- Asian stocks traded mostly higher as the region overlooked the FBI’s raid on Trump’s personal lawyer and instead focused on a conciliatory President Xi
- The return of risk to the market led to outflows in JPY whilst supporting AUD and CNH. DXY eyes 90.00
- Looking ahead, highlights include US PPI, APIs, ECB’s Nowotny, Visco, Fed’s Kaplan, BoE’s Haldane, McCafferty
Asian stocks traded mostly higher as the region focused on Chinese President Xi Jinping’s address at the Boao Forum which struck a conciliatory tone as he stated that cold war mentality is out of place and that China will expand the opening up of its economy. Furthermore, President Xi also vowed to lower auto tariffs and repeated the suggestion of a win-win scenario. As such, ASX 200 (+0.7%) and Nikkei 225 (+0.7%)were underpinned as markets reacted positively to President Xi’s bullish speech with Japan helped by a weaker currency and as automakers cheered the news of the reduced tariffs. Elsewhere, Shanghai Comp. (+0.5%) and Hang Seng (+1.2%) conformed to the optimism, while US equity futures also recovered from the selling pressure seen from reports the FBI raided Trump lawyer Michael Cohen amid an investigation related to possible bank fraud, campaign finance and the payment made to Stormy Daniels. Finally, 10yr JGBs were subdued with demand sapped as focus centred on riskier assets, although downside was also restricted amid an enhanced-liquidity auction in the long-to super-long end which saw firmer demand, while T-notes were pressured overnight as President Xi Jinping’s address spurred some safe-haven outflows.
Chinese President Xi Jinping said reform and opening up in China will definitely succeed and that China will implement major opening up steps ASAP. Chinese President Xi Jinping also commented that cold war mentality is out of place, while he announced that China will increase foreign ownership limits in the auto industry and will reduce auto product import tariffs. (Newswires)
The UK is yet to put forward an alternative backstop for the Irish border issue with a lack of progress being made since March’s breakthrough in negotiations, according to sources. (Newswires)
UK BRC Sales Like-For-Like (Mar) Y/Y 1.4% vs. Exp. -0.1% (Prev. 0.6%). (Newswires)
ECB’s Coeure (neutral) noted the ECB is to discuss timing of QE soon and also commented that growth outlook is not a warrant to modify current monetary policy stance. (Newswires)
ECB’s Praet (dove) said data suggests there is no need to change the ECB’s outlook, while he also stated ample degree of monetary stimulus remains necessary and that inflation remains subdued. (Newswires)
EU is exploring counter-measures to US aluminium tariffs, according to trade body European Aluminium. (Newswires)
USD/JPY and JPY-crosses rose on the back of President Xi Jinping’s speech which further doused trade war fears and resulted to safe-haven outflows, while CNH gained on the speech and AUD was also propped as a proxy for China. Elsewhere, the greenback marginally benefitted with the DXY eyeing the 90.00 level to the upside, which in turn kept overnight price action in counterparts EUR and GBP restricted.
Moody’s affirmed Brazil at Ba2; but revised its outlook to Stable from Negative. (Newswires)
WTI crude futures gained overnight amid a positive risk tone which helped oil prices extend on the prior day’s gains of over 2% amid the backdrop of geopolitical concerns related to Syria while Iran had also threatened a strong response if the US pulls out of the nuclear deal and reapplies sanctions. Elsewhere, gold underperformed the commodities complex on safe-haven outflows, and copper gained in tandem with Chinese metal prices as the comments from China spurred risk appetite.
US President Trump condemned the reported chemical attack in Syria and stated that the US is to make decision on next step in 24-48 hours. Furthermore, President Trump did not rule out military action, while he later stated they have a lot of military options regarding Syria and that attack response will be met forcefully. (Newswires)
US envoy to the UN Nikki Haley stated the US ‘will respond’ to Syria’s chemical attack irrespective of the UN Security Council intervention and reportedly wants the Security Council to vote on draft resolution regarding Syria chemical weapons inquiry on Tuesday. However, there were also comments from the Russian UN envoy that the US has been warned by Moscow that military action in Syria could lead to “grave repercussions”. (Newswires)
US Navy denied reports that the US Destroyer Donald Cook is heading to Syria waters. (Newswires)
North Korea Leader Kim reportedly assessed the outcome of future discussions with US at a party meeting. (KCNA)
Although Treasury yields rose modestly on Monday, curve spreads were narrower by between 1bps and 2bps at settlement. While there were lingering concerns about trade wars/geopolitics, volumes and yields were within Friday’s range. Losses were trimmed in the US afternoon, following the CBO budget and economic outlook report, which forecast higher deficits on the back of GOP spending plans. The US Treasury will sell $64bln in 3s/10s/30s this week; with $76.5bln maturing at mid-month, the Treasury will be paying down some $12.5bln. US 10-Year T-Note Futures settle 3+ ticks lower at 120-29.
Fed’s Kaplan (Non-Voter, Neutral) reiterated the base case is for a total 3 hikes this year, while he also commented that China and US might be well served to turn down the heat on trade rhetoric but added that it is too early to judge how trade spat will impact the economy. (Newswires)
US President Trump lawyer Cohen was raided by the FBI under referral from Special Counsel Mueller in which the FBI seized documents relating to tax and businesses records, as well as info regarding payments to Stormy Daniels. Following these reports, US President Trump said Special Counsel Mueller’s team is the most biased group of people, while replied that he thinks what is going on is a disgrace and will have to see what happens when asked if he will fire Mueller. (Newswires/CBS)
US President Trump said that we are ‘fairly close’ on NAFTA, while he also commented that if China hits US farmers, then the US will make it up to the farmers. (Newswires)
White House Chief of Staff Kelly could leave by the summer. (Fox Business)