Asian equity markets were mostly higher as the region got a tailwind from Wall St where sentiment was lifted by encouraging earnings
USD/JPY and JPY crosses were the most active overnight and were underpinned by safe-haven outflows from JPY amid the positive risk tone across stocks
Looking ahead, highlights include UK, EZ and NZ inflation, BoC rate decision, DoEs and a slew of central bank speakers
ASIA
Asian equity markets were mostly higher as the region got a tailwind from Wall St where sentiment was lifted by encouraging earnings; gains were led by the Nasdaq after Netflix shares surged on strong subscriber numbers. ASX 200 (+0.4%) was positive but with upside capped by weakness in the largest weighted financials sector amid an ongoing Banking Royal Commission grilling and after CYBG flagged a GBP 202mln pre-tax charge, while Nikkei 225 (+1.4%) outperformance was fuelled by a weaker JPY. Hang Seng (+0.3%) andShanghai Comp. (-0.4%) were underpinned at the open in reaction to the PBoC’s surprise 100bps RRR cut for most banks and a CNY 150bln Reverse Repo operation. However, Chinese bourses then failed to hold on to gains with some sceptical as the PBoC also required most of the additional funds from the RRR cut to be used to pay back Medium-term Lending Facility loans, while there were also reports of US Commerce Department probes on imports of some types of Chinese steel wheels and aluminium sheet imports. Finally, 10yr JGBs were flat as safe-haven outflows from the increased risk appetite in Japan was counterbalanced by the BoJ presence in the market for over JPY 1tln in 1-10yr JGBs, while USTs were lower overnight with yields in the short-end higher in which 2yr yields rose to 2.400% for the first time since 2008.
US Commerce Department launched probe on imports of some types of steel wheels from China, while it was also said to have made a preliminary finding that aluminium sheet imports from China benefit from unfair subsidies. (Newswires)
PBoC injected CNY 150bln via 7-day reverse repos. (Newswires)
PBoC set CNY mid-point at 6.2817 (Prev. 6.2771)
Chinese House Prices YY (Mar) 4.9% (Prev. 5.2%). (Newswires)
Chinese Property Prices rose M/M in 55 out of 70 cities (Prev. 44) and rose Y/Y in 60 out of 70 cities (Prev. 59).
Nomura said PBoC RRR cut of 100bps was more prudent than expected and favoured larger banks over mid-caps, while it also suggested that it would only be equivalent to a 30bps RRR cut. Furthermore, CITIC CLSA said it expects the recent targeted RRR cut to help contain default risks. (Newswires)
Japanese Trade Balance Total Yen (Mar) 797.3B vs. Exp. 499.2B (Prev. 3.4B, Rev. 2.6B)
Japanese Exports YY (Mar) 2.1% vs. Exp. 5.2% (Prev. 1.8%
Japanese Imports YY (Mar) -0.6%% vs. Exp. 6.3% (Prev. 16.5%)
UK/EU
UK PM May is reportedly set to lose a key Brexit vote in the House of Commons in which 10 rebel Conservative MPs signed an amendment to the government’s customs bill that would put securing a post-Brexit customs union with EU its main priority. (Times) Note, the vote is separate from an amendment on the customs union in the government’s withdrawal bill that will be voted on in the House of Lords today.
All of the UK government’s Brexit scenarios would leave the country worse off, according to a study by think tank Global Future. (Newswires)
Brussels is issuing a slew of legal proposals on Brexit over the next 10 weeks, in a flurry of lawmaking to prepare the EU in the event of a no deal with the UK. (FT)
German unions reached a pay deal with employers to raise public sector wages in three steps and which will be backdated to March 1st. The agreement involves an average increase of 3.19% in first step, while wages will be increased 3.09% and 1.06% in the following two years. (Newswires)
FX
USD/JPY and JPY crosses were the most active overnight and were underpinned by safe-haven outflows from JPY amid the positive risk tone across stocks. Elsewhere, the remainder of currencies traded relatively quiet with the DXY stuck around 89.50, while EUR/USD and GBP/USD kept range-bound but with the latter briefly back at the 1.4300 handle as it slightly nursed losses following yesterday’s pull-back from post-referendum highs. Elsewhere, antipodeans were also uneventful due to a lack of data and catalysts to spur price action, while HKD remained near the lower end of the band despite further attempts by the HKMA to defend the peg.
Canadian Government sources stated that NAFTA nations are not in a position to say that any more chapters have been closed, while they added that the Washington meeting on Thursday is unlikely to produce any kind of announcement. (Newswires)
COMMODITIES
WTI crude futures gained overnight with support seen following the weekly API inventory report which despite showing a slightly narrower than expected draw in headline crude stockpiles, was accompanied by draws across all product components of the release. Elsewhere, gold was kept rangebound amid a stable USD overnight, while copper was choppy and pared gains alongside a deterioration of sentiment in its largest consumer China.
US API weekly crude stocks (6 Apr) -1.047M vs. Exp. -1.400M (Prev. +1.758M). (Newswires)
GEOPOLITICAL
US President Trump said US has had discussions with North Korea at high levels, while there were separate reports that Secretary of State nominee Pompeo met with North Korean Leader Kim Jong-Un over the Easter weekend. (Newswires)
South Korea said it is mulling how to alter its armistice with North Korea into a more peaceful agreement. (Newswires)
White House Economic Advisor Kudlow said that additional sanctions on Russia are under consideration. (Newswires)
Saudi foreign minister said they are willing to send troops to Syria as a part of a wider coalition. (Newswires)
US
Amid thin volume on Tuesday, US Treasuries saw selling pressure at the short-end of the curve, which pushed 2yr yields up to fresh cyclical highs. However, the rest of the curve found buyers, particularly the long-end, where 30yr yields fell by c.3bps at settlement, and causing 2s30s to narrow to cyclical lows c.60bps. Most other major curves narrowed on the session with attention also on the 5s30s which was another that saw cyclical lows on Tuesday c.32bps. US 10yr T-Notes futures settle 3 ticks higher at 120-18.
Fed Discount Rate Minutes showed 3 Fed policymakers opposed raising the discount rate (Chicago, Minneapolis, Atlanta). Furthermore, regional Fed directors noted tight labour markets, rising wages, and solid economic conditions, although some also noted uncertainty around the impact of US tax cuts. (Newswires)
Fed’s Bostic (Voter, Dove) said goal for policy should be to get to a more neutral stance, while he added the US economy is in a good place and that he expects to see a build to inflation. Furthermore, Bostic commented that businesses are confused regarding the direction of US policy on trade and that he is also hearing about labour shortages everywhere. (Newswires)
Fed’s Evans (Non-Voter, Dove) said rates can be raised gradually without risk of a surge in inflation. (Newswires)
US President Trump said doesn’t like TPP deal for US and that bilateral trade deals are more efficient and profitable. (Newswires)
White House Economic Advisor Kudlow said the Chinese are offering “constructive reaction” regarding trade disputes, while he added that the US would like to see a free trade agreement with Japan and that US President Trump and Japanese PM Abe are to discuss Japan’s exemption from steel and aluminium tariffs. (Newswires)
Source: RANsquawk
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