[PODCAST] EU Open Rundown 4th February 2020
- Asia-Pac equity markets traded higher after following suit to Wall St peers; Shanghai Comp +1.3%
- China’s National Health Commission said total confirmed cases of coronavirus is now at 20438 and death toll at 425
- RBA kept rates unchanged as expected and reiterated the main aspects of its statement which disappointed those anticipating a more dovish tone
- Democratic Iowa caucuses results were delayed due to quality checks amid inconsistencies
- USTR said there was no formal request from China on purchase flexibility although observers suggested that President Trump could provide some leeway
- Looking ahead, highlights include UK Construction PMI, US Factory Orders, New Zealand Unemployment, US President Trump's State of the Union Address
- Earnings: Carlsberg, Intesa Sanpaolo. Disney, Ford, BP
China National Health Commission said total confirmed cases of coronavirus now at 20438 and death toll at 425 vs. Prev. 17205 coronavirus cases and deaths at 361. There were also separate reports of the first coronavirus death for Hong Kong and that a South Korean woman tested positive for coronavirus after visiting Thailand. (Newswires)
US CDC confirmed 11 cases of coronavirus in the US and the second case of person-to-person transmission, while CDC noted it is preparing against the coronavirus as if it were the next pandemic. Furthermore, the Director of the National Institute of Allergy and Infectious Disease said the coronavirus is "very, very transmissible, and it almost certainly is going to be a pandemic". (Newswires)
China Foreign Ministry said it hopes US provides aid it promised on the coronavirus outbreak soon, while it added the US should refrain from overreacting to the outbreak and work with China to deal with the epidemic. (Newswires)
Macau is considering suspending casino operations for at least half a month, although would need to discuss with sector and city to be able to afford the costs of such a move. (Newswires)
German Health Ministry announced the G7 health ministers agreed upon a coordinated approach regarding travel regulations, precautions and research into the coronavirus and cooperation with EU, WHO and China. (Newswires)
Asia-Pac equity markets traded higher after following suit to Wall St peers which were encouraged by China’s support measures and strong US data. The rebound extended into the region in which the Shanghai Comp. (+1.3%) recovered initial losses of more than 2.0% on aggressive bargain buying after having opened at its weakest in almost a year and following the 7.7% sell-off yesterday. The PBoC also continued to supply liquidity through CNY 500bln of reverse repos, while the Hang Seng (+0.8%) was lifted on the improved risk sentiment and after Q4 GDP showed a narrower than expected contraction which effectively overshadowed Hong Kong’s first coronavirus related death. ASX 200 (+0.4%) and Nikkei 225 (+0.4%) were kept afloat albeit with less conviction amid the RBA rate decision where the central bank kept rates unchanged and disappointed those anticipating a more dovish tone, while Tokyo sentiment contained by recent currency strength although firm gains were seen in Panasonic shares after it reported an increase in 9-month net and that its battery JV with Tesla turned profitable. Finally, 10yr JGBs and T-notes were subdued as the recovery in stocks sapped demand for safe havens which saw the former gap below the 153.00 level, with mixed 10yr JGB auction results also adding to the humdrum price action for JGBs.
PBoC injected CNY 380bln via 7-day and CNY 120bln via 14-day reverse repos for a net daily injection of CNY 400bln. Furthermore, PBoC said liquidity injections show resolution to boost confidence and was to steer interbank rates lower, while it added the larger than expected injection is to lower loan rate. (Newswires) PBoC set USD/CNY mid-point at 6.9779 vs. Exp. 6.9758 (Prev. 6.9249)
USTR said there was no formal request from China on purchase flexibility although observers suggested that President Trump could provide some leeway if the numbers are heading in the right direction, according to Politico. (Politico)
ECB's Weidmann said a new inflation target should rid the perception that the ECB can control inflation to a tenth of a percent and noted ECB should simplify its inflation target but must avoid large increases to its goal. (Newswires)
ECB's De Guindos believes we have to be very prudent regarding the coronavirus and noted we are currently in the first stage of this outbreak and does not believe there is a pervasive overvaluation of real estate in the euro zone at all. (Newswires)
DXY was steady ahead of the results of the Democrat Iowa caucuses and held on to recent gains which were spurred by stronger than expected ISM data, as well as losses in its major counterparts including EUR/USD which languished near 1.1050 and with GBP/USD briefly below 1.3000 as it extended on recent losses. USD/JPY remained subdued below 109.00, while commodity-linked currencies were mostly lacklustre after the recent slump in oil and weaker CNY reference rate, although AUD was later boosted after the RBA policy announcement in which it kept rates unchanged as expected and reiterated the main lines from its statement which disappointed those anticipating a more dovish tone and subsequently saw pricing of a March cut halve to just 33%.
RBA kept the Cash Rate unchanged at 0.75% as expected. RBA reiterated it will ease policy if needed to support sustainable growth and rates are to remain low for an extended period, while it added that low rates are boosting asset prices which should lead to increased spending and that it will monitor developments in labour market. RBA added that wage growth is expected to remain at current levels for some time and the central scenario remains for the Australia economy to grow 2.75% this year, 3.00% in 2021 and underlying inflation is to be close to 2% this year and next. Furthermore, RBA noted that bushfires and coronavirus will temporarily weigh on growth although it is too early to determine how long-lasting impact from coronavirus will be.
The US Trump administration it to proceed with new rules that would enable the nation to impose punitive tariffs on goods from countries believed to have undervalued currencies, according to the Commerce Department. (Newswires)
Commodities were mixed overnight in which WTI crude futures found some reprieve from the recent selling which briefly saw prices slip to below USD 50/bbl, although oil has since nursed some of the losses with the rebound helped by the positive risk tone and with OPEC+ reportedly considering further oil output cuts of 500k BPD due to the virus outbreak. Elsewhere, gold was subdued after recent strength in the greenback, as well as the momentum in risk assets which was also the main driver for copper prices.
Russian President and Saudi Crown Prince confirmed readiness to continue cooperation in OPEC+ format, according to Russian agencies citing the Kremlin. (Newswires)
Libya's crude production reportedly fell to 204k BPD due to the continued blockade of its oil infrastructure, according to Argus Media citing sources. (Twitter)
Goldman Sachs said oil prices are now at levels where supply response from both OPEC and US shale producers point to only modest further downside potential, while it suggested recent sell-off, the oil market is pricing at least -0.44% impact to global GDP from the coronavirus. (Newswires)
T-Notes traded choppy, paring back its losses made in the European session, with the 10-year yield floating modestly above the 1.50% figure at settlement. Although the US ISM Manufacturing report was stellar by all accounts for January, concerns linger as the coronavirus outbreak is yet to express itself in the data; Chinese officials have already warned of cuts to its growth figures. Furthermore, participants are unlikely to flood to risk in anticipation of the critical Iowa caucus - results due later Monday – which provides an initial indication of the footing of the Democratic candidates and thus the likelihood of their policies. By settlement, yields were little changed at the long-end, whilst the short-end rose: 2s30s -4bps, 2s10s -2bps, 2s5s -1bps. US T-note (H0) futures settled 2+ ticks lower at 131-18+.
Democratic Iowa caucuses results were delayed due to quality checks amid inconsistencies and Iowa Democrats were said to be undecided if they will release caucus results on Monday night. (Newswires)
Fed's Bostic (Non-Voter, Dove) said we are doing pretty good in meeting employment target although inflation remains weak and not where we would like it to be. Bostic added the Fed will taper pace of repo activity and balance sheet will still grow but slowly, while he added the Fed still views the balance sheet as a possible policy tool although the rate is the main tool. Furthermore, he stated that a material change to him would mean large numbers of businesses changing plans on investment or hiring and that he will start to adjust his outlook if there's a change in mindset for businesses. (Newswires)
Alphabet Inc (GOOGL) Q4 EPS USD 15.35 vs. Exp. USD 12.55, Rev. USD 46.08bln vs. Exp. USD 46.93bln, Google Advertising Revenue USD 37.93bln vs. Exp. USD 38.09bln. (Newswires)