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[PODCAST] US Open Rundown 13th March 2019

  • Major European indices are slightly firmer [Euro Stoxx 50 +0.2%] shrugging off poor performance overnight
  • UK has announced temporary cuts to import tariffs and temporary moves to avoid a hard Irish-Northern Irish border in a no-deal Brexit scenario
  • Sterling outperforms G10 counterparts, around the 1.3150 level
  • Looking ahead, highlights include, US Durable Goods & PPI, Construction Spending, HoC Vote on no-deal, ECB's Coeure, Supply from the US

ASIA

Asian equity markets traded mostly lower following the mixed lead from Wall St and after UK PM May’s Brexit deal was voted down in parliament, while soft data releases also contributed to the subdued tone. ASX 200 (-0.2%) and Nikkei 225 (-0.9%) declined at the open as broad weakness and poor Westpac Consumer Confidence data weighed on Australia, while the Japanese benchmark underperformed on currency effects and after a larger than expected contraction in Machine Orders. Hang Seng (-0.4%) andShanghai Comp. (-1.1%) conformed to the negative tone but with losses stemmed as the region digested some corporate updates. Finally, 10yr JGBs tracked the recent upside in T-notes which were lifted after soft US CPI numbers, while prices were also supported on safe-haven demand and with the BoJ in the market for JPY 710bln of JGBs in the belly to the super long-end.

PBoC skipped open market operations for a net neutral daily position. (Newswires) PBoC set CNY mid-point at 6.7114 (Prev. 6.7128)

 

China’s stats bureau chief said the economy achieved a good start to the year despite recent decline in mobile phone and car sales, while he added industrial production is stable and employment steady in first 2 months of 2019. (Newswires)

 

UK/EU

* A Summary of the potential amendments for today and a timetable for today’s Brexit events is available on the headline feed

Reported that the group of UK lawmakers proposed an amendment for today’s vote that the government should seek Article 50 extension until May 22 in order to prepare for a no-deal exit and that the government should offer mutual standstill agreements with the EU for an agreed period finishing by end-2021 at the latest. Furthermore, UK PM May was warned that as many as a dozen Eurosceptic ministers are prepared to quit in order to support the Malthouse Plan B amendment. (Newswires/Telegraph)

Elsewhere, German Foreign Minister Maas also said we are getting closer to a no-deal scenario but added that Germany still hopes a no-deal Brexit can be avoided. (Newswires)

UK does not intend to have any controls at the Irish border in the event of a no-deal Brexit. (BBC)

 

EU's Moscovici says the Brexit deal that was defeated yesterday was "last chance", adding there are no plans for more Brexit talks with the UK in the coming days. (Newswires) Largely an echo of EU Commission President Juncker’s comments.

 

Meaningful vote 3 has reportedly not been taken off the table; according to BBC's Norman Smith citing sources. (Twitter)

 

UK has announced temporary cuts to import tariffs and temporary moves to avoid a hard Irish-Northern Irish border in a no-deal Brexit scenario, with 87% of total imports exempt (vs. current 80%). (Newswires)

 

Government will whip against the Dromey/Spelman amendment (A) to take no deal off of the table permanently; BBC's Smith. (Twitter) Cooper-Boles-Letwin-Spelman-Dromey (A): Rejects the UK leaving the EU without a Withdrawal Agreement and a Framework for the Future Relationship.

 

UK Trade Minister Fox is to discuss Brexit and tariffs with business leaders at 1500 GMT. (Newswires)

 

UK Tory Lawmaker Baker says UK PM May should seek an extension to Article 50. (Newswires)

 

EU ambassadors and a MEP group are being briefed on the next Brexit steps by EU Brexit Negotiator Barnier's team, are sticking to a tough line on potential extensions, the British have to find a majority for something and only the will Brussels consider an extension; FT's Brussels correspondent. (Twitter)

 

Half a dozen ministers have warned against whipping against the Malthouse amendment, with Williamson saying it would have ‘severe consequences’ for the party, ministers expect No 10 to offer a free vote; Telegraph’s Swinford.

 

Delegation of 15 Brexiteer ministers meeting today at 16:30, will demand a free vote on the Malthouse compromise and are prepared to quit if she does not allow them to back it; Telegraphs Swinford. (Twitter)

 

Some speculation that Attorney General Cox may have further legal advice relating to the Vienna Convention which may help PM May and win over Brexiteers; BBC’s Smith. (Twiter)

 

EU's Chief Brexit Negotiator Barnier says EU is ready for a no-deal Brexit. (Newswires)

 

Italian PM Conte says aims to have greater access to the Chinese market including barriers to contracts in the services sector. (Newswires)

 

GEOPOLITICAL

 

Iran Defence Minister said Tehran will respond firmly if Israel Navy acts against Iran oil sales. (Newswires)

Senior Iranian Security official says some regional countries are spending money on "suspicious nuclear projects" which would force Iran to revise its defence strategy. (Newswires)

US Secretary of State Pompeo criticizes China, Russia, Venezuela and Iran in comments touting increasing US energy supplies, adds will use all economic tools at disposal to deal with Venezuela crisis. (Newswires)

North Korea reportedly appears close to missile site restoration, with South Korea stating the launch sites restoration is almost complete; Yonhap.

 

EQUITIES

European Equities are marginally firmer [Euro Stoxx 50 +0.2%] shrugging off the poor performance seen overnight in Asia where the Shanghai Composite (-1.0%) finished firmly in negative territory on the risk tone following Brexit and a mixed lead from Wall Street. Sectors are mixed, with outperformance seen in energy names as the oil complex is higher by around 0.8%. Notable movers include, Stoxx 600 heavyweight Nestle (+0.4%) in the green after the Co. are said to have selected second round bidders for their skin care unit, which may be valued as high as USD 10bln. Separately, and towards the top of the Stoxx 600 are Pandora (+1.5%) as the Co. are to initiate preparations to identify a new chairman at their annual general meeting today. Elsewhere, and lagging the Stoxx 600 are Inditex (-4.0%) as their FY figures missed on some analysts’ expectations, and in spite of the Co. lifting their dividend by 17%. Adidas (-3.9%) are similarly underperforming as the Co. expect H1 to be impacted by supply chain problems, particularly in the US, may have a 1-2% impact on 2019 sales growth. Finally, Wirecard (-4.9

On the pre-market front Spotify (SPOT) have filed a complaint against Apple (AAPL) stating that Apple abuses its market dominance and engages in anti-competitive behaviour.

FX

GBP - Sterling continues to withstand Brexit-related bearish impulses/knocks and has staged another impressive looking comeback from lows vs the Usd and Eur in wake of a 2nd big defeat for UK PM May on the Withdrawal Agreement, even with legally binding assurances from the EU. In fact, the Pound sits proud at the top of the G10 rankings with Cable back above 1.3100 and briefly through technical resistance in the form of a 50% Fib (1.3148) and the psychological 1.3150 level, while Eur/Gbp has reversed from circa 0.8650 through 0.8600 again.

DXY - The broad Dollar and index remain on the back foot following yesterday’s benign US CPI release, as the data focus switches to PPI, durable goods and construction spending, while the Gbp resilience noted above along with similar resistance in other rival currencies is also impacting. The DXY has subsequently slipped back from 97.000+ yet again and is currently just off a 96.839 base, eyeing chart support at 96.764 (also a 50% retracement) having breached 96.987 (38.2% Fib).

CAD/AUD/NZD - The non-US Dollars are bucking the overall trend of gains vs the Greenback, albeit to varying degrees as the Loonie continues to hold up better around 1.3350 against the backdrop of firmer crude prices. Conversely, the Aussie and Kiwi are underperforming, with Aud/Usd slipping back towards 0.7050 following downbeat Westpac consumer sentiment overnight, and Nzd/Usd retreating through 0.6850 ahead of NZ GDP data that may miss consensus and the RBNZ’s forecast, according to Westpac. However, the Aud/Nzd cross remains weak after a sub-1.0300 dip at one stage.

CHF/EUR/JPY - The Franc has marginally extended recovery gains vs the Dollar to just shy of 1.0050, while the single currency has crossed 1.1300 with the aid of firmer than expected Eurozone IP and bullish near term technical impulses as the headline pair clears 200 hourly a 10 daily MAs (1.1290 and 1.1294 respectively). However, Tuesday’s 1.1305 peak remains (just) intact and the 21 DMA comes in at 1.1313, while decent expiry options sit between 1.1300-10 (2.1 bn). The Jpy has been hampered somewhat by disappointing Japanese data in the form of machinery orders and is currently close to the bottom of a 111.15-38 band.

FIXED INCOME

Supply and data may have been catalysts or at least valid rational for a bit more downside in debt futures, while Gilts may have noted vague talk about Cox having more in his legal capacity to convey on the revised WA that could yet coral support for UK PM May’s deal. Regardless, core bonds and Italian BTPs have extended losses and recoiled a little further from best levels with Bunds down to 164.39 (-15 ticks vs +14 ticks at one stage), the 10 year UK benchmark at 127.10 (-21 ticks vs +2 ticks fleetingly) and the latter trying to regroup after a retreat to 128.41 from 128.88 vs yesterday’s 128.80 close. Meanwhile, US Treasuries are just off new overnight session troughs, and with the curve steeper into long bond issuance, PPI, durable goods and construction spending data.

COMMODITIES

WTI and Brent futures are marginally firmer on the day but remain in within the March range of just over USD 3.0/bbl. WTI futures are approaching the March high of USD 57.86/bbl whilst Brent is also around USD 0.50 from this month’s highs. In terms of production numbers, Russia oil output has reportedly fallen to 11.307mln vs. 11.336mln in February. As a reminder, under the OPEC+ deal, Russia agreed to curb output by 228K BPD in Q1 2019 from the October baseline of 11.418mln. Traders will be eyeing the release of the weekly DoE inventory data which will be released at 1430GMT due to the US clock change.

Metals markets are higher across the board as the complex benefits from the pullback in the Greenback. Gold hit a two week high and reclaimed USD 1300/oz to the upside whilst breaching its 50 DMA at USD 1303/oz whilst copper gains more ground above its 100 WMA (USD 2.8993/lb). Finally, zinc prices hit levels last seen eight months ago (USD 2848.50/tonne) as concern grows about an tight market for the metal.

Kazakhstan is committed to produce 1.860mln BPD of oil under the Global Oil Prodction deal, Feb production 1.893mln BPD vs. 1.885 in Jan. (Newswires)

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