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[PODCAST] US Open Rundown 14th January 2019

  • Major European Indices are in the red [Euro Stoxx 50 -1.0%], with poor performance in luxury names as China exports/imports miss forecasts
  • Chinese trade numbers weigh on the CNY, AUD, NZD while providing impetus to the JPY
  • GBP/USD largely unreactive to the EU assurances letter as MPs seek legally-binding material ahead of tomorrow’s meaningful vote
  • Looking ahead, highlights include earnings from Citi, while US data has been postponed due to the US government shutdown


Asian equity markets began the week subdued following the indecisive close on Wall St last Friday as the US government shutdown extended to its longest in history, while disappointing Chinese trade data and the absence of Japanese participants for Coming of Age Day also contributed to the downbeat sentiment. ASX 200 (Unch.) failed to hold on to early gains as strength in Telecoms and its largest weighted Financials sector was eventually overwhelmed by losses in the broader market, while KOSPI (-0.5%) was lacklustre amid softness in the index heavyweights including Samsung Electronics and Hyundai Motor. Hang Seng (-1.4%) and Shanghai Comp. (-0.7%) were also pressured as Chinese Exports and Imports figures took a further hit from the US-China trade dispute, although losses in the mainland were capped after the PBoC injected liquidity to the interbank market in which it utilized 28-day reverse repos for the first time since June last year.

PBoC injected CNY 80bln via 7-day and CNY 20bln in 28-day reverse repos for a net daily injection of CNY 20bln. (Newswires)
PBoC set CNY mid-point at 6.7560 (Prev. 6.7909)

Chinese Trade Balance (USD)(Dec) 57.06B vs. Exp. 51.53B (Prev. 44.71B)
Chinese Exports (Dec) Y/Y -4.4% vs. Exp. 3.0% (Prev. 5.4%)
Chinese Imports (Dec) Y/Y -7.6% vs. Exp. 5.0% (Prev. 3.0%)

China Customs said the biggest worry this year in trade is still external uncertainty and protectionism, while it added that trade growth may slow this year. (Newswires)


US Senator Graham commented that US President Trump is ready to end the shutdown. (Newswires)


UK PM May warned that failure to back her Brexit deal risks a no-deal Brexit and is to say she believes parliament will more likely block Brexit than the UK leave without a deal, according to the PM's office. In separate reports, the UK government commented that any defeat by less than 100 votes on Tuesday would be counted as a good result. (Newswires)

EU Assurances to UK say they are committed to work on a trade deal by Dec. 2020 to avoid triggering the Irish backstop; backstop will be temporary until a better solution is found. EU has a desire that the withdrawal agreement will be ratified, with the current deal the best outcome. (Newswires)

Furthermore, reports in The Times noted that Brussels expects the UK to ask for an extension to Article 50 to allow Brexit to be delayed if the House of Commons rejects Theresa May’s deal tomorrow, while there were separate reports that Pro-EU MPs are said to publish draft legislation on Monday for a 2nd referendum. (Newswires/Independent/Times/Telegraph)

BBC’s Europe Editor Katya Adler tweeted that to her understanding, the EU letter of assurances does not contain anything new. The letter would come from EU Commission President Juncker and Council President Tusk, though they cannot change the Brexit deal without the EU 27 leaders. (Twitter)

Politics Home Editor Schofield tweets "Former minister Nick Boles confirms he and Tory rebels will table a bill tonight giving the PM three weeks to come up with a new Brexit deal if she is defeated tomorrow. If she can't, parliament would take over.". (Newswires)

BBC's Katya Adler tweets, in today’s EU letter of assurances on Brexit deal, the real message to MPs to help Theresa May is the EU's insistence that, as PM claims, this deal is the ONLY deal on offer, none of my European contacts believe this letter will get the deal passed on Tuesday. (Twitter)

Brussels is to propose extending majoring voting to all EU tax policies by end-2020 in a move to scrap national vetoes but will likely trigger opposition from member states. (FT)

Greece PM Tsipras is calling for a vote of confidence in the government after junior coalition partner and Defense Minister Kammenos announced to quit in protest of a deal to end dispute with Macedonia regarding its name. (Newswires)


US President Trump tweeted that US is starting long overdue pullout from Syria, while he also threatened to devastate Turkey economically if Turkey hits the Kurds and likewise doesn't want the Kurds to provoke Turkey. (Twitter)

Iran suggested it could restart its nuclear program as its nuclear program chief stated that they have started preliminary activities for designing a modern process for 20% uranium enrichment for its reactor in Tehran. (Associated Press) In separate news, US President Trump’s reportedly instructed the Pentagon last year to provide military options to strike Iran. (WSJ)


Major European Indices are in the red [Euro Stoxx 50 -1.0%], with some underperformance seen in the SMI (-1.1%) weighed on by poor performance in luxury names such as Richemont (-2.1%) and Swatch (-1.0%) following poor Chinese trade data. Other luxury names including Pandora (-6.5%), and LVMH (-3.5%) are in the red on the back of this as well; Burberry (+0.3%) is bucking the luxury trend after being upgraded at Bank of America Merrill Lynch. Sectors are similarly in the red with some slight outperformance seen in healthcare. Other notable movers include Next (-2.9%) in the red after being downgraded at Credit Suisse, and Dialog Semiconductor (+4.3%) after reporting a 7% Y/Y increase in full year revenue. 

PG&E (PCG) said to be in discussions with banks about multi-billion dollar bankruptcy financing and may inform employees on Monday it is preparing a bankruptcy filing for January 29th.; the Co’s CEO Williams is leaving with general council John Simon to takeover in the interim. Company shares are down 50% pre-market. (Newswires)


AUD/NZD/CNY/JPY – The major G10 movers, all in the aftermath of below-forecast Chinese trade data as exports and imports both declined to a 6-month low in USD terms vs. expected rises. As such trade-proxy AUD/USD fell around 0.4% to test its 100 DMA at around 0.7180 while NZD/USD declined 0.3% to test its 200 DMA at around 0.6797, ahead of its 50 DMA at 0.6789 as the technicals are still poised to form a golden cross. Meanwhile, global-growth fears sparked safe-haven demand into the Yen as USD/JPY tested 108.00 to the downside ahead of a Fib level at 107.91, of note 1.1bln in option expiries sit between 108.00-15. Finally, the Yuan snapped a three-day winning streak but remains sub-6.80 vs. the greenback, though the currency is of course dampened by the disappointing trade figures, USD/CNY is capped by a firmer PBoC CNY fix of 6.7560 (Prev. 6.7909). In terms of techincals, USD/CNH breached its 50 HMA to the upside at 6.7692 with the 100 HMA above the 6.8000 level. It is also worth noting that Goldman Sachs raised their 3, 6, 12 month USD/CNH forecast to 6.80 (Prev. 6.95), 6.80 (Prev. 7.10) and 6.70 (Prev. 6.90) respectively citing an improvement in sentiment around US-Sino trade talks.

DXY – Relatively docile session for the buck thus far as the index sits around the middle of tight 95.527-726 range as the US government shutdown extends to the longest in history. Subsequently, the US data originally scheduled for release today (building permits, advanced goods trade balance and durable goods) have been cancelled. 

GBP, EUR – Both little changed on the day, while the latter is largely fluctuating with the dollar and the Pound awaits tomorrows meaningful vote, which was originally scheduled for December 11th last year. The deal is widely expected to be voted down and BBC reports that around 100 Tory and the 10 DUP MPs are expected to join the Labour and the opposition parties in voting against the deal. In terms of where we stand with Brexit, PM May is to deliver a speech at 15:30 GMT where she will warn that Parliament is more likely to block Brexit rather than let Britain leave without a deal. Furthermore, the assurances provided by Brussels are also understood to not be enough to sway MPs towards PM May’s deal scheduled for 19:00GMT tomorrow. Cable was largely unfazed by the release of the EU assurances which offered little in the way of legally-binding material MPs sough for. From a technical standpoint, Cable recently saw a pop higher and rests just below its 100 DMA at 1.2893 with no notable option expiries for the day. Going back to the EUR, the currency was relatively unmoved by below-forecast industrial production figures following Germany’s dismal IP release last week. EUR/USD is currently below its 100 DMA at 1.1476 and in close proximity to the psychological (and 200 HMA) at 1.1450, while there is nothing notable to report regarding option expiries.

TRY – The stand-out EM underperformer as USD/TRY reclaimed 5.50 to the upside amid a tweet by US President Trump over the weekend where he threatened to devastate Turkey if Turkey hits the Kurds, subsequently pouring cold water over what seemed like a fruitful relationship between the countries.


The risk off tone after disappointing Chinese Export figures is lifting Core EU debt ahead of UK PM May’s speech later in the day where she is set to say that a no-Brexit is more likely than a no-deal situation, a turn of events she has branded as a “catastrophe for democracy”. This alongside suggestions that pro-EU MPs are looking to publish draft legislation for a 2nd referendum has seen 10year Gilt futures rally into outperformance and trade near a session best of 123.19. German 10-year futures marginally lag their UK counterparts and trade in the top end of a 164.43-164.69 range. The BTP/Bund spread has narrowed marginally this morning to 260 bps, whilst a Bank of Italy director stated that this measure has not had an impact on bank capital but citing caution should it increase again. BTPs are the European underperformer, however, and trade under 126.50 with Deutsche Bank stating that the revised Italian growth figure of 1% is still optimistic as the Italian economy is losing steam and the new fiscal plan is “barely expansionary”.

Elsewhere, as the US Government Shutdown runs into record length UST futures are benefitting from the sour risk tone with strength seen across the curve and outperformance noted in the long end. 10-yr futures hit a one week high of 122-09 overnight after the Chinese exports figures which noted a 4.4% decline YY, with further support offered by WaPo’s suggestions that US President Trump hid details of face-to-face talks with Russian President Putin, as concerns about global growth and political instability remain the dominating factors.


Brent (-1.4%) and WTI (-1.6%) prices are in the red, just below USD 60.00/bbl and USD 51.00/bbl respectively, as the risk tone stemming from the ongoing US government shutdown and disappointing Chinese trade data weighs on markets. Regarding China, December oil imports of 10.35mln BPD, down from November’s figure but up from the 7.97mln BPD for December 2017. Separately, Saudi Energy Minister Al Falih stated that in his opinion OPEC+ has taken enough action to balance the oil market this year, and that there is no need for an extraordinary OPEC meeting before April.

Gold (+0.4%) is in the green, towards the sessions high of USD 1294.57/oz as the aforementioned risk tone weighs on markets. Elsewhere, China’s 2018 iron ore imports fell -1% Y/Y, the first yearly decline since 2010. In contrast China’s 2018 copper imports increased 12.9% to a record high of 5.3mln tonnes.

Saudi Energy Minister Al-Falih stated there is no need for an extraordinary OPEC meeting before April and that the oil market is on the right track. (Newswires)

China 2018 copper concentrates and ore imports at record high, while 2018 unwrought aluminium and product exports also at a record high. However, China December iron ore imports felt to the lowest since June at 86.1mln tons. (Newswires)

THAT'S A WRAP, YOU LEGENDS!! Thanks for another amazing week. Enjoy your weekend, be safe - this lockdown is almos…