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RANsquawk EU Open Rundown 23.01.18

AUDIO NOT AVAILABLE

  • US Senate passes stopgap spending bill to reopen the government
  • Bank of Japan keeps monetary policy instruments unchanged, attention turns to Kuroda
  • Highlights today include German ZEW survey, EU Consumer Confidence and API oil inventories

ASIA

Asia equity markets took impetus from the record levels seen across all major indices on Wall St. and after the US Congress passed the spending bill to end the government shutdown. ASX 200 (+0.8%) and Nikkei 225 (+1.3%) were positive with Australia led higher by the energy sector as it tracked the outperformance of its counterpart stateside, while Nikkei 225 outperformed to reclaim the 24000 level. Elsewhere, Hang Seng (+1.2%) and Shanghai Comp. (+0.5%) were positive with gambling names underpinned in Hong Kong as Wynn Macau shares surged following strong Q4 results from its parent. Conversely, LG Electronics felt the brunt of trade protectionism measures with losses of as much as 5% in early trade after the US imposed a 30% tariff on solar imports to the US and approved safeguard tariff action on imported washing machines. Finally, 10yr JGBs saw mild upside in the latter half of trade, as participants took comfort from an unsurprising BoJ which kept its bond buying intentions stable and eased some tapering concerns.

BoJ kept policy unchanged as expected in which QQE with YCC was maintained and NIRP held at -0.10%. (Newswires)

The decision on YCC was made by 8-1 vote with Kataoka the dissenter again and the central bank also extended the deadline for its loan program by 1yr. BoJ commented that inflation is likely to continue increasing to 2% target but risks to prices tilted to the downside and that inflation expectations have been more or less unchanged, while the central bank affirmed all forecasts for Real GDP and Core CPI.

PBoC injected CNY 80bln via 7-day, CNY 80bln via 14-day and CNY 10bln via 63-day reverse repos. (Newswires)

PBoC set CNY mid-point at 6.4009 (Prev. 6.4112)

UK/EU

Senior member of EU's Brexit team stated that UK has already 'agreed in principle' to a Norway-style transition period for Brexit. (Newswires)

EU Brexit directives draft showed the EU will not allow UK sector by sector access to the single market. (Newswires)

FX

FX price action was choppy in which the USD initially extended on losses despite the breaktspanough in Washington, where both the House and Senate passed the stop gap measure to fund the government to February 8th. This provided early support for its major counterparts and pushed GBP/USD briefly above 1.4000 for the first-time post-referendum, before moves were later pared. AUD also fluctuated as it benefited in early trade after the PBoC set the firmest fix since December 7th 2015, but then reversed gains on cross-related technical selling and amid a slump in iron prices. Elsewhere, the BoJ policy decision provided no surprises as the central bank maintained QQE with YCC and NIRP at -0.10% as expected, although JPY strengthened in a continuation of the moves seen prior to the announcement and amid some slight disappointment after hopes of an upgrade to growth forecasts failed to transpire. Furthermore, analysts at Informa also noted a tweak in the BoJ’s language that ‘inflation expectations have been more or less unchanged’ compared to its previous statement that ‘inflation expectations were weakening’.

COMMODITIES

Commodities were mixed with oil higher as WTI crude futures eyed a retest of the USD 64/bbl level, while gold just about held on to the early mild support from the initial weakness in the greenback. Conversely, copper was subdued and failed to benefit from the broad heightened-risk appetite, amid a sell-off in Chinese commodity trade as Dalian iron ore futures tumbled 5%.

GEOPOLITICAL

North Korea is to mark a new army founding day just before the Pyeongchang Winter Olympics. (Newswires)

US

Yields in the UST complex were higher by between c.1bps to c2.5bps by settlement, though major curves saw small narrowing in the session, (2s10s by 0.2bps, 2s30s by 1.2bps, 5s30s by c. 2bps), though the 2s5s curve saw modest steepening (+0.7bps). Attention was once again on the 10-year yield, which rose above 2.67% at one point in the session, the highest level since 2014. This week, the Treasury will auction USD 103bln of notes this week. With USD 104bln set to mature at month-end, net Treasury supply is seen at -USD 1.5bln by month end. US 10-Year T-Note future settle 6 ticks lower at 122-03.

US Senate voted 81 vs. 18 to pass the stop gap spending bill to reopen government and fund it tspanough to February 8th, while House also voted 266 vs. 150 for the 3-week stop gap measure which President Trump later signed to end the shutdown. (Newswires)

US imposed a 30% tariff on solar imports to the US and approved safeguard tariff action on imported washing machines. This resulted to various comments from other nations including China which said it was dissatisfied with the tariffs on US solar imports. Furthermore, Mexico said it regretted that it was not excluded from the measures, while South Korea stated it is seeking to reinstate tariffs on US products and have asked WTO to stop trade concessions. (Newswires)

Source: RANsquawk

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