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RANsquawk EU Open Rundown 27.04.17

Asian equities followed suit from their US counterparts which failed to be inspired by the latest Trump tax plan

Focus in FX has been on CAD and MXN which have both been supported after Trump agreed not withdraw from NAFTA ‘at this time’

Looking ahead, highlights include German regional and national CPI, Riksbank & ECB rate decisions and US durables

  • ASIA

    Asia equity markets traded lacklustre following the similar lead from Wall St. where the announcement of Trump’s tax plans left much to be desired and failed to provide the impetus many had hoped for. As such, mild weakness was seen in Nikkei 225 (-0.2%) with participants also uninspired following a mundane BoJ policy decision, while ASX 200 (+0.2%) was resilient as strength in financials offset losses across commodity-related sectors. Shanghai Comp. (-0.4%) and Hang Seng (-0.1%) failed to benefit from encouraging Chinese Industrial Profits which surged 23.8% Y/Y last month, as regulatory concerns dampened sentiment following reports the banking industry was urged to pull back from shadow banking. Price action in 10yr JGBs was also subdued as the BoJ provided no surprises, while a cautious tone in stocks only resulted to minimal support for the Jun’17 contract.

    BoJ maintained its QQE with yield curve control policy and kept NIRP at -0.10% as expected. BoJ raised its economic assessment and stated that Japan's economy is turning towards moderate expansion. BoJ also said Japan is likely to see inflation hit 2% target around fiscal 2018, although added that momentum towards target is lacking and that risks for economy and prices are tilted to the downside. (Newswires)

    China’s banking sector has been urged to pull back from shadow banking in a shake-up that could drain trillions of CNY in funds from the bond and stock markets, according to press reports. (SCMP)

    China Industrial Profits (Mar) Y/Y 23.8% (Prev. 2.3%). (Newswires)

    PBoC injected CNY 30bln in 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 6.8896 (Prev. 6.8845). (Newswires)

    EUROPE/UK

    Newsflow from the region remains light overnight.

    FX

    CAD and MXN stole the limelight as concerns the US could withdraw from NAFTA were alleviated after US President Trump agreed not to terminate the trade pact ‘at this time’ following conversations with Mexican President Pena Nieto and Canadian PM Trudeau. This firmly supported CAD and MXN in which USD/CAD declined around 70 pips to below 1.3600, while USD/MXN retreated to a sub-19.00 handle. Elsewhere, the rest of FX trade was mostly quiet with USD/JPY range-bound to hold above the 111.00 level, with an uneventful BoJ policy conclusion ensuring JPY price action remained drab.

    Venezuela is to withdraw from the Organization of American States, according to the Foreign Minister. (Newswires)

    COMMODITIES

    Price action across commodities was relatively uneventful during Asia trade with gold (-0.2%) prices languishing near 2-week lows following yesterday’s strength in the greenback. As such, copper pulled back from recent gains amid a cautious risk tone seen in markets, while WTI crude futures were also subdued it met resistance at the USD 50/bbl level during yesterday’s trade.

    GEOPOLITICAL

    A joint statement from US Secretary of State Tillerson, Secretary of Defense Mattis and Director of National Intelligence Coats stated that North Korea represents an urgent tspaneat to national security and that they remain open towards negotiations but also remain prepared to defend US and its allies. (Newswires/Twitter)

    Various Twitter sources reported Israeli jets conducted an airstrike on Damascus Airport which was said to hit an ammunition depot and air force base used by Iranian-backed forces. (Twitter)

    US

    US treasuries finished with minor gains but traded in a tight range tspanoughout the day. The 5y note auction was soft with a slight tail and dealers left with more than the usual proportion of issuance.

    The Trump administration’s tax plans confirmed a 15% corporation tax and simplification of the tax brackets for individuals. There was no mention of a border adjustment tax and Cohn said more details would be released at a later date. (CNBC)

    There were initial reports that US President Trump was said to be close to notifying countries of his intent to withdraw from the NAFTA. However, it was later reported that Trump agreed to not terminate NAFTA ‘at this time’ following conversations with Mexican President Pena Nieto and Canadian PM Trudeau. (Newswires)

    US House could pass a one-week bill to fund the government and allow more time reach a longer-term deal, according to sources. (Newswires)

    The Freedom Caucus said they would support the new health care bill with new language, while reports stated that a vote could come as early as Friday. (Politico/Axios)

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