DAILY EUROPEAN OPENING NEWS: Asian stocks negative across the board after Trump tariffs stoked trade war fears

Asian stocks negative across the board after Trump tariffs stoked trade war fears USD/JPY declined below 106.00 amid underperformance in the greenback, safe-haven flows into JPY and comments from BoJ’s Kuroda Looking ahead, highlights include Canadian GDP, Baker Hughes, BoE’s Carney and UK PM May’s Brexit speech ASIA

Asian stocks were negative across the board as region followed suit from Wall St. where the majors posted their 3rd consecutive losing streak after reports of incoming Trump tariffs stoked trade war fears and amid raised prospects of 4 Fed hikes this year. The announcement by President Trump to set tariffs on aluminium and steel imports next week also resulted to a global backlash in which EU, Canada and Mexico vowed countermeasures or retaliation against the US, while the China Iron and Steel Association branded the measure as ‘stupid’. As such, ASX 200 (-0.7%), Nikkei 225 (-2.8%) and KOSPI (-1.0%) saw commodity-related pressure with steel names in Asia’s top US-bound steel exporters Japan and South Korea suffering the brunt of the impending tariffs, while heavily-exposed automakers were also reeling from the news. Hang Seng (-1.5%) and Shanghai Comp. (-0.6%) conformed to the downbeat tone, although weakness in the mainland was to a lesser extent as China was said to only export a limited amount of steel to US and after another weekly net liquidity injection by the PBoC. Finally, 10yr JGBs were initially higher with demand spurred amid a broad risk-averse tone and with the BoJ present in the market for 1yr-10yr JGBs under an unchanged Rinban operation, although pressure was later seen on comments from BoJ Governor Kuroda that they will be considering exit around fiscal 2019.

PBoC injected CNY 40bln via 7-day reverse repos, CNY 30bln via 28-day reverse repos and CNY 20bln via 63-day reverse repos for a net weekly injection of CNY 120bln vs. Prev. CNY 580bln net injection last week. (Newswires)
PBoC set CNY mid-point at 6.3334 (Prev. 6.3352)

BoJ Governor Kuroda said BoJ will be considering exit around fiscal 2019 and that there could be a policy change before 2% target is reached, but BoJ may also keep rates unchanged even with CPI at the target. Kuroda had also commented that he will maintain current policy for now as momentum is good and that he is cautious on raising the yield target even if yields increase and other central banks exit loose policy. (Newswires)


UK PM May said Brexit deal must give UK control of its border, laws and money, while she added they will place ‘5 tests’ on the Brexit deal. (Newswires)

UK Cabinet is said to be in dispute regarding text ahead of PM May’s key Brexit speech, while there were also reports that UK PM May will not commit to mirroring EU regulations. (FT/Times)

ECB Sources stated an ECB policy shift is unlikely in the March meeting, but there may be a discussion on easing bias being dropped. (Newswires)


USD was the main fallout in FX from the trade war concerns and subsequent retaliation fears which underpinned all its major counterparts and saw EUR/USD gain a firm foothold of the 1.2200 handle. USD/JPY declined below 106.00 amid underperformance in the greenback and safe-haven flows into JPY, while there were also comments from BoJ Governor Kuroda that the BoJ will be considering exit around fiscal 2019. Elsewhere, CNH bucked the trend and lost ground to USD after a tepid reference rate setting by the PBoC which kept the fix relatively stable and amid some speculation that currency devaluation could be used as one of the weapons by China in the event of a full-on trade war.


Commodities were uneventful overnight in which WTI crude futures languished following this week’s losses and its first monthly decline since August, with prices now back below USD 61/bbl. Elsewhere, gold also traded sideways and held onto US session gains due to a weaker greenback on US trade protectionism concerns, with the resulting risk-averse tone hampering any meaningful reprieve for copper.

American Petroleum Institute said that Trump tariffs on aluminium and steel would raise costs in the oil and gas sector. (Newswires)


Fed Chair Powell said we are not currently seeing strong evidence for a decisive move higher in wages. Powell also said he expects more wage increases and gradual rate hikes to be appropriate, while he added that fiscal policy will likely put upward pressure on inflation this year. (Newswires)

Fed’s Dudley (Voter) is gaining confidence that rate hikes will be required and said that 4 rate hikes would be gradual. (Newswires)

US President Trump announced that the US will institute steel & aluminium tariffs next week, in which reports stated would consist of 25% tariffs for steel and 10% for aluminium. (Newswires)

Canada and EU vowed countermeasures against US steel and aluminium tariffs, while Mexico also stated that it would retaliate with its own tariffs against US if it is not excluded from the steel and aluminium tariffs. Furthermore, China Iron and Steel Association said US tariffs on steel and aluminium are ‘stupid’ trade protectionism measures and that China only exports a limited amount of steel to US, while China Metals Association said China is among the nations likely to retaliate against the US. (Newswires)

There were initial reports that White House is said to be preparing to replace Trump National Security Adviser McMaster. However, NSC spokesman later stated that US President Trump labelled the story related to the departure of National Security Adviser McMaster as fake news. (Newswires)

US Special Counsel Mueller is reportedly compiling a case against Russians who carried out hacking and information leaking which was intended to hurt Democrats in 2016 election. (Newswires)