- Asian stocks mostly lower after reports that National Economic Council Director Gary Cohn is to resign amid tariff disagreements
- In FX, JPY strengthened on safe-haven flows, CAD and MXN hampered post-Cohn
- Looking ahead, highlights include EZ GDP (R), US ADP, BoC rate decision, DoEs, Fed’s Bostic, and Dudley
Asian stocks were mostly lower as US political discord took the limelight once again after reports that National Economic Council Director Gary Cohn is to resign amid tariff disagreements. This latest high-profile and ‘market-friendly’ White House departure dampened the risk appetite and weighed on US equity futures in which Emini S&P gapped lower by about 1% and DJIA futures saw losses of nearly 400 points. ASX 200 (-1.0%) underperformed with sentiment also dragged by weaker than expected GDP figures, while Nikkei 225 (-0.9%) was choppy and briefly found reprieve, before a firmer JPY ultimately weighed. Elsewhere, Shanghai Comp. (-0.2%) and Hang Seng (-0.9%) initially outperformed despite reports US may consider broad curbs on Chinese imports and takeovers, as well as news that ‘China hawk’ Peter Navarro was among the top 2 candidates to replace Cohn as Trump’s top economic adviser. However, gains in Chinese money market rates eventually proved to be the deciding factor and tipped bourses into the red. Finally, 10yr JGBs pared the opening safe-haven inflows to return flat, amid a similar indecisive risk tone in Japanese stocks and following an unchanged BoJ Rinban purchase announcement.
PBoC skipped open market operations, but later announced CNY 105.5bln 1yr MLF operation. (Newswires)
PBoC set CNY mid-point at 6.3294 (Prev. 6.3386)
US is said to consider tariffs and reciprocity with China related investment, while measures reportedly may involve broad curbs on Chinese imports and takeovers. (Newswires)
UK Chancellor Hammond said it is in both UK and EU interests to include financial services in the Brexit deal. (Newswires)
EU said UK PM May speech is ‘double cherry-picking’ on Brexit and ‘zero progress’ has been made on ideas for customs cooperation, according to a document obtained by the Guardian. (Guardian)
UK lawmakers suggest that Britain’s trade with 70 other nations risks falling off a ‘cliff edge’ unless May’s government can mirror the EU’s commerce agreements. (Newswires)
France’s Finance Minister Le Maire stated that France’s reportedly tough stance on Brexit is “not correct”. (Newswires)
JPY strengthened on safe-haven flows following reports of Cohn’s resignation which pressured USD/JPY firmly below the 106.00 handle. The announcement also weighed significantly on CAD and MXN as it effectively meant less opposition for the trade protectionists in Washington, with trade skeptic White House adviser Navarro also seen among the front runners to replace Cohn. Elsewhere, USD was lacklustre amid the latest political developments and AUD weakened following a miss on Q4 GDP, although losses were contained as the data also included upward revisions to prior quarter.
Australian GDP (Q4) Q/Q 0.4% vs. Exp. 0.5% (Prev. 0.6%, Rev. 0.7%). (Newswires)
Australian GDP (Q4) Y/Y 2.4% vs. Exp. 2.5% (Prev. 2.8%, Rev. 2.9%)
Commodities were lacklustre overnight in which WTI crude futures briefly slipped below USD 62/bbl after the latest API inventory report showed a larger than expected build in headline crude stockpiles. Elsewhere, gold was initially underpinned at the reopen of futures trade as participants reacted to the Cohn resignation, although the precious metal suffered fatigue from recent advances and gradually returned flat, while copper was kept restrained by the risk-averse tone.
US API Crude Stocks (Mar 2) 5.661M vs. Exp. 2.700M (Prev. 0.933M). (Newswires)
OPEC Secretary General Barkindo said demand will hit 100mln barrels per day, faster than any forecasts expected. (Newswires)
UAE Energy Minister said both OPEC & NON-OPEC members still have work to do to rebalance the market. (Newswires)
EIA cut forecast for 2018 world oil demand growth by 30k BPD to 1.72mln BPD Y/Y increase (Prev. +10k BPD to 1.73mln). (Newswires)
Treasuries were choppy around the neutral line in Tuesday trade, with yields trading +/- 1-2bps across the curve. Major curves flattened modestly. The TPLEX saw selling action in early trade as the risk tone improved following positive geopolitical developments from the Korean peninsula. US 10-Year T-Note settled half-a-tick higher at 120-21+.
White House Economic Adviser Gary Cohn is to resign and is expected to leave in next few weeks. (NYT) There were also reports that a US administration official stated White House adviser Peter Navarro and commentator Larry Kudlow are the top 2 candidates to replace Gary Cohn, while US President Trump cancelled the tariff meeting on Thursday that Cohn organized. (Newswires) Reports also suggest that Cohn could return to the White House at a later date for an even larger role.
US President Trump administration is said to push for conservative targets related to the Affordable Care Act. (WSJ)
Fed’s Brainard (voter, dove) said gradual US rate hikes are likely appropriate and that there is greater confidence inflation will reach target, while she added that she is encouraged by substantial fiscal stimulus, full employment and above-trend economic growth. Brainard also stated that headwinds are turning into tailwinds, although they are ready to slow or speed up pace of hikes if forecasts are incorrect. (Newswires)
Fed’s Kaplan (non-voter, soft hawk) reiterated that baseline scenario is for 3 rate hikes in 2018 and said that it is too early to change forecasts due to tariffs as it is not yet known what will be implemented. Kaplan added that anything that jeopardizes trade relations with Mexico or Canada is not in US interest. (Newswires)
Goldman Sachs lowers its Q1 GDP to 2% from 2.1% citing softer pace of Q1 equipment investment relative to their previous assumptions. (Newswires)