Original insights into market moving news

[PODCAST] US Open Rundown 30th October 2019

  • European equities are earnings/M&A driven this morning whilst markets remain tentative ahead of today’s risk events
  • FX and Fixed Income markets are largely on standby ahead of FOMC
  • US President Trump’s insistence that China commits to large purchases of US agricultural products has reportedly become a negotiating sticking point
  • Looking ahead highlights include US, ADP, GDP (Advanced), FOMC and BoC Rate Decisions & Press Conferences, ECB's Lautenschlager
  • Earnings: Apple, Facebook


Asian equity markets traded negative after the cautious tone rolled over from Wall St, with global sentiment dampened by mixed US-China trade rhetoric and tentativeness ahead of the FOMC. ASX 200 (-0.8%) was dragged by early underperformance in consumer staples amid losses in Woolworths despite reporting stronger revenue figures, while Nikkei 225 (-0.6%) mirrored a lacklustre currency but with declines cushioned by firm Retail Sales data which printed its highest growth since 2014 due to front-loading of purchases before the sales tax hike. Hang Seng (-0.4%) and Shanghai Comp. (-0.5%) conformed to the downbeat tone following an additional CNY 200bln liquidity drain and after a US official triggered doubts on whether the US-China phase 1 deal would be ready in time for the Chile APEC meeting. Finally, 10yr JGBs were higher with prices supported by the risk averse tone and with the BoJ present in the long-end of the market, although upside was limited as the central bank kick-started its 2-day policy meeting.

PBoC skipped open market operations for a net daily drain of CNY 200bln. (Newswires)

PBoC set CNY mid-point at 7.0582 vs. Exp. 7.0572 (Prev. 7.0617)

US Commerce Department noted there is no estimate to the timing of responses of license requests to sell to Huawei and that requests continue to be in process. (Newswires)

US President Trump’s insistence that China commits to large purchases of US agricultural products has reportedly become a negotiating sticking point; an official from a Chinese state-owned Co. states they do not wish to purchase lots of products that they do not need/no demand for. (CNBC)

China envoy to UN said US criticism of Beijing policy regarding Xinjiang region is not helpful for a good solution to trade talks. China Foreign Ministry spokesperson said team members will make continuous and stepped-up efforts on the trade consultations, in response to media questions whether the deal would be signed ahead of schedule. (Newswires/Global Times)

Chinese Foreign Ministry says lead US and Chinese trade negotiators will speak again soon, working level talks will continue at a fast pace in the meantime. (Newswires)

BoJ will start lending shares in ETF's to brokerages as early as next spring to try to restore some of the liquidity it has drained out of the market via its massive monetary easing program. (Nikkei) Japanese Retail Sales (Sep) Y/Y 9.1% vs. Exp. 6.9% (Prev. 2.0%, Rev. 1.8%); largest increase since 2014. (Newswires)


US Treasury Secretary says the US continues to be strong with low inflation, says there is no question that global growth is slowing. (Newswires)

Acting White House Chief of Staff Mulvaney's aide Robert Blair is expected to testify in impeachment probe on Friday. (Newswires)


US House overwhelmingly voted in favour of resolution recognizing Armenian genocide in 1915 which is seen as a rebuke of Turkey and it also voted in favour of legislation seeking to impose sanctions on Turkey for its offensive in Syria. Turkey’s Foreign Ministry later responded that it strongly condemns the adoption of a draft bill that envisages sanctions against Turkey and stated the US administration should take steps to prevent further deterioration of relations. (Newswires)


Sources in the Brexit Party suggest they are looking to wipe out Labour’s heartlands in the north east of England and Wales as it prepares to campaign for a 'clean break Brexit', however, has left the door open to a pact with the Tories. (Telegraph)

UK government reportedly began restoring the whip to 10 of the Tory 21 group on Tuesday. (Times/Twitter)

EU Council President Tusk tweeted the EU27 has formally adopted the extension and that it may be the last one, while he added to please make the best use of this time. (Twitter) EU Chief Brexit Negotiator Barnier has stated that British companies will be at risk of trade barriers via a ‘proportional’ response, if a new UK government attempts to abandon EU standards on worker rights and environmental protections. (Guardian)

UK PM Johnson and Chancellor Javid are said to favour former BoE Deputy Governor Tucker as next BoE Governor. (ITV)

UK BRC Shop Price Index (Oct) Y/Y -0.4% (Prev. -0.6%). (Newswires)

German State CPIs have largely been slightly softer than the Prev.; which is in-line with expectations for the mainland figure which sees YY at 1.1% vs. Prev. 1.2%. (Newswires)

German Unemployment Chg SA (Oct) 6k vs. Exp. 2.0k (Prev. -10.0k); Unemployment Rate SA (Oct) 5.0% vs. Exp. 5.0% (Prev. 5.0%)


European equities are largely driven by earnings/M&A related action this morning [Eurostoxx -0.2%] following on from a cautious APAC session which was largely weighed on by dampened US/Sino trade sentiment.  Major bourses are mixed with outperformance in France’s CAC40 (+0.2%) outperforming on the back of earnings form L’Oreal (+6.8%) which topped expectations despite fears over a China slowdown and unrest in Hong Kong hitting demand. Thus, the consumer staples sector outperforms. On the flip side, Spain’s IBEX (-1.2%) underperforms largely on the back of Santander (-5.9%) post-earnings with NII deteriorating from the prior quarter, hence the financial sector is hit. In terms of European M&A, the French index is propped up by Peugeot (+6.0%) after the company and Italy’s Fiat Chrysler (+9.2%) commenced merger talks for a combined entity worth around USD 50bln, although sources noted that there is no guarantee that the two will reach a deal. Other earnings related large-cap movers include Standard Chartered (+2.5%), Bayer (+1.9%), Airbus (+1.7%), Volkswagen (+1.4%), and Credit Suisse (-2.5%). Finally, Pirelli (-6.4%) share slumped to the foot of the Stoxx 600 after dismal earnings and a downward revision to its EBIT guidance.

Apple (AAPL) is preparing suppliers for its first launch of 5G iPhones next year, reports Nikkei citing sources, the three flagship models also set to include the most advanced mobile processors available and leading-edge screens, adds Nikkei (Nikkei)

Yum! Brands Inc (YUM) Q3 19 (USD): Adj. EPS 0.80 (exp. 0.95), Revenue 1.339bln (exp. 1.34bln). (Newswires)

General Electric Co (GE) Q3 19 (USD): EPS 0.15 (exp. 0.11), Revenue 23.4bln (exp. 22.93bln). Co. raises FCF outlook despite external headwinds from 737 Mac and tariffs. (Newswires)


DXY - Modestly softer but off intraday lows of 97.585 with the broad Dollar and Index biding its time ahead of the advanced US GDP, ADP and more importantly the FOMC’s latest monetary policy decision (at 1800GMT due to the UK clock change) with markets pricing in almost a 100% chance of a 25bps cut to 1.50-1.75% (full preview available on the Research Suite of the RANsquawk website). Chair Powell is largely expected to keep the statement relatively unchanged from the prior meeting and focus will be on whether the Committee signals that it is now on pause, or whether the door to further cuts remains open.

GBP, EUR - Sterling and the Single currency remain little changed on the day thus far and above 1.1100 and 1.2850 respectively against the Greenback. Cable retested yesterday’s high at 1.2905 as focus steers away from Brexit headlines and onto UK election developments after UK lawmakers approved the election bill by 438 vs. 20 for an election on December 12th, with the last Parliamentary sitting on November 5th before dissolution. Meanwhile, EUR/USD has pulled back from intraday highs after testing its 100 DMA at around 1.1125 with the Single Currency little swayed by modest CPI cooling in German States, as expected looking at the forecasts for the national reading as a proxy. Ahead, incoming ECB President Lagarde is set to speak at 1800GMT alongside the Fed rate decision, with the latter likely to take centre stage. 

AUD, NZD, CAD, JPY - All modestly firmer on the back of an overall softer USD, although the Aussie is underpinned by in-line CPI readings overnight which, coupled with RBA Governor Lowe’s reiterations yesterday, backs the case for the Central Bank to stand pat on its Cash Rate at next week’s meeting. AUD/USD rebounded from its 100 DMA at 0.6850 whilst upside in its Kiwi counterpart is somewhat capped as the AUD/NZD cross reclaimed 1.08+ status post-Aussie CPI. Elsewhere, the Loonie treads water around 1.3075 ahead of the BoC’s monetary policy decision today at 1400GMT (full preview available on the Research Suite of the RANsquawk website) with rates expected to be maintained and the Bank to remain upbeat given the incoming data; Governor Poloz and Deputy Governor Wilkins will partake in the post-meeting presser at 1515GMT. It’s worth keeping in mind that around USD 850mln of USD/CAD options will expire at strikes 1.3100-10. Finally, the JPY remained within a tight intraday band (108.80-90), again with eyes on risk events and Dollar action with the pair eyeing a 2.1bln in options expiring at the psychological 109.00 ahead of its 200 DMA 109.05.

South Africa's State Utility Eskom says no loadshedding is expected today and there is a low probability of loadshedding this week

Australian CPI (Q3) Q/Q 0.5% vs. Exp. 0.5% (Prev. 0.6%). (Newswires)

Australian CPI (Q3) Y/Y 1.7% vs. Exp. 1.7% (Prev. 1.6%)

Australian RBA Trimmed Mean CPI (Q3) Q/Q 0.4% vs. Exp. 0.4% (Prev. 0.4%)

Australian RBA Trimmed Mean CPI (Q3) Y/Y 1.6% vs. Exp. 1.6% (Prev. 1.6%)

Turkish President Erdogan says that interest rates will drop to single digits., currently the CBRT’s policy rate is 14%. (Newswires)


A tentative and generally uninspiring session thus far for the fixed income complex. This morning has seen the release of data points of note out of Germany with unemployment metrics not substantially deviating from expectations and the state CPIs, unsurprisingly, printing slightly softer than prev. ahead of the mainland figure later today which is seen softer than September’s reading. In terms of price action, Bunds have stayed within a 30 tick range for the session thus far as, data aside, newsflow has been relatively quiet. UK debt has been supported this morning as the UK begins preparation for a December 12th General Election which sees Parliament dissolved on the 6th November. As such, gilts trade towards the top of the days range above the 132.0 mark; slightly further out the October 28th high lies at 132.31. Of note, the ECB has today resumed its APP which, in September, the ECB stated would occur at a EUR 20bln a month for an indefinite time period. This was expected to support the bond market, particularly in the periphery, though little in the way of an impact can be discerned in today’s price action; note, today does also see the introduction of the ECB’s tiered rate system. The small magnitude of today’s moves is due to focus remaining firmly on today’s FOMC rate decision, where expectations are for a 25bp cut and focus will once again be on the Bank’s guidance for the next meetings and any dissenters.


Crude prices are rangebound, in uneventful trade as the market awaits coming risk events in form of this evening’s FOMC meeting and EIA Inventory data. The latter is likely to settle some confusion surrounding last night’s API release; initial reports suggested a slightly higher than expected build of 590k bbls, later other sources suggested a draw of 1.7mln bbls and the major newswires were quiet on the subject. For now, WTI Dec’ 19 futures are bound by USD 55.15/bbl – USD 55.60/bbl parameters, whilst Brent is rangebound between USD 60.95/bbl – USD 61.35/bbl. In terms of metals; Gold is nudging slightly higher but, for now, has been unable to recoup much of the losses made this week, as trade remains tentative ahead of the Fed. Copper is a touch lower, but holds on to decent gains made in recent weeks. “Recent price strength in the metal has primarily been driven by disruptions and concerns over supply from Chile, coupled with a pullback in the US dollar index” notes ING, but they caveat that “underlying concerns over demand with the poorer macro backdrop is still the key theme for the market, despite this short-term noise”.

API Energy Inventories Crude +0.59mln (exp. +0.5mln, Prev. +4.51mln), although other social media reports suggested contradicting figures of a 1.7mln bbl drawdown to crude inventories and newswires have not confirmed any figures. (Newswires)

China September YTD gold consumption declined 9.6% Y/Y to 768.3 tons. (Newswires)

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