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RANsquawk EU Open Rundown 13.03.17

  • Asian equities traded mostly positive despite softness in energy markets with Chinese bourses outperforming
  • The USD-index remained lacklustre with participants tentative ahead of the FOMC meeting
  • Looking ahead, highlights include potential comments from ECB’s Lautenschlaeger, Draghi, Constancio and Praet

ASIA

Asia equity markets trade mostly higher after the positive US close last Friday, although gains have been modest ahead of the looming FOMC. Conversely, ASX 200 (-0.3%) was weighed by a struggling energy sector after WTI crude futures extended on last week’s 9.0% losses to briefly slip below USD 48/bbl, while Nikkei 225 (+0.2%) was initially subdued after poor Machine Orders data, but then recovered amid upside in JPY-crosses. Shanghai Comp. (+0.6%) and Hang Seng (+1.3%) traded higher after the PBoC resumed liquidity injections, while the KOSPI (+1.0%) continued the strength seen from last week’s impeachment ruling as participants welcomed a fresh start. 10yr JGBs were uneventful with prices flat after the mildly positive sentiment in Japan was counterbalanced by the BoJ’s presence in the market for JPY 520bln of government debt.

PBoC injected CNY 10bln 7-day reverse repos, CNY 10bln in 14-day reverse repos and CNY 10bln in 28-day reverse repos.

PBoC set CNY mid-point at 6.8988 (Prev. 6.9123).

EUROPE

ECB’s Smets (Dove) states that the ECB hasn’t taken first step toward removing stimulus. (WSJ)

German Chancellor Merkel is said to warn US President Trump that US corporate tax changes could prompt retaliatory measures and that Germany is reviewing responses to border adjustment tax. (Newswires)

Fitch affirmed Germany at AAA; outlook stable and affirmed Lithuania at A-; outlook stable. (Newswires)

UK

UK PM May could trigger Article 50 as early as Tuesday, according to sources on Friday. (Evening Standard)

UK PM May is set to call on Brussels to hand back GBP 9bln of UK assets held by an EU bank when she fires the Brexit starting gun — dramatically cutting Britain’s final bill, according to the sources. (Sunday Times)

UK Brexit Minister Davis has called on lawmakers to drop amendments to the Brexit bill, meaning Article 50 could be triggered as early as this week. (WSJ)

A leaked UK Treasury document warns of a major economic shock if the UK is forced to rely on WTO rules in event of a hard Brexit. (Independent)

FX

The USD-index remained lacklustre with participants tentative ahead of the FOMC meeting, which supported its major counterparts with EUR/USD briefly above 1.0700, while AUD/USD took out stops tspanough Friday’s highs. USD/JPY was choppy and met resistance ahead of 115.00 as the greenback faltered, while JPY-crosses outperformed to resume last week’s advances.

US Treasury Secretary Mnuchin is to tell G20 that US will not tolerate competitive FX devaluations. (Newswires)

Turkish President Erdogan has warned the Netherlands it will "pay the price" for harming ties after two of his ministers were barred, with Turkey closing off the residences of the Dutch ambassador, Charge D’affaires and Consul General. In other news, Germany CDU party leader Weber stated discussions of Turkey membership in EU should be frozen. (Newswires)

COMMODITIES

A weaker USD and short-covering following the extensive 2 weeks of losses, provided some mild relief for Gold (+0.2%), while copper rose for a 2nd day amid a mostly positive risk tone and concerns over supply disruptions as a resolution to the strike at the world’s largest Escondida copper mine remains elusive and amid separate strike action at the Cerro Verde copper mine which is Peru’s largest. Elsewhere, WTI crude futures extended on last week’s over 9% loss, with prices briefly slipping below USD 48/bbl after the latest Baker Hughes Rig Count rose for the 8th consecutive week.

The striking union at Escondida copper mine said it will not accept the company's offer to return to the negotiating table, and called on BHP to clarify its negotiating positions. (Newswires)

Russian Energy Minister Novak stated Russia is ahead of schedule with its production cuts and that oil stocks on world markets will decline. Novak also commented that oil producers are to assess how the market is in March, April and May before deciding on a possible extension of the output deal. (Newswires)

US

Treasuries gained, albeit marginally, after the NFP payrolls reports with the yield on the rate sensitive 2-year down over 2.5bps. The report showed little to suggest that rate hikes by the Fed will be more aggressive despite a March hike looking like a done deal. Jun’17 10y T-note futures settled at 123.00+, up 6 ticks.

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