[PODCAST] US Open Rundown 24th October 2019
- European equities are firmer this morning after a choppy session following Flash PMIs
- Riksbank and Norges Bank left rates unchanged as expected; Riksbank maintained December hiking bias – as such Scandi’s are firmer
- UK PM Johnson reportedly faces increasing revolt from within his party over the threat of holding an election before delivering the Brexit
- Looking ahead highlights include, US Durables, Initial Jobless Claims and Markit PMIs, ECB, and CBRT policy decisions, ECB’s Draghi, US 7yr supply
- Earnings: Amazon, American Airlines, ComCast, Southwest Airlines, Raytheon, Intel, 3M, Visa, T-Mobile, Twitter, Christian Dior
Asian equity markets traded mixed after having failed to fully sustain the positive lead from Wall St with global markets heavily focused on earnings releases. ASX 200 (+0.3%) and Nikkei 225 (+0.7%) were positive in which energy led the advances in Australia and with participants also engrossed in corporate updates, while sentiment in Tokyo was propped up by recent currency weakness and with double-digit percentage gains seen in Japan Display after Apple further extended an olive branch for the troubled screen manufacturer through shorter payment terms. Hang Seng (+0.5%) and Shanghai Comp. (-0.2%) were mixed after the PBoC continued with its liquidity efforts albeit at a reduced amount and with China dismissing reports of replacing Hong Kong Chief Executive Lam as political rumours, while the KOSPI (flat) underperformed its regional peers for a bulk of the session following a miss on Q3 GDP. Finally, 10yr JGBs were flat as they took their cue from the lacklustre trade in T-notes, with demand restricted by the upbeat risk sentiment Japanese stocks and following mixed results at the 20yr JGB auction.
PBoC injected CNY 60bln via 7-day reverse repos for a net daily injection of CNY 60bln. (Newswires) PBoC set CNY mid-point at 7.0727 vs. Exp. 7.0701 (Prev. 7.0752)
South Korea GDP (Q3) Q/Q 0.4% vs. Exp. 0.5% (Prev. 1.0%). (Newswires) South Korea GDP (Q3) Y/Y 2.0% vs. Exp. 2.1% (Prev. 2.0%)
North Korea said its leader Kim and US President Trump continue to have close relations and trust, but added contrary to Trump, US political circles remain hostile to North Korea and noted it will see how wisely US will pass end of the year. (KCNA)
US Defence Secretary Esper notes, in the context of the attacks on Saudi oil facilities, that the US does not seek war with Iran but is prepared and that Iran are threatening international navigation in the Gulf. (Newswires)
Saudi Minister of State for Foreign Affairs notes that a agreement between the Yemen Government and Houthis is imminent., AJA Breaking. (Twitter)
UK PM Johnson reportedly faces increasing revolt from within his party over the threat of holding an election before delivering the Brexit. (The Sun) Opposition leader Corbyn has been urged to prevent an election until Spring 2020, as Labour claimed yesterday it could not trust PM Johnson over the date of a poll. (Telegraph)
Finnish PM Rinne notes that a majority, maybe all, of EU states are in favour of a Brexit extension, for now appears the EU can decide a extension in writing; EU Commission President in waiting Von der Leyen notes that the length is yet to be decided. (Newswires)
European Parliament group leaders are united on a flexible Brexit extension until January 31st 2020, with the option that this period could end earlier., Euro News' McCaffey. (Twitter)
Labour MP Bailey states that if PM Johnson was to go straight to a general election then of course we will be in favor of this., Times Webber. (Twitter)
UK Chancellor Javid suggested that he could name BoE Governor Carney’s successor prior to holding a snap election. (Times)
French Markit Manufacturing Flash PMI (Oct) 50.5 vs. Exp. 50.3 (Prev. 50.1)
- French Markit Services Flash PMI (Oct) 52.9 vs. Exp. 51.6 (Prev. 51.1)
German Markit Manufacturing Flash PMI (Oct) 41.9 vs. Exp. 42 (Prev. 41.7)
- Markit Services Flash PMI (Oct) 51.2 vs. Exp. 52 (Prev. 51.4)
EU Markit Manufacturing Flash PMI (Oct) 45.7 vs. Exp. 46 (Prev. 45.7)
- EU Markit Services Flash PMI (Oct) 51.8 vs. Exp. 51.9 (Prev. 51.6)
- The eurozone economy started the fourth quarter mired close to stagnation, with the flash PMI pointing to a quarterly GDP growth rate of just under 0.1%" says IHS
Major European Bourses (Euro Stoxx 50 +0.4%) are higher, although some choppiness was seen in wake of soft Eurozone PMI data (although France was a bright spot). “The eurozone economy started the fourth quarter mired close to stagnation, with the flash PMI pointing to a quarterly GDP growth rate of just under 0.1%” said IHS Markit. Looking ahead, markets await a slew of US earnings, including from the likes of Comcast, and the next ECB policy announcement. Sectors are in largely in the green, with the exception of Tech (-0.6%) and Telecoms (-0.8%), with notable weakness in Nokia (-19.8%) following earnings contributing to underperformance in the former. In terms of other individual movers; strong earnings from STMicroelectronics (+5.6%), Daimler (4.0%), Hermes (+1.5%), BASF (+1.8%) and AstraZeneca (+3.6%) saw their respective stock prices advance. Meanwhile, weak earnings from Puma (-2.7%), RBS (-2.2%) and Dassault Systemes (-5.3%). Elsewhere, EDF (+2.1%) was supported by the news that it can keep operating nuclear power plants with weld issues, according to the French Nuclear Authority. Porsche (+1.4%) moved higher on the news that the Co. has formed a strategic partnership with SAP (-0.3%), who opened higher but pared gains in line with the tech sector. In terms of broker moves, Rolls Royce (-4.2%) and Telia (-1.8%) moved lower on downgrades at JPM, while Ashmore Group (+1.6%) was bid on an upgrade at Investec.
Of note for Amazon (AMZN) - Democratic senators are asking the FTC to investigate the Co. over concerns it ignored security warnings about a vulnerability that enabled the hack of Capital One customer data. (WSJ)
SEK/NOK/INR - The Swedish Crown has slipped from best levels, but remains bid after the Riksbank doubled down on repo rate hike guidance and signalled that a 25 bp move is likely in December vs a more flexible timeline covering the end of 2019 and early next year. However, the path beyond suggests no further policy normalisation and in recognition of heightened uncertainty surrounding growth and inflation overseas and on the domestic front, the Bank could cut or ease via other measures if necessary. Eur/Sek is holding near the base of a circa 10.7400-10.6510 range and still net down from pre-Riksbank levels around 10.7000, while Eur/Nok is hovering just under 10.1500 within 10.1680-10.1260 parameters in wake of the Norges Bank’s policy meeting that maintained an on hold stance after September’s ¼ point rise in the depo rate given the assessment that little has changed in the ensuing period. Elsewhere, the Indonesian Rupiah is modestly softer after the BI extended its run of consecutive eases to 4 and retained a dovish bias.
AUD/NZD - The major fall guys on little apparent or obvious in terms of negative news and a bearish catalysts, but the Aussie and Kiwi especially seem to have fallen prey to long liquidation and a turnaround in the technical landscape after failing to extend gains through/beyond big figure and psychological levels. Aud/Usd has lost momentum through 0.6850 and Nzd/Usd on a breach of 0.6400, while the Aud/Nzd cross has corrected a bit higher above 1.0650.
EUR/GBP - Nowhere near the biggest G10 movers on the day, but certainly rivalling others on price action given spikes in the single currency and Sterling to 1.1163 and 1.2950 vs the Dollar respectively at one stage followed by sharp/abrupt retreats to 1.1125 and 1.2880. For Eur/Usd, French PMIs were above forecast, but ultimately no more than a flash in the pan as preliminary surveys from Germany disappointed yet again and weighed on the pan Eurozone prints. Meanwhile, Cable’s rise and fall from grace came against the backdrop of latest Brexit and UK election headlines, but probably more on positioning and jitters awaiting the EU’s verdict on another A 50 extension and PM Johnson’s reaction. Back to the Euro, ECB President Draghi’s farewell meeting and press conference loom, but expectations are low in terms of anything pertinent on new policy or guidance.
JPY/CHF/CAD/DXY - All relatively subdued and lacking inspiration as the Yen meanders between 108.60-75 vs the Greenback, Franc pivots 0.9900, Loonie hovers just above 1.3100 and US Dollar index rebounds off a 97.278 low to 97.532 ahead of US data.
EM - The Lira is still eyeing Turkish-Syria developments and international interventions after recent gains on less angst from the US in wake of the ceasefire and President Trump promising to lift sanctions if peace prevails. However, the upcoming CBRT rate call will be watched for near term direction as forecast range from no change to a 200 bp cut – see our headline feed and Research Suite for more. Usd/Try currently straddling 5.7500.
Riksbank: U/C at -0.25% (Exp. -0.25%). Riksbank maintained their hiking bias which sees a hike towards years end – most probably a 25bp hike in December, afterwhich the rate will remain be unchaned at 0.0% for a prolonged period. Governor Ingves states that negative rates were an exceptional measure, which it is now appropriate to gradually exit.
Norges Bank: U/C at 1.50% (Exp. 1.50%). Bank noted that the outlook and balance of risks indicates rates will most likely remain at present levels for the period ahead; a reiteration of the September guidance.
Notable FX Expiries, NY Cut:
- EUR/USD: 1.1020-35 (1.4BLN), 1.1100-10 (1.3BLN), 1.1125-35 (560M), 1.11.40-50 (500M), 1.200 (360M), 1.1220-35 (1BLN)
- AUD/USD: 0.6770-75 (400M), 0.6795-0.6800 (450M), 0.6825-40 (750M)
- USD/JPY: 108.00 (1BLN), 108.30-35 (750M), 108.50 (320M), 108.65-80 (1BLN)
ECB, CBRT, US data and the 7 year Treasury auction still to come, but bonds have already marked out decent ranges and clocked up some hefty price moves. Indeed, Bunds were wrong-footed by French PMI beats and are now back below par, albeit off worst levels within a 171.16-77 range, while Gilts have been pulled pillar to post in sympathy, but also eyeing breaking Brexit headlines and Sterling fortunes between 131.80-132.37. However, US Treasuries are showing relative resilient or a reticence to being whip-sawed awaiting independent drivers in the form of data and the 7 year raffle.
The crude complex is slightly softer, amidst a slight pull-back from yesterday’s post-EIA Inventory data induced highs, with some choppiness seen in wake of mostly weaker than expected Eurozone PMI data. To the downside, technicians will be eyeing support at USD 54.90/bbl and USD 60.70/bbl for WTI Dec’ 19 and Brent Dec’ 19 futures respectively (11th October highs for both); to the upside yesterday’s highs for each contract are at USD 61.30/bbl and USD 56.10/bbl respectively. In terms of crude specific fundamentals, the news flow has been light. Moving to metals; Gold is slight lower, despite soft Eurozone data. Copper, meanwhile, is holding on to decent gains made yesterday; Chilean miner Codelco said that some of its shipments may be delayed as a result of the ongoing protests and strikes in the country, that have seen operations affected in at least two mines and a smelter. Despite being pressured in recent weeks, as global economic data has continued to show deterioration (particularly in China, the largest buyer of the red metal), the unrest in Chile continues to provide support to prices, notes ING.