European Morning Briefing - 12.07

European Morning Briefing - 12.07

• Asian equities traded mixed following a similar lead from Wall Street with political tension mounting amid the Trump Jr email revelations
• In FX, mild USD pressure in Asia saw USD/JPY slip with much of this stemming from yesterday’s slip in US yields
• Looking ahead, highlights include the UK jobs report, OPEC monthly report, BoC rate decision, DoEs, Fed’s Yellen

ASIA

Asian bourses traded in mixed fashion following a relatively indecisive lead from Wall Street. ASX 200 (-1.0%) underperformed with all but one sector (materials) trading in the red, while the Nikkei 225 (-0.6%) slipped amid JPY buying. The Shanghai Comp (-0.2%) conformed to the tone with the index trading with marginal losses despite another PBoC injection, with the Hang Seng (+0.8%) today’s outperformer breaking above 26,000 amid the surge higher in financials. In fixed income, JGB yields ticked lower with the curve slightly steeper, while the BoJ also increased their purchases of 3-5Y bonds.

PBoC injected CNY 40bln in 7-day reverse repos and CNY 30bln in 14-day reverse repos. (Newswires)
PBoC set CNY mid-point at 6.7868 (Prev. 6.7983)

EUROPE/UK

Moody's said UK's creditworthiness under pressure from Brexit-related uncertainty; political and fiscal risks rising

FX

Mild USD pressure in Asian trade saw USD/JPY slip, much of this stemmed from yesterday’s fall in US yields which now sees the pare sub-114.00. Elsewhere, the Antipodean currencies continued to garner attention in Asia with AUD/USD breaching 0.7650, largely owing to the move in the cross vs. the NZD which eyed the 1.0600 level.

COMMODITIES

Crude prices gained on the back of a larger than expected drawdown in the latest API Crude inventory report, while gold, silver and copper prices continued its ascension amid the weaker USD.

US API Crude Oil Inventory Report (July 7) W/W -8133K (Prev. -5764K). (Newswires)

US

Donald Trump Jr stated that he did not tell President Trump about his meeting with Russian lawyer last year. (Newswires)

Fed’s Harker (Voter, Hawk) said slowing inflation gives him pause on raising rates. Would like to start halting reinvestment and see how the market reacts and then consider the third hike. (Newswires)

Fed's Brainard (Voter, Dove) said she seen balance sheet reduction as appropriate soon, which will happen over several years. (Newswires)

Federal Reserve Discount Rate Meeting Minutes: Nine Federal Reserve banks voted to increase discount rate to 1.75% ahead of last Fed meeting in June. New York, St Louis & Minneapolis did not vote for a hike in the Fed discount rate, some noted moderate wage pressures, many commented on tight labour market. (Newswires)

White House reportedly increasingly unlikely to re-nominate Fed Chair Yellen to second term with National Economic Council Director Gary Cohn the leading candidate to succeed Yellen. Of note, Yellen’s four year term will end on Feb’18. (Newswires)


(TFX)

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