- Asian equity markets were mostly lower as the downbeat tone rolled over from Wall St.
- UK Brexit Secretary Davis reportedly threatens to not pay the EU divorce bill in Irish hard border spat.
- Looking ahead, highlights include Eurozone, UK and US mfg PMIs, US PCE, US mfg ISM and a slew of speakers including Fed’s Powell
Asian equity markets were mostly lower as the downbeat tone rolled over from Wall St. where the S&P 500 and DJIA posted their worst monthly performance in over 2 years following the market turmoil seen in early February. This weighed on the Asia-Pac majors from the open with ASX 200 (-0.7%) led lower by weakness in energy names after similar underperformance of the sector in US due to declines in crude, while Nikkei 225 (-1.8%) suffered broad losses amid a firmer JPY. Elsewhere, Hang Seng (-0.5%) was indecisive and Shanghai Comp. (+0.1%) outperformed with pressure somewhat alleviated following better than expected Chinese Caixin Manufacturing PMI data and the resumption of PBoC liquidity operations. Finally, 10yr JGBs were subdued with prices contained after yesterday’s reduced-Rinban-induced selling, while a 10yr auction also failed to spur firm demand as the results were mixed with b/c slightly softer and accepted prices higher than prior.
Chinese Caixin Manufacturing PMI (Feb) 51.6 vs. Exp. 51.3 (Prev. 51.5). (Newswires)
PBoC injected CNY 100bln via 7-day reverse repos, CNY 30bln via 28-day reverse repos & CNY 20bln via 63-day reverse repos. (Newswires)
PBoC set CNY mid-point at 6.3352 (Prev. 6.3294)
BoJ Governor Kuroda said easing has added to Japan’s growth, while he also stated that wages and inflation have been somewhat weak. (Newswires)
BoJ’s Kataoka said BoJ must ease more to reach price target quickly and that Japan they are still quite a distance to considering shift from easy policy. Kataoka added the BoJ should take additional easing steps if there is a delay to reach the 2% price target and that the sales tax hike next year is to put downward pressure on prices. (Newswires)
UK Brexit Secretary Davis reportedly threatens to not pay the EU divorce bill in Irish hard border spat. (The Times)
UK PM May is said to schedule a meeting with EU’s Tusk ahead of her Friday Brexit speech. (Newswires)
Riksbank Gov Ingves said the central bank can always use its balance sheet if required. (Newswires)
USD remained firm overnight with EUR/USD near the prior day’s lows at the 1.2100 handle and as GBP/USD languished significantly below 1.3800 amid discord related to the draft EU withdrawal agreement. Furthermore, the latest reports added that UK Brexit Secretary Davis is now threatening to not pay the divorce bill until the EU backs down regarding the Irish hard border spat. AUD/USDwas also pressured following a miss on Q4 Private Capex data, although a higher estimate for 2017-2018 and upward revisions to the prior figures helped stem losses. Elsewhere, JPY resisted bowing to the greenback for most of Asia trade as safe-haven flows underpinned the currency, while comments from BoJ Governor Kuroda and calls for further easing from dovish dissenter Kataoka were unsurprising and failed to provide any meaningful relief for USD/JPY.
Australian Private Capital Expenditure (Q4) -0.2% vs. Exp. 1.0% (Prev. 1.0%, Rev. 1.9%). (Newswires)
Australian Private Capital Expenditure Est. 5 (AUD)(2017-2018) 114.59B (Prev. 108.92B)
Australian Private Capital Expenditure Est. 1 (AUD)(2018-2019) 84B vs. Exp. 86B
Commodities were quiet overnight with WTI crude futures taking a breather following the prior day’s declines, where a larger than expected build in DoE crude inventories contributed to a 2% drop in prices to below USD 62/bbl and in which oil posted its first monthly decline since August. Elsewhere, gold was further pressured overnight as the greenback remained firm and copper was stable after the recent risk-averse triggered losses.
EIA said US crude oil production fell 108k BPD in December to 9.949mln BPD (Prev. revised 10.057mln BPD in November). (Newswires)
US is said to plan a major announcement today regarding steel and aluminium imports which Twitter sources suggested could involve tariffs on aluminium and steel, with the tariff on steel said to likely be at 25%. In addition, there were also separate reports that trade talks between China and US officials are to take place today at the White House. (Washington Post/Newswires)
US Trump Administration official stated that US is considering oil-related sanctions on Venezuela to place pressure on President Maduro and doesn’t rule out a full US oil embargo on Venezuela which could cause a fairly significant shock to the oil-market in the short-term. (Newswires)
Although the US dollar has held onto gains made in wake of Fed chair Powell’s hawkish testimony, Treasuries saw yields narrow, as the curve bull-flattened. Short-end Treasury yields, however, did touch fresh cycle highs in the day, with yields on 2s hitting 2.2862%. But with that said, at settlement, major curves were still narrower: 2s10s -1.7bps, 2s30s -2.2bps, 5s30s 1.7bps (to 48bps). US T-Note future settled 8+ ticks higher at 120-21.
Fed’s Kashkari (non-voter, dove) said the lack of wage growth signals that slack remains in the labour market and said he wants to see evidence inflation is rising. (Newswires)
US released 2018 Trade Policy Agenda which stated it will use all tools including unilateral action on trade issues and that it is free to respond to unfair China trade policies. (Newswires)
US Special Counsel Mueller is reportedly examining President Trump’s alleged attempts to force Attorney General Sessions out in July. (Newswires)
US President Trump son-in-law Kushner’s business received loans from companies after Kushner held White House meetings with executives. (NYT)
White House Communications Director Hope Hicks is to resign. (Newswires)