RANsquawk EU Open Rundown 02.03.17

Asian bourses traded higher after yet another record day for Wall St. as financials continue to remain supported by the prospects of a Fed March hike

USD was once again bolstered by central bank comments with Fed’s Brainard adding to the recent hawkish rhetoric

Looking ahead, highlights include EU CPI, U.S Initial Jobless Claims, Canadian GDP, Fed's Powell and ECB'S Lautenschlager

ASIA

Asia equity markets traded mostly higher as the region took the impetus from the record day on Wall St. where the DJIA and the S&P 500 broke above 21,000 and 2,400 respectively, as financials led on increased prospects of a March Fed rate hike. This bolstered ASX 200 (+1.3%) and Nikkei 225 (+0.9%) with the former led by strength in mining and material sectors. Elsewhere, Hang Seng (+0.5%) was also buoyed while Shanghai Comp. (-0.2%) lagged after the PBoC kept its daily liquidity operations at a paltry CNY 30bln and as the banking regulator signalled to restrict shadow banking growth. 10yr JGBs were flat as early pressure alongside strength in riskier assets was reversed following a 10yr JGB auction where the b/c and average prices increased from prior, while the tail-in-price also narrowed.

PBoC injected CNY 10bln 7-day reverse repos, CNY 10bln in 14-day reverse repos and CNY 10bln in 28-day reverse repos.

PBoC set CNY mid-point at 6.8809 (Prev. 6.8798).( Newswires)

CBRC stated that working on new regulation to tighten supervision of bank wealth management products and would curb expansion of banks’ off-sheet balance business. (Newswires)

EUROPE

Latest Election IFOP Poll; First Round: Le Pen 25.5% (Unchanged) Macron 24.0% (Unchanged) and Fillon 21.0% (+0.5%). Second Round: Macron (62%), Le Pen (38%). (Newswires)

UK House of Lords passed an amendment to guarantee rights of UK citizens, handing a defeat to UK PM May. The Bill now returns to the Commons where the government is expected to attempt to overturn the amendment. (Sky News) However, PMY May has insisted that this setback will not alter her timeline for triggering Article 50. (Telegraph) Note, that the debate will take place on the 13th, vote on the 14th and May has previously stated that she wishes to trigger Article 50 by March 15th

BoE's Charlotte Hogg has been approved as Deputy Governor. (Newswires) This was firmly as expected.

USD was once again supported by central bank comments with Fed’s Brainard adding to the recent hawkish rhetoric as she stated that a rate hike will likely be appropriate soon. This pushed USD/JPY above 114.00, while JPY-crosses remained at prior session highs as the increased risk appetite added to the pressure for safe-haven JPY. AUD/USD was dampened after Trade Balance missed expectations, while CNY also suffered against a firmer greenback after the PBoC set a mildly weaker reference rate.

RBNZ Governor Wheeler stated that risks around future rate movements as equally balanced and added the RBNZ is comfortable with current economic projections. (Newswires)

Australian Balance of Trade (Jan) 1.302B vs. Exp. 3.800B (Prev. 3.511B)

- Imports (Jan) M/M 4% (Prev. 1%)

- Exports (Jan) M/M -3% (Prev. 5%)

COMMODITIES

Copper saw rangebound trade overnight with prices flat alongside indecisive trade in the world’s largest copper consumer China. Elsewhere, gold (-0.2%) was once again pressured by a firmer greenback and hawkish Fed comments with Brainard stating that rate hike will likely be appropriate soon, while WTI crude futures extended on its pullback below USD 54/bbl amid the firmer USD.

Treasuries tumbled on Wednesday as bets on the Fed hiking in March picked up following comments from Williams and Dudley on Tuesday. The NY Fed President Dudley, a permanent voter on the FOMC, said the case for a hike was becoming more compelling, while Williams said March was under serious consideration. March 2017 10y T-note futures settled at 124.09, down 26+ ticks.

Fed’s Beige Book showed that all 12 districts reported that activity expanded at a modest to moderate pace. A few districts reported some pickup in the pace of wage growth. (Newswires)

Fed's Kaplan (Voter, Neutral) reiterated the Fed should begin process of rate hikes but that should be in a very patient manner. (Newswires)

Fed's Brainard (Voter, Dove) stated that a rate hike will likely be appropriate soon, citing the improved global conditions and continued growth path.

The White House will begin infrastructure planning on Thursday, according to sources. Furthermore, White House is also reportedly mulling options against North Korea, which possibly including the use of force as part of a defence strategy review. (Newswires)