Original insights into market moving news

[PODCAST] US Open Rundown 9th October 2019

  • Risk sentiment is buoyed on reports that China are open to a partial trade deal in-spite of the technology blacklist, subsequent reports indicate China offer to purchase USD 10bln of goods per year
  • Initial reports noted that the EU were prepared to make a significant concession on the Brexit deal; however, this has subsequently been rebuffed from every angle
  • Reports that Turkish troops had crossed the Syrian border, since clarified that this has not happened thought they are at the border
  • Debt complex is subdued and FX is largely firmer/little changed vs. USD, excluding the softer JPY on trade-flow
  • Looking ahead highlights include US JOLTS, EIA Weekly Crude Inventories/Production, FOMC Minutes, Fed’s Powell, Eurogroup meeting and supply from US


China is reportedly open to a partial trade deal despite the tech blacklist; China would accept a limited deal as long as no more tariffs are imposed by US President Trump, including the two rounds of higher duties set to come into effect later this month and in December - China would offer non-core concessions such as continued purchases of agricultural products, but would not give in on major sticking points. (Newswires) Additionally, China offers to buy an extra USD 10bln of US goods per year to ease the trade war. (FT)

Prior to this, Chinese Embassy said the imposition of Visa restrictions "seriously violates the basic norms governing international relations, interferes in China's internal affairs and undermines China's interests" (Newswires) Subsequently, China may restrict US visas with anti-Chinese links. (Newswires)


Asian stocks tracked losses on Wall Street where the DJIA decline over 300 points, but are ultimately mixed, as optimism surrounding US-China trade talks diminished further after the US imposed Visa bans on Chinese individuals related to the abuse of China's Uighur community, which the Chinese Embassy said undermines China’s interests. Stocks in Asia then showed a mild recovery amid an indecisive risk tone ahead of this week’s key risk events. ASX 200 (-0.7%) was pressured by losses in large-cap miners, whilst Nikkei 225 (-0.6%) was dragged lower by chipmakers following downside in US peers, although the index pared some losses amid favourable JPY action. Elsewhere, Hang Seng (-0.8%) and Shanghai Comp (+0.4%) were choppy with gains in the Hong Kong capped by Real Estate stocks as the ongoing anti-government protests continue to impact the domestic housing market, whilst Mainland China was cushioned by industrial and machinery names on the back of favourable base metal prices. As a reminder, South Korean markets are closed due to a public holiday.

PBoC set CNY mid-point at 7.0728 vs. Exp. 7.0929 (Prev. 7.0726) (Newswires) PBoC skipped open market operations for a net daily drain of CNY 20bln

US – Note: Differing times for Fed Chair Powell today, 10:30 ET and 11:00 ET have both been touted

Fed's Kashkari (2020 Voter, Dove) said he is generally in favour of lower interest rates but does not know how much lower, policy rate may be near neutral now or slightly contractionary. (Newswires)

White House told the House Democratic leaders that it will not partake in US President Trump's impeachment inquiry due to the lack of precedent of an impeachment inquiry proceeding without a vote of the full house. US House Speaker Pelosi responded by stating "The White House should be warned that continued efforts to hide the truth...will be regarded as further evidence of obstruction". Meanwhile, US House Democrats subpoena US Ambassador to the EU Sondland after stated department told him not to appear before committees in the impeachment probe (Newswires)

A majority of Americans back US President Trump's impeachment probe but a plurality say that based on what they know, President Trump should not be removed from office, according to a WSJ/NBC poll. (WSJ


US and Kurdish officials expect Turkey to launch an attack on Northeast Syria within the next 24 hours, according to Foreign Policy's Pentagon Correspondent. Separate reports noted that US officials have informed Syrian Kurds that Turkey is likely to attack on air and ground in the next 24 hours, Turkish attack appears coordinated with Russians, according to Washington Post's Ignatius citing sources. (Twitter) Turkish President Erdogan’s aid said the Turkish military together with the Free Syrian army will cross the Turkish-Syrian border shortly. (Newswires) US Senator Lindsey Graham warned the Turkish government that it did not receive the green light to enter Northern Syria, and added that "there is massive bipartisan opposition in Congress, which you should see as a red line you should not cross." (Twitter)

Subsequently, were reports that Turkish troops had crossed the Syrian borded although a Official clarifies that the incursion was yet to begin, though they are at the border. (Newswires)


EU is ready to make a major concession on Brexit deal by providing a mechanism for the Northern Irish assembly to leave a new Irish backstop after a set number of years, reports the Times. European governments are prepared to concede a unilateral revocation of the withdrawal treaty by Stormont after a period of time, say Diplomatic sources close to talks; Potential plan could be for a consent mechanism of double majority within Stormont, to leave, not to continue with the arrangements after unspecified number of years. Seen as a eleventh hour attempt. (Times) Subsequently, Tory Eurosceptics are negative Towards the idea as it appears to be the EU shifting blame to PM Johnson and the DUP have rejected this offer (Times/Twitter). Additionally, EU Sources note that the EU is not about to make a bold offer on this, genuine puzzlement from the EU side on reports of a major concession, Guardian’s Rankin. (Twitter)

Scottish Court rules it is not necessary to issue an order compelling the Prime Minister to write a letter seeking an extension to remaining in the EU if no deal in place by October 19th, according to BBC's Gordon. (Twitter)

The EU is set to extend Brexit talks into as late as next summer, with EU leaders poised to consider a range of dates at next week’s EU summit but sources noted the natural cut-off date would be June. (Guardian)

UK PM Johnson will reportedly make a last-ditch effort to convince Irish PM Varadkar to engage with his plans for a customs border in a face-to-face meeting would could take place today. (Times) Meanwhile, the Irish PM said that “big gaps” remained between the two sides. (BBC)

UK PM Johnson is said to be facing a cabinet rebellion over a no-deal Brexit, "many Tory MPs" are reportedly to quit if there is a no deal Brexit. (Times) This also comes in the context of an FT reports suggesting that at least 50 MPs from the party would revolt against any manifesto in a general election that pledged to pursue a no-deal Brexit. (FT)

UK Parliament has been suspended in order to hold a Queen's Speech next Monday and set out its domestic agenda. (Sky News) UK PM Johnson is planning to tell the Queen she cannot sack him even if he loses a no confidence vote and MPs pick a caretaker replacement. Senior No10 aides are preparing legal advice for the Queen to ensure PM Johnson can stay on to try to deliver Brexit on Oct 31st. (Sun)


Major European Bourses (Euro Stoxx 50 +0.9%) are higher on reports that China is open to a partial trade deal despite the tech blacklist, marking a turn-around from a broadly negative AsiaPac session. This report comes against the grain of a number of recent negative US/China trade headlines and developments ahead of this week’s talks, although the report does appear in fitting with recent commentary, in that it also suggested that China is not willing to make concession on issues such as IP, Industrial subsidies or policies. The positive reaction appeared to be more related to the fact that, despite recent escalations by the US (the US had been refraining from attacking China over its treatment of the Uyghars until yesterday), China is still be willing to do a “mini deal”. Unsurprisingly, in light of the recent negative developments, market expectations had been revising themselves lower heading into the talks, with participants looking for a something closer to a tentative truce at best. In that vein, a “mini deal” would exceed expectations, however, US President Trump has repeatedly insisted that the US wants a full deal. Sectors reflect a risk on configuration; the risk sensitive Tech (+0.7%) and Industrials (+0.7%), while the more defensive Utilities (-0.3%), Consumer Staples (+0.2%) and Health Care (+0.2%) lag. In terms of individual movers; Airbus (-0.6%) shares fell after the Co. issued a warning to staff regarding challenges in hitting their cashflow target in 2019, said sources. UK gambling names were supported after GVC (+2.9%) announced an increase to its FY EBITDA guidance and a successful refinancing of debt. Repsol (+0.4%) shares opened lower, but managed to pare the worst of the losses as the market moved higher, after the co. announced Q3 production at 712kBPD (vs. Prev. 694kBPD). EDF (-1.7%) fell on the news of an increased the cost estimate for the energy producer’s delayed Flamanville nuclear plant, and continued to see downside as the utilities sector came under pressure as risk sentiment improved.

TSMC (2330 TW) September sales at NT$ 102.17bln. (Newswires)


NZD/CNH/AUD/EUR/GBP/CAD - All firmer vs the Greenback amidst a broad revival in risk appetite spurred mainly by reports that China is still willing to negotiate a partial trade accord with the US even though Washington has blacklisted Chinese tech companies. Meanwhile, sentiment was also boosted on the Brexit front with the EU said to be preparing a significant Irish backstop offer to the UK, but the euphoria relatively short-lived given that the DUP reiterated its opposition to a double majority NI veto compromise regardless of any set timeframe and subsequent EU sources denied any major concession in the offing. The Antipodean Dollars are outperforming close to 0.6750 and above 0.6300 respectively, while the offshore Yuan has bounced from recent lows through 7.1300, Euro consolidates between 1.0950-90 and Loonie pares more losses around the 1.3300 handle. However, the Pound has been pulled from pillar to post due to the initial Stormont climbdown by Brussels boost and ensuing fall from grace on the rejection before complete retraction or blank denial. Indeed, Cable has reversed from just shy of 1.2300 back towards circa 1.2200 lows, albeit still holding above fib support at 1.2197 and Tuesday’s 1.2195 base, as Eur/Gbp remains capped ahead of 0.9000.

JPY/CHF - Understandably, the safe-haven Yen and Franc are underperforming in wake of latest US-Sino trade news, embellished by Beijing sweetening the mood ahead of talks with a pledge to buy an additional Usd10 bn agri goods per annum, with Usd/Jpy rebounding to 107.40 from a few pips under 107.00 and Usd/Chf easing back from the psychological 0.9900 level.

NOK/SEK - Notwithstanding the overall upturn in sentiment and firmer crude prices, Scandi Crowns continue to depreciate on a combination of bearish chart and fundamental impulses, with Eur/Nok climbing further above 10.0000 and Eur/Sek crossing fresh decade highs over 10.9200 following NIER Swedish GDP and CPIF forecast downgrades.

EM - Usd/Try also remains on an upward trajectory as the Lira braces for imminent Turkish military incursions across the border with Syria and investor/international reverberations. The pair is currently hovering near the upper end of 5.8455-8180 parameters after false reports implying that Turkish forces have already started operations, but troops are seemingly poised to strike.

Notable FX Expiries, NY Cut:

- EUR/USD: 1.0950-60 (1.6BLN), 1.0995-1.1000 (700M)

- USD/CAD: 1.3250 (1.1BLN), 1.3300 (300M)

- USD/JPY: 106.00-10 (1BLN), 107.00 (2.5BLN)

Australian Consumer Sentiment (Oct) -5.5% (Prev. -1.7%) to 92.8 (Prev. 98.2) - Lowest since July 2015. (Newswires)


Bunds, Gilts and US Treasuries have all fallen to new intraday lows before paring some losses, with the principle catalyst seemingly positive developments ahead of looming US-China trade negotiations via reports that Beijing is open to a mini deal despite Washington’s tech company sanctions and is offering a bigger carrot on the agricultural purchase front, be it in money terms or amount of produce. Looking at debt futures in more details, the 10 year benchmarks are off 174.08, 134.50 and 131-14+ session troughs ahead of FOMC minutes and Powell part 2 (or 3 including Monday’s non-market speech), while the so called major EU Irish customs concession has now been consigned to the annul of false news items.


Crude markets are trading with gains of approx. USD 0.50/bbl, as sentiment receives a boost from the updates to the US-China situation that are outlined above. Elsewhere, the geopolitical situation continues to escalate with Turkey reportedly beginning their incursion into Northern Syria, although officials subsequently denied the reports. Either way, expectations are for the assault to commence soon, and the attack appears to be coordinated with the Russians. Meanwhile, separate reports suggested that Iran was carrying out unannounced military exercises near the Turkish border… Looking ahead, further impetus is likely to come in the form of EIA Weekly Crude Inventory data, Fed’s Powell & Minutes and further US/China trade updates; particularly a response from the US side. As a reminder, API inventory data showed a larger than expected build of 4.1mln barrels (exp. +1.4mln), however, Gasoline posted a much larger than expected draw at -5.9mln barrels (exp. -0.3mln). Expectations are for a 3.1mln barrel headline build in the EIA’s Weekly Crude Inventory data, with gasoline seen drawing 0.228mln barrels. In terms of metals, spot gold has slipped to the bottom of the day’s range though is yet to breach the USD 1500/oz mark to the downside while copper is buoyed just below the USD 2.60/lb mark on the improving trade outlook.

API Energy Inventories: Crude +4.1mln (exp. +1.4mln, Prev. -5.9mln) (Newswires) API Cushing Inventories +1.2mln (exp. +0.348mln, Prev. +0.37mln) API Distillate Inventories -4.0mln (exp. -2.1mln, Prev. -1.7mln) API Gasoline Inventories -5.9mln (exp. -0.3mln, Prev. +2.1mln)

Saudi Aramco IPO prospectus to be published before the end of October, according to sources cited by WSJ. (WSJ)

What film title describes this week? I think @realDonaldTrump's 2020 Oscar nomination of the Gone with the Wind (1939) would hold credence