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RANsquawk EU Open Rundown 13.11.17

  • Asian indices were mixed, with no fresh catalyst for a decisive move
  • GBP was the underperformer in the major space as source pieces suggested as many as 40 MP’s are pressuring UK PM May to resign
  • Today’s main highlight is potential comments from ECB’s Constancio

ASIA-PAC

US index futures edged higher in early dealing this week, but lacked any real conviction. Asian indices were mixed, with no fresh catalyst for a decisive move. Japan’s Nikkei 225 (-0.1%) continued to edge away from the multi decade highs set last week. Elsewhere Australia’s ASX (-0.1%) ebbed lower, while China’s Shanghai Comp. (+0.4%) and Hong Kong’s Hang Seng (+0.2%) tiptoed highersupported by a record breaking Singles’ Day event at the end of last week.

Fixed income dealing was rangebound with Treasuries edging away from worst levels in a modest bull flattening move, despite FOMC voter Harker reiterating that he had pencilled in a December hike and tspanee further hikes in 2018, inflation dependent. JGB’s moved lower as the BoJ refrained from engaging in Rinban operations today, with the long end experiencing a degree of mild underperformance.

PBoC sets the CNY mid-point at 6.6347 vs. Prev. 6.6282

RBA Deputy Governor Debelle said that there is a risk that wages will stay lower for longer, although he did concede that some pockets of the economy are exhibiting wage pressure, and that he expects the recent uptick investment to last a while. (Newswires)

EUROPE/ UK

Sources suggest that 40 Conservative MP’s are calling for UK PM May to step down. This number is 8 short of the amount required to trigger a leadership challenge (Times) Other sources also suggest that UK PM May is facing a rebellion from pro-European Tory MPs who have vowed to vote against her "crass" plans to ensspanine the date the Britain leaves the European Union in law. (Independent)

Sources suggest that a menacing secret memo from Boris Johnson & Michael Gove to UK PM May dictating terms for a hard Brexit has triggered a new Cabinet rift. (Telegraph) Britain must not cave in to EU demands for a bigger Brexit divorce bill after Brussels set a two-week deadline for the UK to concede, allies of Boris Johnson have warned. (Newswires)

Brexit Secretary Davis stated that he still believes that a trade deal with the EU can be negotiated within the given timeframe. (Newswires) However, separately, Chief EU Brexit Negotiator Barnier noted that the EU is preparing for possible collapse of Brexit talks. (BBC)

Reports suggest that US banks are preparing 'stop gap' Brexit plans to avoid moving London jobs. (Newswires)

UK Chancellor Hammond targets VAT shake-up which would raise up to GBP 2bln per year. (Newswires)

Spanish PM Rajoy called on Spanish companies not to leave Catalonia. He stated that "together we must protect the ties that unite us.” (Newswires)

DBRS Confirmed Greece at CCC (high), Trend Changed to Positive. Confirmed Kingdom of Sweden at AAA, Stable Trend

GEOPOLITICS

Over the weekend, US President Trump tweeted that “President Xi of China has stated that he is upping the sanctions against North Korea. Said he wants them to denuclearize. Progress is being made.” (Newswires) North Korea noted that US President Trump’s rhetoric will never stop North Korea from pursuing nuclear programme. (Newswires) South Korea’s Foreign Minister said that North Korea needs to show signs of change before any talks occur. (Newswires)

US President Trump says "we've made a lot of progress on trade" following meeting with Japanese PM Abe & Australian PM Turnbull. Trump is to issue a statement from the White House on Wednesday on his Asia trip, trade & North Korea.

Reports suggest that US President Trump has offered to mediate over the South China sea dispute.  (Newswires))

US President Trump & Russian President Putin have agreed to continue joint efforts in order to defeat Islamic State, and agreed that there is no military solution for the Syrian conflict. Reports suggested that the two did not discuss north Korea. (Newswires)

Reports suggest that the Saudi King is not going to be stepping down. (Newswires)

Lebanon’s PM is withdrawing resignation conditional on Hezbollah committing to remaining neutral, but reports have suggested that he is to resign in Beirut. (Newswires)

FX

The Greenback began the week on a firmer footing, edging higher against most of its major counterparts. The GBP was the underperformer in the major space as source pieces suggested as many as 40 MP’s are pressuring UK PM May to resign. The AUD also continued to wallow on the back of political uncertainty and cautious comments from RBA Deputy Governor Guy Debelle who suggested “that there is a risk that wages stay lower for longer,” although both the Antipodean currencies managed to reverse their early losses vs. the USD in rangebound trade.

COMMODITIES

Crude oil moved back from best levels, as an earthquake in Iraq and tensions in the Gulf region ultimately did little for oil prices. It is worth noting that press reports from over the weekend suggested that the Saudi King has no plans to step down.

A 7.2 magnitude earthquake has hit Iraq, oil facilities are un damaged according to initial statements. (Newswires)

A pipeline explosion led to Saudi Arabia ceasing oil pumping to Baspanain briefly over the weekend, although flows have now resumed. (Newswires)

Yemen Houthis have tspaneatened to attack warships & oil tankers if ports stay closed. (Newswires)

US

Fed's Harker (Voter) reiterated that he has 'lightly pencilled in' a December rate hike and is looking for 3 additional hikes in 2018, inflation dependant. He remains cautious about low-inflation conundrum, be he does expect a rebound. He also opines that tightening monetary policy is, in part, about preparing for economic shock. He also suggested that the US economy is at full strength, with very little slack seen in the labour market. Harker also suggested that the Fed does not have to remove much accommodation to return to neutral. (Newswires)

House Ways & Means Committee Chair Brady stated that the House will not accept total elimination of state and local tax deductions. (Newswires)

The Treasury curve bear steepened on Friday as traders were said to close curve flattening positions ahead of next week’s possible House vote on tax reform, and Monday’s scoring of the Senate Tax Bill.

Traders were also citing the fall in Bunds, which has led Treasury moves at times this week. Additionally, fixed income traders were said to be cautious after the sell-off in high yield debt intensified.

Yields on 2-year notes rose to the highest in nine years, helping the 2s10s spread to widen. Yields on 10-year notes rose to tspanee-week highs, rising 2bps in the session.

US 10-Year T-Note futures settled 15+ ticks lower at 124-22+
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