Original insights into market moving news

[PODCAST] EU Open Rundown 26th February 2019

  • Asian stocks traded mostly lower following an uninspiring lead from Wall Street, Mainland China swung between gains and losses
  • UK PM May is considering a plan to postpone Brexit which she will be discussing with her Cabinet ahead of a Parliamentary announcement
  • UK PM May is said to propose formally ruling out a no-deal Brexit but still wants to keep the option of no-deal alive for later in the year after any potential extension to Article 50
  • In FX markets, DXY was choppy within a relatively tight range, GBP gained on potential Brexit delay, INR weakened amid India-Pakistan tensions
  • Looking ahead, highlights include German GfK Consumer Sentiment, US Building Permits & Housing Starts. US Consumer Confidence, Fed Discount Rate Minutes, BoE’s Carney, Ramsden, Vlieghe & Haskel Testifying, Fed’s Powell testifying before the Senate, German, UK and US Auctions

Earnings from: Macy’s, Home Depot, Thales, BASF, Persimmon


Asian stocks traded mostly lower following an uninspiring lead from Wall Street where the major US indices gave up a bulk of their gains amidst a turn-around in risk sentiment. ASX 200 (-1.0%) extended losses from the open, with all sectors in the red and underperformance in IT, material and oil names amid price action in the energy and base metals complexes. Nikkei 225 (-0.5%) failed to hold onto opening gains as safe-haven flows into the JPY pressured the Japanese benchmark. Elsewhere, Shanghai Comp. (+0.8%) swung wildly between gains and losses following the prior day’s 5% trade-induced rally, whilst Hang Seng (-0.4%) failed to nurse losses as the index was pressured by heavyweight oil names alongside shares in Apple supplier ACC Technologies, which tumbled over 12% following a profit warning. Finally, US equity futures ebbed further from the prior day’s best levels, E-Mini futures (-0.4%) lost more ground below the 2800 level whilst DJIA futures (-0.4%) dipped below 26,000 with some attributing the downside to month-end rebalancing.

PBoC set CNY mid-point at 6.6952 (Prev. 6.7131) (Newswires)
PBoC injected CNY 120bln via 7-day reverse repos

US President Trump said China talks are in advanced stage, and the relationship between the two nations is strong. (Twitter)

A group of US Senators have reportedly written to US Energy Secretary Perry, calling on a ban to Huawei solar equipment as it poses a national security threat to the US energy structure. (FT)


UK PM May is considering a plan to postpone Brexit and will be discussing this at a crunch meeting with her Cabinet on Tuesday (0930GMT), she will reveal the Cabinet's conclusion to Parliament later in the day (1230GMT); according to sources. (Newswires) This is relatively in-fitting with reports via The Telegraph over the weekend that PM May is considering a Brexit delay of two months in a bid to avoid Cabinet resignations.

UK PM May is said to propose formally ruling out a no-deal Brexit which could postpone the Brexit date by months; according to The Sun. The article stated that the Premier is not ruling out a no-deal Brexit willingly, and to avoid total Brexiteer meltdown, PM still wants to keep the option of no-deal alive for later in the year after any extension to Article 50. Aides are said to be split over whether May should make the major concession directly when she addresses Parliament. Furthermore, key figures such as Environment Secretary Michael Gove are expected to back the PM’s move. The Sun’s Political Editor, Tom Newton Dunn tweeted that PM May is convinced that it’s now the only way she can stop Remain ministers passing the Cooper-Letwin amendment, which is viewed in No10 as “catastrophic”. (The Sun/Twitter)

As many as 15 ministers could resign and vote for the Cooper-Letwin motion unless PM May provides assurances on a no-deal Brexit today; according to Daily Mail. Ministers include Work and Pensions Secretary Amber Rudd, Secretary of State for Justice David Gauke, Business Secretary Greg Clark. Other Tories who are said to be close to resigning to stop a no-deal include Scottish Secretary David Mundell, Defence minister Tobias Ellwood, Solicitor General Robert Buckland and Disabilities Minister Sarah Newton. This comes after a group of 23 dissidents met secretly at the Commons last night to discuss how to stop a no-deal Brexit. (Daily Mail)

UK Opposition Labour Party are to put forward a People's Vote amendment this week. Furthermore, there were reports the party will back the Cooper-Letwin amendment to take No Deal Brexit off the table. The Cooper-Letwin amendment would force the government to hand power to parliament if no UK-EU withdrawal deal has been approved by March 13th. UK Labour spokesperson said the exact form of the amendment on the second referendum and timing are not yet clear, but Labour will not vote for anything that supports UK PM May's deal. (Newswires)

Around 70 Labour MPs to vote against a second referendum, according to The Sun's Political Editor Steve Hawkes. (Twitter)

UK PM May reportedly tabled no proposals on amending the backstop during a meeting with Irish PM Varadkar. (Newswires)


In FX markets, DXY was choppy within a relatively tight range ahead of Fed Chair Powell’s testimony before the Banking Senate Committee. As such, EUR/USD traded sideways above 1.1350, whilst GBP/USD received a bout of demand in early Asia-Pac trade after reports that PM May is considering a plan to postpone Brexit, which she will discuss with her Cabinet today, ahead of a Parliamentary announcement. Elsewhere, AUD/USD tested 0.7150 to the downside ahead of its 50 DMA at 0.7134. The mild risk-off sentiment also sent USD/JPY back below 111.00 to a low of 110.75 and subsequently, AUD/JPY lost the 79.500 handle. Finally, the INR weakened amidst the escalating tensions between Indian and Pakistan after an Indian aircraft reportedly violated Pakistani airspace, USD/INR opened around 71.2500 vs yesterday’s close of 70.9850.


WTI and Brent futures traded sideways throughout most of the Asia-Pac session following the significant decline sparked by US President Trump. WTI futures found some support at USD 55.00/bbl and Brent traded on either side of USD 64.50/bbl as the energy benchmarks await further catalysts amid a thinned news-flow environment. Elsewhere spot gold marginally benefitted from the mild risk-averse tone, although the market sentiment pressured copper as the red metal slipped from 8-month highs. Meanwhile, Dalian iron ore futures fell over 4.0%, hitting its lowest in over three weeks after Brazil’s shipment of the base material increased in February vs. January, in turn easing supply worries which were sparked by the collapse of the Vale dam. Finally, spot palladium rose over USD 1550/oz as threats of strikes in South Africa’s Mining Industry ignited supply fears.   

Saudi Crown Prince Bin-Salman and Russian President Putin agreed that cooperation in the oil market is valuable and must continue; according to WSJ citing sources. (Newswires)

Iraq's oil exports from terminals in the Persian Gulf have fallen to 3.550mln BPD in February (3.649mln BPD in January). (Newswires)

Mexico Economy Ministry said it has reached a preliminary agreement for a 15% steel tax over 6-months for countries who don't have free trade agreements with Mexico. (Newswires)

US VP Pence says US will grant sanctions relief to Maduro officials who join the opposition. (Newswires) 


Pakistan army said Indian fighter jets crossed the line of control with Pakistan and bombed a remote region in Pakistan-held Kashmir, Pakistan Air Force responded and there were no casualties. Indian Defence Ministry said it has no information regarding the Indian aircraft violating Pakistani airspace, although an Indian Government Minister said Indian air force conducted air strikes on "terror camps" in Pakistan. (Newswires)

US President Trump will meet with North Korean leader Kim Jung Un on Wednesday evening in Vietnam with a follow-up meeting on Thursday; according to the White House. (Newswires)

Canadian Foreign Minister Freeland said Ottawa is exploring ways to expand sanctions on Venezuelan officials. (Newswires)

Iran Foreign Minister Zarif announced his resignation. US Secretary of State Pompeo, following the resignation, said US policy is unchanged. (Instagram/Newswires)


The complex found sellers as risk sentiment improved. Ahead of month-end, analysts reminded that the Treasury extension is quite chunky at 0.12yrs. The US sold 2 and 5-year paper on Monday, ahead of Tuesday’s auction of 5s (the auctions coming a earlier to allow for month-end settlement. The 2-year auction was reasonable, stopping through 0.1bps, despite slightly softer cover. Indirect bidders, however, dropped significantly, with takedown at 38.6% vs 53.4% previously. The 5s auction stopped through 0.2bps, with cover coming in line with the priors. The curve bias was towards steepening in major spreads, though the extent was modest (under 1bps). * US T-Note futures (H9) settled 3+ lower ticks at 122-01.

Fed's Clarida (Voter, Neutral) said US economy is operating close to full employment and is in a good spot right now, inflation is close to the Fed's target. Clarida added that the Fed can afford to be patient and needs to be data dependent. (Newswires)

Fed's Kaplan (Non-voter, Dovish) said the Fed has let the economy run a little hotter to help boost labour markets. (Newswires)

Have a great weekend, you beautiful people! Live long and prosper!