Original insights into market moving news

[PODCAST] EU Open Rundown 27th June 2019

  • Asian equity markets traded higher after the region shrugged off the uninspiring lead from Wall Street ahead of the G20 Summit
  • UK Remain rebels are reportedly planning to mount a new bid next week to block a no-deal Brexit
  • In FX markets, most currencies remained in a holding pattern, although the DXY was slightly firmer overnight
  • Looking ahead, highlights include German CPI (Prelim), EZ Economic Sentiment, US GDP (Final), Initial Jobless Claims, Banxico rate decision, ECB’s Nowotny, supply from Italy and earnings from Nike, Accenture, Walgreens, H&M



Asian equity markets traded higher after the region shrugged off the uninspiring lead from Wall St where participants were tentative heading into the G20 and amid mixed US-China trade commentary. ASX 200 (+0.1%) was positive in which outperformance in the energy sector just about kept the index afloat following the recent bullish oil inventory data, while Nikkei 225 (+0.8%) was underpinned by the JPY-risk dynamic and with Japan Display the front runner in Tokyo after reports that Apple will infuse USD 100mln into the Co. and also raise its orders. Elsewhere, Hang Seng (+1.3%) and Shanghai Comp. (+0.9%) inspired the turnaround in the region on several factors including the State Council’s recent announcement of measures to cut financing costs for smaller firms and with Industrial Profits back in the black, while the trade-related headlines were more constructive in which SCMP noted the US and China agreed a tentative truce before the G20 summit and that US President Trump’s decision to delay additional tariffs was Chinese President Xi’s price for holding this week's meeting with him. Finally, 10yr JGBs were lower with demand dampened by the improved risk sentiment and after similar weakness in T-notes, but with downside limited amid a mixed 2yr auction in which most metrics improved despite a weaker bid to cover.

PBoC skipped open market operations for a net neutral daily position but announced a CNY 2.5bln in 1-year central bank bill swap, which is aimed at increasing liquidity for perpetual bonds. (Newswires) PBoC set CNY mid-point at 6.8778 (Prev. 6.8701)

Chinese Industrial Profits (May) Y/Y 1.1% (Prev. -3.7%). (Newswires)

SCMP writes "Trade war: US and China agree tentative truce before G20 summit", while the article added that US President Trump's decision to delay additional tariffs was Chinese President Xi's price for holding this week's meeting with him. (SCMP)

Huawei staff reportedly worked with Chinese military on research projects which the Co. said was unauthorized. (Newswires)

BoJ Deputy Governor Wakatabe said will maintain easy policy for as long as needed to reach to 2% target sustainably and that policy cannot be normalized unless economy and prices return to normal state. Wakatabe also suggested that Japan’s economy would not have escaped deflation if QQE was not in place and noted that Europe like Japan adopts negative interest rates but financial institutions there are making higher profits than their Japanese counterparts. (Newswires)

US President Trump said he looks forward to speaking to India PM Modi about how India have placed very high tariffs on US for years and recently increased them further, while Trump added this is unacceptable and tariffs must be withdrawn. In response, Indian government sources noted that India's tariffs on the US are well within the WTO bound rates. (Twitter/Newswires)



UK PM candidate Boris Johnson has refused to rule out suspending parliament to push Brexit through in which he stated he is not attracted to the measure but will not fully dismiss it. Furthermore, Johnson reiterated his pledge to get the UK out of the EU by 31st October but believes the odds of a no-deal scenario are ‘million to one’. Follows on from Johnson recently stating that he intends to leave the EU by 31st October ‘do or die, come what may’. (Sky News/BBC/Newswires)

UK Remain rebels are reportedly planning to mount a new bid next week to block a no-deal Brexit and have tabled amendments to finance legislation which will force the PM to pass a WA through the Commons or get approval for a no-deal. Furthermore, the reports noted that former Tory Attorney General Grieve and former-Labour Foreign Secretary Beckett were leading the attempt which if passed, would cut off funding to key government departments if the government cannot get parliamentary approval for the Brexit. (The Sun)



In FX markets, most currencies remained in a holding pattern in anticipation of the G20 and although the DXY was slightly firmer overnight, price action was contained to within this week’s tight ranges. As such, the greenback’s major counterparts were mixed with EUR/USD subdued and GBP/USD on a retreat from resistance at 1.2700, while antipodeans fared better after the improved Chinese Industrial Profits in which AUD/USD briefly eyed the 0.7000 level to the upside and NZD/USD was stable despite poor Business Confidence data. USD/JPY reclaimed the 108.00 handle and JPY-crosses were also underpinned after the brightened risk tone spurred safe-haven outflows and following comments from BoJ Deputy Governor Wakatabe who sang from the same hymn sheet as Kuroda and was in praise of the merits of QQE.

New Zealand ANZ Business Confidence (Jun) -38.1 (Prev. -32.0). (Newswires) New Zealand ANZ Activity Outlook (Jun) 8.0 (Prev. 8.5) 



Commodities were uneventful during Asia trade with WTI crude futures marginally softer as they gave back some of the prior day’s more than 2% gains which were spurred by recent bullish crude inventory data, but with the pullback cushioned by support around the USD 59.00/bbl level. Elsewhere, gold was subdued by a firmer greenback and the improvement in risk appetite which kept prices on course towards the USD 1400/oz level, while copper failed to benefit from the brightened risk sentiment and instead conformed to the lacklustre trade across the complex.



Iran’s envoy told the UN Security Council that it will not endure the burdens of preserving the nuclear deal and stated that the deal is in a critical condition if remaining participants don't take steps to preserve it, they must accept full responsibility for any consequences. The envoy added the US offer of talks cannot be trusted as long as illegal sanctions remain in place. (Newswires)

Iran's Parliament Speaker Larijani stated that the reaction from Tehran will be stronger in the event that the US repeats the mistake of violating Iran's borders. (Newswires)

South Korea Unification Minister Kim said inter-Korea projects can be used as leverage to boost US-North Korea nuclear talks, while Kim added that China is working with US and is central to progress in North Korea's nuclear dismantlement but also stated that recent comments by North Korea suggests mistrust remains. (Newswires)

Libya's UN-backed government forces have retaken the town of Gharyan which is located south of Tripoli from the Eastern Forces of General Haftar. (Newswires)

Turkey President Erdogan said US President Trump is considering visiting Turkey next month. (Newswires)

Venezuela government claimed it thwarted another coup attempt and Venezuela President Maduro later said he will be ruthless if the opposition attempts to oust him. (Newswires/AFP)



The TPLEX was on the backfoot as the market digested comments made by FOMC participants on Tuesday, where there seemed to be no urgency to cut rates by a 50bps magnitude, and officials preferring to evaluate multiple factors before settling on a rate cut. There was some downside in premarket trade, with a news organisation mis-quoting US Treasury Secretary Mnuchin (the headline suggested a trade deal with China was 90% done, although Mnuchin was referring to the agreement being 90% complete before talks between US/China broke off); there was buying action that followed from players who had identified the misquote. Analysts also attributed the miss in the durable goods data to some selling, too. US President Trump’s wide-ranging interview reiterated familiar themes (and risks) and led to a few positive ticks in the TPLEX. A mediocre 5-year auction saw a tail of 0.6bps; direct bidders took the most since February, leaving dealers with the smallest share since February as well, the yield was the lowest at a 5s auction since August 2017

US President Trump will meet with Russia President Putin on Friday at 1400 local time (0600BST), while President Trump will meet with Chinese President Xi on Saturday at 1130 local time (0330BST) in Osaka, according to a spokesman. (Newswires)

Fed's Daly (Non-Voter, Dove) said signs of persistent inflation drag would be concerning and might require policy makers to do more, while she noted that it is possible inflation expectations are drifting lower. Daly also commented the US economy is strong and tighter than it has been in a while but there might be more to run and that efforts to get inflation back to target could be appropriate, while the next few weeks will provide clarity on whether or not more stimulus is needed. (Newswires)

EU movers: Swatch +0.9% Atlantia +0.7% Carnival -3.5% Infineon -3.5% Dialog Semiconductor -3.5% SAP -3.5% Ocado -1.6%