Original insights into market moving news

[PODCAST] US Open Rundown 17th April 2019

  • European indices are little changed [Euro Stoxx 50 +0.1%] following on from the indecisive trade seen overnight
  • European Commission has published the preliminary list of USD 20bln of US products to potentially be hit with retaliatory tariffs relating to Boeing
  • Looking ahead, highlights include Canadian CPI, Fed Beige Book, BoE’s Carney, ECB’s Lautenschlaeger & de Galhau, Fed’s Harker & Bullard,
  • Earnings: Morgan Stanley, Abbott Laboratories, US Bancorp


Asian equity markets traded indecisively following the cautious gains on Wall St due to mixed earnings and as the region failed to fully benefit from a slew of better than expected Chinese data. ASX 200 (-0.3%) was negative with the index led lower by underperformance in the mining sector after BHP reported weaker quarterly production numbers and amid declines in Chinese iron ore prices after Vale received approval to resume Brucutu mine operations, while Nikkei 225 (+0.2%) was positive although initial price action had mirrored a choppy currency. Hang Seng (U/C) and Shanghai Comp. (+0.3%) were indecisive with only brief support seen despite the better than expected Chinese GDP, Industrial Production and Retail Sales, as some suggested the data dampens prospects of PBoC action and after the central bank also recently suggested a preference for restraint in its quarterly monetary policy document. Furthermore, the PBoC conducted a liquidity injection of CNY 160bln through 7-day reverse repos but only announced CNY 200bln in MLF loans vs. the expiring CNY 366.5bln. Finally, 10yr JGBs were marginally lower as Japanese stocks remained afloat and on spillover selling from T-notes, while the US 30yr yield eyed the 3.0% level for the first time in nearly a month.

Japan and the US have agreed to accelerate trade talks after an initial meeting in Washington suggested the two nations will stick to a narrow range of subjects. (FT)

PBoC injected CNY 160bln via 7-day reverse repos and CNY 200bln of 1yr MLF loans vs. expiring CNY 366.5bln. (Newswires) PBoC set CNY mid-point at 6.7110 (Prev. 6.7097)

Chinese GDP (Q1) Q/Q 1.4% vs. Exp. 1.4% (Prev. 1.5%). (Newswires) Chinese GDP (Q1) Y/Y 6.4% vs. Exp. 6.3% (Prev. 6.4%)

Chinese Industrial Production (Mar) Y/Y 8.5% vs. Exp. 5.9% (Prev. 5.3%); fastest growth since July 2014. Chinese Retail Sales YY Mar 8.7% vs. Exp. 8.4% (Prev. 8.2%)

Japanese Trade Balance (JPY)(Mar) 528.5B vs. Exp. 372.2B (Prev. 339.0B, Rev. 334.9B). (Newswires) Japanese Exports (Mar) Y/Y -2.4% vs. Exp. -2.7% (Prev. -1.2%) Japanese Imports (Mar) Y/Y 1.1% vs. Exp. 2.6% (Prev. -6.6%)


US President Trump vetoed the Congressional Resolution that seeks to end US involvement in Saudi-led war on Yemen. (Newswires)

Reports noted several rockets striking Tripoli, Libya. (AFR/Twitter)


Local UK Conservative party chairmen are circulating a petition which seeks an Extraordinary General Meeting to pass a no-confidence vote in PM May. The report states that the party will be obliged to hold a meeting if more than 65 association chairmen sign the motion; so far between 40-50 have signed it, with expectations that the threshold could be passed next week. (Telegraph)

Italian Economy Minister Tria states that the trend from the first two months of 2019 shows encouraging signs. (Newswires)

- Adds that the 2019 GDP growth forecast of 0.2% growth is "balanced"; reflects the expectations of a slight recovery in the first part of the year which is to be followed by a stronger pick-up. Government forecasts imply that public debt is fully sustainable, even with slower growth

- Rates on Italian debt are still too high, also the country opposes proposals to remove zero risk weighting on Government bonds

German Government cuts 2019 GDP growth forecast to 0.5% vs. prev. 1.0%, expects a rebound to 1.5% in 2020, Inflation seen at 1.5% in 2019, 1.8% in 2020. (Newswires)

European Commission published prelim list of USD 20bln of US products which could be hit with tariffs in relation to Boeing (BA) WTO case.(Newswires)

EU HICP Final YY (Mar) 1.4% vs. Exp. 1.4% (Prev. 1.4%)

- EU HICP Final MM (Mar) 1.0% vs. Exp. 1.0% (Prev. 0.3%)

- EU HICP-X tobacco YY (Mar) 1.3% (Prev. 1.4%)

- EU HICP-X Tobacco MM (Mar) 1.0% (Prev. 0.3%)

UK CPI YY (Mar) 1.9% vs. Exp. 2.0% (Prev. 1.9%)

- UK CPI MM (Mar) 0.2% vs. Exp. 0.3% (Prev. 0.5%)


Major European indices are little changed [Euro Stoxx 50 +0.1%] following on from indecisive overnight trade as Asian equity market were unable to capitalise on the strong Chinses data. The AEX (+0.2%) is marginally outperforming its peers, boosted by index heavyweight ASML (+1.5%) who have around a 12% weighting in the AEX and are higher following their earnings and the Co. confirming their full year guidance. Sectors are mixed, with underperformance seen in material names at the open, with the sector weighed on by BHP (-2.6%) after the Co. lowered their FY19 output guidance and Rio Tinto (-2.8%) in the red after being downgraded. Other notable movers this morning include ABB (+5.4%) following earnings and the surprise resignation of the Co’s CEO Spiesshofer, after being unable to placate shareholders with the sale of their power grid division in December. Elsewhere, Roche (+0.1%) have fallen from opening highs of around 1.6%; however, price action for the Co. was initially driven by the announcement that they are raising FY19 outlook to mid-single digit growth vs. Prev. low-mid single digit range, alongside expectations for further dividend increases.

PepsiCo Inc (PEP) Q1 Core EPS USD 0.97 vs. exp. USD 0.92, revenue USD 12.88bln vs. exp. USD 12.69bln. (Newswires)


USD, CNY - China’s economy unexpectedly held up in Q1 despite a slew of calls for a March bottom. GDP growth for the quarter topped estimates at 6.4% Y/Y, within the country’s 2019 target of 6.0-6.5%, whilst March IP and retail sales beats also provided extra impetus for the Yuan which breached 6.70 to the downside against the Dollar to print a low of just above 6.68. Hence, DXY lost the 97.000 handle upon the release and continues to edge lower in early EU trade. The Dollar index currently resides just off lows of 96.810 ahead of its 50 DMA at around 96.800. A light calendar for the US sees February trade data released at 13:30BST, ahead of Fed voter (and notorious dove) Bullard’s speech on the US economy and monetary policy.

AUD, NZD - The Aussie is the marked beneficiary from the upbeat Chinese data wherein the jump in industrial production and a maintained GDP growth aided AUD/USD to briefly reclaim 0.7200 to the upside (from an intraday low of 0.7150) for the first time since February. The pair currently resides just below the figure, albeit above its 200 DMA at 0.7193 with Aussie jobs data on the overnight docket. Note: around USD 1.5bln options are set to expire between strikes 0.7190-7200. Conversely, the Kiwi does not bode so well amid dismal CPI figures in which markets pricing for a May OCR cut shifted to above 50%. On a brighter note for the NZD/USD, the overnight Chinese data resurrected the currency from a low of 0.6670 (vs. pre-data high of 0.6775) before stabilising above its 200 DMA at around 0.6730.

EUR, GBP - An upbeat day for the Euro thus far amid the weakness in the Buck. The single currency was little swayed by the release of unrevised EZ inflation finals and the German government’s cut to 2019 GDP growth forecasts as was widely expected. EUR/USD breached its 50 DMA at 1.1300 to the upside in early hours and remains north of the figure where 1.4bln in options are set to expire at today’s NY cut. Elsewhere, Sterling took a hit from the benign inflation figures in which headline inflation printed at 1.9%, below the forecast 2.0%. As such, Cable lost the 1.3050 handle and resides close to session lows at 1.3033 ahead of its 50 WMA at 1.3029. ING argues that “British Retail Consortium had suggested that wholesale food costs had risen, on the back of adverse weather and higher global commodity prices”, hence overall inflation could be bumped up next month, possibly to the 2% target when combined with the rise in household energy caps. GBP now awaits for any potential direction from BoE Governor Carney scheduled to speak at 14:00BST.

CAD - Another G10 winner from the pullback in the Dollar, also underpinned from the rise in oil prices following last night’s surprise drawdown in API stocks. USD/CAD currently resides below its 100 DMA at 1.3327, having briefly breached its 50 DMA to the downside at 1.3314 ahead of Canadian inflation data this afternoon, with headline expected to tick up to 1.9% from 1.5%.

New Zealand CPI (Q1) Q/Q 0.1% vs. Exp. 0.3% (Prev. 0.1%). (Newswires) New Zealand CPI (Q1) Y/Y 1.5% vs. Exp. 1.7% (Prev. 1.9%) New Zealand RBNZ Sectoral Factor Model Inflation 1.7% (Prev. 1.7%)


Core EU and UK debt futures are still languishing in the red, but off of lows of the day as both UK and German 10yrs are consolidating above session troughs. UK debt futures were given a little bit of steam in the wake of softer than anticipated CPI data from the UK, but UK 10yrs remain the second worst performers in the core debt scope. This comes after 10yr Bunds briefly broke the 0.1% yield level in the morning on little to no fundamental news besides the strong Chinese production data overnight. EU and UK traders will now look to draw further direction from potential comments via BoE’s Carney and ECB’s Lautenschlager, after largely in-line EZ CPI added little impetus to the market.

Turning to the US, the curve is seeing most of the action in the longer end, with 10yr futures slipping by a shade over 3 ticks in the EU morning. 10yr yields are in focus as they have now broken their long term trend 61.8% fib (2.603%) with a 38.2% fib eyed next to the upside at 2.69%, as some market participants noted a strong bid in the 10yr following the strong production data from China. Looking ahead, traders may look for more inspiration from upcoming US trade and sales data, with Fed’s Bullard and Harker both also on the docket.


Brent (+0.6%) and WTI (+0.6%) prices are firmer with prices supported by the unexpected API draw of 3.1M vs. Exp. build of 1.7M. Elsewhere, strike action at Shells Pernis oil refinery [capacity of 404k BPD] is still ongoing, with most recent updates that union leaders state that the refinery is to remain at 65% operating rate, and there is currently no indication of when the refinery will return to full operation. Separately, Saudi Aramco are reportedly to purchase the 50% stake that Shell currently owns in SASREF, which is a joint venture between the two Co’s with a refining capacity in excess of 300k BPD. Later in the session we have the EIA weekly report, and due to scheduling for Easter holidays the Baker Hughes rig count will be released Thursday April 18th.

Gold (U/C) is flat and trading within a narrow USD 4/oz range, with price action from the softer dollar and stronger than expected Chinese data largely cancelling each other out. As such the yellow metal, is trading just above the prior sessions low of around USD 1272, which was the metals lowest level since December 27th. Elsewhere, the world’s largest iron ore miner Vale say they intend to resume operations at their Brucutu operations within the next 72 hours weighing on both the mining index and iron ore prices.

Barclays believes copper will end the year below USD 6000/tonne as macro economy will ultimately weigh on the red metal. (Newswires)

Kazakhstan's daily oil output is reportedly 199.5K tonnes today vs. 213.9K tonnes yesterday. (Newswires)

Morning all! - Asian equity markets traded negatively with sentiment dampened following choppy performance stateside