Original insights into market moving news

[PODCAST] US Open Rundown 30th September 2019

  • Major European indices are modestly firmer but little changed overall, on a relatively quiet session thus far
  • USD is firmer vs. most G10 counterparts with NZD the laggard although Sterling does modestly outperform
  • US Treasury official stated that there are no current plans to stop Chinese firms from listing on US exchanges.
  • UK Opposition Leaders will be meeting today to find a way to force UK PM Johnson to ask for a Brexit extension as early as this weekend
  • Looking ahead highlights include, German CPI (Prelim), US Chicago PMI


Asian equities showed a mixed performance after a negative lead from Wall Street in which major bourses fell deeper into the red amid reports which suggested that the White House is mulling limits on portfolio flows into China, albeit a US Treasury official later noted that there are no current plans regarding market access. ASX 200 (-0.4%) turned green as Nufarm shares rose in excess of 25% after the Co. reported an increase in revenue alongside the sale of its South American unit to Sumitomo. Meanwhile, Nikkei 225 (-0.6%) was subdued throughout the session as heavyweight Softbank fell over 2% amid the ongoing concerns surrounding WeWork after CEO Neumann left his position following the failed IPO. Elsewhere, Hang Seng (+0.5%) nursed the initial losses which emanated from continuing disarray in Hong Kong as protesters clash with police for yet another week, with further protests planned for China’s 70th anniversary of Communist rule tomorrow. Losses in Hong Kong later pared amid gains in large-cap energy names and as AB InBev’s Budweiser APAC soared over 5% at its debut today, which was seen as a litmus test for the IPO environment in Hong Kong. Meanwhile, Shanghai Comp (-0.9%) received a short-lived boost after the Chinese Caixin Manufacturing metric beat (see below from RANsquawk analysis). Furthermore, the PBoC skipped open market operations today which resulted in a modest net daily drain of CNY 20bln ahead of the Mainland’s absence for the remainder of the week due to the National Week Holiday.

US Treasury official stated that there are no current plans to stop Chinese firms from listing on US exchanges. Further, China Global Times noted that the listing of Chinese companies in the US is not just beneficial to China, but also to US investors and “after all, it is US consumers and investors that will bear the costs.”

US President Trump said that patience is needed to ensure the trade deal with China is a great one. (Newswires)

Hong Kong protesters clashed with police for a 17th week with further protests planned for China’s 70th anniversary of Communist rule on Tuesday 1st October. Furthermore, Hong Kong police confirmed an officer fired a live round Sunday near Wan Chai MTR station, according to CNN International Correspondent Will Ripley (Newswires/Twitter)

Subsequently, China Global Times says Police have received information about Hong Kong protest activity on 1 October creating a highly dangerous situation. (Twitter)

PBoC set CNY mid-point at 7.0729 vs. Exp. 7.0825 (Prev. 7.0731) (Newswires) PBoC skips open market operations for a net daily drain of CNY 20bln

BoJ offered to buy JPY 420bln in 1-3yr JGBs (Prev. JPY 400bln) and JPY 340bln in 3-5yr (Prev. JPY 320bln). (Newswires)

Chinese Caixin Manufacturing PMI (Sep) 51.4 vs. Exp. 50.2 (Prev. 50.4) - Highest since February 2018, New orders quickens to 18-month highs, production expanded at fastest pace since August 2018. Optimism towards the one-year outlook for output remained relatively weak in September, with concerns over future trade conditions commonly cited by panel members. (IHS Markit)

Chinese NBS Manufacturing PMI (Sep) 49.8 vs. Exp. 49.5 (Prev. 49.5) - 5th consecutive contraction (Newswires) Chinese NBS Non-Manufacturing PMI (Sep) 53.7 (Prev. 53.8) Chinese NBS Composite PMI (Sep) 53.1 (Prev. 53.0)

Japan has approved exports of fluorinated polyimide to South Korea, Korean press states. (Newswires) Reminder: On July 1st, Japan announced it would restrict exports of three chemicals to South Korea: fluorinated polyimide, resist and hydrogen fluoride.


CHINA MANUFACTURING PMI: Both the NBS (official) and Caixin (unofficial) PMI data beat expectations, with the former coming in at 49.8 in September, from 49.5, above the consensus 49.6; the latter to 51.4 in September, from 50.4, versus consensus 50.2. For the official data, new orders rose above 50, and although new export orders index increased, it remains below the 50.0 mark; the imports sub-index ticked up by a smaller magnitude. Pantheon Macroeconomics said it was possible that the Caixin gauge is picking up something that the official version is missing: "The Caixin PMI is more weighted towards smaller and private firms. On our reading of the industrial profits data in recent months, private firms appear to be recovering while state-owned enterprises remain in the doldrums. We aren’t convinced, however, that the private sector recovery is sustainable yet; monetary conditions remain too tight." Pantheon also notes that the details within the Caixin survey concur with the official gauge in terms of the trend of new orders and new new export orders, though seem to suggest a less weak outlook on foreign demand.

CHINA NON-MANUFACTURING PMI: While there was an upside surprise for the manufacturing gauges, the NBS (official) non-manufacturing data surprised to the downside, falling to 53.7 in September, from 53.8, below the consensus 53.9. Construction tumbled after the August jump, posing the question whether infrastructure spending will be enough to offset weaker investment in the private sector and a property market being cooled by policymakers (Pantheon Macroeconomics is sceptical). The services index picked up, though is off June's level; additionally, the are some arguments why further downside could lie ahead: Pantheon points out that in recent months, the Caixin services PMI has weakened to the low side of its wide range of the past couple of years, while weakness in manufacturing will likely also prove a drag.


Three House committees subpoenaed US Secretary of State Pompeo to supply documents relating to administration's dealings with Ukraine. This follows comments from the US House Intel Committee Chief who noted that impeachment inquiry hearings and subpoenas could be issued as soon as this week. Further, the US envoy to Ukraine, Kurt Volcker has resigned. (Newswires)

Fed's Evans (Dovish, Voter) says at the moment, fundamentals of the the US economy remain good, however, acknowledges potential headwinds ahead. (CNBC/Newswires)


Saudi Crown Prince Mohammed Bin Salman said the attacks on the Saudi oil facilities were an act of war by Iran, hopes military response will not be necessary as a political solution is "much better". MBS also called on US President Trump to meet with Iranian President Rouhani to craft a new deal. (Newswires)

Iranian Government Spokesman notes that they are prepared for a dialogue with Saudi Arabia if they alter their behavior and stop a war in Yemen; follows Iranian President Rouhani receiving a letter from Saudi Arabia., EHA News. (Twitter)

Turkey air force downed a drone on the Syrian border after it breached Turkish airspace six times. (Newswires)

Russian Government has called on NATO to refrain from deploying European missiles. (Newswires)

Yemen Houthis have reportedly offered to release 350 prisoners, 3 of which are Saudis, according to Al Masirah TV. (Newswires)


Outgoing ECB President Draghi stated that the need for higher fiscal spending is “more urgent than before” and noted that extraordinary monetary stimulus may have to last a long time if there is no support from fiscal policy. (FT)

UK Opposition Leaders will be meeting today to find a way to force UK PM Johnson to ask for a Brexit extension as early as this weekend by changing the law to bring forward the date when the PM legally has to ask Brussels for an Article 50 extension, which currently stands as October 19th. (Telegraph)

The Queen has reportedly sought advice on the circumstances in which she could sack UK PM Johnson, according to iNews citing sources. (iNews)

UK Government is reportedly planning to put out “concrete proposals” this week for reaching a Brexit deal, according to BBC, which is expected to be revealed after the Tory conference. (BBC)

UK GDP QQ (Q2) -0.2% vs. Exp. -0.2% (Prev. -0.2%)

- UK GDP YY (Q2) 1.3% vs. Exp. 1.2% (Prev. 1.2%)

Austrian parliamentary elections has left Chancellor Sebastien Kurz with the option to form a government with the Far Right Freedom Party or the Greens. Kurz took 37.1% votes. (Newswires)

Italy’s new finance minister said he will pursue a “wise middle ground” between exceeding budget constraints and increasing government spending to stimulate the domestic economy. (FT) 

German Saxony State CPI YY (Sep) 1.0% (Prev. 1.4%)

- German Saxony State CPI MM (Sep) -0.1% (Prev. -0.2%)

German Unemployment Change SA (Sep) -10k vs. Exp. 5.0k (Prev. 4.0k, Rev. 2k)


Major European bourses (Euro Stoxx 50 +0.3%) are mostly higher, but consolidating within recent ranges ahead of this week’s slate of important macroeconomic data releases, following a mixed AsiaPac session, in which sentiment was initially downbeat on recent negative US/China trade reports that the US was mulling China portfolio flows limits and the delisting of Chinese stocks from US exchanges; although there are no current plans to do so according to a Treasury Official. The sectors are mixed and unreflective of any definitive risk tone. In terms of individual movers; GlaxoSmithKline (+1.0%) are up on the news that the Co’s Phase 3 PRIMA trial for Zejula is the first study which illustrated a significant benefit, which, according to GSK, justifies the earlier acquisition of Tesaro for approximately USD 4.1bln. Saint Gobain (+2.4%) caught a bid on reports that the Co. announced the sale of their construction glass business in Korea. Separately, Ab InBev (-0.2%) are lower, despite the co’s APAC Budweiser unit opening at HKD 27.40/shr, which is above the initial IPO price of HKD 27.0/shr, before extending gains to over 28.0/shr. Elsewhere, BBVA (+1.0%) is higher on the news that the bank may sell EUR 5bln of bad loans to Deutsche Bank (+0.4%). Finally, Whitbread (-5.1%) is under pressure after being downgraded at Barclays.


NZD/GBP - Contrasting fortunes for the Kiwi and Pound at the start of the final session of September and Q3, as the former props up the G10 table in wake of a downbeat NBNZ business survey, but the latter shrugs off broadly soft UK data and outperforms in corrective trade following recent weakness. Nzd/Usd is hovering near the base of a 0.6303-0.6250 range, while Cable reclaims 1.2300+ status and Sterling also recoups losses vs the Euro after a test of resistance at 0.8900, but no clean break and a subsequent cross reversal down towards 0.8865. However, the Gbp is on tenterhooks awaiting further political developments and latest moves by opposition party Remainers to request another Brextension rather than risk a no deal departure on October 31.

NOK/SEK - Marginal divergence between the Scandi Crowns as in line Norwegian retail sales keeps Eur/Nok rooted towards the bottom of 9.9450-9.9180 parameters in contrast to Eur/Sek that is nudging 10.7350 compared to lows of around 10.7060 following recent disappointing Swedish consumption and consumer sentiment reads.

JPY/CAD/EUR/AUD/CHF - All weaker against a generally firm Greenback, as the DXY holds above 99.000 in a relatively narrow 99.047-216 range, with the Yen paring gains between 107.75-108.00 and flanked by decent option expiries at 107.50 (1.5 bn) and 108.00-05 (1.2 bn), while the Loonie meanders from 1.3225-47 ahead of Canadian PPI data. Elsewhere, the single currency has faded into 1.0950 amidst soft Eurozone inflation updates from Germany’s states and Spain, but Eur/Usd may derive underlying support from a hefty expiry at the 1.0900 strike (2.3 bn) and the fact that the big figure fended off several attempts to the downside last week. Similarly, the Aussie is keeping afloat around 0.6750 and within 1.0740-1.0800 extremes vs its Antipodean rival on the back of a better than expected Caixin Chinese manufacturing PMI and with the jury out on tomorrow’s RBA policy verdict (full preview available in the Research Suite), but the Franc is lagging across the board after a marked decline in the Swiss KOF indicator and downward revision to the previous print. Usd/Chf currently just shy of 0.9950 and Eur/Chf is straddling 1.0850 with latest weekly sight deposits suggesting more intervention.

EM - Bucking the broad trend of losses vs the Dollar, Turkey’s Lira has climbed over 5.6500 after trade data showing a smaller deficit and typically upbeat comments/forecasts from the Finance Minister, bar a sharp downgrade to 2019 GDP.

BoJ Summary of Opinions state BoJ must maintain current powerful monetary easing and momentum for hitting price goal sustained, BoJ can leave policy steady for now, must mull whether additional easing is needed, putting all options on the table. When considering the outlook for the output gap, inflation expectations, and various leading indicators of prices, the inflation momentum seems to be lost, and thus it is necessary to take additional easing measures pre-emptively. Besides additional easing, the Bank should strengthen its commitment and enhance further coordination of fiscal and monetary policy. (Newswires) For reference, the next MPM will take place on October 30th.

New Zealand NBNZ Business Outlook (Sep) -53.5% (Prev. -52.3%) (Newswires) New Zealand NBNZ Own Activity (Sep) -1.8% (Prev. -0.5%)

Notable FX Options Expiries, NY Cut:

- EUR/USD: 1.0870-80 (2BLN), 1.0900 (2.3BLN), 1.0920 (306M), 1.0975 (1BLN), 1.1000 (500M), 1.1015-25 (1BLN)

- AUD/USD: 0.6800-05 (1BLN)

- USD/JPY: 107.00 (1.6BLN), 107.50 (1.5BLN), 108.00-05 (1.2BLN)


No range breaks and less volatility following the remaining German state CPIs and UK data that largely missed consensus, but once again is overshadowed by the uncertain political/Brexit backdrop as the clock ticks down to October 31. Hence, Gilts continue to carry a no deal or further extension premium, with residual support from BoE Saunders and hold up better than bond peers that are all pivoting round numbers, at 134.00, 174.00 and 130-00 in the respective 10 year futures approaching the end of the month, Q3 and Japanese fiscal half year, with Chinese holidays, PMIs and NFP all due as the last quarter of 2019 kicks off.


Crude futures are lower, but well within recent ranges, as the market mostly shrugs off recent news flow; Russian oil output for the month of September is lower than in August, according to sources, at 11.24mln BDP (vs 11.29mln BDP). Additionally, following last Friday’s reports of Saudi Arabia agreeing to a partial ceasefire in Yemen, the Iran backed Yemeni Houthis reportedly offered to release 350 prisoners, 3 of whom are Saudis. Separately, an Iranian Government Spokesman said that they are prepared for a dialogue with Saudi Arabia if they alter their behaviour and stop the war in Yemen, following reports that Iranian President Rouhani had received a letter from Saudi Arabia. Spot Gold is lower, in line with the modestly better risk tone, and is back below the USD 1500/oz mark, an area which has been a solid base since mid-August. Separately, Copper prices are higher, after Chinese Caixin Manufacturing surprised to the upside, easing demand concerns in the red metals biggest market, although some of the forward-looking sub-components were more disappointing

S&P affirmed Saudi Arabia’s sovereign rating at “A-“; outlook “Stable”. (Newswires)

Russian oil output for September down to 11.24mln BPD, down from 11.29mln BPD in August, according to sources. (Newswires)

THAT'S A WRAP!! Thanks for another awesome week, you beautiful people!! All the best to our boy @Tyson_Fury!! Doe…