Original insights into market moving news

[PODCAST] US Open Rundown 22nd January 2019

  • European equities are in the red [Euro Stoxx 50 -0.6%] as risk sentiment continues to deteriorate
  • US-Sino tensions heighten as China vows to retaliate if Huawei Executive Meng is extradited
  • Looking ahead, highlights include US Existing Homes Sales, New Zealand CPI
  • Earnings: Capital One Financial, IBM, Johnson & Johnson, Travelers Companies, United Technologies and Prologis


US President Trump stated there was a recent false report about lifting China tariffs, while he added trade talks are going well and a trade deal with China could very well happen. In separate news, it was also reported over the weekend that US President Trump’s Administration is said to be preparing an executive order that would restrict Chinese telecoms from operating in US. (Newswires)

US President Trump reportedly made an offer on the shut down over the weekend that would provide “Dreamers” and Temporary Protection Status visa holders protection to stay in US for another 3 years in exchange for funding the Border Wall, although this was said to have been rejected by the Democrats. (Newswires)

UK PM May says the right way to rule out a no-deal is for the house to approve a deal, and that tge EU are unlikely to extend Article 50 unless the UK has a plan. Also stated that she will not reopen the Belfast agreement, will be holding further Brexit meetings this week and acknowledges that their approach has changed following the first vote. Doesn’t believe there is a majority for a second referendum.

Chinese GDP (Q4) Y/Y 6.4% vs. Exp. 6.4% (Prev. 6.5%), which is the slowest growth in 28 years.


Asian equity markets were negative as the region lacked impetus following the non-existent lead from the US due to Martin Luther King Jr. Day and as the slowest growth in China in nearly 3 decades continued to reverberate across risk sentiment. ASX 200 (-0.5%) was led lower by underperformance in its largest weighted financials sector and with miners dampened following softer output numbers by BHP, while Nikkei 225 (-0.5%) was also pressured with losses later exacerbated by currency flows. Hang Seng (-0.7%) and Shanghai Comp. (-1.2%) conformed to the downbeat tone in the aftermath of the recent Chinese growth figures which some expect to further deteriorate this year and after the PBoC refrained from open market operations for a 2nd consecutive day which resulted to a net daily drain of CNY 80bln, while there were also reports the US is to proceed with the formal extradition of Huawei's CFO. Finally, 10yr JGBs were underpinned amid the uninspiring risk tone in the region and as yields also declined in the super long-end in which the 40yr yield drop to its lowest since 2016.

PBoC skipped open market operations for a net daily drain of CNY 80bln. (Newswires)
PBoC set CNY mid-point at 6.7854 (Prev. 6.7774)

China Foreign Ministry, when asked about a retaliation against the US if Huawei Executive Meng is extradited, said it will respond with further according taken by the US and added that what the US did is wrong. (Newswires)

Chinese Global Times Editor tweets, China has hoped to reach a reasonable trade deal with the US. When China's GDP grew at double digit rate, we wished China-US relations go well. But if the US forces China to sign an unequal deal, Beijing won't yield even if it is negative growth, let alone 6.6%. (Newswires)

Two US business groups have issued a report on how China is moving forward with a technology policy set to be a "key point of contentions" in US-Sino trade talks. (WSJ)


US President Trump tweeted that China posted slowest economic numbers since 1990 due to US trade tensions and new policies, while he added it makes so much sense for China to do a real deal and stop playing around. (Twitter)

US is to proceed with formal extradition of Huawei's CFO Meng. (Globe and Mail)

Wall Street backlash ruins plans to transform swaps market; a Republican regulator is planning to withdraw a revamp of rules for the swaps market due to criticism from firms. (WSJ)


UK Conservative Party lawmaker Rudd warned PM May she could face dozens of ministerial resignations next week if Tory MPs are banned from voting for a plan that helps stop a no-deal Brexit. (Times)

UK PM May's chief Brexit negotiator, Oliver Robbins, privately cast doubt on her ability to renegotiate the Irish backstop as part of her Brexit "plan B", The Telegraph has been told. (Telegraph)

UK opposition Labour Party leader Corbyn has given in to pressure from party members and MPs by endorsing a plan to force a second EU referendum. (Telegraph)

UK Average Weekly Earnings 3M YY Nov 3.4% vs. Exp. 3.3% (Prev. 3.3%) (Newswires)
UK ILO Unemployment Rate Nov 4.0% vs. Exp. 4.1% (Prev. 4.1%)

French Finance Minister Le Maire says a hard-Brexit is now more likely than it was a few weeks ago. (Newswires)

European Commission are to cut Italy's growth forecast for 2019 to 0.6% (currently 1.2%) or "slightly below"; according to La Repubblica. (La Repubblica)


Major European equities extended losses [Euro Stoxx 50 -0.6%] after briefly pairing back opening losses as the risk sentiment continued to deteriorate. The European banking sector is underperforming, with the sector weighed on by UBS (-4.3%) following poor results; with this dragging other banking names down in sympathy such as Credit Suisse (-1.0%) and Deutsche Bank (-3.6%). Deutsche Bank also impacted by reports that they, alongside another bank, have been accused of fraud with a EUR 11bln lawsuit filed against them. Other notable movers include IG Group (-6.7%) who are at the bottom of the Stoxx 600 after stating that their HY net revenue and profit are down by 6% and 18% respectively. At the other end of the Stoxx 600 are Hugo Boss (+5.0%) who reported a beat on their Q4 sales.


DXY – Relatively flat on the day but choppy within a 96.300-480 range following an uneventful Asia-Pac session. The buck experienced a bout of Dollar demand in earlier European trade which coincided with comments from the Chinese Foreign Ministry regarding the extradition of Huawei’s Executive Meng wherein China strongly opposed the decision by the US and stated they will retaliate in accord with US lawmakers’ decisions. This saw the DXY push higher to intraday highs and levels just shy of 96.500 before a tweet by China’s Global Times Editor stating that China will not yield to an unequal deal from the US sent the index lower to around the middle of today’s range. On the States-side data front, today sees a scarce calendar with the release of existing home sales scheduled.

GBP – Mixed trade as the Pound benefits from the pullback in the buck alongside optimistic jobs data in which headline average earnings beat expectations while the ILO unemployment rate ticked lower. Cable showed some strength in the run-up to the release and as the numbers provided further impetus for the Sterling, GBP/USD extended gains and breached its 100 DMA to the upside at 1.2891 to reclaim 1.2900 and print session highs of 1.2930. On the Brexit front, in yesterday’s statement PM May said she will to head back to the EU for dialogue, while The Telegraph reported that her chief Brexit negotiator is privately doubtful on her ability to renegotiate the Irish backstop. Furthermore, she dismissed the idea of extending Article 50 with reports emerging by BBC’s Assistant Political Editor Smith stating that Ministers will have to sit through the February recess and weekends to achieve in deal in by the Brexit date, which markets could perceive as a positive as it potentially gives them more time to achieve an appropriate deal. Meanwhile, Tory lawmaker Rudd warned that the Premier could face a dozen resignations if Tory MPs get no vote on plans to stop a no-deal Brexit, though analysts at JPM see the likelihood of a no-deal at 5%.

EUR – Little changed against the Dollar as the single currency fails to benefit from the receding buck as gains are capped by the Sterling-induced decline in EUR/GBP following the aforementioned UK jobs data and Brexit developments, while the release of mixed ZEW number did little to move the single currency. EUR/USD remains flat around 1.1360 while EUR/GBP resides close to session lows under 0.8800 with no notable option expiries today.

JPY – A positive day for the Yen amid overnight strength from the risk-averse tone and as the BoJ began their 2-day policy meeting (full preview available on the Research Suite). USD/JPY hovers under 109.50 (vs. low of 109.34) with the pair’s 50 and 200 DMAs poised to form a death-cross.

AUD, NZD – The marked underperformers as the high-beta currencies fail to benefit from the pullback in the dollar. The Aussie bears the brunt of a global slowdown as IMF slashed global growth forecasts yesterday, while simultaneously the currency is pressured by safe-haven demand in the JPY which subsequently sent AUD/JPY below 78.00 to an intraday low of 77.88. Meanwhile the Kiwi falls in sympathy to its antipodean counterpart, albeit to a lesser extent, with NZD/USD straddling just above 0.6700 (vs. high of 0.6734).


Core EU and UK fixed income futures kicked of the day on the front foot and 10-year Bund and Gilt futures hit session peaks of 164.52 and 122.96 respectively but have pared gains in recent trade to essentially trade flat for the day. Technical factors, as opposed to fundamental, likely drove the reversion with Bunds failing to convincingly break the 164.50 level and Gilts also unable to break through the 123.00 handle to the upside. Bunds were also offered marginal support by a ZEW survey which was soft, but not as bad as some had feared. Gilt traders will now be looking out for further direction from events in Westminster, BoE’s Carney who has now arrived at the Davos forum. In the periphery, BTP 10-year futures marginally underperform their German counterparts and trade with gains of just a shade under 10 ticks despite the EU commission set to cut their Italian growth forecast for 2019 to 0.6% from 1.2%, as according to La Repubblica, the second institution in a week to cut their forecast after the Italian Central Bank.

In the USTs are playing catch up after yesterday’s MLK day break in cash markets. Futures are higher across the curve with the majority of the action in the longer end. Focus has returned to Huawei as the Globe and Mail reported the US is to go ahead with the formal extradition of CFO Meng, with traders’ eyes’ now set on further responses by the Chinese Foreign Ministry.


Brent (-1.9%) and WTI (-1.8%) extended losses as the complex is impacted by the negative risk tone and US absence from market yesterday. The energy complex saw another leg lower after Saudi Energy Minister Al Falih has reportedly cancelled his trip to Davos; Al Falih was due to speak on Wednesday on the New Energy Equation but more importantly, the Energy Minister was due to hold talks on the recent OPEC+ production cuts with the Russian Eenergy Minister. Elsewhere, the Canadian province of Alberta is expected to announce a CAD 2bln oil sector investment plan. Separately, as yesterday was a US holiday API weekly data will be released tomorrow.

Gold (+0.3%) is in the green, trading towards the top end of the sessions range as markets continue to be impacted by the negative risk tone and a receding dollar. Elsewhere, China’s top steel-making city of Tangshan has issued a level 2 smog alert; to be effective until January 25th. BHP, the world’s biggest miner, reported a 9% fall in iron ore production, as well as highlighting USD 600mln impact due to iron and copper operations disruptions.

Canadian province Alberta is expected to announce CAD 2bln oil sector investment plan, in which Alberta Premier Notley is reportedly to announce a CAD 2bln facility to squeeze more oil into clogged pipelines. (Globe and Mail)

US equity futures reopen lower with both Emini S&P and Dow futures down around 0.5% after the mixed Chinese PMI fig…