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RANsquawk EU Open Rundown 02.05.17

**NOTE, THIS REPORT INCLUDES STORIES FROM OVER THE WEEKEND AND YESTERDAY GIVEN MARKET CLOSURES IN EU AND UK YESTERDAY**

  • Asian equities trade with little in the way of firm direction as markets return from holiday and digest softer than expected Chinese PMIs
  • Support was seen for AUD after the RBA kept rates on hold as expected while being upbeat on the global economy
  • Looking ahead, highlights include Eurozone Mfg. PMIs

ASIA

Asian equities traded mixed as the majority of the region returned from public holiday and digested the weaker than expected Chinese PMI data. ASX 200 (-0.4%) was led lower by miners and financials after gold prices declined and following earnings from Big 4 bank ANZ Bank which missed expectations despite showing H1 cash earnings rose 23%. Nikkei 225 (+0.6%) traded positive on a weaker currency, while Shanghai Comp. (-0.3%) and Hang Seng (+0.3%) were mixed with the mainland bourse pressured after the PBoC refrained from open market operations and as participants mulled over the latest PMI data in which the Official and Caixin Manufacturing PMIs missed estimates to print 6-month and 7-month lows, respectively. 10yr JGBs traded flat with slightly weaker demand seen in today’s enhanced-liquidity auction for 2yr, 5yr, 10yr and 20yr JGBs, while the curve was mixed with mild underperformance seen in the long-end.

Chinese Official Manufacturing PMI (Apr) M/M 51.2 vs. Exp. 51.6 (Prev. 51.8); 6-month low. (Newswires)

Chinese Non-Manufacturing PMI (Apr) M/M 54.0 (Prev. 55.1); 6-month low

Chinese Caixin Manufacturing PMI (Apr) 50.3 vs. Exp. 51.3 (Prev. 51.2); 7-month low

BoJ minutes for March 15th-16th meeting stated that Japan's economy continued moderate recovery trend and exports picked up. Minutes also stated that members agreed inflation lacked strength and that it was not appropriate to raise the yield target because yields rose overseas. (Newswires)

South Korean Finance Minister Yoo stated that they are already working with US on lowering the trade surplus, while US National Security Advisor McMaster said he assured South Korea’s National Security Chief that US will pay for the THAAD system deployment. (Newswires)

EUROPE

French Presidential Candidate Le Pen suggested that she would not hurry to leave the Euro if elected and commented that she thinks there will be talks in any form to renegotiate terms which they are preparing for. (Newswires)

Former Italian PM Renzi reclaimed leadership of the ruling PD party with 72% of the votes among party supporters over the weekend. (Newswires)

Greek Finance Ministry stated negotiators for Greek government and its creditors conclude agreement on bailout reforms. This would release the next disbursement of funds to meet about EUR 7bln of debt payments due in July, while the agreement includes Greece commitment to further cuts and sets conditions for creditors to discuss debt-relief. (WSJ)

S&P affirmed Germany at AAA; Outlook Stable. Fitch affirmed Netherlands at AAA; outlook stable. (Newswires)

UK

S&P affirmed the UK at AA; outlook still negative. (Newswires)

EU-27 leaders agreed to Brexit negotiation draft guidelines over the weekend in which talks will begin after the UK election on 8th June and with a deadline to complete negotiations on 29th March 2019. The guidelines also confirmed no discussions on future relations between EU and UK will occur until the exit process is completed. There were also comments from German Finance Minister Schauble stated that the UK should understand it will not have advantages over 27 EU members after Brexit negotiations are completed and commented that there is no free lunch. (Newswires)

FX

JPY underperformed following the safe-haven outflows seen during US trade where the Nasdaq 100 posted fresh record highs, which saw USD/JPY approach 112.00 to the upside and underpinned JPY-crosses. Antipodeans benefited in which AUD/USD and NZD/USD extended on gains above 0.7500 and 0.6900 respectively. Further support was seen in AUD following the RBA rate decision where the central bank was upbeat on the global economy and which coincided with a break above 1.0900 in AUD/NZD.

RBA kept the Cash Rate unchanged at 1.50% vs. Exp. 1.50% (Prev. 1.50%), while it reiterated that unchanged policy is consistent with sustainable growth and achieving inflation target. RBA also commented that higher commodity prices give significant support to Australia's national income and that a broad-based pick up was seen globally since last year. (Newswires)

COMMODITIES

The commodities complex saw quiet trade overnight, despite the influx of market activity following the reopen of several markets across Asia, although copper pulled back amid poor Chinese Caixin Manufacturing PMI data and after Freeport McMoRan said its Indonesia arm was working with the union to resolve strikes, while gold and WTI prices were uneventful and languished near the prior session’s lows.

US Baker Hughes Total Rig Count (Apr) 870 (Prev. 857); 15th Consecutive weekly increase.

Iran Oil Minister Zanganeh stated there are positive signals from OPEC and Non-OPEC for extension of output cuts. (Newswires)

GEOPOLITICAL

North Korea conducted a missile test on Saturday, which Japanese and South Korean officials said had failed, while Japanese PM Abe commented that the latest firing represents a grave tspaneat to Japan. In related news, North Korea tspaneatened to sink a US nuclear submarine currently deployed near the Korean peninsula if the US takes provocative action. (Newswires/Twitter)

North Korea accused the US of pushing the Korean Peninsula to the brink of a nuclear war after US bombers flew over the area in a training exercises with the South Korean Airforce. (Newswires)

US

US Congress is reported to have reached a tentative deal on a USD 1tln spending bill, which will fund the federal government tspanough to September 30th. This was after US President Trump initially signed a congressional stopgap funding bill on Friday to fund government for an additional week and allow time for lawmakers to negotiate on the larger spending package. In other news US President Trump also stated that the healthcare vote could occur as soon as this upcoming week. (Newswires)

The risk on sentiment was clear in treasury markets, as US treasuries were offered tspanoughout the session. The comments by Mnuchin regarding longer ultra-issuance and the Atlanta Fed's preliminary GDP Now forecast of 4.3% growth in Q2 sent the complex down to new session lows, however, slight support was seen into the CBOT settlement, settling at 125.15, down 8 ticks.

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