DAILY US OPENING NEWS: White House Economic Adviser Gary Cohn is to resign and is expected to leave in next few weeks

White House Economic Adviser Gary Cohn is to resign and is expected to leave in next few weeks. (NYT) Asian stocks and to a lesser extent their EU counterparts, were seen lower on the news as fears continue to mount over ‘trade-wars’ Looking ahead, highlights include US ADP, BoC rate decision, DoEs, Fed’s Bostic, and Dudley ASIA

Asian stocks were mostly lower as US political discord took the limelight once again after reports that National Economic Council Director Gary Cohn is to resign amid tariff disagreements. This latest high-profile and ‘market-friendly’ White House departure dampened the risk appetite and weighed on US equity futures in which Emini S&P gapped lower by about 1% and DJIA futures saw losses of nearly 400 points. ASX 200 (-1.0%) underperformed with sentiment also dragged by weaker than expected GDP figures, while Nikkei 225 (-0.8%) was choppy and briefly found reprieve, before a firmer JPY ultimately weighed. Elsewhere, Shanghai Comp. (-0.6%) and Hang Seng (-1.0%) initially outperformed despite reports US may consider broad curbs on Chinese imports and takeovers, as well as news that ‘China hawk’ Peter Navarro was among the top 2 candidates to replace Cohn as Trump’s top economic adviser. However, gains in Chinese money market rates eventually proved to be the deciding factor and tipped bourses into the red. Finally, 10yr JGBs pared the opening safe-haven inflows to return flat, amid a similar indecisive risk tone in Japanese stocks and following an unchanged BoJ Rinban purchase announcement.

PBoC skipped open market operations, but later announced CNY 105.5bln 1yr MLF operation. (Newswires)

PBoC set CNY mid-point at 6.3294 (Prev. 6.3386)

US is said to consider tariffs and reciprocity with China related investment, while measures reportedly may involve broad curbs on Chinese imports and takeovers. (Newswires)

Australian GDP (Q4) Q/Q 0.4% vs. Exp. 0.5% (Prev. 0.6%, Rev. 0.7%). (Newswires)

Australian GDP (Q4) Y/Y 2.4% vs. Exp. 2.5% (Prev. 2.8%, Rev. 2.9%)

BoJ Deputy Governor nominee Wakatabe says theoretically no limit to what BoJ can do to ease, but practically there could be limits depending on time frame to hit price target, adds doesn’t have preset view that JGBs only asset to buy for further easing. (Newswires)

RBA’s Lowe repeats likely the next move in rates will be up not down and also repeats does not see a case for a near term adjustment of monetary policy. (Newswires)


White House Economic Adviser Gary Cohn is to resign and is expected to leave in next few weeks. (NYT) There were also reports that a US administration official stated White House adviser Peter Navarro and commentator Larry Kudlow are the top 2 candidates to replace Gary Cohn, while US President Trump cancelled the tariff meeting on Thursday that Cohn organized. (Newswires) Reports also suggest that Cohn could return to the White House at a later date for an even larger role.

Fed’s Brainard (voter, dove) said gradual US rate hikes are likely appropriate and that there is greater confidence inflation will reach target, while she added that she is encouraged by substantial fiscal stimulus, full employment and above-trend economic growth. Brainard also stated that headwinds are turning into tailwinds, although they are ready to slow or speed up pace of hikes if forecasts are incorrect. (Newswires)

Fed’s Kaplan (non-voter, soft hawk) reiterated that baseline scenario is for 3 rate hikes in 2018 and said that it is too early to change forecasts due to tariffs as it is not yet known what will be implemented. Kaplan added that anything that jeopardizes trade relations with Mexico or Canada is not in US interest. (Newswires)

Italy’s Berlusconi says to support League leader Salvini’s bid to form a government after election results. (Newswires)


The departure of NEC Director Cohn spooked investors as the US trade policy may be steered further into protectionist territory while reports from a US administration official stated that White House adviser Peter Navarro and commentator Larry Kudlow are the top two candidates to replace Gary Cohn. Asia-Pacific stocks reacted with a decline across the board. European cash open (Eurostoxx 50 -0.1%) took the lead from Asia with most major bourses in the red, albeit losses have been pared throughout the session. FTSE 100 (+0.1%) outperforming, supported by a weaker sterling. The materials sector is underperforming, pressured by the fall in commodity prices fuelled by US API crude stocks printing a build more than twice as expected. Rolls-Royce (+12.8%) outperforming on the back of strong earnings. Smurfit Kappa (+3.3%) after US based International Papers confirmed its EUR 8bln offer to the company which was then rejected as an “opportunistic” takeover bid. Telecom Italia (-0.2%) is trading in a choppy fashion after company CEO stated the joint venture with Vivendi’s Canal+ will be put on hold.


Usd/Jpy, and Usd/Chf to a lesser extent, continues to provide the clearest if not best barometer of broad risk sentiment and the headline pair’s latest retreat from 106.00+ levels highlights the resurgence of aversion prompted by the US President’s import tariff plans. The failure to extend gains on conciliatory gestures from North Korea on the nuclear front to and beyond a key upside Fib just ahead of 106.50 is deemed to be bearish in terms of the technical outlook, while the departure of chief White House economic adviser Cohn is widely perceived as negative from the global trade wars perspective given his more temperate approach towards protectionist policies. 105.50 bids/support now being tested again, and the 2018 low around 105.25 is back on the radar ahead of reportedly big barriers at 105.00. Usd/Chf is sitting roughly in the middle of 0.9400-0.9350 parameters, and the pseudo safe-haven Eur is looking to climb further above 1.2400 vs the Greenback, while eclipsing its previous ytd base against the still Brexit-weighted Gbp to circa 0.8965 (having breached 0.8950 resistance more convincingly). Back to G10 majors, and it’s all change again for the commodity bloc that has reversed gains vs their US Dollar counterpart. Usd/Cad has rebounded over 1.2900 with the Loonie underperforming on the tariff proposals and NAFTA ahead of the BoC policy meeting, which is now even more likely to underscore the need for caution. Aud/Usd is pivoting around 0.7800 after mixed Aussie GDP data overnight and Nzd/Usd is back below 0.7300 as the Aud/Nzd cross holds above 1.0700 in wake of the latest GDT auction showing a dip in prices.


Bunds marginally erased more gains and inched closer to plugging a hole down to 156.50 at a fresh 156.59 Eurex base (+2 ticks vs +31 ticks at one stage), but Gilts have seen better price action in recent trade with an advance to 121.27 (+22 ticks). Not much in the way of fresh catalysts for core fixed, but again it seems that UK rates are moving inversely with Sterling in the FX markets, like the FTSE. Perhaps German debt was displaying some caution just ahead of the bidding deadline for Bobl supply (well received), while resistance a few ticks below 157.00 also continues to cap advances. US Treasuries relatively side-lined before a pretty packed pm agenda and ADP’s jobs proxy for NFP on Friday.


WTI and Brent crude futures are trading with losses of over 1% this morning, largely following last nights API report which showed a wider than expected build in crude inventories (5.7mln vs. Exp. 2.7mln). As such, WTI initially traded south of the USD 62/bbl level, with Brent briefly below USD 65/bbl before reclaiming the levels. Elsewhere, gold has been trading relatively sideways throughout the morning, having pared its gap higher overnight after initial support from reports of Cohn’s resignation. Good news out of Australia, which reported record high iron ore exports from Port Hedland (largest iron ore loadings port in Australia).

US API Crude Stocks (Mar 2) 5.661M vs. Exp. 2.700M (Prev. 0.933M). (Newswires)