Original insights into market moving news

[PODCAST] US Open Rundown 17th January 2019

  • European indices are mostly in the red, albeit off worst levels as risk sentiment soured following an indecisive Asia-Pac session
  • Choppy DXY amid rising tensions between US and China regarding Huawei’s prosecution and chip sale ban
  • Looking ahead, highlights include US Initial Jobless Claims & Philly Fed Business Index, BoE's Carney, Fed's Quarles Speaking, UK 2024 Gilt
  • EARNINGS: American Express, Morgan Stanley, Netflix


Asian equity markets were choppy throughout the session but eventually followed suit to the gains on Wall St, where financials led after strong earnings from banking powerhouses Goldman Sachs and Bank of America. ASX 200 (+0.3%) and Nikkei 225 (-0.2%) were mixed as resilience in financials and commodity-related sectors kept the Australian benchmark afloat, while Tokyo trade was hampered again by currency effects. Hang Seng (-0.5%) briefly surmounted the 27,000 level for the first time since early December where it then met resistance and Shanghai Comp. (-0.4%) swung between gains and losses as participants digested another substantial liquidity operation by the PBoC, as well as US-China concerns after reports that US prosecutors are to pursue criminal charges against Huawei over theft of trade secrets. Finally, 10yr JGB futures recovered from the prior day’s lows but with price action kept range-bound on the session alongside the indecisive risk tone in the region and a relatively tepid Rinban announcement by the BoJ.

PBoC injected CNY 250bln via 7-day and CNY 150bln via 28-day reverse repos for a net injection of CNY 380bln. (Newswires)

PBoC set CNY mid-point at 6.7592 (Prev. 6.7615)

US lawmakers are reportedly seeking to ban chip sales to Huawei and ZTE (763 HK). (Nikkei) In response, China's Foreign Ministry has called on proposed US legislation against Huawei and ZTE hysteria and urges lawmakers to stop the bill to ban chip sales to the companies. (Newswires)


Fed's Kashkari (Non-Voter, Dove) said Fed has less room to cut rates in future downturn but has other tools, while he repeated that he wants to see wage growth and inflation before backing a rate hike. (Newswires)

US President Trump signed bill to give Federal workers back pay from the shutdown, while there was also reports that the White House threatened to veto the stopgap bill the House is preparing. (Newswires)

US Senate Finance Committee Chairman Grassley said Trump administration's trade negotiations may be delayed due to government shutdown

China has confirmed that Vice Premier Lui will attend trade talks in the US; trip was scheduled for January 30th-31st. (Newswires)


UK PM May said there is now an opportunity to find a way forward on the Brexit and that she intends to deliver on Brexit which she believes it is her duty to do so. PM May also said we must work out what lawmakers want and that she spoke to several parties although the Labour party leader has yet to take part in discussions, while there were comments from Labour Party leader Corbyn who declared there will be no talks with PM May until a no-deal Brexit is off the table. (Newswires)

BBC's Political Correspondent Nick Eardley tweets "Tory sources predict majority of Conservatives in Commons would refuse to back permanent customs union and several ministers would quit" (Twitter) Subsequently reported that the EU are to condition any potential delay to Brexit on an agreement being struck between UK PM May and opposition leader Corbyn, according to El Pais. (Newswires)

House of Commons leader Leadsom said that the statement and motion on the Governmental steps on Brexit will be put forward on January 21st, and will they hold a full day of debate on the next steps on January 29th. (Newswires)

ITV's Peston tweeted, attempts to reach out by PM May to Labour MP's are not going to plan as according to a senior Tory '“Big push-back

Italian PM Conte says Cabinet is to approve budget later today; adding that global growth is not favourable but it is too early to discuss a budget correction for Italy. (Newswires)

ECB's Lautenschläger (Hawk), when asked about she still expects rates to rise this year, she said she'll wait for the March projections before changing her view, she is data-driven and thinks the EZ is still in the projected environment. (Newswires)

EU HICP Final YY Dec 1.6% vs. Exp. 1.6% (Prev. 1.6%) (Newswires)
EU HICP Final MM Dec 0.0% (Prev. -0.2%)


Major European equities (ex-SMI) are mostly in the red, albeit off worst levels [Euro Stoxx 50 -0.3%]. The DAX (-0.3%) is the underperforming index weighed on by the poor performance in the auto sector (-0.9%), following US Senate Finance Committee Chairman Grassley commenting that he believes US President Trump is inclined to impose new US auto tariffs; with Daimler (-1.4%), Volkswagen (-1.4%) and BMW (-0.6%) in the red as a result. Sectors are broadly in the red, with financials underperforming due to Societe Generale (-4.0%) being firmly in the red after stating that Q4 2018 was impacted by disposals. Other notable movers include Sage Group (+5.7%) towards the top of the Stoxx 600 after the Co reiterated their full year 2019 guidance. Elsewhere, ITV (-6.8%) and Voestalpine (-6.2%) are at the bottom of the Stoxx 600 following a broker downgrade and profit warning respectively.


DXY – Choppy day for the Dollar as the index fluctuated in a range of 96.021-250 with upside triggered by rising tensions between US and China regarding Huawei. In terms of the latest, US prosecutors are to pursue criminal charges against the company over trade secret theft, while separate reports noted that US lawmakers are looking to pass a bill which bans chip sales to Huawei and ZTE. In response, the Chinese Foreign ministry urged US lawmakers to stop this bill. On the technical front the index sits just above its 100 DMA at 96.045 ahead of its 50 DMA at 96.639, just below the 2019 peak at 96.960.

JPY–  The Yen firmer on the back of safe-haven demand amid the aforementioned Huawei-related US-Sino tensions. USD/JPY retreats further below the recently-claimed 109.00 level to a low of 108.72 as the pair is underpinned by its 50 HMA around the intraday low. In terms of option expiries, nothing major to report today, however tomorrow sees some USD 3bln between 109.00-10.

EUR - The Euro was largely unreactive to the in-line December inflation figures as the single currency continues to move in tandem with the Dollar, thus EUR/USD has experienced a relatively choppy session in the range of 1.1372-1.1404 ahead of comments from ECB-hawk Lautenschlager who is due to speak in Dublin at 1100GMT following a recently published interview in which she said she will wait for the March projections before changing her view about a rate hike this year. In terms of option expiries, tomorrow sees 4bln scattered between 1.1400-25.

GBP – Sideways action following PM May’s victory at last night’s Labour-tabled vote of no confidence in which the Premier defeated the motion via 325 vs 306 votes, as expected. Sterling sold off with Cable re-testing 1.2700 to the downside in the run up to the results before spiking higher to levels just shy of 1.2900 upon the announcement. In terms of the latest, Spanish press reported that the EU are to condition any potential delay to Brexit on an agreement being struck between UK PM May and opposition leader Corbyn, though Sterling was unreactive to this as Corbyn already made it clear that he will not hold talks with the Premier until a no-deal Brexit is off the table. GBP/USD action is largely dominated by Dollar fluctuation as the pair remains choppy sub-1.2900 and below its 100 DMA at 1.2893.

AUD, NZD – The antipodeans continue their decline from the prior session as the softer risk sentiment and global growth fears weighs on the high-beta currencies. NZD/USD underperforms as the pair broke below its 200 DMA and printed a  session low of 0.6731 with the next support seen around 0.6726 ahead of further support at 0.6700. Meanwhile the AUD/USD is relatively flat as the falling Kiwi mitigates the impact of the rising dollar as AUD/NZD rose to close proximity of 1.065 (vs low of 1.057).


Core EU and UK debt has had an uneventful open, with both 10-year benchmarks essentially unchanged vs. yesterday’s closes of 164.56 and 122.70 respectively after UK PM May’s Government unsurprisingly survived the Labour vote of no confidence. Participants are now looking out for commentary ahead of the Plan B presentation on Monday, with source reports already stating that the EU believe that the UK PM’s attempts to gain support have come too late, alongside suggestions that EU plans are being drawn up for a Brexit extension to 2020. In Italy, 10-yr futures are trading with gains of around 20 ticks after comments from Italian PM Conte that their budget is set to be ratified by the cabinet later today, with suggestions alongside this that the League party are looking for a far-right political partner to join the Government. Traders in Europe will now be looking out for further comments from ECB’s Lautenschlager, who stated this morning that she is data-driven and thinks the EZ is still is in the projected environment, with BoE’s Carney also set to speak.

Elsewhere, UST futures are outperforming their European counterparts, with the Huawei-driven trade tensions that weighed on the Asia-Pac equity space laying some downward pressure on yields across the curve, with the longer end underperforming. This also comes after the Fed’s Beige Book release which, whilst noting a strong US labour market, cited trade and financial volatility as worries. Market participants will now be looking out for the Philly Fed and the Initial Jobless Claims releases, alongside Fed speak set to come from the Hawkish voter Quarles later in the day. On the supply side USD 13bln is up for grabs in the US’s 10yr TIPS Auction.


Brent (-1.0%) and WTI (-1.2%) prices hover under USD 61/bbl and USD 52/bbl respectively, weighed on by the record EIA US crude production figure of 11.9mln BPD for the previous week, an increase from the prior of 11.7mln BPD; a level which was already the largest national output globally. Elsewhere, it has been reported that Russian Energy Minister Novak and Saudi Energy Minister Al Falih are to meet at next weeks Davos summit. Separately, Libyan oil ports Es Sider, Zueitina and Hariga have reportedly reopened following weather improvements.

Gold (U/C) has traded within a narrow USD 4/oz range, as the dollar has also traded largely unchanged due to a lack of catalysts. Elsewhere, the US Senate voted to reject legislation to keep sanctions on companies linked to Oleg Deripaska, including Rusal. Separately, steel company Voestalpine have issued their second profit warning in 4 months; citing US plant operating problems and cartel investigation provisions as the cause.

OPEC monthly report: OPEC crude production fell 751k bpd in December to average 31.58mln bpd, according to secondary sources with cuts led by Saudi Arabia, Librya

Libyan oil ports Es Sider, Zueitina and Hariga have reopened as the weather improved; according to a port worker. (Newswires)

Iran's first post-sanctions condensate arrives off of South Korea, carrying around 1mln/bbl; according to tanker tracking data. (Newswires)

*HQ saying toodle pip for the week* Much love guys, as always, see you on the other side! (don't worry about him…