European Morning Briefing 06.06

European Morning Briefing 06.06

AUD pared initial weakness after the RBA kept rates unchanged as expected while striking an overall neutral tone

Asian equities traded mostly lower with underperformance in the ASX and the Nikkei 225 hampered by a firmer JPY

Looking ahead, highlights include US APIs and the NZ GDT Index


Asia traded mostly lower following a subdued Wall St. close where all 3 major indices finished with minor losses amid range-bound trade. ASX 200 (-1.3%) underperformed as the utilities, REIT and IT sectors weighed down the index, whilst Nikkei 225 (-0.6%) suffered as the JPY firmed across the board. Shanghai Comp. (-0.2%) and Hang Seng (+0.3%) were initially negative after the PBoC refrained from conducting repo operations, although the Chinese bourses attempted to recover following a CNY 498bln medium lending term facility operation. 10yr JGBs were relatively flat with only minimal gains seen amid a cautious risk tone, while the 30yr JGB auction also failed to spur firm demand despite the b/c printing its highest in 8 months of 3.63 (Prev. 3.35), as this was only a mild increase and other metrics were relatively stable from prior.

PBoC skipped open market operations today, but conducted a CNY 498bln Medium-Term Lending Facility operation. (Newswires)

PBoC set CNY mid-point at 6.7934 (Prev. 6.7935)


UK BRC Retail Sales (May) Y/Y -0.40% vs. Exp. -0.50% (Prev. 5.60%). (Newswires)

Survation Poll conducted on June 2nd-3rd showed UK Conservatives at 41.5% vs. Labour 40.4% (Prev. 40% vs. 39%). (Newswires) Note, that the survey was carried out on Friday and Saturday before the London Bridge attack.


USD/JPY and JPY-crosses underperformed with USD/JPY breaking below its 200-DMA as well as the 110.00 handle amid safe-haven flows into JPY, which in turn pressured the greenback against its major counterparts. NZD benefitted following the release of the Treasury’s monthly economic indicators which suggested optimism on employment and dairy, while AUD initially weakened following a wider than expected Current Account deficit and contraction in Net Exports of GDP ahead of tomorrow’s GDP release, but then recovered after the RBA kept rates unchanged as expected and kept a neutral tone.

RBA Interest Rate Decision 1.5% vs. Exp. 1.5% (Prev. 1.5%). RBA reiterated that steady policy is consistent with growth and inflation targets, while it also commented that labour market indicators remain mixed and that tighter regulation is to decrease risks from increasing debt. (Newswires)

Australian Current Account (Q1) -3.1B vs. Exp. -0.5B (Prev. -3.9B)
Australian Net Exports of GDP (Q1) -0.7% vs. Exp. -0.4% (Prev. 0.2%)


WTI crude futures saw a mild retreat overnight in which WTI retested the USD 47.00/bbl level to the downside. Elsewhere, gold (+0.4%) prices gained traction as the greenback softened, with the precious metal also mildly supported from the safe-haven flows alongside a cautious tone which in turn kept copper flat throughout the session.


White House said it expects Congress to move forward on healthcare reform bill in June-July and expects tax legislation to be introduced in Congress after Sept 4th Labor Day holiday. (Newswires)


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