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APAC incrementally higher with catalysts somewhat limited before Wednesday's CPI - Newsquawk Euro Market Open

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Tuesday, Aug 09, 2022 - 05:43 AM
  • APAC stocks eventually traded mostly higher following a tentative lead from the US (S&P 500 -0.1%).
  • Taiwan began a live-fire artillery drill simulating defence against an attack by China, according to AFP.
  • European equity futures are indicative of a marginally softer open with the Euro Stoxx 50 future -0.2% after the cash market closed higher by 1.0% yesterday.
  • G10 FX is contained with the USD steady, EUR/USD eyeing 1.02 to the upside, and USD/JPY sub-135. 
  • Looking ahead, highlights include EIA STEO, Supply from UK, Germany & US.

 

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US TRADE

  • US stocks were mixed as small caps outperformed which appeared to be led by "meme stocks" while the Nasdaq 100 lagged after the preliminary Q2 update from NVDA missed on revenue expectations and its Q3 guidance disappointed. Nonetheless, the major indices finished relatively flat with markets awaiting Wednesday's US CPI release, while the latest NY Fed Consumer survey was encouraging in which both the 1yr and 3yr inflation expectations eased from the prior month.
  • SPX -0.12% at 4,140, NDX -0.37% at 13,159, DJIA +0.09% at 32,831, RUT +0.81% at 1,935.
  • Click here for a detailed summary.

NOTABLE US HEADLINES

  • US President Biden's administration will permit a new injection method for the monkeypox vaccine, while the US is reportedly seeking to stretch out supply by injecting 20% of the current dose into the skin, according to NYT.
  • Former US President Trump said his Mar-a-Lago home was raided by FBI agents although Trump was in New York at the time, while the raid was part of a probe into his handling of classified information, according to AP.

GEOPOLITICS

RUSSIA-UKRAINE

  • Russian forces heavily bombarded front-line towns in Ukraine on Tuesday and Ukrainian officials reported intense fighting near the eastern city of Donetsk, according to The Telegraph.
  • Parties involved in the Ukraine grain export deal issued guidance on shipping procedures in which vessels moving through the Ukraine corridor are to be protected by a buffer zone, while no military vessel, aircraft, or drone can be within ten nautical miles of a merchant ship. Furthermore, Russia and Ukraine agreed not to attack merchant vessels or other civilian vessels and port facilities engaged in the deal, according to Reuters.
  • US is readying an additional USD 1bln of military aid to Ukraine including long-range artillery munitions, anti-tank weapons and medical vehicles, according to Bloomberg.
  • Russian Foreign Ministry said Moscow told the US it suspended inspection activities under the START (Strategic Arms Reduction Treaty) weapons treaty.

OTHER

  • Iran's Foreign Ministry official said Iran is not at a stage to talk about finalising a deal on the JCPOA but noted that relative advances were made on a number of issues during the latest round of nuclear talks.
  • EU foreign policy chief Borrell said what can be negotiated has been and is now in a final text regarding Iran nuclear talks, while he added that behind every part of the proposed Iran nuclear text lies political decisions that need to be taken in capitals.

APAC TRADE

EQUITIES

  • APAC stocks eventually traded mostly higher but with gains capped as the region focused on key earnings releases and initially followed suit to the indecisive performance in the US.
  • ASX 200 was just about kept afloat by strength in tech and miners although gains were limited by weakness in financials including NAB despite posting earnings growth as it also flagged higher costs.
  • Nikkei 225 was the laggard with the worst performing stocks pressured by earnings releases including SoftBank which suffered a record quarterly loss and warned of a potentially dramatic reduction in its headcount.
  • Hang Seng and Shanghai Comp were indecisive in early trade with participants tentative amid lingering geopolitical concerns and after a Chinese press report suggested that interest rate and RRR cuts are unlikely. The Hang Seng Index later strengthened with property names underpinned after reports that Hong Kong is considering waiving double stamp duty for mainland Chinese homebuyers. However, these reports were later refuted by the government.
  • US equity futures eked mild gains as markets remained tentative ahead of US CPI data. ES +0.2%.
  • European equity futures are indicative of a marginally softer open with the Euro Stoxx 50 future -0.2% after the cash market closed higher by 1.0% yesterday.

FX

  • DXY was uneventful amid quiet overnight trade across the FX space and after the prior day’s choppy price action in which the dollar marginally declined in tandem with lower yields and softer inflation expectations, while markets await Wednesday's CPI release.
  • EUR/USD traded steadily overnight with the single currency contained by resistance after several brief incursions above the 1.0200 level.
  • GBP/USD remained little changed below 1.2100 amid a lack of catalysts, while Barclaycard noted an increase in UK consumer spending in July but added that consumers were beginning to cut back on travel abroad, dining out and drinking to offset rising expenses.
  • USD/JPY reverted to beneath the 135.00 handle amid underperformance in Tokyo stocks.
  • Antipodeans were rangebound amid the mixed business and consumer surveys from Australia, as well as weak New Zealand Card Electronic Card Retail Sales.

FIXED INCOME

  • 10yr UST futures were quiet after having advanced steadily on Monday and were unfazed by the chunky corporate issuance but with upside capped overnight after a failed attempt on the 120.00 level.
  • Bund futures were kept afloat although struggled to overcome resistance at 157.00.
  • 10yr JGBs eked mild gains amid the pressure in Japanese stocks although gains were limited after mixed results at the 30yr JGB auction.

COMMODITIES

  • Crude was uneventful and took a breather from recent gains although the pullback was limited with WTI remaining above the USD 90/bbl level.
  • The first ever cargo of US Mars crude oil was discharged in Germany's Rostock port, according to Reuters sources.
  • Norway has drawn up plans to ration electricity exports in a move which could stoke fears of energy shortages in Europe and the UK this winter, according to The Telegraph.
  • Spot gold marginally pulled back from yesterday's highs but with price action kept rangebound by an uneventful dollar and ahead of the CPI data mid-week.
  • Copper was rangebound with price action hampered by the tentative mood in Asia.

CRYPTO

  • Bitcoin was indecisive and took a breather from Monday's advances after prices briefly reclaimed the 24k level.

NOTABLE APAC HEADLINES

  • Taiwan's Foreign Minister said China conducting military exercises around Taiwan is a gross violation of international law and has hindered one of the busiest shipping routes in the world, while he added Taiwan has the right to maintain relationships with other countries and has the right to participate in the international community which China has no right to interfere with. Furthermore, he stated that China's sea and military exercises continue, especially around the median line, and that China is trying to wreck the median line which has been there for decades, according to Reuters.
  • Taiwan began a live-fire artillery drill simulating defence against an attack by China, according to AFP.
  • China's military said it will continue drills around Taiwan on Tuesday, according to Reuters.
  • Around 20 Chinese and Taiwanese warships stayed close to the Taiwan Strait median line on Tuesday morning and some Chinese ships briefly attempted to cross the line, while several Chinese ships continued to conduct missions off Taiwan's eastern coasts, according to a source briefed on the matter cited by Reuters.

DATA RECAP

  • Australian NAB Business Conditions* (Jul) 20 (Prev. 13, Rev. 14)
  • Australian NAB Business Conditions* (Jul) 20 (Prev. 13.0)
  • Australian Westpac Consumer Sentiment Index (Aug) 81.2 (Prev. 83.8)
  • Australian Westpac Consumer Sentiment MM (Aug) -3.0% (Prev. -3.0%)
  • New Zealand Elec Card Retail Sales MM (Jul) -0.2% (Prev. 0.1%)
  • New Zealand Elec Card Retail Sales YY (Jul) -0.5% (Prev. 1.9%)

EU/UK

NOTABLE HEADLINES

  • Barclaycard said UK consumer spending rose 7.7% Y/Y in July which was boosted by clothing, beauty and staycations, while it added that UK consumers are starting to cut back on overseas travel, eating out and drinking to offset higher outgoings.
  • Poland’s Kaczynski (de-facto leader) has pledged they will not undertake any further steps in adhering to the EU Commission’s rule of law demands regarding unlocking grants/loans, saying “..shown maximum goodwill, but concessions have yielded nothing”. Will, if necessary, veto EU initiatives and seek to remove President von der Leyen. (Politico)

DATA RECAP

  • UK BRC Retail Sales YY (Jul) 1.6% (Prev. -1.3%)
  • UK BRC Total Sales YY (Jul) 2.3% (Prev. -1.0%)
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