US President Trump said China will not be ripping the US anymore and doubts China trade talks will be successful. (Newswires)
UK Cabinet agreed a Brexit customs ‘backstop’ option with the new customs proposal to prevent a hard border in Ireland.
Reports stated that ministers signed off on the “backstop” that would see the UK match EU tariffs after 2020 if there is no deal on their preferred customs arrangements, while the measure offers the guarantee sought by the Irish government to stop a hard border being introduced at the end of the transition period. (BBC)
EU is to brush off UK PM May’s pitch for customs plan guarantees, while there were also reports that UK established a ministerial team to deal with border disruptions after Brexit. (Newswires)
A source at PM May’s office dismissed Telegraph reports of remaining in the customs union beyond 2021. (Newswires)
US President Trump said the EU has been terrible to the US on trade and reportedly told German Chancellor Merkel to drop support for a major gas deal with Russia and instead buy American gas instead to avoid a trade war, while White House economic adviser Hasset is also said to see no trade war if Germany invests. (Newswires)
EU’s Juncker said the EU wants unlimited exemption from US tariffs and adds the EU is ready to discuss WTO reforms with the US. (Newswires)
Mexico’s Central Bank kept rates unchanged at 7.50% as expected, via unanimous decision. (Newswires)
Hong Kong Monetary Authority purchased HKD 1.96bln to keep HKD in trading band. (Newswires)
Saudi Energy Minister Al-Falih said he had discussions with IEA’s Birol to underscore commitment to maintaining stability in the oil market. Furthermore, there were also reports that Saudi Arabia & UAE oil ministers spoke about oil prices and said they are both concerned about recent market volatility, while they both also see ample supply of oil and agree oil prices are being driven by geopolitical tensions. (Newswires)
US President Trump said US and North Korea are continuing to prepare for a summit next month and warned that if North Korea doesn’t make a deal they would most likely put in place a ‘Libya model’ which he referred to as a total decimation, but also stated that he thinks North Korea leader Kim would be very happy if they reached a deal. (Guardian) In separate news, the White House said the US has no intention of altering military exercises with South Korea. (Newswires)
There were later reports that North Korea is to increase efforts to defuse military tensions, according to state media. (KCNA)
Fed’s Kaplan (Non-Voter, Neutral) does not see the US economy entering a recession and forecasts growth between 2.5% and 2.75%. Kaplan also stated that the US economy is either at or past full employment, while he added that he is concerned that there will be no capacity in the US for fiscal stimulus in the next recession. (Newswires)
Fed’s Kashkari (Non-Voter, Dove) said low wage growth is a big conundrum and noted a theory that there is more slack in the labour market. (Newswires)
Canada’s PM Trudeau declined to comment when asked whether a NAFTA deal can be sealed this year but stated that current auto proposals are broadly acceptable to industries in the three nations, while Canada’s Finance Minister Morneau is optimistic a NAFTA deal can be completed and thinks the NAFTA sunset clause is not practical. (Newswires)
US equity futures were rangebound after Wednesday’s close, however, at the US cash open, ES caught a bid and extended towards the key 2732.50 resistance before paring back the gains and sliding to lows as the session progressed. In later trade, US President Trump said he doubts trade talks will be successful with China, which provided bears with a catalyst to drive the emini to lows around 2710, but those knee-jerk losses were pared back, and the Emini once again consolidated around 2720. In stock specifics, Thursday’s trade saw the unofficial end of earnings season as Wal-Mart (WMT) reported its numbers which slightly beat estimates, however, the retail giant did close lower and was one of the big underperformers in the DJI; Cisco (CSCO) also reported earnings which were relatively in line with estimates, but its operating income was lower. In the pre-market, Alphabet’s (GOOGL) YouTube announced it is to start a music subscription service which put pressure on Spotify Tech, (SPOT) and Pandora (P). Energy names outperformed on Thursday, as Morgan Stanley raised its US refining and marketing industry forecast, which saw the SPX leaders dominated by energy names, (MRO, ANDV & VLO). SPX -0.08% at 2720, NDX -0.4% at 6901, DJI -0.22% at 24715.
The Treasury curve steepened marginally, despite slightly softer volumes when compared to mid-week trade, and the ranges weren’t exactly wide on Thursday. Yields continued to rise to fresh highs along the cruve, except for in the 2yr sector, where they were slightly lower. Most of the action concentrated in the long-end of the curve, where 10yr yields were higher by c.1bps and 30yr by c.3bps at settlement. 2s30s widened by c.5bps, 2s10s and 5s30s by c.3bps. Today’s USD 11bln in 10yr TIPS auction tailed by 1bps, bid-to-cover came in at 2.42x in line with the 6-auction average though dealer participation was well above average. The Treasury announced next week’s supply of USD 48bln in 3-month bills, USD 42bln in 6-month bills and USD 26bln 52-week bills next. It will also auction USD 16bln in a 2-year FRN reopening, USD 30bln in 7-year notes, USD 36bln in 5-year notes and USD 33bln in 2-year notes. Of note, the Treasury finally introduced a two-month bill. US 10yr T-Notes futures settled one tick lower at 118-16+.