Original insights into market moving news

[PODCAST] US Open Rundown 8th March 2019

  • Chinese trade surplus shrinks, as exports sink to 3 year lows
  •  European indices [Euro Stoxx 50 -0.6%] extend losses amidst global growth concerns
  • Dxy drifts from YTD peaks awaiting US payrolls
  •  Looking ahead, highlights include US & Canadian Jobs Report, ECB's Mersch Speaking



Asian equity markets were negative across board on spill-over selling from their global peers after the ECB's latest policy announcement, while sentiment further deteriorated on disappointing Chinese trade data. ASX 200 (-1.0%) and Nikkei 225 (-2.1%) were lower with the top-weighted financials sector front-running the broad-based declines in Australia, while Japanese sentiment was dragged by a stronger currency with Kawasaki Kisen the worst hit after it widened its FY net loss guidance by fivefold to JPY 100bln. Hang Seng (-1.9%) and Shanghai Comp. (-4.4%) slumped with underperformance seen in the mainland in which the CSI 300 slipped by the most so far this year of more than 3% in early trade, as concern regarding global growth took its toll and with selling exacerbated after Chinese trade data showed the steepest decline in exports for 3 years. Finally, 10yr JGBs tracked the gains in T-notes amid declining yields in the aftermath of the dovish ECB, while the widespread risk averse tone and BoJ presence in the market in the short-end also contributed to the support for government bonds.

PBoC skipped open market operations for a net weekly drain of CNY 220bln vs. last week's CNY 160bln net injection. (Newswires) PBoC set CNY mid-point at 6.7235 (Prev. 6.7110)

Chinese Trade Balance (USD)(Feb) 4.1B vs. Exp. 26.4B (Prev. 39.2B); lowest since March 2018. (Newswires) Chinese Exports (USD)(Feb) Y/Y -20.7% vs. Exp. -4.8% (Prev. 9.1%); largest decline since February 2016. Chinese Imports (USD)(Feb) Y/Y -5.2% vs. Exp. -1.4% (Prev. -1.5%)

China Senior Diplomat Wang Yi said China will protect rights of its people and companies, while he added that justice will have its day regarding Huawei and that US-China disputes at this stage do not represent a long-term trend in bilateral relations. Furthermore, Wang commented that it is normal for there to be competition between the 2 nations and hopes US drops zero-sum thinking and meets China halfway. (Newswires)

Japanese GDP (Q4 F) Q/Q 0.5% vs. Exp. 0.4% (Prev. 0.3%). (Newswires) Japanese GDP (Q4 F) Y/Y 1.9% vs. Exp. 1.8% (Prev. 1.4%) 


US & China have not set a date for a US President Trump and Chinese Premier Xi summit, no preperation for the summit is underway as both sides to resolve the majority of issues before the leaders meet; WSJ China Correspondent. (WSJ)


US official stated that they need to see meaningful and verifiable action regarding denuclearization from North Korea soon but added that the magnitude 2.1 tremor in North Korea is not causing alarm. (Newswires/Yonhap/Korea Times)


UK PM May will urge the EU to help get her Brexit deal through House of Commons by agreeing to legally binding changes to the backstop. (BBC)

UK PM May is reportedly being warned by Cabinet 'remainers' that she will lose control of Brexit next week unless she holds a series of humiliating votes regarding alternatives to her deal if it fails to get parliament approval for a 2nd time. (The Times)

UK opposition Labour Party will not support a new referendum on Brexit in all circumstances, according to reports which added the party will only support final say vote on PM May's deal and could back a softer Brexit without giving public a say. (Independent)

There will not be a meeting today between Brexit Secretary Barclay, Attorney General Cox and EU's Chief Negotiator Barnier; BBC's Fleming. (BBC)

There will be a three-line whip for Tory MP's on the Brexit votes next Tuesday, Wednesday and Thursday; Buzzfeed's Wickham. (Twitter) For reference, a 'three-line whip' is a strict instruction to attend and vote, a breach of which would typically result in serious consequences.

EU ambassadors have been summoned to a meeting about Brexit this afternoon at 14:00 GMT; BBC's Fleming. (Twitter)

EU Commission says the EU has offered ideas on reassurances for Britain regarding the backstop, have nothing to add. (Newswires)

UK PM May has no plans to travel to Brussels over the weekend, talks will continue over the weekend; PM Spokesperson. (Newswires)


BoE's Tenreyro sees slight softening in core inflation measures and doesn't see a rush to hike rates. (Herald Scotland)

ECB's Villeroy says expects French economy to grow by more than Germany in 2019, and above average in the Euro Zone. (Newswires)

ECB's Nowotny says the decision to launch TLTRO in September is due to the need for careful preparation; details to be announced in at latest June. (Newswires)

ECB's Vasiliauskas says the ECB acting preemptively a reaction was needed, adding that the ECB has the time until September to agree on the TLTRO details. (Newswires)

Riksbank's Floden says he is surprised by the recent crown weakening, adding that the the weaker crown will have a short term effect on inflation, and will need to be weighed into policy. (Newswires)


Major European indicies are in negative territory [Euro Stoxx 50 -0.6%] as global growth concerns continue to dominate market sentiment; following yesterday’s ECB TLTRO announcement, pushing back of rate guidance and lowering of growth & inflation forecasts. Overnight the Shanghai Composite (-4.4%) was at its worst level in 5 months; also exacerbated by poor Chinese trade data. Sectors are broadly in the red, with the automobile sector lagging on the aforementioned Chinese trade data and growth concerns. Significantly underperforming its peers at the bottom of the Stoxx 600 are GVC Holdings (-17.0%) after the Co’s CEO sold 2.1mln worth of shares alongside the Chairman selling 900k shares; with both sales at the price of GBP 6.66/shr. Elsewhere, and towards the top of the Stoxx 600 are Azimut (+2.1%) benefiting from being upgraded at Kepler Cheuvreux. Elsewhere, following the Norwegian government stating the sovereign wealth fund should cut energy stocks from the investment benchmark, there was an immediate negative reaction in energy names including Total (+0.6%), BP (-1.5%) and Shell (-1.9%).


JPY - The traditional and enduring safe haven currency is outperforming amidst heightened risk off sentiment, as worrying Chinese trade data and an unexpected decline in German manufacturing orders exacerbate global growth concerns. Usd/Jpy has subsequently retreated further from 112.00+ highs to just under 111.00, and through key technical support in the shape of the 200 DMA at 111.39.

DXY - The index and Greenback overall have succumbed to a bout of broad profit-taking and consolidation along with the aforementioned stronger demand for the Yen, as attention turns towards the looming NFP report and at least partly away from Thursday’s dovish ECB policy moves. The DXY has duly backed off from a new 2019 peak at 97.711 to straddle the 97.500 level as G10 (and EM) counterparts claw back some lost ground.

NZD/AUD - Although risk aversion has been stoked by the factors noted above, short-covering and cross-positioning have protected the Antipodean Dollars from further depreciation and fall-out. In fact, the Kiwi has rebounded firmly enough from recent lows to vie with the Jpy at the top of the major league as its Aussie peer remains depressed following recent worrying data that has prompted yet another bank to predict 2 RBA rate cuts this year. Nzd/Usd is back up over 0.6775 and Aud/Nzd slips below 1.0350, as Aud/Usd languishes between 0.7028-04 with a hefty 1.5 bn option expiry at the 0.7000 strike exerting another gravitational pull.

EUR/CHF - Some respite for the single currency and Franc, with Eur/Usd pivoting 1.1200 after testing a key chart support at 1.1187 on follow-through selling in wake of the ECB’s decision to offer more TLTROs and delay rate hikes. However, the headline pair looks hemmed in by option expiries at 1.1220-25 (1.6 bn) and 1.1250 (2.6 bn), and with nothing significant on the downside in terms of technical levels until 1.1110-33, aside from another expiry at 1.1150 (1 bn). Meanwhile, Usd/Chf is in a tight band around 1.0100 and now eyeing NFP for the next directional lead.

GBP/CAD - Marginal underperformers, with Cable looking increasingly bearish after losing grip of 1.3100 and hopes of a Brexit breakthrough appearing more and more forlorn as the latest EU offer on the backstop is not deemed sufficient to appease the majority of UK MPs that rejected the WA at the 1st time of asking. The Loonie has stabilised somewhat after its midweek collapse on a more cautious and uncertain BoC, but remains on the backfoot vs its US rival around 1.3450 ahead of jobs data from both sides of the NA divide.

SEK/NOK - The Scandi crowns are both weaker vs the Eur and Usd, with the former ruffled by comments from Riskbank’s Floden expressing surprise at the Sek’s recent decline and the fact that the ECB’s policy actions in March will be taken into account when the Swedish Central Bank meet at the end of next month. A rebound in household spending and upward revisions to back data has nudged Eur/Sek off the highs, but the pair remains above 10.6000, while a deeper retreat in oil prices is undermining the Nok, as Norway’s SWF pulls the plug on energy stocks in its benchmark portfolio. Eur/Nok currently around 9.8500.


Although off best levels, the core Eurozone bond has regrouped again after another bout of consolidation that briefly dragged prices below parity. However, Gilts continue to underperform and just slipped to a new, albeit very marginal Liffe low of 127.14 and EZ peripheral paper has unwound quite a bit of dovish ECB premium and outperformance vs Bunds/OATs as spreads edge back in. Meanwhile, US Treasuries are rooted near the base of their overnight ranges with the curve incrementally steeper as NFP looms.


Brent (-1.7%) and WTI (-1.6%) prices are continuing to extend upon their losses, as global growth concerns weigh on risk tone; both WTI and Brent are trading at the bottom of the sessions range, with WTI prices dropping under USD 56.00/bbl to the downside exacerbating the price decline; with session lows of around USD 55.80/bbl. Looking ahead we have the Baker Hughes Rig count, a decline in the crude rig count would be the third consecutive week of oil rigs decline; and as such may provide some reprieve to Brent and WTI prices. 

Gold (+0.6%) is shining as the yellow metal benefits from the global growth concerns which are dominating markets. With gold at the top of it’s USD 10/oz range, trading around USD 1294.60/oz. Conversely, copper prices are down afflicted by the poor Chinese trade data exacerbating growth concerns in the worlds largest importer of the metals.

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