Original insights into market moving news

[PODCAST] EU Open Rundown 2nd April 2019

  • Asian indices were firmer following gains on Wall St. as the data driven sentiment continues
  • Once again, all Brexit motions were rejected, though a customs union moved closer to passing; ahead of today’s cabinet meeting and another potential vote on Thursday
  • RBA kept rates unchanged as expected, maintained a neutral tone and stated that policy will be set to support growth
  • Looking ahead, highlights include UK Construction PMI, US Durable Goods, APIs, ECB’s Praet, Fed’s Kaplan, supply from the UK



Asian equity markets were mostly higher as the regional bourses picked up the bullish baton from Wall St where sentiment was underpinned and growth fears were eased by strong PMI data from US and China. ASX 200 (+0.4%) andNikkei 225 (+0.1%) traded positive with tech, energy and financials leading the upside in Australia and with price action in the Japanese benchmark mainly currency-driven. Furthermore, participants had been awaiting any dovish clues from the RBA, as well as the Federal Budget which is seen as a platform for upcoming elections and is expected to include income tax cuts, billions for infrastructure spending and its first surplus in 12 years of AUD 4.1bln. Hang Seng (+0.2%) and Shanghai Comp. (+0.4%) remained upbeat after the recent recovery in factory data and amid optimism ahead of this week’s US-China trade talks in Washington, while outperformance was seen in gambling names following the better than expected Macau gaming revenue figures. Finally, 10yr JGBs were lower on spill-over selling from USTs and as the positive risk tone continued to dampen safe-haven demand, although some of the losses were pared following stronger demand and lower supply in today’s 10yr JGB auction.

PBoC skipped open market operations for a net neutral daily position. (Newswires) PBoC set CNY mid-point at 6.7161 (Prev. 6.7193)

PBoC Adviser Sheng Songcheng said China may decide whether to lower RRR after the release of Q1 data, while Sheng added the chance of a cut in China's benchmark interest rate this year is not big. (Newswires)


UK Parliament rejected all 4 Brexit options in indicative votes as MPs voted 273 For vs. 276 Against Motion (C) on Customs Union and voted 261 For vs. 282 Against Motion (D) for a Common Market 2.0, while MPs voted 280 For vs. 292 Against Motion (E) which called for a Confirmatory Public Vote and 191 For vs. 292 Against Motion (G) on Parliamentary supremacy. (Newswires)

Following the rejection of all four options, Conservative Remainer MP Boles (one of the architects of the indicative vote plan) left the party stating “I accept I have failed. I have failed chiefly because my party refuses to compromise”. (Telegraph)

UK Chancellor Hammond is to tell the Cabinet on Tuesday that Tories may have to consider a referendum as neither party nor country can afford an election, according to Times political editor. (Twitter)

There is an increasing consensus within the UK cabinet to reluctantly accept a customs union if PM May's deal loses during a run-off final round of indicative votes which is expected on Thursday, while reports also noted that some Brexiteer Cabinet ministers will demand PM May issue a final ultimatum to the EU to improve the backstop otherwise it will be a No Deal on April 12th. (The Sun)

Britain has reportedly been warned it is staring into the abyss by the EU which is prepared to outline new no-deal Brexit measures. (Guardian)

A Junior Brexit Minister reportedly has collected 200 Conservative MPs backing calls for a managed no deal Brexit. (ITV) Trade talks between EU and US are said to face delays as governments across the bloc struggle to agree on a mandate to start discussions with the US, which reports suggests could risk provoking a backlash from US President Trump. (Newswires) 


In FX markets, the greenback mildly benefitted from a subdued tone across its major counterparts in which EUR/USD stuck at 3-week lows near 1.1200 where a large option expiry for today’s New York cut resides. GBP/USD fell below the 1.3100 handle after Parliament rejected all motions in the indicative votes, although Motion C which calls for a Customs Union only lost by a tight margin of 3 votes (273 vs. 276). Following the results, there was said to be increased cabinet consensus to reluctantly accept a customs union if PM May's deal loses during a final round run-off in indicative votes expected for Thursday, although others were said to demand PM May issue an ultimatum to the EU to improve the backstop or it will be a no-deal on April 12th. Elsewhere, USD/JPY was driven by risk sentiment, while antipodeans were pressured with NZD dampened by weak NZIER Business Confidence. AUD/USD was choppy overnight with the pair only briefly supported by strong Building Approvals figures as participants awaited the RBA which was eventually met with some indecision as the central bank kept rates unchanged as expected and kept to a neutral tone. This initially saw a knee-jerk reaction to the upside for AUD/USDas some dovish bets were disappointed, although the currency then retreated to pre-announcement levels and further below as markets eventually digested parts of the statement concerning increased downside risks for the global economy and that the RBA will set policy to support growth.


RBA kept the Cash Rate Target unchanged at 1.50% as expected and reiterated that low rates are supporting the economy and that the labour market remains strong, while inflation remains low and stable. Furthermore, the RBA added that downside risks to global economy have increased and the board will monitor developments as well as set policy to support growth. (Newswires)


Australian Building Approvals (Feb) M/M 19.1% vs. Exp. -1.0% (Prev. 2.5%). (Newswires) Australian Building Approvals (Feb) Y/Y -12.5% vs. Exp. -27.0% (Prev. -28.6%)


WTI crude futures extended on recent gains with prices supported by the positive risk tone and supply disruptions with Venezuela’s main oil port closed due to a lack of electricity and with US said to be seeking further sanctions on Iran, which lifted prices towards the USD 62.00/bbl level where it then met resistance. Elsewhere, gold prices were lacklustre and remained near its lowest levels in over 3 weeks amid a firmer greenback and as safe-havens were shunned, while copper was steady and took a breather from recent advances despite the risk appetite and Dalian ironore futures hitting a record intraday high.


US official said US is considering additional sanctions on Iran, aiming at parts of the economy that have not been hit before and reiterates previous goal to get Iran oil exports as close to zero as possible. (Newswires) 

Venezuela's main Jose oil terminal has halted operations due to lack of electricity supply, according to sources. (Newswires) 


Risk-on was the theme after China PMI data reassured that the country has seen a stabilisation in the manufacturing sector, and combined with a chipper ISM manufacturing report out of the US, the stage was set for yields to rise. In fact, it appears yields are set for the biggest-single day rise in around three-months (2s yields +5.3bps at settle, 5s yields +6.9bps, 10s yields +8.2bps, 30s yields +7bps). Major curves bear-steepened modestly (1.2bps to 2.6bps), though 10s30s saw some small narrowing. The much-watched 3m/10yr spread moved back into positive territory with reassuring global growth signs (ex-EZ PMIs); while this spread is only a symptom of a much larger cause, analysts seem to be more generally buying-into the argument presented by some Fed officials of late, which suggested that structural factors have diminished the recession signal, though the growth concerns remain valid. US T-note futures (M9) settled 19+ ticks lower at 123-19+.

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