Original insights into market moving news

[PODCAST] US Open Rundown 7th March 2019

  • Major European equities are marginally lower [Euro Stoxx 50 -0.4%] ahead of today’s ECB policy announcement
  • EU Brexit negotiators have told UK Attorney General Cox to rework his backstop proposals and return for further talks on Friday
  • Huawei has filed a lawsuit against the US for banning equipment from certain networks
  • Looking ahead, highlights include ECB Rate Decision & Press Conference, Fed's Brainard, ECB's Praet,
  • Earnings: Costco



Asian stocks were mostly lower following a three-day losing streak on Wall Street where the Dow and S&P fell to a three-week low. ASX 200 (+0.3%) was kept afloat by its telecom and utilities sectors, although upside was capped by the underperformance of its heavyweight metal and mining names. Meanwhile, Nikkei 225 (-0.6%) gave up the 21,500 level as the domestic currency gains weighed on the Japanese index. Semi-conductor name Renesas fell over 15% after Nikkei reported the company is to temporarily halt operations at 13 of its 14 production facilities amid uncertainty in China, thus Japanese chipmakers were hit in sympathy. Elsewhere Hang Seng (-0.9%) and Shanghai Comp. (+0.1%) conformed to the overall risk tone with the former pressured by Geely shares after the company fell over 3.5% amid dismal February sales, moreover the Chinese stocks wobbled after Huawei filed a law suit against the US government, but the indices ultimately came off worst levels.

Huawei has filed a lawsuit against the US for banning equipment from certain networks. Huawei says it is not owned, controlled or influenced by the Chinese government. Company said US Congress has repeatedly failed to give evidence as to support restrictions on Huawei products. Huawei noted that the lawsuit filed against the US government is independent from the Huawei CFO case. Furthermore, separate reports said US allies in EU are said to be sceptical of Trump Admin's efforts to persuade countries from not using Huawei equipment. (Newswires)

A Washington think-tank says China's economy is around 12% smaller than official figures indicate, and its real growth has been overstated by around 2 ppt per annum in recent years, according to new research, also added concern that China’s slowdown is more severe than the government has acknowledged.

PBoC set CNY mid-point at 6.7110 (Prev. 6.7053) (Newswires) PBoC skipped open market operations for a net neutral daily position

India is reportedly mulling retaliatory tariffs on the US worth USD 10.6bln, which comes after US decided to scrap USD 5.6bln worth of duty benefits on Indian exports by May. (Newswires)


House Intelligence Panel Chairman said Former Trump Lawyer Cohen has provided documents and a cooperative testimony in the second day of hearings. Furthermore. US Representative Schiff said Cohen's material will allow then to substantially advance in the investigation. (Newswires)

Fed voted 4-1 to keep counter-cyclical buffer for banks at 0%; Fed's Brainard dissented. (Newswires)


Activity has been detected at a North Korean ICBM production side; according to South Korean press. (Newswires)

South Korea has confirmed it has modified another US-South Korea joint drill. (Newswires)

Venezuelan authorities have released the American journalist arrested this morning; according to local media. (Newswires) Venezuela’s government has expelled the German ambassador to Venezuela after he welcomed the opposition leader Juan Guaido on his return to Caracas earlier this week. The ambassador has been given 48 hours to leave. (FT)


EU officials are reportedly pessimistic about reaching a Brexit breakthrough. Negotiators suspect that whatever they offer will not be enough to get Parliament to back PM May's Brexit deal; according to sources. Furthermore, Brussels believes that unrealistic expectations have build up in London. (Newswires) EU officials have urged the UK to table fresh proposals within the next 48 hours and said they will work non-stop over the weekend if “acceptable” ideas are received to break the Irish backstop impasse. (BBC)

UK PM May's Cabinet believes her Brexit deal 'will be defeated by 100 votes' after talks collapsed with Brussels. (The Telegraph) Reminder: Chief Whip Smith said If UK MPs reject PM May's deal a second time next week, parliament would take control and force a softer Brexit.

Labour Leader Corbyn is working with Tory backbenchers to reach a soft Brexit deal that can go through Parliament, he is holding cross-party talks with MPs who are backing a Norway-style deal. Corbyn said "“I left both meetings more certain than ever that we can find a way to work across Parliament to force the Government to back a sensible Brexit plan that protects jobs and more determined to achieve it.” (The Mirror)

Remain Tory MPs will today meet with senior members of French President Macron's government to discuss extending Article 50 as a path to a second referendum. (The Telegraph)

EU Brexit negotiators have told UK Attorney General Cox to rework his backstop proposals and return for further talks on Friday in Brussels; EU Diplomats. Adding that Cox's proposal for a mini-backstop, did not include a referral to EU's top court, which is not acceptable for the EU, the mini-backstop would envisage fewer Irish border checks than are already seen within the EU-UK withdrawal deal. EU are now skeptical that a Brexit deal can be achieved before the March 21st summit; bloc are trying to prevent direct negotiations between the EU 27 leaders and UK PM May. (Newswires)

UK Government source says there is currently little to suggest that anything is going to change with the EU in the next 48 hours. (Newswires)

EU wants to seal an investment deal with China by next year and will use next month’s summit with China to push for progress on a bilateral investment accord. (FT)

Italian Deputy PM Di Maio reiterates that he does not see the government falling over the Italy-France rail link; adding that it is hard to find a solution. (Newswires)


Riksbanks Ingves says the need for a highly expansionary monetary policy has decreased slightly; as inflation has become established close to the target and confidence in the target has increase. Adding that the rate path is a forecast not a guarantee. (Newswires)

BoE's Tenreyro says a disorderly Brexit is more likely to require loosening of monetary policy than tightening, adding that it is easy to envisage other scenarios which would require a opposing response. Sterling is likely to appreciate after a smooth Brexit, which would limit inflation pressure. Going on to say that a small amount of tightening will be needed over the next 3 years assuming a smooth Brexit. (Newswires)


Major European indices are in the red [Euro Stoxx 50 -0.4%] little changed from opening losses, with no standout under/out-performing index as markets take the lead from a subdued overnight session ahead of upcoming key risk events. Sectors are mixed, with some underperformance seen in material names, with the sector likely weighed on by growth concerns; interestingly, there was a report from a Washington think tank which stated that China’s economy is around 12% smaller than the official figure. Notable movers this morning include, Rio Tinto (-7.3%) who are at the bottom of the Stoxx 600 after being downgraded to sell at Societe Generale. Dialog Semiconductor (-0.8%) are also in the red weighed on by the poor performance of Japanese listed Renesas who fell by 15% following Nikkei reports that the Co. are temporarily halting 13/14 of their production facilities amidst uncertainty in China. Elsewhere, and towards the top of the Stoxx 600 are Melrose (+3.4%) after their FY revenue came in significantly above the prior at GBP 8.605bln vs. Prev. GBP 2.092bln.


NZD/AUD - Marginal G10 outperformers, but largely due to a degree of consolidation, profit taking and short covering following heavy losses. Moreover, extremely rangebound trade overall/elsewhere somewhat flatter the actual extent of the recoveries that only equate to between 0.15-0.2% vs the Usd. Nevertheless, the Kiwi and Aussie have clambered off recent lows to sit a bit more comfortably above 0.6750 and 0.7000 respectively as the Aud/Nzd cross rebounds towards 1.0400.

CAD - The other main non-US Dollar has also gleaned some much needed traction after yesterday’s post-BoC slide, but remains precarious within a 1.3425-50 range vs the Greenback as attention turns to the upcoming EPR presented by Deputy Governor Patterson that could underscore the more dovish or uncertain outlook in terms of the timing of policy normalisation.

CHF/EUR/JPY/GBP - All narrowly mixed vs the Greenback, and as noted above all broadly stuck in tight confines with the Franc meandering between 1.0040-55 and single currency rooted to 1.1300, albeit hovering just above the big figure following recent breaches below that threatened a steeper decline. Of course, a dovish ECB later may yet see the Euro buckle completely, but technically it remains resilient vs the Dollar having held above Fib support around 1.1305. Note also, big option expiries could limit moves post-ECB, at least into the NY cut, as 2 bn sits at 1.1250 and a mega 3.7 bn from 1.1360-80, if the ECB disappoints – for a full preview of the March policy meeting check out the Research Suite. Meanwhile, Usd/Jpy looks increasingly capped around 112.00 after several attempted breakouts, but again hefty expiries may keep the headline pair contained given a series of 1 bn options stacked all the way down to 111.25-35 (just above the 200 DMA at 111.39) and 1.5 bn from 112.00-05. Turning to Cable, 1.3200-1.3100 essentially covers the recent range with moves towards the top or bottom correlating closely with the tone regarding ongoing Brexit negotiations.

SEK/NOK - The Swedish Krona has retreated from circa 10.5000 vs the Eur to a low just shy of 10.5600 in wake of comments from Riksbank Governor Ingves that could arguably be perceived as more ambiguous with regard to guidance for another 25 bp repo rate hike in H1 this year. Conversely, the Nok has not been unduly upset by a significant miss in Norwegian manufacturing output and remains around 9.8000 vs the Eur, perhaps with some support from firmer oil prices.


Slightly softer than forecast Eurozone GDP and jobs data on balance may have given Bunds a bit more incentive to probe higher after their earlier retracement, but more likely the latest retreat in Italian BTPs amidst the ongoing impasse within the coalition on the proposed Turin-Lyon rail link, and ahead of a crisis meeting. However, core debt may also be deriving mild support from the recent slippage across EU bourses in the run up to the ECB, as Gilts are grinding higher as well. Whatever the precise rationale or catalyst, new highs for the EU benchmarks are 163.73 and 126.87 respectively (+18 and +21 ticks vs -12 and -10 ticks at one stage) to expose 163.93 and 126.94 on any follow through. Meanwhile, US Treasuries have also inched up, but fractionally after registering better gains on Wednesday, and awaiting several data points ahead of a speech from Fed’s Brainard.


Brent (+0.9%) and WTI (+0.9%) prices are firmer, with the complex likely retracing some of the recent losses from the API and EIA crude builds this week coming in above expectations at 7.4mln and 7.1mln respectively; although both Brent and WTI prices are trading within a tight range of around USD 1/bbl on the lack of fundamentals. In terms of recent news flow Saudi Energy Minister Al Falih has reported crude exports of around 7-8mln BPD. Separately, US State Department official has stated that talks are ongoing with the 8 countries who received a waiver in November, as Washington seeks to lower Iranian oil purchases to zero; alongside, India wanting to continue Iranian oil purchases at around 300k BPD in any waiver extension. Elsewhere, China’s customs union have confirmed that it has suspended canola imports from Canada’s Richardson International.

Gold (U/C) is unchanged in a similar vain to the dollar, ahead of key events this week including the ECB rate decision later today. Elsewhere, China’s Hebei province is to reduce steel capacity by 14mln tonnes annually this year and next, in an attempt to improve air quality.

Saudi Energy Minister Al-Falih reportedly said that the Kingdom is exporting around 7-8mln BPD of crude; according to Saudi press citing the Energy Minister. (Newswires)

CME lowered Nymex WTI Crude and Diesel futures margins. (CME)

China's Hebei Province Party Chief says steel capacity will be reduce by 14mln tonnes this year followed by another 14mln tonnes in 2020. (Newswires) Note: The Hebei Province is China’s largest steel-making province

European Equity Movers this Morning: Persimmon (PSN LN) +14.0% RBS (RBS LN) +11.0% Peugeot (UG FP) +2.6% Airbus (AI…