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[PODCAST] EU Open Rundown 24th December 2019

  • Asian equity markets were mixed with price action range-bound amid the ongoing holiday lull
  • China Global Times tweeted that “hopefully the US can move faster towards lowering tariffs” after China recently announced new tariff-cut plans on imports
  • In FX markets, price action was contained with the DXY languishing below its 200DMA at 97.71
  • Looking ahead, highlights include Richmond Fed, APIs, US 5yr. Note, there are several early market closures, all of which are detailed on our calendar

ASIA-PAC

Asian equity markets were mixed with price action range-bound amid the ongoing holiday lull and with several early market closures in the region for Christmas Eve. ASX 200 (+0.1%) was uneventful in today’s shortened trading session as outperformance in the commodity-related sectors counterbalanced weakness in tech and financials, while Nikkei 225 (Unch.) also meandered on the marginal ebbs and flows in the domestic currency with outdated BoJ minutes from the October meeting doing little to spur price action. Hang Seng (-0.2%) and Shanghai Comp. (+0.4%) conformed to the non-committal tone amid the reduced hours in Hong Kong and with mainland also kept indecisive after the PBoC skipped open market operations, although Chinese Premier Li noted that China will study further steps to lower financing costs including RRR and targeted RRR cuts. Finally, 10yr JGBs were initially lacklustre following the similar holiday-quietened trade in USTs and with demand sapped by a lack of buying from the BoJ which were only in the market for treasury discount bills, although prices were later supported following the 2yr auction results which were mixed but still attracted a higher b/c.    

PBoC skipped open market operations for a net neutral daily position and announced CNY 6bln in 3-month central bank bill swaps. (Newswires) PBoC set USD/CNY reference rate at 7.0119 vs. Exp. 7.0126 (Prev. 7.0117)

China Global Times tweeted comments from Chinese Premier Li that China pledges equal treatment for all enterprises under all forms of ownership and won't take on protectionism but instead it will stick to further opening-up despite deficit with Japan and South Korea, while the trilateral joint press statement from China, Japan and South Korea reaffirmed commitment to resolve North Korea issue and that they will try to facilitate US-North Korea dialogue. (Newswires/Twitter)

China Global Times tweeted that hopefully US can move faster towards lowering tariffs after China recently announced new tariff-cut plans on imports, while it separately tweeted comments from China Foreign Minister Wang Yi who stated the US should work with China to get bilateral ties back on track. (Twitter) China Global Times tweeted that China expresses strong dissatisfaction with the US over the negative contents distorting and smearing China's military development and on issues regarding Taiwan, Hong Kong and Xinjiang, as well as prohibited purchase of Chinese products. Furthermore, the Global Times also tweeted that it is impossible for the US to rope in other countries to contain China and that neither Russia nor any other country is willing to become its pawn to contain China. (Twitter)

BoJ Minutes from October Meeting stated most members recognized there had been no further increase in the possibility that the momentum towards achieving the price stability target would be lost and that it is appropriate to maintain current purchase guidelines. The Minutes added that some members noted BoJ must not hesitate to take additional easing if there was a greater chance momentum to reaching price target was lost, while members agreed that the economy had been on a moderate expanding trend with a virtuous cycle from income to spending operating, although exports, production, and business sentiment continued to be affected by the slowdown in overseas economies. (Newswires) 

UK/EU

White House reportedly stepped up its warnings to the UK regarding permitting Huawei into its 5G networks which the US alleged is a risk for the British intelligence agencies. (FT)

FX

Price action was contained ahead of the holidays in which the DXY languished below its 200DMA of 97.71 after the recent weak US Durable Goods Orders, while its transatlantic counterparts fared no better which EUR/USD at a sub-1.1100 level and with GBP/USD dejected after having extended its slide firmly beneath 1.3000. Elsewhere, USD/JPY and JPY-crosses reflected the non-committal risk tone and an uneventful BoJ Minutes from the October meeting, while antipodeans were also steady amid a lack of risk appetite and pertinent data releases, as well as the relatively stable CNY reference rate setting.

Banxico Governor De Leon said the central bank is not committed to rate moves in any direction and notes inflation is clearly on a downward trend, but risks remain. (Newswires)

COMMODITIES

Commodities were uneventful with WTI crude futures relatively flat throughout the session amid the holiday-thinned conditions and touted book squaring, with oil prices kept afloat as Wall St extended on its streak of records and as WTI found a base at the USD 60.50/bbl level. Elsewhere, gold took advantage of the humdrum trade in the greenback to extend on a monthly high and edged closer towards the USD 1500/oz level, while copper traded predominantly sideways as price moves restricted by the indecisive overnight risk tone but then saw a late marginal breakout from the range heading into the European open. 

US 

Yields were higher across the curve (by 1-3bps at settlement) in thin, holiday-trading conditions, with the T-Note future remaining within an 11-tick range; the curve was a touch flatter, however, but by under 1bps. The US' sale of 2-year notes was lacklustre, at the very least; the auction stopped on the screws, though cover was the softest in 11 years, signalling very little interest in the last 2s auction of the year. Dealer participation was beneath recent averages, directs was in line with recent averages, while the indirect bid was beneath recent averages. Note: The Treasury will also be selling USD 41bln in 5s on Tuesday, as well as USD 32bln of 7s on Thursday, with this week's auctions set to raise a net USD 31.7bln at the month-end settlement. T-notes (H0) settled 5 ticks lower at 128-03.

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Fed balance sheet size rises to USD 6.13trln this week (prev. USD 5.86trln) https://t.co/MAXLQrUn3n