European Morning Briefing 12.06

European Morning Briefing 12.06

• Asian equities traded mostly lower after Friday’s tech sell-off seen on Wall Street while uncertainty continues to surround UK politics
• Exit polls from the first round of France's parliamentary election suggest Macron’s La Republique En Marche party is to win between 415-455 seats (out of 577)
• Today’s session sees a lack of tier 1 data releases


Asia equities traded subdued following a mixed US close on Friday, in which tech underperformed as Apple and FANG stocks dropped over 3%, with participants also cautious ahead of this week’s FOMC meeting where the Fed are expected to hike rates by 25bps. In Asia, ASX was closed for public holiday while Nikkei 225 (-0.5%) was dampened by a mildly stronger JPY and after disappointing machinery orders. Shanghai Comp. (-0.5%) and Hang Seng (-1.1%) conformed to the downbeat risk tone with underperformance also seen in HK’s tech stocks and after a lacklustre CNY 40bln injection by the PBoC.

PBoC injected CNY 10bln in 7-day reverse repos and CNY 30bln in 28-day reverse repos. (Newswires)
PBoC set CNY mid-point at 6.7948 (Prev. 6.7971)


Exit polls from the first round of France's parliamentary election suggest Macron’s La Republique En Marche party is to win between 415-455 seats (out of 577), Republicans 70-110 seats and National Front with 1-5 seats. (Newswires) Note, 289 seats are require for an absolute majority. These results also exceed those expected by pollsters with the Sopra Steria poll forecasting 385-415 seats.


UK PM May said she intends to stay as PM, while there were reports that the Conservatives agreed an outline deal "in principle" with the DUP, which is not an official coalition but known as a "confidence and supply" arrangement. (Newswires) Elsewhere, PM May has carried out a cabinet reshuffle which has brought Michael Gove back to the front line. Some have viewed the reshuffle as a sign that May could be softening her stance over Brexit. (Times) 5 Conservative ministers urged Foreign Minister Boris Johnson to push for PM. (Newswires) However, Johnson later took to social media to express his support for May.

German Chancellor Merkel stated that the EU is prepared to start Brexit discussions and that she sees no obstacles in the way of beginning talks as scheduled. (Newswires)

Visa stated that UK May household spending fell 1.9% M/M vs. Prior rise of 0.3%, while it also fell 0.8% Y/Y which was the first contraction since September 2013. (Newswires)


FX markets saw uneventful trade amid a lack of key drivers and data points to spur price action. This kept the USD rangebound against its major counterparts with EUR/USD hovering around 1.1200, while last Friday’s election-triggered volatility in GBP/USD also dissipated with support held at 1.2700. Elsewhere, price action in JPY was contained ahead of a likely monotonous BoJ policy meeting this week, while AUD saw similar tepid trade amid the market closure.


Price action in the commodities complex was limited overnight alongside a lack of key data releases or risk events, with copper trading rangebound experiencing minor losses from the dampened risk sentiment, which also provided minimal support to gold (+0.1%). WTI crude futures were also quiet, although prices edged back above USD 46/bbl to trade near Friday’s highs.

Saudi Energy Minister Al-Falih stated on Saturday that there was no immediate need to adjust the oil output deal. (Newswires)

Qatar Energy Minister reiterated a commitment to the oil output cut agreement between OPEC/Non-OPEC producers through to next March. (Newswires)


US Republican Senator Graham said the senate will vote on new round of Russia sanctions this week and warns President Trump not to veto it. (Newswires)




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