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[PODCAST] US Open Rundown 24th December 2019

  • European bourses are little changed with a number of market closures already underway
  • China Global Times tweeted that hopefully US can move faster towards lowering tariffs after China recently announced new tariff-cut plans on imports
  • FX markets are tentative/little changed with the debt complex painting a similar picture
  • Looking ahead, highlights include Richmond Fed, APIs, US 5yr. Note, there are several early market closures, all of which are detailed on our calendar/headline feed

ASIA-PAC

Asian equity markets were mixed with price action range-bound amid the ongoing holiday lull and with several early market closures in the region for Christmas Eve. ASX 200 (+0.1%) was uneventful in today’s shortened trading session as outperformance in the commodity-related sectors counterbalanced weakness in tech and financials, while Nikkei 225 (Unch.) also meandered on the marginal ebbs and flows in the domestic currency with outdated BoJ minutes from the October meeting doing little to spur price action. Hang Seng (-0.2%) and Shanghai Comp. (+0.7%) conformed to the non-committal tone amid the reduced hours in Hong Kong and with mainland also kept indecisive after the PBoC skipped open market operations, although Chinese Premier Li noted that China will study further steps to lower financing costs including RRR and targeted RRR cuts. Finally, 10yr JGBs were initially lacklustre following the similar holiday-quietened trade in USTs and with demand sapped by a lack of buying from the BoJ which were only in the market for treasury discount bills, although prices were later supported following the 2yr auction results which were mixed but still attracted a higher b/c.    

PBoC skipped open market operations for a net neutral daily position and announced CNY 6bln in 3-month central bank bill swaps. (Newswires) PBoC set USD/CNY reference rate at 7.0119 vs. Exp. 7.0126 (Prev. 7.0117)

China Global Times tweeted comments from Chinese Premier Li that China pledges equal treatment for all enterprises under all forms of ownership and won't take on protectionism but instead it will stick to further opening-up despite deficit with Japan and South Korea, while the trilateral joint press statement from China, Japan and South Korea reaffirmed commitment to resolve North Korea issue and that they will try to facilitate US-North Korea dialogue. (Newswires/Twitter)

China Global Times tweeted that hopefully US can move faster towards lowering tariffs after China recently announced new tariff-cut plans on imports, while it separately tweeted comments from China Foreign Minister Wang Yi who stated the US should work with China to get bilateral ties back on track. (Twitter) China Global Times tweeted that China expresses strong dissatisfaction with the US over the negative contents distorting and smearing China's military development and on issues regarding Taiwan, Hong Kong and Xinjiang, as well as prohibited purchase of Chinese products. Furthermore, the Global Times also tweeted that it is impossible for the US to rope in other countries to contain China and that neither Russia nor any other country is willing to become its pawn to contain China. (Twitter)

China's Cabinet states that the pressure regarding the stabilisation of employment is increasing. (Newswires)

BoJ Minutes from October Meeting stated most members recognized there had been no further increase in the possibility that the momentum towards achieving the price stability target would be lost and that it is appropriate to maintain current purchase guidelines. The Minutes added that some members noted BoJ must not hesitate to take additional easing if there was a greater chance momentum to reaching price target was lost, while members agreed that the economy had been on a moderate expanding trend with a virtuous cycle from income to spending operating, although exports, production, and business sentiment continued to be affected by the slowdown in overseas economies. (Newswires) 

UK/EU

White House reportedly stepped up its warnings to the UK regarding permitting Huawei into its 5G networks which the US alleged is a risk for the British intelligence agencies. (FT)

GEOPOLITICS

Japanese PM Abe tells South Korean President Moon that he would like to improve ties between Tokyo-Seoul, according Yonhap. Subsequently, South Korean President Moon has urged Japanese PM Abe to completely retract export restrictions against South Korea, according to the Blue House. (Yonhap/Newswires) For context, last week Japan lifted some of its export restrictions but South Korea said the measures are not sufficient for a fundamental resolution to the problem.

EQUITIES

European equity markets tread water in the run up to the early Christmas closures and with a bulk of the regional bourses already away on holiday (full closure available on the Newsquawk headline feed). DAX, FTSE MIB and SMI cash markets are among those shut, whilst FTSE 100 (+0.1%), CAC 40 (Unch), AEX (Unch) and IBEX 35 (-0.3%) trade without a clear direction. The latter, however, experiences mild pressure on the back of index-heavy BBVA (-1.1%) - whose shares declined after sources stated that the ECB has asked Spain’s High Court to provide information regarding a probe into spying involving BBVA, to evaluate potential impact on the bank’s governance. Sectors are likewise largely uninspiring, but energy names see some outperformance as most oil-giants remain open – with Royal Dutch Shell (+0.8%) piggybacking on Sterling’s post-election declines and stable energy prices. In terms of other individual movers, PSA (-0.6%) resides towards to bottom of the CAC after the Co. was reiterated with an underperform rating at RBC. Meanwhile, Vivendi (-0.2%) shares are modestly subdued amid the ongoing spat with Mediaset regarding its pan-European merger plans which drew criticism from Vivendi.

FX

FX markets trade with no conviction ahead of the festive season with DXY just above its 200 DMA around 97.71/7; for reference, its 21 DMA resides at 97.61. Similarly, EUR/USD and GBP/USD move relatively sideways – although the former dipped below its 50 and 21 DMA which both reside around 1.1083 to a low of around 1.1071 before paring some downside, whilst the latter manages to remain afloat above yesterday’s 1.2905 low. Elsewhere, USD/JPY retains its 109.00+ status heading into the Christmas break having largely side-lined the out-of-date BoJ Minutes from its October meeting with the pair reflecting the non-committal risk tone across the holiday-thinned market. Meanwhile, the antipodeans remain choppy within tight 20-pip ranges, albeit the Kiwi saw mild impetus heading into the Asia close and currently hovers in proximity to yesterday’s high around 0.6640. The Aussie overall remains flat intraday amid a paucity of pertinent data releases and with no clear risk tone. Finally, USD/CNH heads into the partial session modestly north of the 7.00 mark after seeing another stable Yuan reference rate setting with the next level to the upside at 7.0163 (21 DMA), and with traders eyeing US-China developments early next year, particularly details surrounding the timing of the Phase One deal signing.

FIXED INCOME

Debt futures reflect the overall tentative feel in the market and with regional closures which see Bunds and BTPs out of action. Gilt futures have waned off yesterday’s 132.25 high and breached 132.00 to the downside with prices currently hovering around the 131.75 mark– that said, holiday conditions are likely to not prompt much price action in the contracts. State-side, the UST curve sees minimal flattening, whilst prices remain little deviated from the open around 128-05; some impetus may be derived from a USD 41bln 5-year auction later in the session.

COMMODITIES 

WTI and Brent futures hover in mild positive territory around the USD 60.50/bbl and USD 66.50/bbl levels respectively and both within tight USD 0.20/bbl ranges. News-flow has remained light as markets wrap up for the Christmas holidays and thus provide little impetus to the complex. Meanwhile, spotgold trades on a firmer footing having yesterday surpassed its trendline resistance at USD 1487/oz and briefly topping its 100 DMA (USD 1492.30/oz) in recent trade, although the move was fleeting. From a macro-perspective, there is little by way of fresh fundamental factors to prompt the upside in gold, but light volumes could result in unexplained price action. Elsewhere, copper prices are similarly in the green; prices are back above the 2.80/lb mark with possible upside derived by China’s Environment Ministry issuing 2020 scrap metal import quotas – which sees high-grade copper scrap allowances for just over 270k tonnes (vs. 560k tonnes of copper scrap quota in 2019) alluding to a potential rise in the red metal’s demand within China. 

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