European Morning Briefing 07.06

European Morning Briefing 07.06

• Asian equities saw little in the way of firm direction as participants remained weary ahead of a slew of upcoming key risk events

• AUD took focus overnight in FX markets following better than expected domestic Y/Y GDP data

• Looking ahead, highlights include Eurozone GDP and DoE Inventories

ASIA

Asia traded choppy with initial downside observed following a subdued close in US, where participants were cautious ahead of the looming key risk events including the ECB meeting, UK election and former-FBI Director Comey’s testimony all scheduled for this Thursday. This pressured Nikkei 225 (Unch.) and ASX 200 (+0.1%) in early trade with Japanese exporters reeling from a firmer JPY, while the ASX 200 fell to a 4-month low before better than expected GDP data provided support. Shanghai Comp. (+0.7%) and Hang Seng (+0.2%) gained with the mainland bourse outperforming after the PBoC upped its liquidity efforts with a total CNY 180bln injection via 7-day, 14 day and 28-day reverse repos.

PBoC injected CNY 40bln in 7-day reverse repos, CNY 50bln in 14-day reverse repos and CNY 90bln in 28-day reverse repos.
PBoC set CNY mid-point at 6.7858 (Prev. 6.7934)

EUROPE/UK

Latest Opinium UK election poll showed Conservatives at 43% vs. Labour at 36% (Prev. 43% vs. 37%). (Twitter)

Ashcroft probability model for the UK election suggested that Conservative Party could win a 64 seat majority with 357 seats vs. Prev. projection of a 60 seat majority. (Twitter)

FX

AUD stole the limelight and extended on this week’s gains after a better than expected Q1 GDP Y/Y release, which also saw the implied probability of an RBA rate cut within the next 12 months decline to 15% from 22%. Elsewhere, USD/JPY attempted to nurse some of its recent losses, although a recovery was only minimal as a predominantly cautious risk tone limited downside in JPY and with the greenback languishing after yesterday’s losses.

Australian GDP Growth Rate (Q1) Q/Q 0.3% vs. Exp. 0.3% (Prev. 1.1%). (Newswires)
Australian GDP Growth Rate (Q1) Y/Y 1.7% vs. Exp. 1.6% (Prev. 2.4%)

Japan is to promote direct Asian currency exchanges as it seeks to bypass the USD to reduce conversion costs. (Nikkei)

COMMODITIES

A gradual improvement in risk-tone during the Asia session saw a mild pull-back in gold prices, although the precious metal remains in proximity to 7-month highs and the USD 1300 level ahead of the looming key risk events. Elsewhere, copper was uneventful and traded sideways, while WTI crude futures retreated from yesterday’s best levels alongside RBOB weakness after the latest API crude inventory report showed a build in gasoline inventories of over 4mln bbls.

US API Crude Oil Inventory Report (Jun 02) W/W -4620K (Prev. -8670K). (Newswires)

CME lowered RBOB Gasoline futures margins for August to USD 3,150 per contract from USD 3,500. (Newswires)

US

S&P affirmed US AA+ rating, outlook kept at stable. S&P forecasts US real GDP growth to average 2.2% during 2018-2019 and stated that the US sovereign rating is supported by resiliency and diversity of economy, although disagreements between parties limits ability to enact forward looking legislation and adds to constraint on ratings. (Newswires)

An ABC sources piece noted that former FBI Director Comey is to stop short of saying US President Trump obstructed justice in the probe into former national security advisor Michael Flynn when he appears in front of the Senate Intelligence Committee on Thursday. (ABC) In related news, Comey is to also say he never told US President Trump he was not under FBI Probe, which would contradict President Trump's claim he was told that he was not under investigation. (Newswires)

US Director of National Intelligence Coats reportedly told associates that US President Trump asked if he could intervene with then-FBI Director Comey on Russian probe. (Washington Post)

Reports stated a US House Democrat will launch an official attempt to impeach US President Trump and is preparing the articles required, although the report also added that the articles have little chance given Republican control of the House. (The Hill)


(TFx)

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