Newsquawk

Euro Market Open: DXY remains contained with US yields incrementally higher pre-Powell

26 Aug 2022, 06:50 by Newsquawk Desk

APAC stocks took impetus from Wall St where stocks eventually ramped up heading into the close (SPX +1.41%, NDX +1.75%)
European equity futures are indicative of a higher open with the Euro Stoxx 50 future +0.5% after the cash market closed up by 0.2% yesterday
DXY is contained on a 108 handle, antipodeans lag G10 FX, EUR/USD remains below parity, cable hovers around 1.18
EU's Borrell said they have received the US answer to Iran's response and that it is a very reasonable counterproposal.
Looking ahead, highlights include US PCE Price Index, Personal Consumption/Income, Jackson Hole, UK Ofgem Cap Announcement, Speech from Fed Chair Powell.

US stocks were firmer and saw a ramp up into the close, led by the Nasdaq, as the late advances coincided with the lower yield environment and curve bull-flattening following a solid 7yr auction.
SPX +1.41% at 4,199, NDX +1.75% at 13,144, DJIA +0.98% at 33,292, RUT +1.52% at 1,965.
Click here for a detailed summary.

NOTABLE HEADLINES

Fed's Bullard (2022 voter) reiterated his 3.75-4.00% FFR target for 2022 and he likes front loading as it shows they are serious about the inflation fight, while he noted that rates are not high enough right now and they need to get the policy rate to where it pushes downward pressure on inflation. Bullard added that after rates get to 3.75-4.00%, he is not quite sure what is next and the baseline is that inflation will be more persistent than what many expect. Furthermore, he said inflation will be higher for longer and that the risk is under-priced in the market.
US President Biden is to visit Ohio on September 9th to address the Chip Act and will travel to New York for UN General Assembly on September 18th-20th, according to the White House.

Ukrainian Energy Minister said the IAEA mission to the Zaporizhzhia nuclear power plant could happen in the coming days. In relevant news, the IAEA said Ukraine informed it that the Zaporizhzhia nuclear power plant temporarily lost connection on Thursday to its last remaining operational 750KV external site but is currently up again.

White House Press Secretary Jean-Pierre said the US will agree to the Iran deal if it is in the US interest.
EU's Borrell said they have received the US answer to Iran's response and that it is a very reasonable counterproposal, according to WSJ's Norman.
Iran’s Foreign Minister said they are very serious about the remaining issues that are rational to the guarantees in the nuclear agreement and said they are not ready to leave some baseless accusations by the IAEA, while he said that they will not rush to sign an agreement as long as the rights of the Iranian people are not guaranteed, according to Al Jazeera.

APAC stocks took impetus from Wall St where stocks eventually shrugged off the initial choppy mood and ramped up heading into the close with outperformance in the Nasdaq amid a lower yield environment.
ASX 200 was underpinned amid a slew of earnings releases and with the consumer-related sectors leading the gains after Australia’s largest retailer Wesfarmers reported a 9% increase in revenue.
Nikkei 225 gained from the open with the index unfazed by firm Tokyo CPI data which printed its fastest pace of increase since 2014, as this is seen as unlikely to trigger an adjustment of BoJ policy.
Hang Seng and Shanghai Comp conformed to the constructive mood as participants digested a slew of earnings results including PetroChina’s record profit and with tech stocks buoyed after delisting concerns were soothed by reports that China and the US are nearing a deal regarding company audits.
US equity futures plateaued overnight as markets await Fed Chair Powell's speech; ES -0.1%.
European equity futures are indicative of a slightly higher open with the Euro Stoxx 50 future +0.5% after the cash market closed up by 0.2% yesterday.

DXY was rangebound after yesterday’s lacklustre mood despite the mostly better-than-expected US data and slew of hawkish Fed rhetoric.
EUR/USD was uneventful after recently failing to sustain a brief stint back above parity and as sources noted the ECB is unlikely to decide on ending asset purchase programme reinvestments in September.
GBP/USD lacked firm direction with early pressure cushioned by support near 1.1800.
USD/JPY resumed its choppy price action which was largely driven by yield differentials and with firmer Tokyo CPI unlikely to trigger a policy response from the BoJ,
Antipodeans were slightly softer after partially fading some of this week's gains.

10yr UST futures eased after the recent bull flattening which had been spurred by a strong 7-year auction, while the overnight pullback reflected positioning as markets brace for Powell.
Bund futures pulled back from the prior day’s highs but remained above 151.00 as sources suggested the unlikelihood of an ECB decision soon on ending asset purchase programme reinvestments.
10yr JGBs futures were kept afloat and largely ignored the firmer than expected Tokyo CPI data.

Crude nursed some of the prior day's losses but with the recovery limited amid incremental optimism surrounding the Iran nuclear deal.
Ukrainian Energy Minister said Ukraine will reach its goal of 19bln cubic meters of natural gas reserves to get through winter and that gas consumption in Ukraine has fallen 40% due to the Russian invasion, while the official added that Russia could cut gas transit through Ukraine this winter.
Spot gold was kept rangebound by an uneventful dollar.
Copper extended on yesterday's gains amid the mostly constructive risk tone.

NOTABLE APAC HEADLINES

US military aircraft landed in Taipei airport with US Senator Blackburn now in Taiwan, while the Chinese Embassy in Washington said US Senator Blackburn's Taiwan trip proves the US does not want to see stability across the Taiwan Strait and it is interfering in China's internal affairs.
China's Taiwan military drills in response to Pelosi's visit reportedly put Washington on edge but not enough to spur an immediate sharp increase in weapons sales to the island, while the focus will be on sustaining Taiwan's military systems and fulfilling existing orders rather than offering new capabilities, according to Reuters sources.
US suspended 26 US flights by Chinese carriers after China's COVID action limited some US flights, according to the DOT cited by Reuters.

DATA RECAP

NOTABLE HEADLINES

UK Tory leadership frontrunner Truss is considering plans to invoke Article 16 regarding the Northern Ireland Protocol within days if she becomes the next PM, according to government insiders cited by FT.
UK Tory leadership frontrunner Truss has reportedly been meeting with the business secretary and her prospective chancellor regarding a significant support package to help with energy bills, according to The Times citing sources.
ECB is unlikely to take any decision on ending asset purchase programme reinvestments in September and a decision is not urgent, according to Reuters sources.