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RANsquawk EU Open Rundown 21.03.17

  • Asian equities trades relatively mixed following a rather subdued lead from Wall St. in which financials underperformed
  • An encouraging performance from Macron in the first presidential election TV debate saw EUR/USD outperform
  • Looking ahead, highlights include: UK CPI, Canadian Retail Sales, API report and comments from BoE’s Carney as well as Fed’s Dudley, George and Mester.
  • ASIA

    The major equity indices in Asia traded somewhat mixed following a similar lead from Wall St., where financials underperformed and participants were indecisive amid a lack of tier-1 data releases. ASX 200 (-0.1%) was dampened by weakness in telecoms and underperformance in the financial sector, while Nikkei 225 (-0.4%) lagged on return from an extended weekend, although downside was stemmed as USD/JPY nursed losses. Elsewhere, Hang Seng (+0.4%) and Shanghai Comp. (+0.2%) were kept afloat following the continued liquidity operations by the PBoC which resulted in a 2nd day of net injections. Finally, 10 year JGBs traded higher amid a dampened risk tone in Japan and with the BoJ present in the market for a total JPY 1.15tln of JGBs ranging from 1-10yr maturities.

    PBoC injected CNY 50bln 7-day reverse repos, CNY 20bln in 14-day reverse repos and CNY 10bln in 28-day reverse repos

    PBoC set CNY mid-point at 6.9071 (Prev. 6.8998)

    EUROPE

    ECB's Weidmann (Hawk) stated that the current circumstances mean that continued expansionary monetary policy was still appropriate. (Newswires)

    French presidential candidates conducted the first debate in which Macron stated that Europe needs to be rigorous in Brexit talks, while Le Pen vowed to increase defence spending to 3% of GDP by 2022 and Fillon criticized Le Pen's plan to hire more security forces and conduct an expansion on prison places would lead the nation to bankruptcy. (Newswires)

    Elabe poll showed Macron as the most convincing and performed the best in the debate, Melenchon 2nd while Le Pen and Fillon were tied for 3rd. (Newswires)

    FX

    In FX markets, EUR/USD outperformed following the 1st French presidential debate in which snap polls suggested Macron was seen to come out on top, while far-right candidate Le Pen was in joint 3rd place. USD/JPY nursed losses as Japanese participants returned from the extended weekend and after comments from Japanese Finance Minister Aso confirmed there was no change in thinking regarding FX at the G-20. Elsewhere, AUD/USD underperformed amid weakness in iron ore prices with the RBA minutes failing to provide sustained support to the currency despite positive comments on the economy, as the central bank also reiterated a stronger currency would complicate the economic transition.

    RBA minutes from Mar 7th meeting stated that it judged steady policy was consistent with growth and inflation targets and that rising AUD/USD would complicate economic transition. RBA also stated that economic growth is to accelerate gradually to above potential over the next 2 years and higher commodity prices could last longer than first thought given the stronger global demand. (Newswires)

    COMMODITIES

    Copper prices slipped after reports that the union for workers on strike at the BHP Billiton Escondida copper mine held talks with the company and also coincided with a 4% drop in Dalian iron ore futures during early trade. Elsewhere, gold (-0.4%) prices pulled back from 2 week highs, while WTI crude futures were uneventful with participants looking ahead to the upcoming inventory reports to spur trade, beginning with today’s API release.

    US

    US treasuries traded higher across the curve in a touted short squeeze in what was another day with relatively light volumes. The Fed speakers (Kashkari, Evans and Harker) did little to alter direction with Yellen scheduled to speak later in the week. Finally, June’17 10y T-note futures settled at 124.00, up 8 ticks.

    Fed's Evans (Voter, Dove) said the setting for monetary policy has improved and he supports two or tspanee rate hikes this year. However, Evans went on to say that there is some chance of 4 rate hikes this year, if things were really a lot stronger. (Newswires)

    US President Trump wants to include to the Republican healthcare bill a provision to reduce drug costs tspanough competitive billings. Trump also stated he is preparing an executive order to put coal miners back into work and is working to remove regulations in the auto-industry. (Newswires)

    US Government officials have temporarily banned most electronics larger than a cell phone on flights in and out of the US from 13 countries, although the items will be allowed in checked-in baggage. (Newswires)

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