DAILY US OPENING NEWS: Last trading session of the week sees EU bourses slightly softer, USD is under pressure again amid political headwinds over the tax plan

15th December 2017

ASIA

Asia stocks were mostly lower as a downbeat tone rolled over from Wall St, where sentiment was pressured on tax reform discord after Republican Senator Rubio said he would not vote for the GOP tax bill unless it expands child tax credit. ASX 200 (-0.2%) closed negative as weakness in its top-weighted financials sector weighed, while Nikkei 225 (-0.5%) was pressured after a  mixed Tankan survey but then rebounded amid reports the BoJ is to tweak its language due to dovish dissent. Shanghai Comp. (-0.6%) and Hang Seng (-0.9%) were subdued after the recent quasi-tightening in China and with President Xi also expected to stress the need to curb financial risks at next week’s annual Central Economic Work Conference. Conversely, Indian markets  bucked the trend with gains of 0.9% after polls suggested the country’s ruling BJP retained power in Gujarat with a clear majority and won  Himachal Pradesh from Congress in the state assembly elections. Finally, 10yr JGBs were relatively uneventful despite the  indecisive tone in Japan, while the BoJ Rinban announcement also failed to spur demand with the total amount at a reserved JPY 290bln in 10yr-25yr+ maturities.

 

PBoC injected CNY 80bln via 7-day reverse repos and CNY 70bln via 28-day reverse repos, for a weekly net injection of CNY 80bln vs. last week's CNY 510bln net drain. (Newswires)

PBoC set CNY mid-point at 6.6113 (Prev. 6.6033).

BoJ reportedly is to tweak its message after dissenter calls for further easing, according to reports. (Newswires)

Japanese Tankan Large Manufacturing Index (Q4) 25 vs. Exp. 24 (Prev. 22). (Newswires)
- Tankan Large Manufacturing Outlook (Q4) 19 vs. Exp. 22 (Prev. 19)
- Tankan Large All Industry Capex (Q4) 7.4% vs. Exp. 7.5% (Prev. 7.7%)

 

EU/UK

UK PM May is expected to back down on Brexit date plan in order to avoid a second defeat in the commons next week, according to press reports. (Times)

German Chancellor Merkel said EU leaders could move to Brexit phase 2 today, but added that a lot of work is still needed regarding migration. (Newswires) There were also reports that EU leaders warned UK Conservative Party rebels have made a no deal Brexit more likely. (Telegraph)

 

EQUITIES

European equities have kicked the final trading session of the week off on a relatively tame footing and lacking in firm direction (Eurostoxx 50 -0.1%) with yesterday’s ECB decision/press conference seeing no follow through into today’s trade. On a sector breakdown, consumer discretionary names are seen lower in the wake of a profit warning from Salvatore Ferragamo (-8%) and H&M (-15%) delivering an uninspiring trading update. Consumer discretionary aside, individual movers have been relatively limited thus far.

 

FX

USD is under pressure again following concerns over Rubio’s commitment to the latest draft of the US tax bill . The Index is only just maintaining 93.500+ status and still looking vulnerable within the broader 94.000-93.000 recent range. JPY finding some resistance against latest safe-haven gains just above 112.00 vs the USD but sellers appear eager to short the headline pair ahead of 112.50 amidst talk that the BoJ may be listening to dovish dissenters and tweak guidance accordingly. Cable hugs the 1.3400 handle amidst ongoing Brexit uncertainty and conflicting headlines. AUD/CAD/NZD all firmer vs their US rival and not just because the Dollar is weaker across the board. EUR Still struggling to advance beyond 1.1800 vs the Greenback, but equally supported well before 1.1713 and with 2.9bln option interest at the big figure running off today

Russian Federation Central bank key rate (Dec) 7.75% vs. Exp. 8.00% (Prev. 8.25%). (Newswires)

 

FIXED INCOME

The extent of the opening/early bid on core EU bonds appeared somewhat excessive in the absence of something more supportive/bullish, and without much further follow-through buying, Bunds and Gilts have duly drifted back down. The 2 benchmarks are now middle and near the bottom of ranges respectively, with the 10 year UK debt future just off a new 125.33 low (+4 ticks vs +40 ticks at best, and seemingly unwinding some of Thursday’s marked outperformance). A degree of stability in stocks may have encouraged longs to book profits/pare positions, and trading volumes are relatively light after yesterday’s CB-inflated turnover, so price moves are exaggerated. Indeed, for many this could mark the last full week of the year before Xmas and the New Year. Elsewhere, USTs continue to bide time just a few ticks below parity, with IP data ahead.

 

 

COMMODITIES

In metals markets, gold remains supported by aforementioned tax concerns while copper and aluminium prices outperformed their peers during Asia-Pac trade with some attributing the price action to recent Chinese industrial output data. In the energy complex, WTI and Brent crude futures continue to remain firmer in the wake of ongoing supply disruptions from the Forties pipeline with the latest reports suggesting that repairs could take several weeks.

 

The Nigerian Pengassan white-collar oil and gas workers union is in discussions with the government about cancelling their intended Dec 18th strike. (Newswires)

Chinese finance ministry are to remove export duties on steel products. (Newswires)

15 Dec 2017 - 10:46- Research Sheet- Source: Newswires

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