[PODCAST] US Open Rundown 23rd December 2019
- European bourses are overall little changed, though the FTSE 100 outperforms as Sterling slips
- China is to lower import tariffs on certain products beginning January 1st in which it will cut some import tariffs on 850 items and will further lower import tariffs for some IT products from July 1st
- North Korean launch sites reportedly look basically ready to go, while other reports note NK Leader Kim is to take a wait and see approach regarding a US deal
- In FX, the USD slightly underperforms most G10 peers excluding Sterling which has given up the 1.30 mark vs. USD
- Looking ahead, highlights include US Durable Goods, New Home Sales, Canadian GDP and US 2yr supply
Asian equity markets traded somewhat mixed as the region once again failed to fully join in on the Christmas cheer which had propelled Wall Street to fresh record highs on Friday, with volumes light heading into the holidays. ASX 200 (-0.5%) and Nikkei 225 (+0.1%) were varied with Australia dragged by commodity-related losses and due to the adverse effects of its recent currency appreciation, while the Japanese benchmark remained afloat but with upside capped by an indecisive JPY and after Japanese Chief Cabinet Suga clarified that they have not eased export controls on South Korea. Hang Seng (+0.1%) and Shanghai Comp. (-1.4%) lacked conviction despite the announcement that China is to lower import tariffs for some products beginning January 1st and after the recent Trump-Xi call in which the leaders were said to have conducted a very good talk regarding the trade deal, although reports further noted that Chinese President Xi stated US interference is harming China’s interests and there were also downward revisions to November Chinese trade data including a wider contraction in Exports. Finally, 10yr JGBs languished firmly below the 152.00 level after the recent bear-flattening in USTs and with demand also dampened by the lack of BoJ presence in the market today.
PBoC injected CNY 50bln via 14-day reverse repos for a daily net injection of CNY 50bln. (Newswires)
PBoC set USD/CNY reference rate at 7.0117 vs. Exp. 7.0119 (Prev. 7.0020)
China is to lower import tariffs on certain products beginning January 1st in which it will cut some import tariffs on 850 items and will further lower import tariffs for some IT products from July 1st. Furthermore, it was also reported that China is taking a major step to open up sectors ranging from oil and gas to telecoms and railways by easing market regulations and reducing financing costs for private companies, with the government to offer more tax breaks and broaden incentives to more firms. (Xinhua)
China Global Times tweeted that China would reduce import tariffs even without the phase-one deal as it is seeking a more cooperative and inclusive global trade environment, citing Beijing Economic Operation Association Vice Director Tian Yun. (Twitter)
China November USD-denominated trade data revisions: Trade Balance revised to 37.93B (Prev. 38.73B), Exports revised to -1.3% (Prev. -1.1%), Imports revised to 0.5% (Prev. 0.3%). (Newswires)
Japanese Chief Cabinet Secretary Suga clarified that they have not eased export controls on South Korea and that the change to controls are just procedural. (Newswires)
US President Trump signed the USD 1.4tln spending bill on Friday to avert the government shutdown as expected. (Newswires)
ECB's Knot said cannot dismiss worrying prospect of current low interest rates lasting another half-decade and that low interest rate policy risks becoming counterproductive, while he added that the ECB have to reassess policy in time. (Newswires)
German Import Prices MM* (Nov) 0.5% vs. Exp. 0.4% (Prev. -0.1%). (Newswires)
Syrian anti-aircraft defence fired at hostile missiles which allegedly came from Israel. (Newswires)
Center for Strategic and International Studies’ Victor Cha said possible launch sites in North Korea look that they are basically ready to go. (Twitter)
North Korean Leader Kim Jong Un is expected to take a ‘wait and see’ approach regarding making a deal with the US due to US President Trump being politically vulnerable (impeachment & 2020 election); if Trump were to win another term North Korea may be more likely to return to negotiations., according to a source familiar with North Korean leadership. Adding, that the likely hood of a proactive test is ‘very low’ as this would be too confrontational for China and Russia. (CNN)
North Korea leader Kim is said to have held a meeting with top military officials to discuss boosting the country's military capability. (Newswires)
Russian Prime Minister has ordered the Russian government to draw retaliatory measures regarding US sanctions on Nord Stream 2., Ifax. Follows on from Russian Kremlin refuses to give a timeline for the launch of the Nord Stream 2 project,adding it is too early to talk about any potential retaliation against the US but actions by the US will not go unanswered. (Newswires)
Tentative and mixed trade for European bourses in the final full session before Christmas [Euro Stoxx 50 -0.1%] following on from a similar APAC handover amid a lack of conviction and participants. In terms of YTD performance in Europe – FTSE MIB stands as the winner with YTD returns of just over 30% followed by the CAC 40 (+27.3%), DAX (+26.0%) and Euro Stoxx 50 (+25.7%) whilst IBEX 35 (+13.1%) and FTSE 100 (+12.8%) reside towards the bottom end of the spectrum. State-side, Nasdaq (+34.5%) leads the YTD gains followed by S&P 500 (+28.5%) and DJIA (+22.0%). Back to today’s session, FTSE 100 (+0.4%) outpaced peers as exporters benefit from a softer Sterling. Sectors also reflect an indecisive risk tone with no major standouts. In terms of individual movers: Bayer (+3.0%) rose to the top of the German index after the US government said the USD 25mln verdict on Co's Roundup case should be reversed. Lufthansa (-1.3%) shares are pressured after talks with the German Union UFO fell through and strikes are imminent, albeit the union will refrain from strike action during the busy Christmas period. Meanwhile, GSK (-0.4%) drifted off lows but remains subdued after the US FDA declined to approve Co’s long acting HIV injections after the regulator questioned the treatment’s chemistry, manufacturing and controls process but not its safety. Finally, NMC Health (+28.5%) spiked higher at the open, and have continued to strengthen, after the Co. stated it will be commencing an independent third-party review to provide additional reassurances to shareholders after activist short-seller Muddy Waters questioned the integrity of NMC’s reports. Note: tomorrows session sees Eurex and all its derivatives closer whilst cash DAX will be shut all day – the rest of the cash bourses will see an early finish (full schedule on the Newsquawk headline feed)
JD.com's (JD) logistic are considering a potential USD 8-10bln IPO., according to sources. (Newswires)
Tesla (TSLA) has reportedly agreed to a 5-year loan facility, of up to 10bln yuan with Chinese banks; to be used to roll-over a previous loan as well as their China operations including their Shanghai factory. (Newswires)
AUD/NZD - The Aussie and Kiwi are still outpacing their G10 rivals and jostling for top spot in the major stakes having made firmer breaches of big figures against their US counterpart, with Aud/Usd up to 0.6920 and Nzd/Usd reaching 0.6625. Both have benefited from a mixture of short covering and technical buying after recent relatively upbeat data that has reduced or rolled back RBA/RBNZ rate cut expectations. In terms of next bullish chart targets, 0.6939 looms as long as the pair holds/closes above the 200 DMA (circa 0.6905) and 0.6636 respectively.
CHF/GBP - The Franc is in bronze position and eyeing 0.9800 vs the Buck as latest weekly Swiss sight deposits suggest less active currency intervention and the Greenback drifts down from best levels generally (DXY dipping within a narrow 97.708-578 range) amidst even thinner seasonal volumes and a softer/flatter Treasury yield curve. Similarly, Sterling is trying to take advantage of the Dollar’s dip and attempting to keep hold or sight of the 1.3000 level even though no deal Brexit risks have risen with the passing of the 1st parliament vote on PM Johnson’s WAB that includes a no transition delay clause.
EUR//JPY/CAD - All more narrowly mixed against the Usd, with the single currency mired between 1.1074-88 parameters, Yen meandering from 109.35-53 and Loonie pivoting 1.3150 ahead of Canadian GDP for the month of October that is forecast to be flat, but could disappoint given a string of bleak data since this month’s BoC meeting. Back to Eur/Usd, some option expiry interest could impact in the absence of anything else and the aforementioned quiet pre-Xmas trade, as almost 1 bn rolls off at 1.1070 and from 1.1100-10.
SCANDI/EM - The Swedish Crown has slipped after another test of resistance near 10.4150 against the Euro failed to propel the Sek higher, but its Norwegian peer is extending gains through 10.0000 towards 9.9150 on the back of the Norges Bank’s gently inclined depo rate path. Elsewhere, EMs are largely going through the motions in tight bands vs the Dollar.
A busier pm docket bodes well or at least better for debt markets that appear to have run out of inspiration and impetus after their earlier exertions. Bunds are back down nearer the base of a 171.56-88 band and Gilts and hovering just a few ticks above 132.00, while US Treasuries are a tick or so off overnight highs with the very short end still underperforming in to 2 year issuance. On that note, Italian bonds have also been lagging and below par even either side of a so-so CTZ auction and in contrast to Spanish paper that is content with constructive developments on the political front. Back to what lies ahead in the 2nd half, more housing data and the Fed’s national activity index, but the pick of the bunch and often erratic looks to be durable goods.
The energy complex remains flat/subdued amid holiday-thinned conditions after a lacklustre Asia session in light of a number of bearish supply-side factors including Friday’s increase in active rigs reported via the Baker Hughes rig count coupled with reports of a Saudi-Kuwaiti agreement to renew oil output in the shared neutral zone by year-end. WTI futures hover just above the USD 60/bbl mark whilst its Brent counterpart retains USD 66/bbl+ status at time of writing. Russian Energy Minister Novak failed to provide the complex with much impetus in early EU trade despite noting that the OPEC+ could discuss deeper oil output cut quotas at its March meeting (5th/6th) in 2020. This follows this month’s policy revision in which the cartel agreed to deeper cuts of 496k BPD starting from Q1 2020, with an extraordinary meeting in March for a review. Elsewhere, gold trades on a firmer footing with the yellow metal hovering around current session highs of ~USD 1485/oz ahead of reported trend-line resistance at ~USD 1487/oz. Copper also garnered some support from the initially softer Dollar with prices re-eying USD 2.80/lb to the upside, although the red metal’s 100 WMA rests just below the round figure at USD 2.7988/lb. Finally, Dalian iron ore rose in excess of 1.0% after key steelmaking cities in Northern China issued pollution alerts as air quality in the region deteriorates.
Saudi Arabia and Kuwait reportedly could agree to renew oil output in the shared neutral zone along the border between the countries by year-end. (Newswires)
Russian Energy Minister Novak says OPEC+ could discuss cutting oil output quotas at its March 5th/6th meeting next year. Additionally, adding that global oil supply growth is to slowdown next year, notes that Russia's oil production in 2019 was 560mln tonnes, reported via RBC TV. (Newswires)
French CGT workers voted to halt output at Petroineos Lavera refinery which has a capacity of 210k bpd, according to a union official. (Newswires)