E.U Morning Call

roche futures

h January 2018
•    Asian bourses slipped overnight amid the soft close on Wall St. as political concerns and profit taking put a lid on recent gains.
•    USD sees a modest recovery, subsequently pushing EUR and USD through 1.23 and 1.38 respectively.
•    Looking ahead, highlights include Eurozone inflation, Bank of Canada rate decision, alongside earnings from Goldman Sachs and Bank of America.

ASIA
Asia’s major stock markets traded mostly negative following a weak performance on Wall St, where the main indices reversed from record levels on political concerns including the looming government shutdown deadline and reports that former Trump strategist Steve Bannon was subpoenaed by Special Counsel Mueller. Furthermore, some also suggested profit taking in overbought conditions after both the S&P 500 and DJIA notched historical feats at the open in which they briefly rose above the 2800 and 26000 levels respectively for the 1st time ever. ASX 200 (-0.5%) and Nikkei 225 (-0.3%) were negative as losses in miners continued to weigh on Australia, while risk appetite in Japan remained sapped by the recent JPY strength. Elsewhere, Hang Seng (-0.4%) pulled back from yesterday’s record close and the Shanghai Comp. (+0.6%) bucked the trend after another firm liquidity effort by the PBoC, although a slump in Shenzhen stocks provided some mainland jitters as the ChiNext board for small cap and tech firms fell to its lowest since July after blockchain-related stocks tumbled in the wake of the crypto-chaos. Finally, 10yr JGBs were subdued as prices failed to benefit from a broad risk-averse tone, while today’s Rinban announcement was also uneventful in which the BoJ maintained its purchase amounts in the belly to short-end.
PBoC injected CNY 100bln via 7-day, CNY 90bln via 14-day and CNY 10bln via 63-day reverse repos. (Newswires)
PBoC set CNY mid-point at 6.4335 (Prev. 6.4372)

UK
UK PM May is reportedly set to agree to pay more cash to France and accept more child migrants to keep the UK border posts in Calais. (Newswires)

EU
ECB's Weidmann said that ending asset purchases in 2018 would be appropriate. Weidmann again warned about undesired consequences of the ECB's easing programme. Weidmann also said that analyst’s expectation for a mid-2019 rate hike is roughly in line with ECB guidance. (FAZ)

FX
USD was choppy as weakness initially persisted in early Asia trade, triggered by a surge in EUR/USD as the pair tripped through stops at the 1.2300 level to print fresh 3-year highs. The greenback’s woes were not helped by AUD/USD which tested the 0.8000 handle to the upside with mild support seen after better than expected Home Loans data, while the PBoC also set another stronger reference rate albeit to a lesser extent in comparison to the past few days. However, the moves were then gradually reversed throughout the session, which provided the USD with much needed reprieve and helped USD/JPY nurse recent losses.
Australian Home Loans (Nov) 2.1% vs. Exp. 0.0% (Prev. -0.6%). (Newswires)
SNB President Jordan reiterated that the CHF is still highly valued, but gave no expectations for when Swiss interest rates will normalise. (Newswires)

COMMODITIES
Commodities were subdued with gold lower as prices were dictated by fluctuations in the greenback, while copper remained near its worst levels in 3½ weeks amid the negative risk tone in the region. Elsewhere, crude prices languished in the aftermath of the prior day’s losses with Brent crude barely holding above the USD 69/bbl after various banks upgraded their oil price forecasts to below current market levels, while Russian energy minister Novak also remained cautious and stressed that the oil market is not yet balanced and stuck to Russia’s previous forecast for 2018 at USD 50-60/bbl.

GEOPOLITICAL
US Secretary of State Tillerson urged Russia and China to fully implement UN Sanctions on North Korea and later added that the world will not accept a nuclear-armed North Korea. (Newswires)
China labelled the 20-nation meeting in Vancouver regarding the North Korean nuclear crisis as illegitimate after Beijing representatives were not invited, while the Canadian Foreign Minister said the Vancouver meeting participants agreed to work together to ensure North Korean sanctions are strictly enforced. (Newswires)

US
The US curve flattened as the 2-year space was subjected to selling pressure after the elongated US weekend, although the Treasury space operated in a narrow range today. US T-Note Futures settled 1+ ticks higher at 122-31+.
Reports suggested that former Trump strategist Steve Bannon has reportedly been subpoenaed by special counsellor Mueller. There were also source reports that former Trump advisor Bannon was told by the White House to not answer questions before House Intel Committee about White House and transition, while House Intelligence Committee Rep. Himes later stated that Bannon used a broad definition of executive privilege to avoid many questions related to his time in the Trump administration. (NYT/Fox/Newswires)
US House Republican discussed a stop-gap bill to fund government through to February 16th, although there were also later comments from US Rep. Meadows that there was not enough support to pass a GOP only spending bill in the House. (Newswires)
US Republican lawmaker stated that a US government shutdown for the first time since 2013 is a real possibility. (The Hill)
US Republicans were said to discuss attaching a 2-year delay of Obamacare medical device and cadillac healthcare plan taxes. (Newswires)
Sources believe that US President Trump is not inclined to pull out of NAFTA, but status is subject to a daily change. (Newswires)