Original insights into market moving news

[PODCAST] EU Open Rundown 27th February 2019

Asian equities posted firm gains following a subdued lead from Wall Street, energy stocks outperformed

UK PM May said she is close to winning concessions from the EU that could persuade Eurosceptic MPs to back her deal

Brexiteer Jacob Rees-Mogg is prepared to consider other legal fixes to make sure the Irish backstop does not become permanent

FX markets are relatively quiet as the DXY roamed just above the 96.000, AUD and NZD were dented by disappointed data

Looking ahead, highlights include EZ Economic Sentiment, Canadian CPI, US Factory Orders, ECB’s Coeure & Weidmann Speaking, Fed’s Powell testifying before the House, German Auction

Earnings: HP, Lowe’s, Bayer, Ahold Delhaize, Rio Tinto, Taylor Wimpey


Asian equities were higher across the board following a subdued lead from Wall Street where the Dow dipped into the red following disappointing earnings from Home Depot and the S&P retreated further below the 2800 level. ASX 200 (+0.4%) gains were led by energy names following the rebound in the complex after sources stated that OPEC are to stick to their output curb agreement coupled with bullish API inventory data, while Nikkei 225 (+0.5%) benefitted from the strength in the healthcare sector. Elsewhere, Shanghai Comp (+1.8%) and Hang Seng (+0.8%) extended on gains from the open with the former supported by IT names whilst the latter profited from the strong performance in heavyweight energy and financial names. Furthermore, Morgan Stanley raised its targets for Chinese equities, citing policy stimulus alongside positive trade developments.

BoJ Governor Kuroda said the chance of Japanese inflation to hit the 2% target during FY 2020 is low and any exit from the BoJ's ultra-easy policy will be very gradual. (Newswires)

BoJ Board Member Kataoka disagrees with the BoJ's view of persistently easing policy to reach price goal and added that longer monetary easing will bring more side effects. Kataoka also added that the BoJ is still far from ending its ultra-easy policy. He expects any sales-tax hike driven pickup in Japan's economy to be moderate and said Japan's inflation expectations remain weak whilst also acknowledging that global growth has slowed compared to the prior year. (Newswires)

PBoC set CNY mid-point at 6.6857 (Prev. 6.6952) (Newswires)
PBoC injected a net CNY 40bln via 7-day reverse repo


UK PM May said she is close to winning concessions from the EU that could persuade Eurosceptic MPs to back her deal. (Daily Mail)

Brexiteer Jacob Rees-Mogg has softened his stance on PM May's Brexit deal; he is no longer insisting the Irish backstop be scrapped and he is prepared to consider other legal fixes to make sure it does not become permanent. (FT)

Cabinet Ministers warned PM May that Brexit could be delayed by up to two years after she announced a series of votes on her deal, no deal and a Brexit delay to be held in a fortnight. (The Telegraph)

UK's SNP are to put forward an amendment, in Wednesday's government motion, to say that parliament rejects a no-deal Brexit in any scenario, including at the end of any extended Article 50 period; according to the BBC. (BBC)

The newly-formed Independent Group has tabled an amendment demanding the government to commence preparations for a second EU referendum. The amendment reportedly has support from the SNP, LibDems, and Plaid Cymru and is said to be aimed at provoking a fresh split in the Labour party by tempting MPs who are seeking a new vote. (The Guardian)

UK Tory Brexiteers are mulling offering to vote in favour of PM May's deal if she commits to stepping down before negotiations go forward; according to Buzzfeed’s Senior Political Correspondent Wickham. (Twitter)

BBC’s Katya Adler reported that the EU now can't wait till 21st March summit to make an offer on the Irish backstop in an attempt to stop the PM coming back for more; will now have to make an ‘offer’ in time for March 12 meaningful vote. (Twitter)

Senior Cabinet Members were reportedly accused of sabotaging dialogue with the EU after forcing UK PM May to give MPs the chance to delay Brexit. (The Times)

UK Chancellor Hammond and Work and Pensions Secretary Rudd want to move conversation on what do to with a 90-day Article 50 Extension; according to sources cited by BBC's Political Editor Kuenssberg. (Twitter)

European Union has agreed on tough rules for investments firms wanting to operate in the bloc post-Brexit, which signals that London’s financial services industry will have to stick closely to EU standards on everything from capital requirements to bonuses in exchange for market access. (FT)

UK NO DEAL BREXIT IMPACT ANALYSIS: UK government said, despite steps taken to manage negative effects, there are areas were impact on trade, business and individuals would be significant. (Newswires)

Government said the UK economy would be between 6.3%-9.0% weaker in the long term in a no deal scenario (after around 15 years) than it otherwise would have been when compared with today’s arrangements, assuming no action is taken

The short time remaining before March 29th does not allow the government to unilaterally mitigate the no deal effects

A lack of preparation by individuals and businesses is likely to add to the disruption in a no-deal scenario

There is little to show that businesses and citizens are preparing in earnest for a no-deal scenario

Deutsche Bank has cut its no-deal Brexit probability to 10% from 15%; raised new election probability to 20% from 15%; raised second referendum probability to 10% from 5%. (Newswires)

UK BRC Shop Price Index Y/Y 0.7% vs. Exp. 0.3% (Prev. 0.4%) (Newswires)


FX markets are relatively quiet as the DXY roamed just above the 96.000 level throughout most of the session after month-end rebalancing and Fed Chair Powell’s cautious stance on global growth pulled the index further below the prior day’s highs of around 96.500. As such, EUR/USD traded sideways just below its 100 DMA at 1.1390, whilst GBP/USD meandered around 1.3250 ahead of key resistance at 1.3298 (September high). JP Morgan believes that the Pound has fully discounted positive Brexit news, and added that only a decisive break above Cable’s September high and below EUR/GBP support at 0.8541 would confirm a higher-scale change. Elsewhere, the antipodeans were initially dented by below-forecast data wherein the NZD was hit by a wider than expected trade deficit, alongside lower exports and downward revisions to the metrics. Meanwhile, AUD/USD was sent further below the 0.7200 level at the release of a significant miss in Australian Q4 construction work done.

New Zealand Annual Trade Balance (Jan) -6.36B vs. Exp. -5.496B (Prev. -5.86B, Rev. -6.11B) (Newswires)
New Zealand Exports (Jan) 4.40B (Prev. 5.48B, Rev. 5.30B)

Australian Construction Work Done (Q4) -3.1% vs. Exp. 0.4% (Prev. -2.8%) (Newswires)


WTI and Brent futures were bolstered in late US hours amid a surprise drawdown in US crude inventories which sent the former towards USD 56.00/bbl while the latter gained ground above USD 65.50/bbl. Since the move higher, the energy benchmarks traded sideways throughout most of the Asia-Pac session amid a lack of catalysts and as traders await the release of the weekly DoE’s which last week, showed US crude production rising to a record high of 12mln BPD. Elsewhere, spot gold failed to reclaim USD 1330/oz to the upside and was largely dominated by the greenback. Meanwhile, copper held steady around seven-month highs as falling supply and a pullback in the Dollar underpinned the red metal. Finally, spot palladium remained above USD 1550/oz amid widening supply tightness in the market alongside threats of strikes by South African mineworkers providing the metal with additional support. Palladium has risen around 24% thus far in 2019.

US API Weekly Crude Stocks (Feb 22) -4.2mln vs. Exp. +2.8mln (Prev. +1.3mln) (Newswires)

Russian Energy Minister Novak said global oil markets are more or less stable, and volatility is low; adds current oil prices are more or less acceptable for both consumers and exporters. Novak stated that Russia has reduced oil output by 140k-150k BPD vs. Dec levels; says it is fully complying with OPEC+ deal.  (Newswires)

Nigerian President Buhari has won the re-election with a margin of just under four million votes. Nigeria's defeated opposition party rejected the Presidential election results and believes legal avenues should be taken to resolve the issue; according to an official. (Newswires/BBC)

Venezuela opposition's US Envoy Vecchio has met with Trump in recent days, asking for "increased pressure" on incumbent President Maduro. (Newswires)

US has opened anti-dumping probe into Canada, Mexico and China steel imports; according to sources. (Newswires)

Canada may not ratify USMCA until US ends its steel and aluminium tariffs; according to Canadian press. (Newswires)


US Secretary of State Pompeo has spoken to the Indian and Pakistani Foreign Minister separately; according to the US State Department. The Secretary of State urged Pakistan to avoid military action against Indian following the Indian air strike on a terrorist camp on Pakistan. Furthermore, at least three Pakistan fighter jets have entered the Indian side of Kashmir, Indian Air Forces intercepted the Pakistani planes; according to an Indian Official. (Newswires/FT) It was later reported that an Indian Air Force jet has crashed in Jammu & Kashmir, according to PTI.

US President Trump tweeted that North Korea could be thriving if it denuclearises. (Twitter)


Treasuries traded higher on Tuesday, supported by weak housing starts data and a strong 7-year auction. The T-plex saw a leg up on the release of December housing starts which tanked by a whopping 11.2%. Also providing support at the margin was Fed Chair Powell reminding markets at his Senate testimony that the Fed is in a patient, supportive mode. The upward path was exacerbated by two block buyers in the March 10-year contract, one of 12k contracts and one of 6k contracts. Demand also remained resilient in later trade where the US sold USD 32bln of 7-year notes, with strong demand exhibited through a bid-to-cover ratio at 2.6x and stopping through the when issued by 0.9bps, where the six-auction average comes in on the screws. Breaking down the buyers, direct bidders took their largest share (28.42%) since March 2014, indirect bidders however exhibited weak foreign demand where they took their smallest share in three years. Going into settlement, treasuries remained near highs with the 7-year yield falling the most, c. -3.5bps. Across the curve, the belly-to-long end of the curve saw the most steepening, with the 5s/30s widening by c. 1bps and the 2s/5s contracting by c. 0.5bps. * US T-Note futures (H9) settled 9+ ticks higher at 122-10+

Fed discount rate minutes stated that all 12 Fed regional banks voted to maintain the discount rate unchanged in January. (Newswires)

US House voted to block (245-182) US President Trump's national emergency declaration regarding a Mexican border wall, as expected. The bill will now be passed onto Senate. (Newswires) The measure would stop the action President Trump took to secure billions of dollars to build his proposed Mexican border wall

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