RANsquawk Daily US Opening News – 14th March 2018

To download the report, please click here
If you would like to subscribe to receive the research sheets directly in your inbox, you can no do so under the Research Suite section of the portal.
To subscribe simply check the box next to “Email these reports” under the desired category.

ECB speakers give small dent to the EUR as they say policy needs to be patient, persistent and prudent European equity markets marginally higher as Adidas boosts the DAX Looking ahead, highlights include the OPEC monthly report, US PPI & Retail Sales, DoE Inventories and NZ GDP ASIA

Asia equity markets were negative across the board as the region tracked the losses on Wall St, where sentiment was dampened after another high-profile departure from the administration in which President Trump fired Secretary of State Rex Tillerson, while trade war concerns were also stoked by reports the US is looking to impose tariffs on Chinese goods. ASX 200 (-0.7%) and Nikkei 225 (-0.9%) were negative with financials pressured amid the ongoing royal commission hearings in which NAB employees were said to knowingly approved fake loans to reach targets, while Nikkei 225 was pressured by a firmer JPY and with some analysts also noting ‘Abexit’ worries in the wake of the land-sale/cronyism scandal. Shanghai Comp. (-0.4%) and Hang Seng (-1.4%) conformed to the weakness with tech and telecom names weighed as the US seeks to impose tariffs of USD 60bln on Chinese goods, which would target tech and telecom products as a punishment for intellectual property infringement. Although, losses in the mainland were somewhat stemmed by mixed data including higher than expected Industrial Production and Fixed Asset Investments. Finally, 10yr JGBs were flat despite the weakness in stocks, with an uneventful BoJ minutes release and unchanged BoJ Rinban operation amount for 1yr-10yr maturities also ensured quiet price action.

BoJ Minutes from the January 22nd-23rd meeting stated it is appropriate to pursue powerful easing and that price momentum to reach target is maintained. (Newswires)

BoJ Governor Kuroda stated that the BoJ is still a long way from target for inflation and is not at the point to consider exit details. (Newswires)

ECB

ECB President Draghi said performance of underlying inflation remains subdued; currently see inflation converging towards aim over the medium term. Draghi added that there are two risks that could conspire to reduce confidence in inflation: 1. An escalation of US trade measures and 2. Developments in FX markets. (ECB)

ECB’s Praet said cannot yet declare mission accomplished on inflation but substantial progress has been made. Reiterates policy to be patient, persistent and prudent. (ECB)

ECB’s Coeure said the economic expansion is “very strong” but inflation is not at the desired level. (Newswires)

ECB’s Mersch said that the ECB are not yet ready at this stage to change interest rates. (ECB)

ECB’s Constancio said euro area asset prices currently do not point to signs of a general overvaluation in the euro area and certainly not of credit-fuelled bubbles. (ECB)

BREXIT

Germany’s Brexit negotiator Ptassek said Brexit negotiations are accelerating and a lot of progress is being made on withdrawal agreement. (Twitter)

UK PM May’s Brexit Committee is said to agree to extend freedom of movement with the EU until 2021. (The Sun)

DATA

Eurozone Industrial Production MM (Jan) -1.0% vs. Exp. -0.4% (Prev. 0.4%)

Eurozone Employment Change QQ (Q4) 0.3% vs. Exp. 0.3% (Prev. 0.4%)

Swedish CPI YY (Feb) 1.6% vs. Exp. 1.6% (Prev. 1.6%)

EQUITIES

European equities are trading in the green this morning, subsequently pairing the initial losses that stemmed from Asian and US bourses, which saw risk-sentiment soured by reports of Secretary of State Tillerson being fired and increased caution over trade wars. All major sectors with the exception of utilities are trading higher in the Euro Stoxx, while much of the morning stock movers have been dictated by company earnings, with Adidas (+9%) shares sitting at the top of DAX. Elsewhere, the IBEX underperforms its counterparts as index heavyweight Inditex (-3%) slipped after highlighting concerns over FX headwinds.

FX

Usd weakness amidst ongoing global trade war and White House personnel concerns remains the principle theme, as the DXY continues to reject advances towards the 90.000 level and beyond, which in turn is shifting the technical outlook more bearish. However, Eur/Usd and single currency crosses have been knocked back to an extent by comments from ECB President Draghi and Chief Economist Praet, reiterating that inflation is still below target and therefore policy needs to stay ‘patient, persistent and prudent’. Key downside risks were highlighted – FX and the aforementioned potentially adverse trade developments due to US President Trump’s import tariff proposals. Eur/Usd is back below 1.2400, but holding above the 30 DMA at 1.2345, and also eyeing decent expiry interest from 1.2390-1.2405 (around 1 bn). Conversely, Aud/Usd is testing resistance either side of the 0.7900 handle again and recent peaks just below the big figure, aided by some Chinese data beats overnight and more balanced rather than dovish/cautious RBA rhetoric via Assistant Governor Kent. Chart-wise, yesterday’s 0.7898 high forms the first/nearest bullish target and offers are touted around 0.7925, if 0.7900 is breached. Cable looks capped by the 1.4000 level, and Usd/Cad by 1.3000, while Usd/Jpy is back in the 106.50 area after a further retreat from 107.00+ peaks late last week and earlier this week with the 10 DMA at 106.31 holding in for now. Elsewhere, Eur/Sek just a fraction softer after broadly as forecast Swedish CPI data that will underscore growing calls for the Riksbank to refrain from tightening for longer.   

FIXED INCOME

No real surprise to see the German benchmark unsettled by a far from well received 30 year tap by all conventional measures used to gauge the success of issuance, bar a lower average yield vs the previous offering of the same maturity. 10 year Bunds have now been as low as 157.34, 13 ticks below yesterday’s Eurex close and 33 ticks down from the early session peak. However, UK Gilts and USTs remain relatively bid despite ongoing resilience across EU bourses in the face of latest Wall Street wobbles and declines in Asia-Pac equities on protectionism and US President Trump’s latest changes in high ranking members of the administration.

Germany sold EUR 1.211bln vs. Exp. EUR 1.5bln of 30-year bunds: B/C 1.06 (Prev. 1.51), Avg yield 1.27% (Prev. 0.69), Retention 19.3% (Prev. 16.9%)

COMMODITIES

In the commodity bloc, oil prices are trading slightly higher with prices finding some slight reprieve from yesterday’s smaller than expected build in the latest API report, alongside the improvement in risk sentiment, which has seen WTI retest USD 61/bbl.

Saudi Energy Ministry says crude exports to remain under 7mln bpd in April and production under 10mln bpd. OPEC and non-OPEC partners remain committed to returning inventories to normal levels. (Newswires)

(RANsquawk)