- Asian equity markets lower, tracking Wall Street, after Trump ousted Tillerson
- USD lower across the board as EUR/USD regains 1.2400
- Looking ahead, highlights include US PPI & Retail Sales, DoE Inventories and a number of ECB speakers
Asia equity markets were negative across the board as the region tracked the losses on Wall St, where sentiment was dampened after another high-profile departure from the administration in which President Trump fired Secretary of State Rex Tillerson, while trade war concerns were also stoked by reports the US is looking to impose tariffs on Chinese goods. ASX 200 (-0.7%) and Nikkei 225 (-0.9%) were negative with financials pressured amid the ongoing royal commission hearings in which NAB employees were said to knowingly approved fake loans to reach targets, while Nikkei 225 was pressured by a firmer JPY and with some analysts also noting ‘Abexit’ worries in the wake of the land-sale/cronyism scandal. Shanghai Comp. (-0.4%) and Hang Seng (-1.4%) conformed to the weakness with tech and telecom names weighed as the US seeks to impose tariffs of USD 60bln on Chinese goods, which would target tech and telecom products as a punishment for intellectual property infringement. Although, losses in the mainland were somewhat stemmed by mixed data including higher than expected Industrial Production and Fixed Asset Investments. Finally, 10yr JGBs were flat despite the weakness in stocks, with an uneventful BoJ minutes release and unchanged BoJ Rinban operation amount for 1yr-10yr maturities also ensured quiet price action.
Chinese Industrial Production YTD (Feb) Y/Y 7.2% vs. Exp. 6.2% (Prev. 6.6%). (Newswires)
Chinese Retail Sales YTD (Feb) Y/Y 9.7% vs. Exp. 10.0% (Prev. 10.2%)
Chinese Urban Investment YY (Feb) 7.9% vs. Exp. 7.0% (Prev. 7.2%)
PBoC Governor Zhou replacement is to be announced on Monday with Politburo member Liu He and economist Xie Fuzhan said to be included among the front runners. (SCMP)
PBoC injected CNY 30bln via 7-day reverse repos and CNY 20bln via 28-day reverse repos. (Newswires)
PBoC set CNY mid-point at 6.3205 (Prev. 6.3218).
BoJ Governor Kuroda stated that the BoJ is still a long way from target for inflation and is not at the point to consider exit details. (Newswires)
BoJ Minutes from the January 22nd-23rd meeting stated it is appropriate to pursue powerful easing and that price momentum to reach target is maintained. The minutes added that Japan’s economy was expanding moderately and exports had been on an increasing trend, while inflation expectations had been more or less unchanged. (Newswires)
UK PM May’s Brexit Committee is said to agree to extend freedom of movement with the EU until 2021. (The Sun)
The USD was weaker overnight after Tillerson’s ouster added to the political instability concerns and already high staff turnover at the White House. This benefitted the greenback’s major counterparts overnight with EUR/USD back above the 1.2400 level, while GBP/USD eyed the 1.4000 handle. Elsewhere, antipodeans were marginally underpinned as stronger than expected Chinese Industrial Production and Fixed Assets Investment slightly overshadowed the miss on Retail Sales, while USD/JPY and JPY-crosses traded mixed in which the Japanese currency mostly retained the gains seen from the risk averse tone.
WTI crude futures were relatively flat and nursed losses below the USD 61/bbl, after prices met resistance at USD 62/bbl and slipped amid the risk-off tone brought on by the Rexit. However, oil saw some mild reprieve in late US trade on the release of the latest API inventory report which showed a lower than expected build in crude stockpiles and drawdowns across the other product components. Elsewhere, gold extended on recent upside on safe-haven support and amid a subdued greenback, while copper benefitted from the encouraging Industrial Production data from its largest consumer China.
US API weekly crude stocks (Mar 9) 1.156M vs. Exp. 1.500M (Prev. 5.661M). (Newswires)
South Korean President Moon and North Korean Leader Kim may discuss declaring an end to the Korean war. (Chosun)
Despite the distinctly risk-off tone, once again Treasury action wasn’t as stark as other havens, even though volume in the June contract was pretty healthy. The curve bull-flattened with the long-end yields c.3bps lower while shorted-dated yields rallied by 1bps. The US treasury sold USD 13bln of 30yr bonds at high yield of 3.109% softer cover than recent averages (2.38x vs 2.41x over the last six), with uninspiring internals (smallest indirect participation since November 2016, while directs took the largest share since October 2015). US 10-year T-note futures (June 2018) settled 4 ticks higher at 120.10+.
US President Trump administration is looking to impose tariffs of USD 60bln on Chinese goods which would target tech and telecom products, according to sources. A US senior administration official stated that tariffs on China are expected in the very near future. (Newswires)
Sources close to the White House reportedly expect more major personnel shifts with National Security Adviser McMasters being suggested, while President Trump is reported to be mulling replacing Secretary for Veterans Affairs Shulkin with Energy Secretary Perry. (NYT/Newswires)