside, prompting some intraday buying for a bounce to  163.06 resistance initially and then 163.16 (yesterday’s session peak) vs a high so far at 163.15. Beyond that, 163.22 needs to be breached to expose 163.40 and this month’s 163.63 peak. However, another retreat and failure to retain grasp of the 163.00 handle will bring 162.82 back into play as support (Monday’s actual intraday low), and on a break those short term longs not booking profit at 163.06 are expected to bail. Turning to Gilts, more upside also seen and a return to the 125-plus zone, at 125.29 for a 33 tick gain on the day vs 12 tick loss at one stage, before easing back slightly on larger than forecast UK PSNB shortfalls.

 

 

FX

In FX markets, price action has been relatively contained thus far. The USD index is firmer around the 94.000 handle in thin holiday-impacted trade, with the USD gaining ground vs most major counterparts on a generally more risk-on mood. EUR has been resilient in the face of Germany’s struggles to form a new Government and the threat of another election. EUR/USD continues to find support ahead of stops around 1.1720 and bids at 1.1700, with reported fixing demand in Asia propping the pair, but the 100 DMA around 1.1745-50 capping recovery gains. Elsewhere, AUD has rebounded from overnight lows post-RBA minutes, as Governor Lowe underlined that the next move in rates will be up, although the lead time to any tightening remains lengthy. Meanwhile, GBP was unreactive to the latest public borrowing data as markets look to see whether or not PM May will get the green-light for an enhanced divorce bill offer to the EU.

 

COMMODITIES

WTI and Brent crude futures have continued to climb through the European session with energy related newsflow on the light-side as prices retrace some of the declines seen in the early stages of yesterday’s session. Energy markets are looking ahead to next week’s OPEC meeting, however, markets are firmly expecting an extension to existing production cuts in lieu of recent rhetoric from the cartel. In metals markets, gold only managed to nurse some of yesterday’s losses overnight as a broad positive risk tone kept safe-haven demand subdued. Copper maintained most of the prior session’s gains with prices supported by the risk appetite and amid gains in Chinese steel and iron ore prices on optimism for increased demand following the winter season.

 

 

21 Nov 2017 - 10:43- Research Sheet- Source: RANsquawk

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