Original insights into market moving news

[PODCAST] US Open Rundown 25th April 2019

  • European Indices [Euro Stoxx 50 -0.3%] are trading with losses after a earnings dominated morning
  • BoJ & Riskbank kept rates unchanged but both altered their forward guidance
  • UK PM May is reportedly planning a Withdrawal Agreement Bill vote for next week, subsequently a source has suggested there is no plan for such a vote next week
  • Looking ahead, highlights include US Durable Goods & Initial Jobless Claims, New Zealand Trade Balance, ECB’s de Guindos Speaking, Supply from the US
  • Earnings: Bristol-Myers Squibb, 3M, Intel, Southwest Airlines, Altria, Comcast, Amazon, UPS, Ford



Asia equity markets traded cautious following an uninspiring lead from Wall St where the major indices consolidated albeit near record levels. In addition, holiday closures in Australia and New Zealand, the BoJ policy announcement, weak South Korean GDP and a slew of earnings provided much for participants to ponder over. Nikkei 225 (+0.5%) traded higher with newsflow and the biggest gaining stocks in Japan dominated by corporate results, while KOSPI (-0.5%) was subdued following abysmal growth data for Q1 in which GDP Q/Q unexpectedly contracted by 0.3% which was the worst reading since Q4 2008 and GDP Y/Y expanded at the slowest pace in almost a decade. Elsewhere, Hang Seng (-0.8%) and ShanghaiComp. (-2.5%) were downbeat as earnings season also started to pick up in the region and after the PBoC refrained again from liquidity operations which resulted to a net CNY 80bln drain. In addition, there were state media reports the PBoC will set up policy framework to implement relatively low RRR for small and medium banks, although this failed to spur a recovery given the absence of an actual RRR cut announcement and as PBoC officials reaffirmed a preference for prudent monetary policy. Finally, 10yr JGBs were choppy amid the cautious risk sentiment in the region and after the BoJ policy announcement which initially lifted 10yr JGBs at the open due to the dovish aspects from the statement and downgrades in the Outlook Report. However, prices then returned to pre-announcement levels as the lower projections were not much of a surprise given the recent data, while the BoJ slightly adjusted its modified forward guidance in which it stated that it will keep very low interest rate levels for an extended period of time at least through around Spring 2020.

PBoC skipped open market operations for a net daily drain of CNY 80bln. (Newswires) PBoC set CNY mid-point at 6.7307 (Prev. 6.7205)


PBoC will set up policy framework to implement relatively low RRR for small and medium banks, in which the extra funds will be used to support private and small companies, according to state media. However, there were later comments from the PBoC that China's prudent monetary policy is overall appropriate and neither tight nor loose and that the use of repos and MLFs does not signal loosening bias. (Newswires)

BoJ kept monetary policy settings unchanged as expected with NIRP held at -0.1% and 10yr JGB yield target at around 0%, but slightly modified forward guidance in which it stated that it will keep very low interest rate levels for an extended period of time at least through around Spring 2020(added at least through around Spring 2020). BoJ also stated that it will take longer than intended to achieve 2% target and that both risks to economic and price outlooks are skewed to the downside, while it noted it will relax terms and conditions for securities lending as well as consider introduction of ETF lending facility. In terms of the Outlook Report, the BoJ lowered its forecasts for Real GDP in FY19 and FY20 as well as Core CPI forecast for FY20. (Newswires)

BoJ Governor Kuroda says that policy will be swiftly adjusted if it is needed in order to keep momentum towards the 2% target; member Kataoka opposed the assessment of prices in the economic outlook report. Adds that it is possible the time frame regarding the forward guidance may exceed Spring 2020. And that he is not at all thinking of reviewing interest rates in Spring of 2020, "no matter what" (Newswires)

South Korean GDP (Q1) Q/Q -0.3% vs. Exp. 0.3% (Prev. 1.0%); worst reading since Q4 2008. (Newswires)


NEC Director Kudlow said we will nominate Stephen Moore to the Fed if he passes the FBI vetting process. (Newswires)


UK PM May is reportedly planning a Withdrawal Agreement Bill vote for as early as next week. (Sky News). Subsequently, a source suggests no plan to bring back the Brexit Withdrawal Bill next week., BBC's Kuenssberg. (Twitter)

PM May is reportedly giving serious consideration to introducing the Withdrawal Agreement Bill to the House of Commons, without the Northern Irish Backstop; in the hope that it shows her Brexit deal would be approved without it., ITV's Peston. (Twitter)


The Riksbank Rate was unchanged as expected at  -0.25%. They stated that the rate will remain at this level for a somewhat longer period of time than was forecast in February; repo rate is expected to be raised again towards the end of year or at the beginning of next year (vs. H2 2019), with hikes thereafter to occur at a somewhat slower pace. Bonds purchases will be for a nominal value of SEK 45bln, from July 2019 to December 2020. Inflation is close to the target level but prospects for inflation are slightly weaker; overall, inflation is expected to be somewhat lower over the next few years vs. Prev. forecast. (Newswires)

Riksbank's Ingves states that the Bank's inflation mandate means they have to live with currency fluctuations over time; sofer SEK has a smaller impact on inflation than they thought. (Newswires)

ECB Economic Bulletin: The risks surrounding the euro area growth outlook remain tilted to the downside. Global headwinds continue to weigh on euro area growth developments. (Newswires)



Iran Foreign Minister Zarif said US Navy ships can pass through Strait of Hormuz and stressed commitment to freedom of navigation, while he suggested confidence Iran can evade US sanctions and that they 'have a PHD in that area'. Furthermore, Zarif said the US blacklisting of Iran's Revolutionary Guard is absurd but Iran will exercise prudence. (Newswires)

North Korea warned of a response to US-South Korea drills, while there were also reports that North Korea leader Kim removed Kim Yong Chol as head of United Front Department which overseas foreign ties as he blames Kim Yong Chol for the failed summit with US in Vietnam. (Newswires)

China's Defence Ministry states that China has lodged stern representations with France regarding a French warship which illegally entered Chinese waters. (Newswires)



European Indices are trading with losses [Euro Stoxx 50 -0.5%] after having opened relatively flat, with markets initially taking the lead from the cautious performance in Asia. This morning’s downturn is on the back of significant underperformance in a number of Co’s after a morning driven by earnings with Nokia (-10.0%) leading the losses at the bottom of the Stoxx 600 after the Co. reported a EUR 50mln operating loss vs. Exp. profit of EUR 305mln. Separately, Sainsbury’s (-5.3%) are down after the CMA confirmed that they are to block merger discussions with Asda; as such the Co. are at the bottom of the FTSE 100 (-0.4%). The FTSE 100 is also weighed on by Barclays (-1.5%) post earnings where they reported a CIB total income which was lower than the prior, and Taylor Wimpey (-4.0%) after the Co. stated that increasing build costs are to push margins slightly lower. In recent reports Commerzbank (-2.0%) and Deutsche Bank (+3.0%) have confirmed that they have discontinued merger talks, as they believe that the merger would not result in sufficient benefits; which does follow earlier source reports that talks between the Co’s were on the verge of collapsing. Regarding this morning more positive earnings, ASM (+7.2%) lead the Stoxx 600 after beating on Q1 revenue and operating profit; while, Bayer (+3.5%) top the Stoxx 50 after confirming their FY guidance.

There were mixed fortunes for the post-market earnings yesterday from the NASDAQ heavyweights Microsoft, Facebook, and Tesla. The former two companies were inspiring on a top and bottom line basis, both beating quite substantially on EPS, with MSFT also exceeding expectations on revenue, whilst FB came in in-line (Microsoft Corp (MSFT) Q3 EPS USD 1.14 vs. exp. USD 1.00, revenue USD 30.6bln vs. exp. USD 29.84bln & Facebook Inc (FB) Q1 Adj EPS USD 1.89 vs. exp. USD 1.63, adj revenue USD 14.91bln vs. exp. USD 14.97bln). The components were also tailwinds, with daily and monthly average users increasing by 8% for the social media giant, and cloud services revenue jumping 22% for the Windows maker. Similar positivity could not be found for Musk’s Tesla, who had a wider EPS loss than expected, with revenues missing by over USD 600mln, however, the foul earnings could be cleaned up slightly by a reaffirmation of 2019 deliveries guidance, Model 3 production rising 3% QQ, and a cited expectation to return to profit in Q3. (Tesla (TSLA) Q1 Non-GAAP loss per share USD 2.90 vs. Exp. loss USD 0.69, rev. USD 4.54bln vs. Exp. USD 5.33bln)



SEK - A technical break below support in Eur/Sek and brief look at the 10.5000 proved fundamentally flawed or just premature as the cross catapulted more than 15 big figures on a much more dovish than expected Riksbank policy meeting outturn, while Usd/Sek hit its highest levels in some 16 years. In short, the Swedish Central Bank pushed back the likely timing for further rate normalisation to year end or early 2020 from H2 this year and lowered its repo path over the forecast horizon, adding that the current -0.25% level will be maintained for longer than previously anticipated (ie as flagged in February). The Riksbank also predicted softer inflation in light of recent weaker than expected price developments and announced that Sek45 bn SGBs will be bought from July 2019 through December 2020 regardless of a couple of reservations. Eur/Sek has eased back from a circa 10.6655 peak, but remains relatively close to chart resistance around 10.6730 and Usd/Sek is now eyeing 9.6000 as the Dollar continues to rally across the board.

USD - The Greenback is still outperforming or gaining at the expense of its currency counterparts, as the DXY consolidates and builds on advances through 98.000. In truth, aside from the Swedish Crown’s post-Riksbank collapse the Buck breached key levels late yesterday as resilience in several rivals finally gave way and the index cleared resistance ahead of the round number to register a new ytd best at 98.189, with only a relatively minor extension to 98.233 so far today. However, the DXY remains in the ascendency and 98.496 is the next bullish chart target.

CAD/GBP/EUR/AUD - All weaker vs the Usd, albeit just off worst levels, as the Loonie continues to reflect on Wednesday’s shift from the BoC to a wait-and-see stance vs tightening previously and fails to derive much support from a rebound in oil prices. Meanwhile, Cable has fallen under 1.2900 to test Fib and MA supports, with Eur/Usd probing below its latest 2019 trough to 1.1135 and eyeing downside chart levels ahead of 1.1100 (1.1190-10), Aud/Usd pivoting 0.7000 where hefty option barriers lie and the Franc back to straddling 1.0200.

JPY/NZD - The Yen has recovered well from new ytd lows vs the Usd around 112.40 to trade back above 112.00 amidst more speculation about positioning for the upcoming lengthy Golden Week holiday and not really reacting to the BoJ’s attempt to clarify policy guidance given Governor Kuroda’s admission that it is highly possible that ultra accommodation may continue beyond Spring 2020 as the 2% inflation target could well remain elusive even after FY 2021. Elsewhere, the Kiwi is trying to cling to 0.6600 vs its US peer ahead of NZ trade data and with some indirect help via the Aud/Nzd cross that is hovering near the base of a 1.0627-42 range at the tail end of ANZAC day.

EM - Another day and another rise in Usd/Try, to circa 5.9000 awaiting the CBRT to see if hawkish words can be as effective as actions.


It’s minimal, but UK debt has regrouped and recouped a bit more of its earlier losses to post a new 127.55 intraday high vs 127.30 at one stage, in contrast to Sterling that is testing fresh lows vs the outperforming Dollar with Cable down through tech support just under 1.2900 and the DXY nudging slightly loftier 2019 highs (98.276). Not even a significant beat on CBI retail sales has impacted, as Short Sterling contracts also stage a comeback to trade 2 ticks ahead vs 1 adrift. Meanwhile, Bunds have slipped back from a marginal Eurex intraday peak of 165.80 and US Treasuries have pared overnight gains with the curve flipping back to steeper, albeit fractional ahead of durable goods, weekly claims and the 7 year auction.


Brent (+1.0%) and WTI (+0.4%) prices are in the green as oil prices have now largely shrugged off yesterday’s larger than expected EIA build; which came in at 5.479M vs. Exp. 1.25mln, as this was below Tuesday’s API build of 6.86M. This morning Brent prices did surpass, and remain above, the USD 75/bbl level for the first time in 2019. In recent newsflow Iran’s Foreign Ministry have stated that Tehran will not allow any country to replace their oil sales within the market; which does come in the context of the Iranian oil waivers ending on May 2nd. Separately, Iraq’s Oil Minister states that they have the capacity to increase oil production to 6mln BPD, for reference Iraq currently have a production level of 4.5mln BPD; however, there will be no change in production and if markets need more oil this will be decided at the relevant time.

Gold (+0.1%) has been relatively uneventful overnight, as the yellow metal remains subdued by the continuing dollar strength. Elsewhere, Anglo American reported Q1 copper production of 161k tonnes vs. Prev. 155k tonnes, and an increase in iron ore output from their Minas-Rio mine, 4.9mln tonnes vs. Prev. 3mln tonnes; with the mine having reopened in December after an 8-month closure due to a pipeline leak. 

IEA's Birol says expects Iraq to add 1.2mln BPD in the next 10 years to achieve 6mln BPD of production by 2030. (Newswires)

Around 700k BPD of Russian oil flows are currently suspended due to issues over quality., according to sources. (Newswires)

*HQ saying toodle pip for the week* Much love guys, as always, see you on the other side! (don't worry about him…