Original insights into market moving news

[PODCAST] EU Open Rundown 3rd April 2019

  • Asian indices were firmer with sentiment driven by Chinese PMIs and US-China trade; ahead of further talks in Washington
  • UK PM May seeks a further A50 extension and a solution with Labour leader Corbyn
  • Looking ahead, highlights include EZ, UK & US Services PMIs, EZ Retail Sales, US ADP National Employment, US Non-Manufacturing ISM PMI, Fed's Bostic, Barkin, George & Kashkari



Asian equity markets were mostly higher as trade optimism and Chinese PMI data helped the region shrug-off the indecisive lead from the US, where the global stock rally had stalled amid thin volumes, weak durable goods data and ahead of upcoming risk events. ASX 200 (+0.6%)and Nikkei 225 (+0.8%) were positive with Australia led by miners amid strength in iron ore prices which hit record levels in China and as participants also digested the budget which included an upward revision to the first projected surplus in over a decade and proposed AUD 158bln in tax cuts. Japanese stocks were lifted as risk appetite was stimulated by reports US and China are nearing a final trade agreement with most issues resolved but continue to haggle on enforcement and implementation. Hang Seng (+1.0%) and Shanghai Comp. (+0.2%) also benefitted from the trade hopes and after further encouraging data from China in which Caixin Services PMI topped estimates and printed its highest since January 2018. However, the performance of the mainland was somewhat fatigued after its recent bullish streak and with Bank of Communications underperforming on reports China National Council for Social Security Fund plans to sell 1.49bln of Bocom’s A-shares. Finally, 10yr JGBs were lower as trade hopes ensured a lack of safe-haven demand and with selling exacerbated as prices ran through stops at 153.00. SMBC also suggested the BoJ may reduce its purchases today, although this failed to materialize as the BoJ maintained its Rinban amounts which totalled JPY 1.23tln in 1yr-10yr JGBs and which helped alleviate some of the pressure.

PBoC skipped open market operations for a net neutral daily position. (Newswires) PBoC set CNY mid-point at 6.7194 (Prev. 6.7161)

Chinese Caixin Services PMI (Mar) 54.4 vs. Exp. 52.3 (Prev. 51.1); Highest since January 2018 (Newswires)

Chinese Caixin Composite PMI (Mar) 52.9 (Prev. 50.7)

US and China are drawing closer to a final trade agreement with most issues resolved although continue to haggle on trade deal enforcement and implementation. (FT)

US Chamber of Commerce official said US-China trade talks are at a point where a deal is more likely than not. The official also commented that negotiators from both sides need to make progress on enforcement mechanism as well as tariff removal issues this week and commented that it is unlikely China would agree to the trade agreement enforcement mechanism with unilateral US right to retaliation unless all US tariffs on Chinese goods are first withdrawn. (Newswires)


UK PM May said we need a further extension of A50 to ensure we leave in a timely way with a deal and will try to complete legislation by May 22nd. PM May said she is taking action to break the logjam and offered to sit down with opposition Labour leader Corbyn to hopefully reach a solution that delivers on the referendum and if they cannot agree on a single unified approach, they could agree on a set of arrangements to put to the house and that the government would abide by Parliament’s decision. There were later reports that PM May is said to consider asking lawmakers to rank Brexit outcomes. (Newswires)

UK PM May spokesperson said the UK is setting a course where we hope it won't be necessary to participate in the EU Parliament elections and commented that it is possible to cancel participation right up to the day of those elections. (Newswires)

DUP said UK PM May's lamentable handling of negotiations with EU means she has failed to deliver a sensible Brexit, while it added it remains to be seen if sub-contracting out future of Brexit to Labour's Corbyn will end happily. (Newswires)

EU is preparing to offer PM May a long Brexit extension with strict conditions including taking part in European Parliament elections and a possible “gentleman’s agreement” regarding Britain's conduct (e.g. potentially abstaining from taking part in important decisions over the EU’s future), according to FT. Separately, EU officials are said to think the UK could get an extension with a pretty weak excuse *as long as* it signs up to terms and conditions such as European elections and more, according to Guardian's Jennifer Rankin. (FT/Guardian/Twitter)

French President Macron has led other EU leaders in warning that UK PM May's apparent move to take no-deal Brexit off the table offers no guarantees UK will not crash out of the EU on April 12th. (Newswires)

A senior EU official said the WA would need to be approved by MPs next week - if the UK doesn’t participate EP elections - because otherwise a short extension is “not imaginable” as it would “jeopardise” elections, according to BuzzFeed. (Twitter)

UK BRC Shop Price Index (Mar) Y/Y 0.9% (Prev. 0.7%). (Newswires)


In FX markets, the greenback weakened as it suffered from the broad strength seen across its major counterparts including EUR/USD which rebounded to back above the 1.1200 level, while GBP/USD held firm after PM May announced she will seek a further extension to Article 50 and offered to sit down with opposition Labour leader Corbyn to find a solution for the current deadlock. Furthermore, PM May is aiming to complete legislation by May 22nd and suggested if they cannot reach a single unified approach, they could agree on a set of arrangements to put to the house and that the government would abide by Parliament’s decision. Elsewhere, USD/JPY and JPY-crosses were lifted by the risk appetite, while antipodeans also benefitted from their high-beta properties with AUD/USD further boosted by better than expected Australian Retail Sales and Trade Surplus, as well as the Chinese PMI data, which saw the pair test resistance at 0.7100 where there is also a large option expiry of AUD 1.3bln for today’s New York cut.

Australian Trade Balance (Mar) 4.80B vs. Exp. 3.80B (Prev. 4.55B, Rev. 4.35B). (Newswires) Australian Retail Sales (Mar) M/M 0.8% vs. Exp. 0.2% (Prev. 0.1%) COMMODITIES


Commodities were mostly higher in which WTI crude futures marginally extended on gains to its best levels in around 5 months with prices underpinned by the positive risk sentiment and ongoing supply side factors with the US also looking to take further action on the Venezuela’s Maduro regime. Elsewhere, upside in gold was restricted as the gains in stocks weighed on safe-havens, while copperbenefitted from the risk tone and amid further upside in Chinese iron ore prices which hit fresh all-time highs amid  tightening supply concerns and expectations of increased demand from steel mills.  

US API Weekly Crude Stocks (29 March): +3.0mln (Exp. -0.4mln, prev. +1.9mln). (Newswires)

US VP Pence said the US is looking to take action to isolate Venezuela's Maduro regime, while there were also reports that Venezuela exported nearly 1mln BPD in March despite sanctions and power outages according to PDVSA. (Newswires)

US ITC finds some imports of large-diameter welded steel pipe from Canada, Greece, South Korea and Turkey harm domestic producers, locking in duties; says some other pipe imports do not. Elsewhere, it was also reported that Russia has notified the WTO that it may retaliate for EU steel curbs. (Newswires/IFX) 


US President Trump said he gets along great with North Korean leader Kim but added he is not ready for a deal, while there were separate reports that North Korea propaganda outlet criticized South Korea's cautious approach to inter-Korean relations in which it suggested Seoul has given in to US pressure. (Newswires)


Action was rangebound and horizontal, with a bias higher with risk-sentiment cooling after Monday’s PMI/ISM inspired bounce. The complex managed to look through the US data; after UK PM May’s remarks, which points to a softer form of Brexit, Treasuries saw small downside as US stocks saw positive ticks. Major curve spreads were relatively unchanged at settlement. US T-note futures (M9) settled 5 ticks higher at 123-24+.

US President Trump said Germany is not paying its fair share to NATO and repeated his threat that he is prepared to close the border with Mexico if he has to, while there were also comments from US NEC Director Kudlow that the US is looking at ways to allow freight passage if the US-Mexico border shuts. (Newswires)

Fitch affirmed United States sovereign rating at 'AAA'; Outlook Stable. (Newswires)

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