Original insights into market moving news

[PODCAST] US Open Rundown 4th February 2019

  • A lacklustre start of the week for European equities [Eurostoxx 50 -0.4%] as the region failed to sustain the momentum seen in Asia
  • Dollar continues on a firmer footing as JPY and AUD underperform, while GBP still suffers from Brexit fatigue
  • Looking ahead, highlights include US Building Permits and Starts, Durable Goods & Factory Orders, New York ISM Business Conditions
  • EARNINGS: Alphabet, Gilead Sciences, Sysco


Asian equity markets began the week positively but with gains only marginal amid the mass closures in the region for the Lunar New Year and following the indecisive performance on Wall St last Friday amid mixed employment data. ASX 200 (+0.5%) was led higher by energy names and with optimism also seen in the largest weighted financials sector despite the looming Banking Royal Commission final report on the industry which was released after the close and referred 24 misconduct to regulators but did not suggest criminal charges. Nikkei 225 (+0.5%) was underpinned by favourable currency moves and a slew of earnings, but with Sony and Honda among the few notable underperformers after Sony reduced its revenue outlook and Honda posted a 34% drop in 9-month net. Elsewhere, Hang Seng (+0.2%) traded indecisive amid the absence of mainland participants all week and early closure in Hong Kong, while Chinese PMI data over the weekend was somewhat inconclusive in which Caixin Services PMI topped estimates but Caixin Composite PMI weakened from prior. Finally, 10yr JGBs were lower with demand subdued by the gains in riskier assets and as prices tracked the post-NFP declines in T-notes, although losses were contained by the BoJ presence in the market for a respectable JPY 1tln of JGBs.

Chinese Caixin Services PMI (Jan) 53.6 vs. Exp. 53.3 (Prev. 53.9). (Newswires)
Chinese Composite PMI (Jan) 50.9 (Prev. 52.2)


US President Trump commented on Saturday that he expects to reach a trade agreement with China soon, while there were also reports that President Trump may meet with Chinese President Xi in Da Nang, Vietnam at the end of February. In related news, China state-owned Cofco Group said it purchased an additional 1mln tons of US soybeans. (Newswires/SCMP)


Fed’s Kashkari (non-voter, dove) said Chairman Powell is coming around the view that more rate hikes are not needed. (Newswires)


UK PM May said she will seek a pragmatic solution regarding Brexit when she returns to Brussels and said she will be armed with a fresh mandate and new ideas. (Newswires) Additionally, UK PM May could be planning for a general election in June, according to reports; reports were later downplayed by Boris Johnson. (Sky News)

UK PM May has invoked the support of Jeremy Corbyn to insist the EU must offer concessions on her Brexit deal, as she states that she will "battle for Britain" when she travels to Brussels to re-open negotiations. (Telegraph)

UK Business Secretary Clark reportedly urged PM May to rule out a no-deal Brexit and told PM May that Nissan’s decision to cancel production of a new model in its Sunderland factory was a warning sign of what could occur to the UK car industry in the event of failing to reach an agreement. (Newswires)

The Alternative Arrangements Working Group consisting of several UK Tory MPs will conduct its first meeting today to discuss alternative arrangements for the backstop, which will be chaired by Brexit Secretary Barclay. (BBC/FT) However, The Times reported that the Conservative Party’s fragile Brexit truce was close to collapse yesterday after hardline Brexiteers ruled out two of May’s proposals for solving the Irish backstop issue (unilateral withdrawal clause or end date) and insist that they want the backstop scrapped entirely. (Times) Other reports suggested that the truce is fracturing amid fears by Eurosceptics that May will sell them short. (Telegraph)

Rebel Labour MPs are threatening to step down and form their own party amid growing disaffection with Jeremy Corbyn as a new opinion poll puts the Tories seven points ahead. (Telegraph)

Scotland First Minister Sturgeon is to say Britain is nowhere close to being ready for Brexit and is to use speech in US to call again for a 2nd referendum. (The Times)

UK Construction PMI 50.6 vs. Exp. 52.4 (Prev. 52.8)

ECB's Nowotny (Hawkish) said that uncertainty is high but there is no chance of a recession. (Newswires)

Fitch affirmed Finland at AA+; Outlook Positive while it affirmed Czech Republic at AA-; Outlook Stable and affirmed Malta at A+; Outlook Stable. (Newswires)


President Putin said the US breached the INF arms treaty and that Russian will also suspend the treaty, while he is said to agree with Defense Ministry proposal to begin development of a mid-range supersonic missile. (Newswires)

Turkey President Erdogan said Turkey and Syria have begun low level discussions. (Newswires)


A lacklustre start of the week for European equities as the region failed to sustain the momentum seen in Asia. Major indices drifted lower from the open (Euro Stoxx 50 -0.4%) but remain mixed. The energy sector is the marked outperformer amid the price action in the complex in which Brent hovered around USD 63/bbl. In terms of laggards, material names are subdued following weak performances in some base metals during Asia-Pac trade. On the tech front, Japanese-listed Panasonic became the latest company to issue a profit warning, following on from NDIVIA, Apple and Samsung, also citing a slowdown in China, however European tech names largely shrugged this off. The sector is kept afloat by DAX-listed Wirecard (+13.5%) after shares rebounded with a vengeance after an internal investigation into alleged criminal misconduct showed no conclusive findings. Elsewhere, UK-listed gambling names kicked off the week at the top of the Stoxx 600 following a number of positive broker moves at Jefferies, albeit William Hill (+0.4%) and Paddy Power Betfair (+0.4%) have since trimmed gains. Finally, SMI’s Julius Baer (-4.6%) rests at the foot of the Swiss index amid disappointing earnings wherein its CEO highlighted that a cost-to-income ratio of 68% is unlikely this year. Looking ahead State-side, notable earnings include Alphabet (market cap of USD 780bln) reporting after US hours.


DXY - A relatively quiet start to the week, with trade in Asia dampened to an extent by China’s Lunar New Year holidays, but the Dollar continues on a firmer footing in wake of last Friday’s bumper US payroll number that was only partially nullified by less frothy earnings, a rise in the jobless rate and a downgrade to the previous month’s NFP tally. The index is holding towards the upper end of a tight 95.771-571 range, but further off its pre-data low and key chart support ahead of 95.000.

JPY/AUD - The major laggards, partly due to the aforementioned general Greenback bid, but the former also underperforming as the Nikkei climbed and some stops were triggered at 109.85. However, option related offers appear to have capped the headline pair around 109.90 vs 109.45 at the low, with 2 bn expiries running off between 110.00-10, while techs will also be aware that a 61.8% Fib sits just above the big figure at 110.03. Meanwhile, the Aud has retreated further from recent circa 0.7295 peaks following another sharp decline in Aussie building approvals overnight, and is currently nearer the base of 0.7255-25 parameters. Note, expiry interest may also keep Aud/Usd depressed given 1.6 bn at 0.7240-50 for the NY cut.

CHF/GBP - The next weakest G10 links, as the Franc edges down through 0.9950 support and probes below 0.9970, while the Pound is still suffering from Brexit fatigue and uncertainty in the main. Cable is hovering a few pips off the 200 DMA (1.3045) vs 1.3095 at best, with additional pressure coming via another sizeable UK PMI miss, as construction tumbled to 50.6 from 52.8 and vs an expected 52.4.

CAD/NZD/EUR - All narrowly mixed vs the Buck, as the Loonie consolidates gains beyond 1.3100 and the 200 DMA amidst another upturn in crude prices, while the Kiwi gleans support from favourable cross-flows vs the Aud (sub-1.0500) to keep tabs, or within sight of 0.6900. Elsewhere, the single currency is restrained between 1.1435-65 and 2 bn option expiries at 1.1450-65 on the topside vs buying interest from 1.1425 to 1.1400 and just under.


Gilts have bounced further from early Liffe lows to trade 9 ticks over last Friday’s close at 123.42 vs 27 ticks under at one stage, and the recovery has been aided by the much weaker than forecast UK construction PMI. Bunds have also regrouped, but not quite to the same degree despite suspected dip buying around the 165.30 Eurex intraday base that coincides with chart support down to 165.28. The 10 year German debt future remains just a few ticks shy of parity, and perhaps undermined by the relatively impressive BTP resurgence from 127.31 (-78 ticks) to around 128.00 again and not far from 128.29 highs, which also appears partly technical as a 127.35 mid-January low was tested and breached, but not convincingly. Meanwhile, US Treasuries are still mildly softer and the curve fractionally steeper ahead of a fairly busy agenda including housing data, NY ISM, factory orders and durable goods revisions.


The oil complex remains on an upwards trajectory after consolidating during Asia-Pac hours. WTI (+0.1%) and Brent (+0.5%) are choppy and off highs as the former still resides above USD 55/bbl while the latter hovers around USD 63/bbl. Recent gains are attributed to a number of factors leading to a tighter market. As output curbs come into effect, OPEC’s oil supply fell by the most in two years in January; according to a Reuters’ survey. Meanwhile, Russia’s production fell from a record 11.45mln BPD in December to 11.38mln BPD in January, around 35k BPD from October 2018 (the baselines for the global oil accord), albeit, Moscow missed the output cut target last month according to Energy Ministry data. Furthermore, adverse weather in Libya resulted in crude and condensate exports declining to a six-month low with the country’s largest oil field still halted. Prices are also underpinned as US sanctions on Venezuela sharply limits oil transactions between the OPEC member and other countries, but to a lesser extent compared to the Iranian sanctions last year; according to experts citing US Treasury data. Furthermore, oil exports from the country fell to a ten-month low with exports to US and China both declining.

Metals are relatively mixed with spot gold (-0.5%) unwinding some risk premium as risk aversion wanes following Friday’s above-forecast US jobs report and optimistic China-US trade developments. Meanwhile copper was lacklustre as the red metal’s largest buyer is away on a week-long holiday. On the flip side, iron ore prices surged as demand concerns continue to weigh on the base metal amid the collapse of Vale’s dam.

Head of Russian Finance Ministry said that Russian oil production has not peaked yet. (Newswires)

Venezuelan oil exports fell to a ten-month low in Jan at 1.11mln BPD (-11% M/M, -16% Y/Y); according to sources. (Newswires)

  • Exports to US: -16% M/M , -12% Y/Y to 355k BPD
  • Exports to China: -6.1% M/M to 248k BPD
  • Exports to India: +3.3% M/M to 303.2k BPD
*HQ saying toodle pip for the week* Much love guys, as always, see you on the other side! (don't worry about him…