Original insights into market moving news

[PODCAST] US Open Rundown 4th November 2019

  • Asian equity markets kick-started the week on the front-foot following a strong performance from Wall St., Japan was away on holiday
  • SCMP opinion piece noted that China might make further compromises, but the Phase 1 deal does not provide any incentive for a more comprehensive agreement
  • US Commerce Secretary Ross suggested the US may not need to impose auto tariffs later this month
  • In FX, DXY is firmer, GBP, EUR, CAD, JPY and CHF are softer, ZAR outperforms in the EM space
  • Looking ahead, highlights include US Factory Orders, ECB’s Lagarde & Fed’s Daly
  • As a reminder, US Daylight Saving time ended on Sunday, hence the London to New York time gap has returned to 5 hours


White House Trade Adviser Navarro that the sides had good talks, while he also suggested the trade deal with China will require 3 phases. (Newswires)

US Commerce Secretary Ross said they are very far along in Phase 1 of the US-China trade deal. Ross separately commented that they had positive conversations with Europe, Japan and South Korea, while he suggested they may not need to impose auto tariffs later this month and that talks with companies about their capital investment plans may help avert tariffs. (Newswires)

An SCMP opinion piece noted that China might make further compromises, such as reducing tariffs on imports, removing some non-tariff barriers, strengthening IP protection and further opening its markets to avert a full-blown trade war. However, the article noted that the Phase 1 deal does not provide any incentive for a more comprehensive agreement. (SCMP)

US President Trump floated the idea of Iowa as the replacement location to hold the signing of the phase 1 of US-China trade agreement. (Newswires)

Chinese Foreign Ministry confirmed that Chinese President Xi and US President Trump have been in touch via various means. (Newswires)



Asian equity markets kick-started the week on the front-foot as the region took impetus from the record highs on Wall St. last Friday following a better than expected Non-Farm Payrolls report and constructive call between top US-China trade negotiators in which progress was said to be made in a variety of areas. ASX 200 (+0.3%) was lifted by outperformance in the mining related stocks due to the trade optimism and after the recent rally in oil prices, but with gains in the index limited by weakness in the largest weighted financials sector after Big 4 bank Westpac reported a decline in its FY profit. Hang Seng (+1.7%) and Shanghai Comp. (+0.6%) were also positive with the trade optimism turned up a notch after the recent top-level call, with even White House Trade Adviser and China-hawk Navarro noting the sides had good discussions and US President Trump also floated Iowa as a location for the signing of a phase 1 deal. Furthermore, strength in oil names contributed to the outperformance in Hong Kong, and Japanese markets remained closed today for Culture Day.

PBoC skipped open market operations for a net neutral daily position, but will conduct MLF operations tomorrow (Newswires) PBoC set CNY mid-point at 7.0382 vs. Exp. 7.0361 (Prev. 7.0437)



US President Trump agreed to be questioned under oath by lawyers for a former Apprentice contestant who accused him of sexual assault. (SMH)



Head of Iran's Energy Authority says operation of 30 new centrifuges is underway, adding "We didn't intend to take these steps, but Washington's wrong policies pushed us to do so", reported via Al Jazeera. (Twitter/Al Jazeera)

North Korea and US working level talks could be held in mid-November/December, Yonhap citing South Korea's spy agency. (Newswires)

Reports via China People’s Daily, the communist party’s mouthpiece noted that government employees’ careers are at stake as it flagged intervention in senior appointments. (Newswires)

Turkey is evaluating a Russian offer for fighter jets and the second delivery of Russian S-400 missile system is planned for 2020 but could be delayed due to technology sharing and production talksaccording to the Head of Turkish Defence Industry Directorate. (Newswires)



Following on from Friday’s post NFP/encouraging trade rhetoric rally, major European bourses (Euro Stoxx 50 +0.9%) are again on the front foot, with further trade optimism the major tailwind. US Commerce Secretary Ross, over the weekend signalled optimistic China developments whilst noting that US may not need to impose auto tariffs later this month on the EU, Japan and South Korea, following positive conversations with these countries. DAX and Euro Stoxx indices are at fresh YTD highs, with the latter at its highest levels since early 2018. As expected, European auto names, including Fiat Chrysler (+4.0%), Peugeot (+4.9%), Daimler (+2.2%) and Volkswagen (+2.5%) are driving gains amid Ross’ comments. More broadly, sector performance is reflective of the market’s risk-on sentiment; Materials (+1.6%), Consumer Discretionary (+1.2%), Tech (+1.1%), Energy (+1.7%) and Financials (+1.6%) are all on the performing well, with the latter two aided by higher yields and crude prices from Friday’s late-doors rally. Meanwhile, the more defensive Utilities (+0.1%), Consumer Staples (Unch.) and Health Care (+0.5%) sectors are laggards. In terms of specific movers; strong earnings from Ryanair (+6.6%), Siemens Healthineers (+7.0%) and Telefonica Deutschland (+1.6%) has seen their respective stock prices advance. Wirecard (+3.7%) trades higher with the prospect of EUR 200mln in additional share buybacks providing some reprieve from the recent FT-induced declines. Finally, UK gambling stocks fell sharply (William Hill -6.9%, GVC -10%) amid pre-market reports via The Guardian that UK MPs are demanding an overhaul of gambling laws which would see online casinos subject to the a maximum stakes limit similar to the GBP 2 imposed on fixed-odds betting terminals.



UK Brexit Party Leader Farage said he won’t stand as a PM candidate in the upcoming general election on December 12th. (BBC/FT)

UK Election Polling: - YouGov poll (30th October – 1st November) shows Conservatives with a 12 point lead over labour vs. Prev. 15 point lead (29th – 30th October). The poll notes that Labour gained 6 points in the 30th October – 1st November polling period while Conservatives gained 3; hence, their lead is narrowing. Liberal Democrats on 16% (-3) for this period. (YouGov/Times)

Spanish Election Polling:

- Three polls indicate a new stalemate in Spain, no party securing a majority in the November 10th election. (Newswires)

EU Markit Manufacturing Final PMI (Oct) 45.9 vs. Exp. 45.7 (Prev. 45.7) (Newswires) - German Markit/BME Manufacturing PMI (Oct) 42.1 vs. Exp. 41.9 (Prev. 41.9) - French Markit Manufacturing PMI (Oct) 50.7 vs. Exp. 50.5 (Prev. 50.5) IHS said “goods producing sector is on course to act as a severe drag on GDP again in the fourth quarter” (IHS Markit) 

UK Markit/CIPS Construction PMI (Oct) 44.2 vs. Exp. 44.0 (Prev. 43.3) (Newswires)

SNB President Jordan reiterated that he sees further room to cut rates and further monetary policy loosening may become necessary under certain circumstances. Jordan also reiterated that the CHF is still highly valued. (NZZ am Sonntag) For reference, the SNB will conduct its next monetary policy review on December 12th. 



NZD/AUD/ZAR - The Kiwi is head and shoulders above its G10 counterparts in wake of news that NZ and China will enhance their FTA, with Nzd/Usd extending gains through 0.6450 at one stage even though the latest NZ Treasury report paints a rather bleak picture of the domestic economy as Q2 GDP was weaker than expected and business activity remained depressed during the 3 months to September. However, cross-currents also favoured the Kiwi as Aud/Nzd retreated through 1.0750 and the Aussie lost traction vs its US rival on the 0.6900 handle following disappointing retail sales data on the eve of the RBA’s policy meeting – full preview available via the Research Suite. Elsewhere, the Rand is breathing a big sigh of relief after Moody’s SA ratings review on Friday as the agency resisted any temptation to go beyond the widely anticipated outlook downgrade to negative. Usd/Zar has reversed further from recent highs in response and back below the psychological 15.0000 level to test bids/support at 14.7500.

CHF/JPY - The safe-havens have receded in line with risk-on sentiment prompted by the hefty US payroll beats and rising global trade optimism amidst latest positive updates on US-China Phase 1 alongside talks between the US, EU, Japan and South Korea that could culminate in auto tariffs being rolled over or even removed altogether. The Franc is also digesting even more dovish remarks than normal from SNB chief Jordan and latest weekly Swiss sight deposits showing a hefty rise in domestic bank accounts, as Usd/Chf hovers above 0.9875 and Eur/Chf over 1.1025, while the Yen and crosses are also elevated, with Usd/Jpy eyeing 108.50.

CAD/GBP/EUR - All softer vs the Greenback as the DXY holds above 97.000 and Friday’s 97.107 post-NFP low, as the Loonie continues to reflect on the BoC’s rather concerned outlook and pivots 1.3150, while Cable strives to keep its head above 1.2900 ahead of the UK election and the Pound lags against a relatively resilient Euro after some signs of stabilisation in the core and pan Eurozone manufacturing PMIs. Note also, Sentix sentiment improved substantially and Eur/Usd may be benefiting from expiry hedging given 1 bn running off between 1.1155-60.

EM - Choppy trade in Usd/Try within 5.7075-6800 parameters after another slowdown in Turkish CPI and reports that the second batch of S-400 missiles from Russia may be delayed, with the Lira testing 200 DMA resistance, but not quite breaching the technical marker.

Moody’s affirmed South Africa at BAA3; Outlook cut to Negative from Stable. (Newswires)



Some respite and decoupling from stocks that remain on an upward trajectory, with Bunds and Gilts paring a chunk of their losses from 170.98 and 131.87 intraday lows to trade considerably closer to earlier Eurex and Liffe peaks. Short covering clearly contributed to the relatively strong recovery and perhaps technical buying or cash related support as 10-year yields defended -35 bp and 70 bp respectively. However, USTs remain soft and the curve steeper post-NFP and in advance of more US releases ahead of Fed’s Daly, with new ECB President Lagarde filling the void in between.



Crude markets are firmer on the first trading session of the week following overnight consolidation from Friday’s late-door gains, with impetus derived from the overall risk sentiment and in wake of of comments from the Iranian Oil Minister Zanganeh who expects further cuts to be agreed at the 5th/6th December OPEC meeting (in-fitting with some of the recent sources reports ahead of the meeting, although the magnitude of the touted cuts is unknown). WTI Dec’ 19 futures have moved above last Friday’s USD 56.43/bbl high, as has Brent Jan’ 20 futures, which also eclipsed the USD 62.00/bbl level. Elsewhere, COT data released last Friday showed that speculators increased their net long in ICE Brent by 45.6k lots over the last reporting week, leaving them with a net long of 253,999 lots as of last Tuesday. “This is the largest weekly increase since early September, and also takes the net spec position back to levels seen in September” notes ING, who point out that “the increase was predominantly driven by fresh longs, rather than shorts coming in to cover.” Turning to metals; gold prices are subdued, despite the risk on moves being seen across equities and bonds. Copper meanwhile is similarly uneventful – CFTC data from last Friday revealed that speculators have increased gross longs by 11,514 lots over the week, and covered 11,949 shorts, amid recent gains in the markets risk tone.

Saudi Arabia have confirmed that Saudi Aramco is to be publicly floated, currently no indication on the timing, price or magnitude of the IPO. Reports note scepticism that Aramco will achieve its USD 2trl valuation, likely to be closer to USD 1.5trl. Stake offered could be between 1-3% valued at USD 15-60bln. (Times/Newswires)

Iranian Oil Minister Zanganeh expects further cuts to be agreed at the 5th/6th December OPEC meeting. (Newswires)

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