• Major European indices trade positively as US-China trade optimism continues from Asia.
• UK AG Cox is attempting to win over Brexiteers and DUP with new legal advice; however, Cox’s efforts have been rejected by Brexit supporting lawmakers.
• Dollar underperforms major counterparts, particularly NZD & GBP
• Looking ahead, highlights include US NY Fed Manufacturing, US Manufacturing Output & Industrial Production, and Quadruple Witching

ASIA  

Asian stocks traded mostly positive across the board as US-China trade optimism helped the region shake off the negative lead from the US, where sentiment was subdued by growth concerns following recent discouraging data from China and the reported delay in the Trump-Xi summit. ASX 200 (-0.1%) and Nikkei 225 (+0.8%) were mixed with upside in Australia capped as weakness in mining names and financials offset the continued outperformance in energy, while the Japanese benchmark coat-tailed on recent currency moves. Elsewhere, Hang Seng (+0.6%) andShanghai Comp. (+1.0%) were higher as overnight trade-related news flow spurred optimism including comments from President Trump that we will have news regarding a China trade deal in the next 3-4 weeks and although he included a ‘one way or the other’ caveat, he suggested that people will be talking about it for a long time and that China has been very reasonable. In addition, Chinese officials also contributed to the trade hopes after the NPC approved Foreign Investment law reforms dealing with forced tech transfers and IP theft which is seen as an attempt to appease US concerns, while Chinese Premier Li noted that China can use reserve requirements as well as interest rates to support the economy and confirmed VAT tax cuts will begin from next month. Finally, 10yr JGBs were relatively flat with demand dampened as focus centred on riskier assets and after the BoJ policy announcement proved to be a non-event in which it maintained policy settings and downgraded assessments on exports and output as expected.

PBoC injected CNY 20bln via 7-day reverse repos for a net weekly injection of CNY 20bln vs. last week's CNY 220bln net drain. PBoC set CNY mid-point at 6.7167 (Prev. 6.7009). (Newswires)

US President Trump said we will have news on China trade deal in the next 3-4 weeks one way or the other, while he added that China has been very responsible and very reasonable. In related news, there were also earlier reports which suggested China was proposing tying in an official state visit by President Xi to a US trade deal (Newswires)

Chinese Vice Premier Liu He conducted a phone call with US Treasury Secretary Mnuchin and Trade Representative Lighthizer in which China and US were said to have made further substantive progress on trade discussions, while Mnuchin had earlier commented that he is pleased with progress on trade talks with China and expects elements of Chinese trade talks to be resolved in the near future. (Newswires)

Chinese Premier Li said China faces new downward pressure but added they will not let growth slip out of reasonable range and that China can use reserve requirements as well as interest rates to support the economy. Premier Li added China will cut VAT tax from April 1st and will tighten its belt due to tax cuts, while he hopes US-China trade talks achieve results. (Newswires)

China NPC approved foreign investment law reforms which deal with forced technology transfers and intellectual property protections which will take effect from January next year. However, the American Chamber of Commerce in China said tweaks to FDI law only addresses small concerns. (Newswires)

Chinese House Prices (Feb) Y/Y 10.4% (Prev. 10.0%). (Newswires)

BoJ kept monetary policy settings unchanged with NIRP held at -0.10% and 10yr JGB target at around 0% as expected, while it also maintained forward guidance of keeping rates at current extremely low levels for extended period. Furthermore, the BoJ stated that Japan’s economy is likely to continue expanding moderately despite effects of overseas slowdown but lowered its assessment on exports and output. (Newswires)

Governor Kuroda says momentum towards 2% inflation target is maintained. (Newswires)

- Overseas developments will effect Japan for some time but the economy remains in moderate expansion

- The BoJ is aware of a slowdown in exports and production but the domestic economy remains firm

NORTH AMERICA

US Senate voted 59-41 in favour of the proposal to reject President Trump’s national emergency declaration on the US-Mexico border, although President Trump tweeted “VETO!” shortly after. (BBC)

BoC Deputy Governor Wilkins said underlying vulnerabilities means there will still be headwinds to growth even after trade war is resolved, while she added that interest rate changes will have stronger impact then in the past as people are more indebted and that high debt could mean move to neutral could be longer. (Newswires)

US President Trump and Chinese President Xi may meet in mid-April or later; US Secretary of State Pompeo. (Newswires)

UK/EU            

UK Attorney General Cox is reportedly attempting to win over Tory Brexiteers and the DUP with new legal advice which will state Britain will be able to break off from backstop under terms of the Vienna Convention. (Telegraph) Following this, Brexit supporting lawmakers have rejected UK Attorney Cox's additional legal opinion on UK PM May's divorce deal assurances. (Times)

EU's Verhofstadt said EU can only agree to Brexit delay if parliament makes it clear what it will support. In related news, ITV's Peston suggested If UK PM asked EU for an extension to the Article 50 process, EU might not make the decision at the 21st March summit and may schedule an emergency EU summit for a few days before the 29 March exit date. (Newswires/ITV)

Irish Finance Minister says that DUP is engaging intensively with the UK Government. (Newswires)

ECB's Rehn states that the ECB should conduct a systematic review of policy strategy as unconventional tools so far have failed to have the desired effect. (Newswires)

- Central banks ability to influence inflation may have eroded

- Interdependence of growth and inflation seem to have weakened, eroding ECB impact on prices via demand

GEOPOLITICAL

North Korea is considering suspending nuclear discussions with US and does not intend to yield to US demands, while leader Kim is set to make an official announcement of his position, according to the Deputy Foreign Minister Choe Son Hui. Elsewhere other reports also noted that Kim Jong Un may rethink moratorium on missile launches and that the US threw away a golden opportunity at the Hanoi summit. (TASS/AP)

EQUITIES

Major European indices have remained firm after opening with mild gains [Euro Stoxx 50 +1.4%], continuing from overnight where risk sentiment improved following US-China trade optimism. Sectors are largely in the green, although there is some mild underperformance in healthcare names. Weighed on simultaneously by a downgrade at Citi Group and reports that the Co’s India operations are the focus of a Singapore probe are Wirecard (-9.1%) who are at the bottom of the Stoxx 600, although this was later refuted by the Co. Elsewhere, and towards the top of the Dax, are BMW (+1.0%) who have been in focus after warning of headwinds impacting the sector and reported FY18 revenue slightly above expectations and EBIT margin above target; which subsequently led to short-term volatility in Co. shares. Separately, UBS (-0.9%) are in the red after their annual trade report where the Co. stated that provisions for litigation, regulatory and other matters reduced FY18 operating profit before tax and net profit for shareholders by USD 382mln.

FX

NZD/AUD - The Kiwi has rebounded firmly from lows close to 0.6800 vs its US counterpart after a more conciliatory tone from both sides of the US-China trade divide overnight compared to reports circling on Thursday highlighting ongoing issues that remain unresolved and have rolled back the likely date of a Trump-Xi official signing-off Summit. Nzd/Usd is currently towards the top of a 0.6858-24 range, but hampered somewhat by cross-winds as Aud/Nzd consolidates recovery gains above 1.0300 and the Aussie also reclaims lost ground against the Usd to retest resistance ahead of 0.7100.

CAD/EUR/GBP - Also benefiting from the Greenback’s broad loss of momentum as the DXY failed to sustain yesterday’s more bullish technical impulses beyond 96.821 and closer to the 97.000 handle. The Loonie is also deriving some impetus from steadier oil prices and could get a helping hand from Canadian manufacturing sales if expectations for a rebound are confirmed. Usd/Cad is hovering just above 1.3300 and back to within striking distance of the 200 DMA. Meanwhile, the single currency continues to try and establish/build a base on the 1.1300 handle, but resistance around the recent 1.1340 high and mega option expiry interest remain formidable barriers to overcome, with 1.9 bn at the big figure and 3.3 bn running off between 1.305-25 at Friday’s NY cut. Turning to the Pound, and a bout of selling saw Cable test underlying bids/support ahead of 1.3200, while Eur/Gbp spiked to 0.8575, but with little obvious in the way of a catalyst and for once relative quiet on the Brexit front the relatively rapid moves have subsequently reversed to circa 1.3275 and 0.8525 respectively.

JPY/CHF - Both relatively flat vs the Dollar and still rangebound, as Usd/Jpy meanders from 111.90 to 111.50 and just above the 200 DMA (111.44) in wake of a dovish BoJ policy meeting, as widely anticipated. Decent expiries from 111.50-65 (1.1 bn) could underpin the headline pair, while 112.00 and a Fib at 112.08 are keeping the upside in check. The Franc is even more contained within 1.0045-20 and vs the Eur around 1.1350 ahead of next week’s quarterly SNB policy review.

SEK/NOK - The Scandi Crowns looks set to end the week on the front foot having regained the initiative over the Euro and crossed psychological/technical levels, and with some added backing from a US bank advocating long positions via the Eur/Sek cross and Usd/Nok -  see our headline feed for more details.

FIXED INCOME

No physical or even market rumblings about any asset-switching, but a recent advance in EU stocks has resulted in or coincided with a broader and more pronounced pull-back in core debt futures. Bunds are now testing the water around 164.00 and Gilts are 35 ticks off best levels at 126.60, albeit only 7 ticks below par as US Treasuries drift down sit essentially flat or a tad weaker at marginal new overnight session lows. No doubt short term technicals are also impacting, but bonds appear to be spellbound by equities into quadruple-witching.

COMMODITIES

Brent and WTI prices are softer heading into the weekend, a sharp decline this morning saw prices drop significantly below the day’s ranges, with no significant fundamental news behind this. This morning saw the release of the IEA’s monthly report, which maintained the 2019 global oil demand growth forecasts at 1.4mln BPD, which has been supported by strong non-OECD consumption. IEA state that OPEC crude production in Feb was 30.68mln BPD, a decrease of 240k BPD; due to losses in Venezuela and lower output from both Saudi Arabia and Iraq. Adding that preliminary data for February points to a sharp drop in inventories. Looking ahead on the calendar sees the Baker Hughes rig count at 17:00 GMT due to the US time change, where total rigs decreased by 11 to 1027.

Gold (+0.4%) is firmer in spite of the improvement in risk sentiment, potentially due to the yellow metal retracing some of yesterday’s decline where it dropped below USD 1300/oz, for reference spot gold is currently trading around USD 1302/oz. Separately, Indian gold demand may drop in May due to restrictions surrounding cash movement an Industry Official has reported. Elsewhere, copper prices improved overnight on the risk sentiment.

Russian Energy Minister Novak says it is too early to decide whether OPEC & Non-OPEC output cut deal should be extended, and that he will attende the JMMC meeting in Baku. (Newswires)

IEA Monthly Report: maintain forecast of global oil demand growth for 2019 at 1.4mln BPD, has been supported by strong non-OECD consumption. (Newswires)

- Global oil production fell by 340 K BPD in February as OPEC and non-OPEC cuts deepened.

- OPEC crude oil production in February dropped by 240k BPD, to 30.68mln BPD

- Global refining throughput returned to growth, with 1Q19 expected to be up 0.8mln BPD Y/Y

- OECD commercial oil stocks rose 8.6mln BPD on the month in January to their highest level since November 2017

- Brent futures reached a four-month high, above $67/bbl, in mid-March on reduced production from OPEC

- Non-OPEC oil output growth will slow from 2018 record of 2.8mln VPD to around 1.8mln BPD in 2019

- Preliminary Feb data suggest a sharp drop in stocks