Original insights into market moving news

[PODCAST] US Open Rundown 10th July 2018

  • Surprise UK Industrial Output miss reverses GBP early rise, German ZEW conditions miss hits EUR
  • European equities largely higher following in step with Asia in a news-thin morning
  • Looking ahead, highlights include, APIs and ECB’s Lautenschlaeger



Asian equity markets traded mostly higher on the momentum from Wall St where the DJIA notched its best performance in a month, and financials outperformed on optimism heading into earnings season. ASX 200 (-0.4%) and Nikkei 225 (+0.6%) initially took impetus from US and both opened higher although the Australia index later pared gains amid losses in its largest weighted financials sector, while Tokyo stocks remained firm on a weaker currency. Elsewhere, Hang Seng (+0.1%) conformed to the overall positive tone. The Shanghai Comp. (+0.4%) was choppy but ended positive despite continued inaction by the PBoC resulted to a CNY 30bln liquidity drain, while participants also digested CPI and PPI figures which either printed inline or firmer than expected. Finally, 10yr JGBs were subdued with demand weighed by the overall positive risk appetite and after the 5yr auction failed to support prices despite showing stronger interest with both b/c and accepted prices firmer than prior.

PBoC skipped open market operations for a net daily drain of CNY 30bln. (Newswires)

PBoC set CNY mid-point at 6.6259 (Prev. 6.6393)

Chinese CPI (Jun) Y/Y 1.90% vs. Exp. 1.90% (Prev. 1.80%). (Newswires)

Chinese PPI (Jun) Y/Y 4.70% vs. Exp. 4.50% (Prev. 4.10%)

China Mofcom announced measures to mitigate impact of trade dispute with US, in which new tax income from countermeasures against US will mainly be utilized to ease impact to companies and workers. (Newswires)


UK Monthly GDP Estimate YY (May) 1.5% vs. Exp. 1.40%

UK Monthly GDP Estimate MM (May) 0.3% vs. Exp. 0.30%

UK Manufacturing Output MM (May) 0.4% vs. Exp. 0.70% (Prev. -1.40%, Rev. -1.3%)

UK Manufacturing Output YY (May) 1.1% vs. Exp. 2.00% (Prev. 1.40%, Rev. 0.9%)

UK Industrial Output YY (May) 0.8% vs. Exp. 1.90% (Prev. 1.80%, Rev. 1.6%)

UK Industrial Output MM (May) -0.4% vs. Exp. 0.50% (Prev. -0.80%, Rev. -1.0%)

German ZEW Current Conditions (Jul) 72.4 vs. Exp. 78.2 (Prev. 80.6)

German ZEW Economic Sentiment (Jul) -24.7 vs. Exp. -18.2 (Prev. -16.1)

San Francisco Fed economic letter noted economic upside from tax cuts may not meet analysts' overly optimistic expectations. (Newswires)

US President Trump nominated judge Brett Kavanaugh for US Supreme Court Justice. (Newswires)


European equities are largely positive (Euro Stoxx 50 +0.2%), with the IBEX (-0.1%) currently the underperforming bourse, pressured by losses in BBVA (-2.5%), whom are being hit by falling Turkish fixed income prices in the wake of Erdogan’s seating, as a result of their exposure to this market.

The CAC (+0.3%) is outperforming bourse, led by index heavyweight Airbus (+2.3%) on the back of a positive note by Bank of America.

TP ICAP (-32.2%) shares are crashing after they announced their CEO is to leave his post, and reduced their synergy targets.

21st Century Fox (FOXA) is preparing a new bid for Sky (SKY LN) (+2.2%) that would value it at GBP 25bln, and top the offer made by Comcast (CMCSA), as according to sources.

PepsiCo Inc (PEP) Q2 EPS USD 1.61 vs. Exp. USD 1.51, revenue USD 16.1bln vs. Exp. USD 16.05bln


In the end it seems that good old fashioned economic indicators overshadowed new ONS releases, as big UK ip and manufacturing output misses helped Gilts bounce off worst levels to 122.95 vs 122.84 at one stage (-31 ticks). Bunds have also regained some composure off a fresh 162.26 Eurex base (-35 ticks) amidst reports of supply hedging via 10 year swaps ahead of tomorrow’s new German benchmark and as books build for long end syndications. Note, a considerably weaker than forecast ZEW survey has also prompted some short covering. Elsewhere, US Treasuries have slipped a fraction in thin overnight trade, and also have issuance to make room for alongside a relatively light data schedule.


GBP - Some calm after Monday’s UK political storm for the Pound as PM May resisted growing pressure and heightened prospects of a no confidence vote after the resignations of Brexit Minister Davis and Foreign Minister Johnson. Cable rebounded pretty firmly from just under 1.3200 to retest 1.3300 in the run up to a raft of data, while Eur/Gbp pulled back from 0.8875 before Sterling sold off again on much weaker than forecast IP and manufacturing output readings that ultimately stole the limelight from much hyped new monthly ONS GDP figures that were broadly in line with consensus anyway. Cable back near 1.3250 and the cross just shy of 0.8850.

EUR - The single currency was also undermined by negative macro factors as the latest ZEW survey deteriorated much more than anticipated, albeit on heightened political uncertainty in July, some of which has dissipated, alongside rising concerns about global trade wars and in particular the tariff spat with the US. Eur/Usd has subsequently retreated from around 1.1760 to test layered bids ahead of 1.1700.

JPY/AUD/NZD - All around 0.3% lower vs the Greenback, as Jpy marginally breaks down through recent lows circa 111.00+ and is now eyeing bids said to be housed between 111.22-59 (a chart resistance zone), with option flow reportedly looking at upside strikes in the headline pair. The Aud is back below 0.7450 having failed to seriously test key resistance just ahead of 0.7500 and the Kiwi is back towards 0.6800 with the cross remaining above 1.0900.

CAD - Also softer vs the Usd with the pair over 1.3100, but the Loonie looking towards housing data later for independent impetus before a widely expected and priced BoC hike on Wednesday.

DXY - The index has reclaimed 94.000, largely by virtue of all the weakness in rival G10 currencies rather than anything Dollar supportive.

TRY - The Lira has been trashed again as fears about changes in key cabinet roles by President Erdogan were realised with the appointment of his son-in-law to the newly formed and combined office of Economy and Treasury Minister, replacing two tried and trusted people – Simsek and Agbal. Usd/Try has been up over 4.7500, but currently around 4.7000.


Oil is currently up on the day, with WTI +0.5% and Brent +0.8%. Some traders are eyeing developments in the Knarr oilfield in Norway with Shell confirming it is to stop production due to strike action. This comes as supply concerns remain in the middle east, with the UAE energy minister saying it is time for extra supply to come into the market and that OPEC has enough capacity to offset output shortfalls.

Most metals are softer this morning with Gold slightly down on a rising dollar, that is recovering from near 3 week lows. Silver, Copper, Platinum and Palladium are all also negative on a higher dollar, with steel the only metal bucking the trend on unconfirmed reports of Tangshan production to be cut by 50%.

Source: RANsquawk