RANsquawk EU Open Rundown 08.03.17

Asian equities traded mixed with notable data releases including downbeat Japanese GDP and Chinese trade figures

FX markets saw range-bound trade which initially provided the greenback’s major counterparts some mild respite from the recent losses against the USD

Looking ahead, highlights include US ADP Employment Change, DoEs and the UK budget

ASIA

Asia equity markets traded mixed as the region digested key data releases and after a downbeat close on Wall St., where healthcare names suffered from US President Trump comments that he will work to lower drug prices. ASX 200 (Unch) was subdued amid weakness in commodities, while Nikkei 225 (-0.5%) was dampened after Japan’s Final Q4 GDP missed expectations. Hang Seng (+0.2%) and Shanghai Comp. (-0.2%) were choppy after the PBoC kept liquidity operations weak which led to a 10th consecutive day of net outflows and as participants mulled over the latest trade figures which showed weaker than expected exports and an unexpected trade deficit, while imports surged 44.7%. 10yr JGBs were slightly lower as a mild bid tone from weaker than expected GDP data and risk averse sentiment in Japan was overshadowed following a reserved Rinban buying operation in which the BoJ were in the market for a reserved JPY 750bln of government debt.

Chinese Trade Balance (CNY) (Feb) -60.4bln vs. Exp. 172.5bln (Prev. 354.5bln)

- Imports (CNY) (Feb) Y/Y 44.7% vs. Exp. 23.1% (Prev. 25.2%)

- Exports (CNY) (Feb) Y/Y 4.2% vs. Exp. 14.6% (Prev. 15.9%)

Note: Some analysts have attributed the large discrepancies of the figures to distortions in base year comparisons, due to differing months between Lunar New Year holidays in 2016 and 2017.

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 6.9032 (Prev. 6.8957). (Newswires)

Japanese GDP (Q4 F) Q/Q 0.30% vs. Exp. 0.40% (Prev. 0.20%)

- GDP (Q4 F) Y/Y 1.20% vs. Exp. 1.50% (Prev. 1.00%)

EUROPE/ UK

House of Lords voted 366 to 268 votes to pass an amendment to the Article 50 bill that requires the Government to allows MPs a “meaningful vote” on the final Brexit deal. (Newswires)

Govt Ministers are said to urge for UK PM May to call for a snap election to give her a clear mandate for her Brexit plan. (Newswires)

FX markets saw range-bound trade which initially provided the greenback’s major counterparts some mild respite from the recent losses against the USD. This helped AUD/USD briefly reclaim 0.7600, although the recovery was limited as the mostly disappointing Chinese trade data saw gains pared. JPY strengthened on safe-haven flows triggered by the widespread negative sentiment and miss of Japanese GDP data, while CNY was pressured after the PBoC set the reference rate at its weakest since January.

COMMODITIES

API inventories dictated energy trade with WTI crude futures pressured following a headline inventory build of 11.6mln bbls, while gasoline prices surged on a 5mln bbls drawdown. Elsewhere, copper saw mild short-covering, but still languished near 5-week lows while gold (+0.2%) prices were off yesterday’s worst levels as a cautious tone in the markets provided mild support for the safe-haven.

US API Crude Oil Inventory Report (Mar 3) W/W 11600K (Prev. 2500K)

- API Gasoline Inventories (Mar 3) W/W -5000K (Prev. 1840K)

Saudi Oil Minister Al-Falih stated they will seek an extension of output reduction deal in May and added that inventory levels will be considered on whether to extend the deal. Al-Falih also stated that OPEC and non-OPEC have removed 1.4mln bpd from markets and that global oil demand is picking up. (Newswires)

Similar story in credit markets with volumes lighter which could be the on-going theme ahead of ECB and NFP later in the week. The US yield curve saw a modest uptick with the 10-yr consolidating above 2.5%, while underperformance had been seen in the belly following a tepid 3-yr auction. At the pit close, T-notes settled at 124.01+, down 4+ ticks.

US House speaker Ryan stated we will have enough votes to pass GOP healthcare plan in the house. (Newswires)

CNBC's Kudlow cited sources stating that US Commerce Secretary Ross now opposes the US border adjustment tax. (Newswires)

Atlanta Fed was considering former Obama administration housing official Raphael Bostic for Lockhart's replacement as Atlanta Fed President. (WSJ)