Original insights into market moving news

[PODCAST] EU Open Rundown 3rd October 2019

  • Asian equities joined the global stock rout, Mainland China and South Korean markets were closed due to public holidays
  • Hong Kong is reportedly studying a curfew to contain protest violence, according to local press
  • US will impose retaliatory tariffs of 10% on EU aircrafts, 25% on EU agriculture and industrial goods, effective October 18th
  • EU is ready to grant another Article 50 extension even if the letter is not signed by UK PM Johnson, diplomats stated that no European leader has reached the point of wanting to veto an extension
  • In FX Markets, the DXY traded flat, EUR, GBP moved sideways, USD/JPY briefly dipped below 107.00
  • Looking ahead, highlights include UK, EZ, US Services and Composite PMIs, EZ Retail Sales, US Initial Jobless Claims, Durable Goods, Factory Orders and ISM Non-mfg PMI, ECB’s de Guindos, de Cos and Rehn, Fed’s Evans, Quarles, Mester, Kaplan and Clarida, Riksbank’s Olhsson, Skingsley and Ingves, supply from Spain and France, German Unity Day


Asian equities tracked losses seen on Wall Street which saw the DJIA fall below its 100 DMA (~26400) and briefly dip below the 26k level as the trade landscape took a turn for the worse with the US set to impose tariffs on EU goods on October 18th. ASX 200 (-2.3%) was led lower by heavyweight financials and miners whilst the Nikkei 225 (-2.1%) was pressured by a firmer domestic currency. Meanwhile, upside in the Hang Seng (-0.5%) was hindered by losses in oil giant CNOOC following a downgrade at Daiwa Securities, whilst HSBC and other financials rested near the bottom of the index amid lower yields and against the backdrop of ongoing protests, as demonstrators staged overnight vandalism and targeted Mainland China-linked businesses, and with reports of Hong Kong studying methods to contain the protest violence. Elsewhere, Mainland China and South Korean markets are closed today due to public holidays.

Hong Kong is reportedly studying a curfew to contain protest violence, according to local press. HK Chief Executive may use a ban to direct each person to remain in the specified area for the period specified in the order, until the Chief Executive revokes the curfew. The article also stated that anyone who breaks the curfew is guilty of offence and is liable on conviction to imprisonment for two years. A person such as a police or other disciplined force is not subject to a ban on duty or on his way to and from duty, the article said. Other reports stated that the government has also considered a law banning the wearing of face masks. (Sing Tao/Newswires)

BoJ Board Member Funo said the global economy slowing, downside risks are heightening, the BoJ should keep easing persistently and possible easing measures include rate cuts, boosting asset purchases and expanding monetary base. (Newswires) N.B: The comments were in-fitting with recent BoJ rhetoric ahead of its MPM on October 30-31.


USTR Official said the US will impose retaliatory tariffs of 10% on EU aircrafts (not applicable to aircraft parts), 25% on EU agriculture and industrial goods, effective October 18th. USTR Official declined to provide a total amount of imports that will be affected. US said it would be ready to respond if the EU invokes further than the WTO tariff authority in retaliation. US also said it is willing to negotiate with the EU to settle aircraft case, but past EU offers have not been adequate. Sources stated that the US has requested an emergency meeting of the WTO dispute body for October 14th, a signal of fast movements for tariffs on EU goods, the sources added. Some items hit include French wine, cheese and Scotch whiskey; click here for the full list of items. (Newswires)

China Global Times Chief Editor tweeted the "US economy is not as promising as the White House brags … but it still launched a trade war. More terrible consequences will come.” (Twitter)


EU Commission welcomed UK PM Johnson's determination to advance Brexit talks, Commission President Juncker acknowledged the positive advances, notably to the regulatory alignment for control of goods entering Northern Ireland from Britain but added will need further work in coming days. Brussels still believe a new Brexit extension is the most likely outcome, according to BBC's Adler. EU Brexit Negotiator said, after receiving the UK backstop proposal, that there is progress, but a lot of work still needs to be done. EU believe PM Johnson is willing to negotiate further in Brussels, but it does not mean EU thinks a deal is likely by mid-October. An EU source also noted that the proposal “is a million miles away from being acceptable”, Sky News’ Lewis Goodall tweeted. (Twitter) Meanwhile, the European Parliament's Brexit coordinator Verhofstadt said the initial reaction from the EU's Steering Group to UK's proposals were not positive, a full written statement will be provided today. (Newswires) Note, PM Johnson will suspend Parliament from Tuesday 8th October to hold a Queen's Speech on October 14th. (Telegraph)

EU is ready to grant another Article 50 extension even if the letter making the request for Brexit beyond October 31st is not signed by PM Johnson. Senior European diplomatic sources noted that the request for an extension until January 31st could come from “the head of government or head of state” which means either the PM or a representative of the Crown. Should the PM refuse to sign or send the extension letter, a Whitehall source said the letter could be sent by Cabinet Secretary Sir Mark Sedwill or UK’s ambassador to the EU Sir Tim Barrow. Furthermore, diplomats stated that no European leader has reached the point of wanting to veto an extension. (Times)

Irish PM Varadkar told UK PM Johnson that the proposals did not fully meet the objectives of the backstop but would study the proposals further and would consult with the EU, according to a spokesperson. Irish PM said he wants a deal agreed and ratified and will speak to Johnson again next week. DUP Deputy Leader Dodds said nothing can be done in regard to the regulatory divergence between the UK and NI without Unionist consent, so it is "no change whatsoever". UK Minister for the Cabinet Office Gove said that with DUP, Conservative switchers and some Labour MPs on board, UK PM Johnson's has a very good chance of getting through parliament. (Newswires/ITV)

UK Government sources said that UK PM Johnson needs to know by this weekend whether the EU regards his offer as the basis for a final deal. Officials said that if the EU rejected his offer, PM Johnson may not attend the EU summit on Oct 17th. (Telegraph) The PM will be meeting his Cabinet today to discuss the reaction from Dublin and Brussels. (Sky News) Meanwhile, UK PM Johnson's aides have sent a memo ordering Tory MPs to label the EU "crazy" if the Brexit proposals are denied in a measure to shift the blame to the EU, according to BuzzFeed. (Buzzfeed)


North Korea said it successfully test-fired new Submarine-Launched Ballistic Missile (SLNM), the tests were to contain outside forces' threats, tests had no adverse impact on security of neighbouring counties. (Yonhap/KCNA) US and North Korea will begin working level talks on October 4th in Sweden, according to sources cited by CNN International Correspondent Will Ripley. (CNN)

Shelling has been reported in residential neighbourhoods near the US embassy South of the Libyan capital. (Al-Jazeera)



DXY traded flat on either side of 99.00 following the recent weakness seen in lieu of the decade-low ISM Mfg metric and a weaker-than-forecast ADP, with attention now on the US ISM Non-mfg PMI ahead of Friday’s NFP. EUR/USD and GBP/USD moved sideways above 1.0950 and around 1.2300 respectively with the former eyeing 1.2bln in options expiring at strike 1.0970 at the NY cut, and the latter somewhat underpinned by reports that the EU will grant another Brexit extension even if the request is not signed by PM Johnson. USD/JPY edged lower in early trade and briefly dipped below 107.00 amid the risk-environment, whilst in terms of technicals, the pair sees its 50 and 100 DMA at 107.02 and 107.73 respectively. Antipodeans were overall little changed, AUD/USD defended its 0.67+ status despite a narrower-than-forecast August trade balance, and its Kiwi counterpart remained north of 0.6250.



WTI and Brent futures hovered around the prior session’s lows after prices saw a sharp leg lower on the back of bearish DoEs. WTI remained below its 200 WMA (53.54/bbl) and under the 53/bbl mark whilst Brent also took out its 200 WMA (58.31/bbl) in light of yesterday’s larger-than-expected build in crude stocks, prices meandered just above 57.50/bbl overnight. Elsewhere, gold remained in a tight range on either side of 1500/oz with little by way of catalysts ahead of key data releases and a slew of Fed speakers, whilst copper posted mild gains as the red metal side-lined sentiment and capitalised on the recent Dollar weakness.

ANZ Bank revised down its 2019 oil demand growth forecast to 1.0mln BPD (Prev. 1.2mln BPD); ANZ still expects balance to tighten in Q4 2019. (Newswires)


* US T-NOTE FUTURES (Z9) SETTLED 15+ HIGHER AT 131-04+: The TPLEX rallied again as risk appetite continued to dwindle due to persistent global weakness in manufacturing, with added strain of the WTO clearing the way for a new US-EU trade front. The curve continued to bull steepen throughout the session with CME market expectations for an October rate cut rising to 77%, compared to 55% priced in the wake of Tuesday’s ISM manufacturing data and 40% before it. Participants now wait crucially on Thursday’s ISM non-manufacturing and Friday’s payrolls to see whether they echo the ominous tone from the manufacturing sector. At settlement the 2-year yield fell by 8bps, and the long bond being little changed.

Fed's Williams (Voter, Neutral) said monetary policy is in the right place, financial stability risks are not huge although heavy corporate borrowing could amplify a downturn, labour market is still very strong and in a world with low interest rates, aid from the fiscal side is important. (Newswires)

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