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[PODCAST] EU Open Rundown 29th January 2020

  • Asian equity markets were mostly higher as the region found some reprieve following the rebound on Wall St
  • Total number of coronavirus cases in China rose to 5974 and total deaths at 132 as of Jan 28th
  • People's Daily reported the coronavirus outbreak may reach its peak in one week or around 10 days
  • SCMP suggested that the coronavirus could impact Beijing’s ability to meet US-China Phase 1 trade deal import demands
  • Looking ahead, highlights include German GFK Consumer Sentiment, US Trade, Pending Home Sales, DoEs, FOMC Rate Decision and Press Conference, supply from Germany
  • Earnings: Microsoft, Facebook, Mastercard, AT&T, Boeing, Mcdonald's, PayPal, Tesla, General Electric, Mondelez International, ADP, Marathon Petroleum, Sprint, Novartis, Santander

CORONAVIRUS UPDATE

Total number of coronavirus cases in China rose to 5974 and total deaths at 132 as of January 28th according to state media, while the National Health Commission said the total number of suspected coronavirus cases in China was at 9239. (Newswires)

People's Daily reported the coronavirus outbreak may reach its peak in one week or around 10 days and then there will be no large-scale increases citing a renowned Chinese respiratory expert Zhong Nanshan. In related news, China Global Times tweeted that 11 Wuhan residents traveling back from abroad were found to be infected with the novel coronavirus as of 6am Tuesday citing Chinese customs, while an article in SCMP suggested that the coronavirus could impact Beijing’s ability to meet US-China Phase 1 trade deal import demands, (People’s Daily/Global Times/SCMP)

PBoC Beijing Branch said it will increase funding support to financial institutions under its administration to help tackle coronavirus. (Newswires)

US NIH official said they hope to advance coronavirus vaccine into Phase 1 trials within three months, while there were separate comments from the US Health Secretary that the use of face masks in the US to counter coronavirus is not necessary as the risks to individuals are currently very low. (Newswires)

White House was reportedly mulling China travel restrictions and told airlines it may suspend all China-US flight amid coronavirus outbreak, while other reports also stated that the White House was monitoring China-US flights but decided against suspending air traffic on Tuesday and that it is holding daily meetings in which it could revisit the idea of suspending China-US flights. However, a senior US administration official later commented that White House did not call airlines and did not ask for suspension of flights between US and China. (Newswires)

ASIA-PAC

Asian equity markets were mostly higher as the region found some reprieve following the rebound on Wall St where sentiment was underpinned by vaccine efforts to tackle the coronavirus, touted dip-buying and encouraging US data, while a stellar report from Apple which beat on both top and bottom lines, as well as iPhone revenue added further fuel to equity futures after-hours. ASX 200 (+0.6%) and Nikkei 225 (+0.5%) took impetus from their US peers but with upside somewhat capped as participants also digested a slew of corporate updates, while Tokyo sentiment was driven by recent favourable currency flows and a heavy slate of earnings. Conversely, Hang Seng (-2.6%) suffered a bloodbath on return from the Lunar New Year holiday and briefly slipped into correction territory with heavy losses across a broad range of industries including financials, airliners and retailers due to the coronavirus fears which prompted measures from Hong Kong to reduce cross-border travel with mainland China, while casino stocks were also a losing bet after China stopped issuing individual travel visas for visits to Macau by mainland residents in an effort to control the outbreak. 10yr JGBs were flat after the recovery in risk appetite dampened safe-haven demand, but with downside also stemmed by support at 152.50 and amid the BoJ’s presence for over JPY 1.1tln of JGBs in up to 10yr maturities.

BoJ Summary of Opinions from the January meeting stated there has been no further increase in the possibility that the momentum toward achieving the price stability target will be lost and that it is appropriate to maintain the current guidelines for market operations. BoJ also noted that Japan's economy has been on a moderate expanding trend, although exports, production and business sentiment have shown some weakness, mainly affected by the slowdown in overseas economies and natural disasters. Furthermore, the BoJ stated that although risks concerning overseas economies remain significant, signs of recovery have started to be observed in part and there was the opinion that they may need to conduct review of policy framework given heightening debate in Europe and US over 'Japanification'. (Newswires)

UK/EU

UK government will introduce a bill into parliament today for legislation to end automatic rights for EU vessels to fish in UK waters. (Newswires)

The Times’ shadow MPC voted 8-1 (1 hawkish dissent) in favour of leaving rates unchanged at 0.75%; cites return of economic confidence and planned budget stimulus. (Times)

Senior Tory backbenchers are considering a HoC revolt to force a total ban on Huawei and there were feelers out last night on how many will back them with 45 Conservative MPs needed to defeat the government, according to Sun's Tom Newton Dunn. (Twitter)

US Republican Senator Graham said the UK's decision for Huawei could "greatly complicate" a free trade agreement between the two sides, while a report also noted that US Politicians are said to be ‘furious’ at the UK’s decision on Huawei with some suggesting they could take a harder line in post-Brexit trade negotiations as a result. (Newswires/LBC)

UK BRC Shop Price Index (Jan) Y/Y -0.3% (Prev. -0.4%). (Newswires)

FX

DXY was steady and held above 98.00 following the mild support from better than expected data, although overnight price action was relatively contained. EUR/USD was rangebound after rebounding from support at 1.1000 and GBP/USD was indecisive just north of 1.3000 ahead of the BoE meeting on Thursday. Elsewhere, USD/JPY and JPY-crosses were initially supported by the improvement in global risk sentiment although have since plateaued, while antipodeans traded mixed with AUD underpinned after Q4 inflation data which showed headline CPI Q/Q and Y/Y topped estimates, which led to RBC revising its RBA rate cut forecast to June from Q1 and JPMorgan also pushed back its rate cut call to May from February.

Australian CPI (Q4) Q/Q 0.7% vs. Exp. 0.6% (Prev. 0.5%) Australian CPI (Q4) Y/Y 1.8% vs. Exp. 1.7% (Prev. 1.7%) Australian RBA Trimmed Mean CPI (Q4) Q/Q 0.4% vs. Exp. 0.4% (Prev. 0.4%) Australian RBA Trimmed Mean CPI (Q4) Y/Y 1.6% vs. Exp. 1.5% (Prev. 1.6%) Australian RBA Weighted Median CPI (Q4) Q/Q 0.4% vs. Exp. 0.4% (Prev. 0.3%) Australian RBA Weighted Median CPI (Q4) Y/Y 1.3% vs. Exp. 1.3% (Prev. 1.2%)

COMMODITIES

Commodities were mixed in which WTI crude futures extended on the gains seen during the prior session, while further upside was spurred following bullish private sector inventory data which showed a surprise draw in headline crude stockpiles. Elsewhere, gold remained lacklustre as safe havens were shunned due to the rebound in global equities which also underpinned copper to reclaim the USD 2.60/lb level. 

US Private Inventory Crude Stocks (w/e 24th Jan) -4.3mln (exp. +0.5mln, prev. +1.6mln). (Newswires) 

Libya NOC said oil production on January 27th was at 271k bpd which was slightly up from the prior day. (Newswires)

GEOPOLITICS

US and Israel proposed a two-state solution for Israel and Palestine with the Palestine capital in Jerusalem. Israel agreed to negotiate on the basis of a detailed proposed map, while agreement for statehood for Palestinians is contingent on security arrangements to protect Israelis, as well as Palestine’s respect for human rights, freedom of press and transparent judiciary. US President Trump commented that this is the first time Israel has authorized the release of a proposed and consensual map for an Israeli-Palestinian peace plan, although the President of the State of Palestine Abbas stated the deal plot will not pass and Jerusalem is not for sale, while a Hamas official also described the peace plan as 'aggressive' and as 'nonsense'. (Newswires)

US 

Yields were higher across the curve by between 2.5-4.5bps, at settlement, with the shape of the curve marginally steeper. It helped the 2s5s and 3m/10-year spreads to both go positive, having briefly inverting in the last 24hrs. A more constructive risk tone was cited. The US Treasury sold 7-year notes, tailing 0.4bps (the 2s, 5s, and 7s auctions have all tailed this week), though cover was in line with recent averages. The internals were more or less in line with recent averages; Directs took 17.2% against recent average of 15.7%; indirects took 58.1% against an average of 61.5%, while dealers were left with 24.7% against recent average of 22.7%. US T-note futures settled 9 ticks lower at 130-19+.

US Senate Majority Leader McConnell said the GOP doesn't have the votes to block impeachment witnesses. (Newswires)

Apple (AAPL) Q1 '20 earnings (USD): EPS 4.99 (Exp. 4.55); Revenue 91.82 (exp. 88.50bln), iPhone: 55.96bln (exp. 51.51bln), iPads: 5.98bln (exp. 6.70bln), Mac: 7.16bln (exp. 7.15bln), Services: 12.72bln (exp. 13.07bln). (Newswires)

eBay Inc (EBAY) Q4 19 (USD): EPS 0.81 (exp. 0.76), Revenue 2.8bln (exp. 2.81bln); Sees 2020 net revenue 10.72-10.92bln (exp. 11.0bln); boosts share buyback by USD 5bln, raises dividend to 0.16/shr (+14%). (Newswires)

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