RANsquawk EU Open Rundown 12.01.18

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  • Asia equity are mostly positive following on from the record highs in the US
  • Chinese trade data saw a larger surplus than expected, a beat on exports and a miss on imports
  • Looking ahead, highlights include US CPI, retail sales and earnings from Wells Fargo, JP Morgan and Blackrock

ASIA

Asia equity markets are mostly positive following record highs across all major US indices on optimism heading into earnings season and where energy outperformed with oil at 3yr highs. ASX 200 (Unch) was kept positive throughout the day by commodity-related stocks, but still closed flat due to losses in the largest weighted financials sector. In Japan, index-heavyweight Fast Retailing outperformed and hit its highest in over 2 years after strong quarterly results, although the Nikkei 225 (-0.3%) failed to benefit with the broader market negative on JPY strength. Elsewhere, Hang Seng (+0.5%) and was positive following better than expected Chinese Trade Surplus and Exports, as well as a more convincing liquidity effort by the PBoC. However, the Shanghai Comp (-0.1%) was less decisive as participants also digested disappointing Import numbers and the fact that open market operations still resulted to a net weekly drain. Finally, 10yr JGBs were marginally higher with support seen amid the dampened risk tone in Japan and amid slightly firmer demand in the 40yr JGB auction.

PBoC injected CNY 140bln via 7-day reverse repos and CNY 130bln via 14-day reverse repos. This resulted to a daily net injection of CNY 180bln, but also a weekly net drain of CNY 60bln vs. last week’s CNY 510bln net drain. (Newswires)
PBoC set CNY mid-point at 6.4932 (Prev. 6.5147)

Chinese Trade Balance (CNY)(Dec) 362.0B vs. Exp. 235.2B (Prev. 263.6B). (Newswires)
Chinese Exports (CNY)(Dec) Y/Y 7.4% vs. Exp. 6.7% (Prev. 10.3%)
Chinese Imports (CNY)(Dec) Y/Y 0.9% vs. Exp. 11.8% (Prev. 15.6%)

Chinese Trade Balance (USD)(Dec) 54.69B vs. Exp. 37.00B (Prev. 40.21B). (Newswires)
Chinese Exports (USD)(Dec) Y/Y 10.9% vs. Exp. 10.8% (Prev. 12.3%)
Chinese Imports (USD)(Dec) Y/Y 4.5% vs. Exp. 15.1% (Prev. 17.7%)

China Customs said China trade outlook is upbeat for this year, but added it will be difficult for Chinese trade to maintain double-digit growth. (Newswires)

Chinese trust companies reportedly placed caps on leveraged funds used for equities. (China Securities Journal)

UK/EU

US President Donald Trump said he would not travel to the UK to open the new American embassy next month, blaming the “bad deal” to relocate it. (Telegraph)

FX

USD remained subdued overnight after yesterday’s weaker than expected PPI data and fallout from the EUR strength post-ECB minutes, which were viewed as hawkish as it suggested forward guidance and policy language could be revisited early this year. As such, most major currencies have stayed close to the prior day’s highs against the greenback with EUR/USD and GBP/USD firmly above the 1.2000 and 1.3500 levels respectively, while USD/JPY languished and briefly approached 111.00 to the downside.

S&P cut Brazil sovereign rating to BB-; Outlook Stable from BB; Outlook Negative. (Newswires)

Turkey purged 262 government employees with an emergency decree. (Twitter/Gazette)
COMMODITIES

WTI crude futures traded sideways as price action took a breather from yesterday’s ascent and subsequent pullback from fresh 3-year highs and the USD 64/bbl level. Elsewhere, gold was underpinned by a subdued greenback to trade near 4-month highs and with prices on course for a 5th consecutive weekly gain, while copper was relatively flat alongside mixed Chinese trade data which also showed 2017 copper and product imports fell 5.2% Y/Y.

US Commerce Secretary Ross said results of investigation into national security impact from steel imports have been submitted to President Trump who has 90 days to decide on any potential action. (Newswires)

US Treasury Secretary Mnuchin confirmed US plans to reimpose sanctions on Iran, while a separate report states the White House plans to announce decision on Friday. (Newswires)
GEOPOLITICAL

US sent B2 Bombers to Guam, which will conduct local and regional training sorties amid North Korea threat. (Daily Express)

US President Trump said he “probably” has a very good relationship with North Korean leader Kim Jong Un, but didn’t want to comment when asked whether he had spoken with Kim. (Nikkei)

Reports stated that satellite imagery showed tunnelling at North Korea’s nuclear test site. (Yonhap)

US

Treasuries were supported yesterday after China denied reports it considering reducing or halting its purchases of USTs, while prices then hovered around best levels heading in to the release of the latest ECB meeting minutes, which were deemed hawkish.
This allowed some concession heading in to a 30-year auction which stopped screens by 2.1bps, foreign buyers also stepped in and pushed the indirect takedown to the highest level on record, while the BTC was the highest since December 2014. T-Note Futures settle +4 ticks higher at 123-04

Fed’s Dudley (voter) said there is a ‘strong case’ for gradual hikes and that he is worried growth overheating is a risk, while he added the Fed may have to press harder on the breaks at some point. Dudley also said three Fed hikes in 2018 is not an unreasonable starting point and sees inflation rising to target in the medium term and unemployment falling under 4% this year. (Newswires)

Source: ransquawk

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