European Morning Briefing 03/07

European Morning Briefing 03/07

• Asian equities traded in an indecisive manner with modest support seen for the Nikkei 225 post-Tankan data
• Most major currencies pared recent gains against the greenback as the USD-index further recovered from 9-month lows
• Looking ahead, highlights include Eurozone, UK and US mfg PMIs, US ISM and construction spending.


ASIA

Asia traded mixed following a similar indecisive close last Friday on Wall St. where US indices finished their best H1 performance since 2013 in a choppy manner, as energy posted a 7th consecutive gain and tech underperformed. ASX 200 (-0.6%) slipped below 5,700 with utilities and healthcare weighing on the index, while Nikkei 225 (+0.2%) was kept afloat following the mostly better than expected Japanese Tankan data. Shanghai Comp. (Unch.) and Hang Seng (Unch.) failed to benefit from better than expected Caixin Manufacturing PMI data (50.4 vs. Exp. 49.8) and the launch of the bond connect, with participants despondent after the PBoC refrained from liquidity injections for the 7th consecutive session. However, Chinese markets then recovered gradually throughout the session to return flat.

Chinese Caixin Manufacturing PMI (Jun) 50.4 vs. Exp. 49.8 (Prev. 49.6). (Newswires)

PBoC refrained from open markets operations again today for the 7th consecutive session. (Newswires)
PBoC set CNY mid-point at 6.7772 (Prev. 6.7744)

Japanese Tankan Large Manufacturers Index (Q2) Q/Q 17 vs. Exp. 15 (Prev. 12). (Newswires)
Japanese Tankan Large Manufacturing Outlook (Q2) Q/Q 15 vs. Exp. 14 (Prev. 11)
Japanese Tankan All Large CAPEX (Q2) Q/Q 8.00% vs. Exp. 7.40% (Prev. 0.60%)

EUROPE/UK

ECB's Weidmann commented that the ECB council agreed expansive policy is needed, while he also said that the ECB will not suddenly stop stimulus and that the move will be gradual. (Newswires)

ECB’s Mersch commented that Eurozone growth is not self-sustaining and that upturn in inflation is also not yet self-sustained. (Newswires)

UK Chancellor Hammond will use a speech on Monday to assure companies that government will listen to their concerns about Brexit. (FT)

FX

Most major currencies pared recent gains against the greenback as the USD-index further recovered from 9-month lows, in which EUR/USD declined towards 1.1400 and GBP/USD pulled-back to test 1.3000 to the downside. Elsewhere, USD/JPY was marginally higher after finding support near 112.00, while AUD/USD traded choppy as a surprise expansion in Chinese Caixin Manufacturing PMI data was counterbalanced by weaker than expected Australian Building Approvals.

Australian Building Approvals (May) M/M -5.6% vs. Exp. -1.3% (Prev. 4.4%, Rev. 4.8%). (Newswires)
Australian Building Approvals (May) Y/Y -19.1% vs. Exp. -14.1% (Prev. -17.2%)

COMMODITIES

WTI crude futures held near Friday’s highs after the Baker Hughes rig count showed the first decrease in 5 months. Elsewhere, gold (-0.3%) lost further ground ahead of US Independence Day in addition to the strengthening greenback, while copper trade was subdued alongside an indecisive risk tone in the region.

Baker Hughes Rig Count (30/Jun): Oil rigs declined by 2 at 756 (Prev. 758) to snap a 23-week run of adding rigs. (Newswires)

GEOPOLITICAL

Saudi Arabia, UAE, Egypt and Bahrain foreign ministers are to meet on Wednesday to discuss next steps in dealing with Qatar, while there were also reports that the Saudi-led bloc agreed to extend Qatar's deadline by 48 hours. (Newswires)

China dispatched military vessels and fighter jets as a warning to a US warship sailing near Xisha Islands, while China also stated that the US warship near South China Sea Island is a serious provocation. (Newswires)

Chinese President Xi spoke with US President Trump, in which both agreed that the Korea peninsula needs to be denuclearized. (Newswires)


(TXF)

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