Original insights into market moving news

[PODCAST] US Open Rundown 29th October 2019

  • European bourses are softer after a relatively flat open, as newsflow remains light ahead of the weeks risk events
  • UK Opposition Labour Party are to back a December election, irrespective of the date
  • US House Speaker Pelosi announced in a letter to Democrats that the House will vote to formalize the procedures related to impeachment inquiry of President Trump
  • Looking ahead highlights include, US Consumer Confidence & Pending Home Sales, BoE's Carney
  • Earnings: Pfizer, Amgen, AMD, Mastercard


Asian equity markets trade mixed as the region just about took impetus from Wall St where the S&P 500 and NASDAQ 100 notched record highs after US-China trade optimism was further fuelled by comments from US President Trump that suggested a signing of the phase 1 deal could be ahead of schedule. ASX 200 (U/C) was lifted at the open although some of the gains were later faded amid losses in commodity stocks due to lower oil prices and after the precious metal gave up the USD 1500/oz level, while Nikkei 225 (+0.5%) briefly reclaimed the 23000 milestone for the first time in over a year as it benefitted from a more favourable currency. Conversely, Hang Seng (-0.4%) and Shanghai Comp. (-0.9%) were the laggards despite the current backdrop of heightened trade optimism, as participants digested a slew of earnings and after the PBoC refrained from liquidity operations which resulted to a substantial CNY 250bln liquidity drain. Finally, 10yr JGBs tracked the losses in T-notes amid gains in stocks and with the Japanese benchmark at a yearly high, although some of the losses were recouped following a predominantly stronger than previous 2yr JGB auction results.

PBoC skipped open market operations for a net daily drain of CNY 250bln. (Newswires)

PBoC set CNY mid-point at 7.0617 vs. Exp. 7.0604 (Prev. 7.0762)

Tokyo CPI (Oct) Y/Y 0.4% vs. Exp. 0.7% (Prev. 0.4%). (Newswires) Tokyo CPI Ex. Fresh Food (Oct) Y/Y 0.5% vs. Exp. 0.7% (Prev. 0.6%) Tokyo CPI Ex. Fresh Food & Energy (Oct) Y/Y 0.7% vs. Exp. 0.7% (Prev. 0.5%)


US House Speaker Pelosi announced in a letter to Democrats that the House will vote to formalize the procedures related to impeachment inquiry of President Trump. (FT)


Northern Hong Kong residents are reportedly demanding authorities investigate a 'suspicious smell' which may be tear gas or shooting practices relating to the Peoples Liberation Army (PLA); said to have sparked further protests on Tuesday., SCMP. (Newswires)


Tentative UK Parliament Schedule for Today’s Election bill:

- 16:30GMT onwards, Second Reading Vote

- 18:30GMT onwards, Final Vote

- Note, MP’s will be denied individual votes on amendments in the scenario that there are too many, they will instead be put together into combined votes.   Mirror’s Bloom (Twitter)

Labour are to back a bill for a December election, regardless of the date. (Twitter/Newswires)

UK Downing Street sources say they would accept an SNP/Lib Dem amendment to allow an election to take place on December 11th, according to PoliticsHome's Schofield. (Twitter)

Several cabinet sources prefer to push through the WAB rather than holding an election, an opinion shared by many Conservative MPs, says BBC's Hawkins. (Newswires)

UK Liberal Democrat Leader Swinson said the reason for seeking a December 9th election is to ensure Brexiteers have no time to push through the Brexit deal; adding, even if PM Johnson gave assurances not to reintroduce the WAB during the election bill period she would not trust this. (BBC/Newswires) BBC political correspondent Nick Eardley tweeted that he is hearing the government will attempt to force election bill through various commons stages today. (Twitter/BBC)


European equities have drifted lower after a relatively uninspiring open [Eurostoxx -0.3%] following on from a mixed APAC. Bourses are broadly in the red and remain choppy with no clear underperformer, albeit the region remains cautious ahead of this week’s risk events. Sectors are mostly in negative territory with the exception of Healthcare, which is buoyed by Fresenius SE (+4.5%) and Fresenius Medical Care (+5.8%) after earnings topped analyst estimates. On the flip side, the energy sector bears the brunt of softer energy prices coupled with overall downbeat numbers from oil-giant BP (-2.2%) who reported a 41% drop in Q3 net profits due to lower upstream earnings, softer oil prices, maintenance and weather impacts. Individual movers are largely earnings orientated, Grifols (+3.2%) benefit following firm earnings coupled with a EUR 5.3bln refinancing programme whilst to the downside, Stora Enso (-8%) shares plumbed the depths after disappointing earnings in which the Co. cited weak Q4 demand, thus peers Smurfit Kappa (-0.5%) and Mondi (-0.3%) initial fell in sympathy but has since trimmed losses. Finally, Swedbank (-3.8%) sunk after Estonian Financial Inspector and Sweden’s FSA opened sanctioning cases regarding the Co’s alleged money laundering. Looking ahead to US earnings, Dow listed Merck & Co (2.1% weighting) and Pfzier (0.9% weighting) which may have follow-through effects to European peers.

Sony (6758 JT) are to invest nearly USD 1bln on image sensor production in Japan, according to Nikkei. (Nikkei)

BP (BP/ LN) – Q3 adj. net USD 2.25bln vs. Exp. USD 1.77bln, revenue USD 68.29bln vs. Prev. USD 72.67bln, underlying replacement cost profit USD 2.3bln vs. Prev. USD 3.8bln, replacement cost (RC) loss USD 0.351bln vs. Prev. profit USD 3.091bln. FY19 Capex guidance midpoint cut to under USD 16bln vs. Prev. guidance. USD 15-17bln; Prev. YY USD 15.1bln. Note divestments are ahead of schedule, downstream expansion in fast-growing markets; adding that Q3 saw lower oil and gas prices and the hurricane impacts were significant. Q3 dividend of USD 0.1025/shr, scrip dividend alternative has been suspended for Q3. (Newswires)

Merck & Co Inc (MRK) Q3 19 (USD): Adj EPS 1.51 (exp. 1.24), Revenue 12.4bln (exp. 11.63bln); narrows and raises FY revenue range to 46.5-47bln (exp. 45.99bln)

Pfizer Inc (PFE) Q3 19 (USD): Adj. EPS 0.75 (exp. 0.62), Revenue 12.7bln (exp. 12.26bln). FY EPS view 2.94-3.00 (exp. 2.82), Raise midpoint of guidance range by 200mln driven by a 400mln operational improvement.

Alphabet Inc (GOOGL) reported Q3 EPS USD 10.12 vs. Exp. USD 12.39, Revenue USD 40.5bln vs. Exp. USD 40.32bln. (Newswires) Co. shares fell 1.6% aftermarket.


GBP - The Pound was initially precarious after the latest Parliament rejection of a motion to hold a GE on December 12 and ongoing wrangle to find an alternative date that might garner enough backing between Downing Street and those opposition parties that are likely to vote in favour of a snap poll. However, Labour subsequently giving their support to a December General Election has generated Sterling strength with Cable now firmer on the day with a high circa 1.2870 thus far.

USD - Sterling weakness and some contagion has nudged the DXY a tad closer to 98.000 ahead of more US data and day 1 of the October FOMC meeting that is widely expected to culminate in a 3rd 25 bp rate cut, but probably highlight ongoing divergence between Fed policy-makers resulting in less clarity over forward guidance.

EUR/CHF/NZD/CAD - All softer vs the Greenback, as the single currency remains top heavy around 1.1100, but underpinned ahead of Fib support at 1.1065, while the Franc continues to pivot 0.9950, Kiwi straddles 0.6350 and Loonie meander either side of 1.3050.

AUD/JPY - Bucking the overall trend, albeit marginally and also largely rangebound awaiting this week’s big events that kick off from Wednesday. The Aussie is still outpacing is US and NZ peers as Aud/Usd hovers around 0.6850 and Aud/Nzd just shy of 1.0800, but not deriving much impetus via comments from RBA Governor Lowe broadly reaffirming the on hold for now with an easing bias stance. However, looming CPI data could well be influential ahead of housing metrics on Thursday and PPI the following day. Elsewhere, the Yen has pared some losses from a test of 200 DMA support at 109.06 and decent option expiry interest from 109.00 to 109.10 (1.6 bn) even though Japan Post Insurance is eyeing less JGB holdings in the October-March period.

NOK - The Norwegian Crown is underperforming and only just holding off fresh record lows vs the Euro circa 10.2575 amidst softer crude prices and Norges Bank rhetoric underlining that rates are likely to remain unchanged for the entire forecast horizon, or coming period to quote Nicolaisen verbatim.

EM - The Rand has rapidly depreciated in wake of outlines of the SA Government’s plan for Eskom that did not include debt restructuring and propelled Usd/Zar up sharply towards 14.7200 vs near 14.5300 at one stage.

South African government plan has no new information on debt restructuring for state-owned utility company Eskom and sees separate transmission units. New CEO to be announced next week, Co. aims to cut fuel costs break up the monopoly and increase output of renewables (Newswires)

RBA Governor Lowe reiterates the Central Bank is prepared to ease further if needed and sees a gentle turning point in the economy, it is extraordinarily unlikely we will see negative interest rates in Australia. (Newswires)

Notable FX Expiries, NY Cut:

- USD/JPY: 108.00-05 (1.1BLN), 108.50 (360M), 109.00-10 (1.6BLN)


A solid enough uptake for UK linkers may have been discounted given ongoing Brexit uncertainly and potential inflation implications, but the recovery in debt markets was already gathering more momentum regardless. Indeed, Bunds, Gilts and 10 year US T-notes extended their rebounds to 171.07, 132.13 and 129-11 respectively before running out of steam approaching yesterday’s intraday peaks. Ahead, US housing data and APIs as the clock ticks down to the start of the Fed policy meeting and business end of the week.


WTI and Brent are softer this morning but once again not by any significant magnitude trading with losses of less that USD 1/bbl at present. News flow for the session thus far has again been light though this is likely to pick up from tomorrow via data and Central Bank meetings, including FOMC. For the rest of the session the main highlight will be tonight’s APIs which previously printed a build of 4.51mln and was notably not corroborated by the subsequent EIA metrics showing a draw of 1.69mln. Elsewhere, source reports note that Saudi Aramco is to announce the price range on November 17th and begin an IPO subscription on December 4th, aiming to trade on the Saudi Market from December 11th. Further, Nigeria’s new Energy Minister was on the wires this morning, albeit provided little by way of new substance. Elsewhere, gold prices remain tentative within a tight range, as is usually the case ahead of the Fed’s monetary policy meeting; however, the metal has just seen a modest sell off. Meanwhile, copper trimmed some of yesterday’s losses, again on the lookout for risk events. Finally, Dalian iron ore futures ended the day lower by 1.7% amid China demand woes.

Saudi Aramco is to reportedly announce price range on November 17th, start subscription for IPO on December 4th and trade on the Saudi stock market on December 11th, sources state. (Newswires)

*HQ saying toodle pip for the week* Much love guys, as always, see you on the other side! (don't worry about him…