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Asian stocks were mostly higher as they took impetus from the post-election rally seen on Wall St where all majors gained at least 2% EU Commission see Italian budget measures leading to a deficit/GDP ratio of 2.9% vs. the Italian government’s view of 2.4%, according to sources FX markets calmed overnight in which the greenback consolidated at session highs above the 96.00 level after the prior day’s post-election rebound Looking ahead, highlights include German trade, US weekly jobs, FOMC rate decision, ECB’s Coeure, Draghi and Nowotny, supply from Spain and France ASIA
Asian stocks were mostly higher as they took impetus from the post-election rally seen on Wall St where all majors gained at least 2% and the DJIA notched more than a 500-point gain as investors ploughed back into stocks after the US mid-terms results conformed to the broad consensus. ASX 200 (+0.5%) and Nikkei 225 (+1.9%) were both firmer from the get-go with tech the outperformer in Australia after a similar strong showing of the sector in US, while the Japanese benchmark ignored the largest drop on record for Machine Orders and was boosted by a weaker currency. Shanghai Comp. (-0.1%) and Hang Seng (+0.9%) initially benefitted from the heightened global risk appetite with the latter underpinned by a decline in money market rates after the PBoC’s bill sale in Hong Kong the prior day, while participants also digested the latest trade data from China in which Trade Balance slightly missed but Exports and Imports both topped estimates. Finally, 10yr JGBs initially tracked the downside in USTs as the rampant tone in equities weighed on safe-havens but with losses stemmed following firmer demand at today’s enhanced liquidity auction for 2yr-20yr JGBs.
PBoC skipped open market operations for a net neutral daily position. (Newswires)
PBoC set CNY mid-point at 6.9163 (Prev. 6.9065)
Chinese Trade Balance (CNY)(Oct) 233.6B vs. Exp. 237B (Prev. 213B). (Newswires)
Chinese Exports (CNY)(Oct) Y/Y 20.1% vs. Exp. 14.2% (Prev. 17.0%)
Chinese Imports (CNY)(Oct) Y/Y 26.3% vs. Exp. 17.7% (Prev. 17.4%)
BoJ Summary of Opinions from the October meeting stated that although it will take time to reach price goal, it is necessary to persistently continue with power monetary easing as momentum to the price target is maintained. The BoJ also noted that Japan’s economy has continued its moderate expansion but momentum towards economic expansion recently weakened somewhat due to natural disasters and US-China trade conflict, while it added It is important to patiently wait for a rise in inflation by continuing with the current monetary easing policy. (Newswires)
UK Cabinet ministers have informed PM May that her Brexit deal must not mean that Britain remains in the single market “by the backdoor” by signing up to last-minute concessions to the EU. (Times)
ITV political correspondent Paul Brand tweeted “source close to PM seems pretty clear with me that cabinet won’t meet until next week to sign off Brexit deal”. (Twitter) Delays are said to be as a result of Cabinet members seeking legal advice on the text of May’s deal
Deputy Political Editor of the Telegraph tweets “DUP *very* unhappy tonight at suggestion NI could be tied more closely to EU under backstop”. (Twitter)
UK RICS Housing Survey Oct -10 vs. Exp. -2.0 (Prev. -2.0). (Newswires)
EU Commission see Italian budget measures leading to a deficit/GDP ratio of 2.9% vs. the Italian government’s view of 2.4%, according to sources. Sources add that the EU are to revise Italian growth forecasts lower and see Italian growth a third below the government’s target. (Repubblica)
FX markets calmed overnight in which the greenback consolidated at session highs above the 96.00 level after the prior day’s post-election rebound, while its major counterparts EUR/USD and GBP/USD drifted sideways at the 1.1400 and 1.3100 handles respectively. Elsewhere, USD/JPY and JPY-crosses marginally extended on recent gains as the rally in stocks dampened demand for safe-haven JPY, while antipodeans were rangebound with AUD only mildly supported by the latest Chinese trade data and with NZD lacking direction following an unsurprising RBNZ policy announcement in which it maintained rates as expected at 1.75% and kept the option of a future rate cut on the table.
RBNZ maintained the Official Cash Rate at 1.75% as expected and kept guidance unchanged until 2020, while it sees OCR at 2.41% in December 2021 (Prev. 1.8%). RBNZ stated that the timing and direction of any future rate OCR moves remain data dependent, while RBNZ Governor Orr stated that they are not taking a rate cut off the table and that they would consider reducing rates if GDP falls short of projection. (Newswires)
Commodities were lacklustre overnight with prices restrained as the greenback held on to its gains. As such, WTI crude futures traded sideways at a sub-USD 62/bbl level following the prior day’s weakness in the wake of a larger than expected build in DoE crude inventories, while reports also noted Russia was seeking to increase output unless a deal is made with Saudi. Gold was subdued by the firm USD and copper extended on recent losses despite the positive risk tone, with the latest trade data showing China copper imports in October fell to 423k tons vs. Prev. 520k tons M/M.
Russia is looking to raise crude output next year by 300k BPD unless a deal is struck with Saudi Arabia according to sources. (FT)
Treasuries drifted lower in post-elections trade as the Republicans kept the majority in Senate and Democrats retained control of the House, as expected, with the complex unreactive to US Attorney General Sessions resignation. The curve saw some modest bear-flattening as short-dated yields were higher by c.2bps while the long end showed yields below 1bps at settlement. 2s30s and 2s30s narrowed by c.3bps. The US Treasury sold 19bln in 30yr bonds, at a high yield of 3.344% tailing by 2.3bps. Demand was significantly weak with the bid-to-cover at the lowest level since February 2009. Looking at the breakdown, directs were awarded the smallest portion since September 2009, indirects took the smallest share since March and dealers were left with the largest slice since August 2015. US T-note futures (Z8) settled half-a-tick lower at 117-31+.
US President Trump said he hopes to work with the Democrats on infrastructure and drug prices, as well as trade and economy, while he said he is not ruling out a government shutdown over border wall funding. Furthermore, Trump also commented he will try to make a deal with China and that he does not like the OPEC monopoly. (Newswires)
US Attorney General Jeff Sessions resigned at US President Trump’s request, while Matthew G. Whitaker – previously Sessions’ Chief of Staff – will become acting Attorney General with a permanent replacement to be nominated at a later date. There were also comments by US House Majority leader Pelosi that Trump’s firing of AG Sessions is a “blatant” attempt to try to end the Russia probe. (Newswires)