Original insights into market moving news

[PODCAST] US Open Rundown 29th April 2019

  • European indices have continued to edge lower after a choppy morning for stocks [Euro Stoxx 50 -0.5%]
  • On the trade front, US Treasury Secretary Mnuchin says that trade negotiations with China are now in their final laps
  • Looking ahead, highlights include US Personal Income & Consumption, US PCE Price Index & Dallas Fed
  • Earnings: Alphabet, NXP Semiconductor


Asian equities traded mixed despite last Friday’s gains on Wall St where sensational Q1 GDP and soft Core PCE Prices suggested a Goldilocks economy and propelled US stock markets to fresh record closes, as this week’s looming risk events and holiday closures restricted upside for the region. ASX 200 (-0.4%) was the laggard amid losses in its largest-weighted financials sector and with energy names also downbeat after a pullback in oil prices, while this week’s array of key releases including Chinese PMI, US NFP, BoE and FOMC announcements also added to the tentative tone. Elsewhere, Hang Seng (+0.9%) was positive after data showed Chinese Industrial Profits recovered in March and with focus on earnings including Agricultural Bank of China which kicked off the Big 4 bank earnings with an improvement in Q1 net, while Shanghai Comp. (-0.7%) was less decisive after the PBoC refrained from liquidity operations and with the mainland only open for the first 2 days of this week. As a reminder, Japan is closed until May 7th.

PBoC skipped open market operations for a net neutral daily position. (Newswires) PBoC set CNY mid-point at 6.7310 (Prev. 6.7307)

Agricultural Bank of China (1288 HK) - Co. Q1 net CNY 61.3bln vs. Prev. CNY 58.7bln Y/Y. Co. closed higher by around 0.8% (Newswires)

ICBC (1398 HK) - Q1 net profit CNY 82.01bln vs. Prev. CNY 78.8bln, net interest income CNY 148bln vs. Prev. CNY 137bln, capital adequacy ratio at end-March at 12.84%. (Newswires)

Bank of China (3988 HK) - Q1 net profit CNY 50.97bln vs. Exp. CNY 49bln, NPL Ratio 1.42% vs. Prev. 1.42%, net interest margin 1.82% vs. Prev. 1.90%, CET1 Ratio 11.38% vs. Prev. 11.41%. (Newswires)

Chinese Industrial Profits (Mar) Y/Y 13.9% (Prev. -14.0%). (Newswires)

US Treasury Secretary Mnuchin said trade negotiations with China are in the final laps. (NYT)


UK opposition Labour Party accused the government of refusing to compromise on its red lines in cross-party talks. (Sky News)

Labour is said to be prepared to sign up to a Brexit deal with the government without the promise of a referendum attached if cross-party talks make significant progress in the coming days according to one of the party’s negotiators, while it was separately reported that Labour deputy leader Watson stepped up calls for his party to promise a referendum on any Brexit deal in its European elections manifesto. (Guardian/BBC)

Subsequently, UK PM May spokesman says a way forward in cross-party talks with Labour has yet to be found, would like to introduce a Withdrawal Agreement bill ASAP, but needs assurance that it will pass in Parliament. (Newswires)

Sources stated that PM May could be axed as PM by the end of June if cross-party talks with Labour break down. (The Sun)

The Conservative party can expect to lose 800 or more seats at this week’s local elections according to a leading Tory analyst. (Guardian)

Spain’s election over the weekend showed no party won a majority but the incumbent Socialists under PM Sanchez emerged as the only party with a chance of forming a governing coalition with 123 out of the 350 seats in parliament, while conservatives won 65 seats, centre right at 57 seats and far fright at 24 seats. (Newswires) Subsequently, Spain’s Socialist Party are in no rush to form a government, according to the Party Head. (Newswires)

Fitch affirmed UK at AA; Outlook Negative and affirmed Netherlands at AAA; Outlook Stable, while S&P affirmed UK at AA; Outlook Negative and affirmed Italy at BBB; Outlook Negative. (Newswires)

EU Consumer Confidence Final (Apr) -7.9 vs. Exp. -7.9 (Prev. -7.9, Rev. -7.2) (Newswires)

- EU Industrial Sentiment (Apr) -4.1 vs. Exp. -2.0 (Prev. -1.7, Rev. -1.6)

- EU Services Sentiment (Apr) 11.5 vs. Exp. 11.1 (Prev. 11.3, Rev. 11.5)

- EU Economic Sentiment (Apr) 104.0 vs. Exp. 105.0 (Prev. 105.5, Rev. 105.6)

Italian Producer Prices YY* (Mar) 2.9% (Prev. 3.1%). (Newswires)


Major European indices are choppy but overall marginally lower [Euro Stoxx 50 -0.5%], following on from their Asian counterparts ahead of a week with multiple market closures and several key risk events. Sectors are similarly mixed, with some mild underperformance seen in energy names in-line with the complex in general. The IBEX 35 (-0.4%) is lagging its peers this morning following on from the Spanish elections where the incumbent Socialist party emerged as the only one with the potential to form a coalition; within the index utility names are underperforming, which is dragging the utility sector in general down, with some speculation that this may be due to the success of the far right Vox party which secured 24 seats. Downside in utilities likely stemming from pledges by Vox to keep nuclear plants open, which contradicts the incumbent socialist party’s policies of closing nuclear plants and supporting renewable energy, which has been beneficial to Spanish utility names. Notable movers this morning include, Altice (+5.1%) who have reportedly attracted 3 potential bidders for their fibre optic network. Following the dissolution of merger discussions, Commerzbank (+1.6%) have rebutted speculation that the Co. may be sold, stating that they are strong enough alone and their customer relationships remain intact. Elsewhere, Bayer (-2.5%) are down after a spokesman stated that the majority of the Co’s investors voted against ratifying the executive boards 2018 business conduct, for reference the Co. are trading ex-div today.

Anadarko (APC) is said to be preparing to endorse USD 55bln bid from Occidental Petroleum (OXY), according to FT citing sources. (FT) This would jeopardies the Co’s sale to Chevron (CVX)


DXY - The Greenback has regained some composure after last Friday’s post-data downturn, but remains on a mixed footing vs G10 peers and EM currencies at the start of what looks like a busy/pivotal week on paper at least. First up, more inflation data and the Fed’s preferred price measure in the form of core y/y PCE following softer than expected Q1 reads within the advance GDP release, and then it’s month end on Tuesday with FX rebalancing models suggesting a Usd sell signal that could be countered to an extent by supportive SOMA flows. On to May 1, and the FOMC follows the first NFP proxies for Friday via the ADP survey plus employment readings in the manufacturing PMI and ISM. In the run up, the index is straddling 98.000 in a relatively narrow 98.066-97.917 range, with last week’s new 98.330 ytd peak providing resistance vs support at 97.693 that held on Friday.

GBP/EUR/AUD/NZD - Cable continues to display resilience ahead of the 1.2900 handle even though Brexit remains up in the air and talks between the Tory and Labour Party are still grid-locked, but the Pound is still looking toppy around 1.2950 amidst offers at 1.2945 (last month’s low) and with DMAs in close proximity (100 and 200 from 1.2962-65). Similarly, the single currency is finding support off 1.1100 and 2019 lows, as mostly weaker than forecast Eurozone sentiment indicators are countered by a degree of relief post-Spanish election and S&P reaffirming Italy’s BBB rating. Meanwhile, an improvement in Chinese industrial profits and latest US-China trade reports suggesting negotiations are reaching the last stretch are propping up the Aussie and Kiwi circa 0.7050 and 0.6670 respectively.

CHF/CAD/JPY - All on a more even keel vs the Usd and in relatively thin confines as the Franc meanders between 1.0200-1.0185 and Loonie roams from 1.3472-51 amidst a further pull-back in crude and ahead of tomorrow’s Canadian monthly GDP and PPI data. Meanwhile, Usd/Jpy has extended its trading parameters, but only to 111.54-77 in the absence of Japanese markets at the start of Golden Week and with strong chart support sub-111.50 as the 30 DMA, 38.2% Fib retracement of April peak to March trough (112.40-109.70) and last week’s low all fall at 111.37.

EM - At last some respite for the beleaguered Lira as an improvement in Turkish industrial confidence nudges Usd/Try off near 5.9600 peaks awaiting Tuesday’s CBRT inflation report for more independent impetus.

Goldman Sachs sees EUR/USD declining to 1.10 in the next 3 months and DXY rising to 99.00, while it suggested global growth is unlikely to be strong enough to weigh on the greenback. Furthermore, Goldman Sachs forecasts USD/TRY at 6.25 in 3 months, 6.50 in 6 months and 7.00 in 12 months. (Newswires)


Bunds remain around ¼ point underwater at 165.58, but off worst levels as relief gains in Italian debt fade to leave the 10 year Italian benchmark almost flat within a 130.36-95 range. However, Spanish Bonos have advanced a bit further to 151.88 following the weekend election that put PM Sanchez in prime position to begin talks to find partners for a majority regime and this is keeping spreads to core Eurozone paper on a tighter trajectory. Indeed, Gilts and US Treasuries have staged a firmer bounce from worst levels than their German equivalent, with the former up to 127.71 at one stage (-4 ticks vs -26 ticks at the Liffe low) and T-note recovering to 123-22 from 123-18 vs last Friday’s 123-21+ close. Note also, some decent option interest overnight via long bond calls in a diagonal calendar spread.


Brent (-0.9%) and WTI (-0.5%) prices are subdued in reaction to US President Trump’s comments on Friday that he contacted OPEC and told them to lower oil prices; although, there were subsequent reports that OPEC or Saudi officials have not spoken to President Trump regarding oil prices. However, some of the downside was mitigated by the Baker Hughes total rig count which fell by 21, with oil rigs falling by 20 to 805 in the steepest decline since January. Regarding the Iranian waivers a Trump Official says there is no wind down period or short-term waiver being considered for China’s oil purchases from Iran, and that it should be easy for China to comply as business with the US is more important for them than Iran. Elsewhere, sources report that exports of Nigeria’s Amenam crude oil is currently under a force majeure; these exports are operated by Total and typically equal 100k BPD.

Gold (-0.3%) is marginally weaker, although the yellow metal is trading within a relatively narrow USD 5/oz range. After the metal printed its biggest daily gain in over a month on Friday, following US data which was disappointing in-spite of the larger than expected headline GDP print of 3.2%. Elsewhere, China’s Iron and Steel association stated that the industry is at risk from excess capacity which could impact profits in the industry.

Eastern Libyan military forces have sent warships to the port of Ras Lanuf, according to a spokesman. (Newswires)

Shell (RDSA LN) has declared force majeure on Nigerian Bonny Light crude exports amid a pipeline closure. (Newswires)

Iraq southern oil exports have averaged 3.33mln BPD in April, according to Oil Officials. In March, southern exports fell to 3.25mln BPD due to bad weather. (Newswires)

Q1 China refined oil demand +0.4% Y/Y to 76.87mln tonnes, according to China State Planner. (Newswires)

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