Newsquawk

Europe Market Open: Mixed APAC trade given an earnings deluge and latest CPI from China

09 Aug 2023, 06:30 by Newsquawk Desk

APAC stocks traded mixed as participants digested a deluge of earnings releases and the latest inflation data from China
Chinese inflation data was mixed but showed consumer prices in deflationary territory for the first time in more than two years
European equity futures are indicative of a firmer open with the Euro Stoxx 50 +0.9% after the cash market closed down by 1.1% yesterday
DXY is a touch softer, EUR/USD remains sub-1.10, USD/JPY sits on a 143 handle, AUD marginally outperforms
Looking ahead, highlights include EIA Weekly Energy Inventories, Supply from UK, Germany & US, Earnings from Continental, E.ON, Bellway, Flutter & Walt Disney

US stocks were negative but finished off lows after nursing the early selling pressure stemming from global peers with banks hit on both sides of the pond due to Moody's downgrade of US regionals and as Italian banks suffered from the approval of the windfall profit tax, while Asia also provided early headwinds owing to disappointing Chinese trade data and Country Garden's failure to pay coupons on dollar bonds.
SPX -0.42% at 4,499, NDX -0.87% at 15,273, DJIA -0.45% at 35,314, RUT -0.59% at 1,947.
Click here for a detailed summary.

NOTABLE HEADLINES

Fed's Harker (voter) said sometime, probably next year, the Fed will start cutting rates and he doesn't want to overdo it with Fed tightening, according to an interview with Philadelphia's Whyy radio station.
Moody's said bank downgrades and rating reviews were driven by the profit outlook and downgrades reflected earnings that were as good as it gets in Q2. Moody's noted banks face challenges from rising rates, potential recession and funding costs but noted the US banking system is still strong and not broken.

APAC stocks traded mixed as participants digested a deluge of earnings releases and the latest inflation data from China which was mixed but showed consumer prices in deflationary territory for the first time in more than two years.
ASX 200 was just about kept afloat by the outperformance in its top-weighted financial sector after Australia’s largest lender CBA posted a record FY profit.
Nikkei 225 ultimately weakened with trade initially indecisive amid an influx of earnings releases and with the biggest winners and losers all driven by corporate results including SoftBank which was near the bottom end of the spectrum after its surprise loss.
Hang Seng and Shanghai Comp were subdued as markets reflected on the mixed inflation data from China which showed CPI Y/Y slipped into deflation territory, albeit at a narrower-than-expected drop in prices, while factory gate prices continued to fall at a steeper than forecast pace.
US equity futures were steady and largely ignored the latest soft metrics from China.
European equity futures are indicative of a firmer open with the Euro Stoxx 50 +0.9% after the cash market closed down by 1.1% yesterday.

DXY took a breather after benefitting yesterday from the risk-off conditions and was unfazed by comments from Fed's Harker who suggested the potential for the Fed to begin cutting rates next year.
EUR/USD attempted to nurse some of its recent losses although remained firmly below the 1.1000 handle in the absence of any pertinent catalysts to fuel the rebound.
GBP/USD lacked direction after recovering from yesterday’s brief slip beneath the 1.2700 level.
USD/JPY was uneventful after the recent dollar strength provided a firmer footing above 143.00.
Antipodeans gained with AUD/USD underpinned as CNH strengthened in the aftermath of a firmer-than-expected reference rate setting and with Chinese major state-owned banks purchasing the yuan.
PBoC set USD/CNY mid-point at 7.1588 vs exp. 7.2198 (prev. 7.1565)
China's major state-owned banks were seen selling dollars to buy yuan in the onshore spot FX market.

10yr UST futures were uneventful but held on to most of their recent spoils following the bull flattening in the US alongside the subdued risk tone and as global supply was met with strong demand.
Bund futures plateaued overnight after yesterday’s strong rally to above the 133.00 level.
10yr JGB futures tracked the gains in global counterparts and with the BoJ in the market for nearly JPY 1.8tln of JGBs on top of its fixed-rate operations.

Crude futures traded rangebound after recent swings and mixed private sector inventory data.
US Energy Inventory Data (bbls): Crude +4.1mln (exp. +0.6mln), Gasoline -0.4mln (exp. flat), Distillates -2.1mln (exp. flat), Cushing -0.1mln
EIA STEO showed 2023 world oil demand growth view was unchanged at a 1.76mln BPD increase and the 2024 growth forecast was cut by 30k BPD to a 1.61mln BPD increase.
Europe has resorted to shipping large volumes of gas into Ukraine given its ample storage space despite the war, according to FT.
Spot gold found some reprieve as the dollar took a breather from this week's advances.
Copper futures were in recovery mode despite further soft economic releases from China.
Peru's copper production rose 21.8% in June Y/Y, according to the nation's energy ministry.

Bitcoin mildly pulled back overnight after rallying yesterday to test the USD 30,000 level.
Fed announced the creation of an activities supervision program to oversee bank tech initiatives which will focus on activities related to crypto, blockchain tech and non-bank tech partnerships, while the Fed said state member banks should receive written non-objection from the Fed before issuing, holding or transacting in dollar tokens, according to Reuters.

NOTABLE ASIA-PAC HEADLINES

US is set to limit the scope of the China investment ban with a revenue rule and the order limiting investments is expected in the approaching days, according to Bloomberg.
US lawmakers asked the FCC to address potential threats from Chinese cellular Internet of Things modules in US networks.
China's National Bureau of Statistics said the Y/Y decline in consumer prices is only temporary.

DATA RECAP

Chinese CPI MM (Jul) 0.2% vs. Exp. -0.1% (Prev. -0.2%)
Chinese CPI YY (Jul) -0.3% vs. Exp. -0.4% (Prev. 0.0%)
Chinese PPI YY (Jul) -4.4% vs. Exp. -4.1% (Prev. -5.4%)
New Zealand 1yr Inflation Expectations (Q3) 4.2% (Prev. 4.3%)
New Zealand 2yr Inflation Expectations (Q3) 2.83% (Prev. 2.79%)

Russia shot down two combat drones that were headed towards its capital, according to AFP News Agency citing the Moscow Mayor.
German Defence Ministry said Germany offered Poland an extension of the Patriot air defence system deployment until year-end.

NOTABLE HEADLINES

UK government is pushing back against attempts by some members of the House of Lords for tighter corporate transparency and warned that publishing all trust data could be problematic, according to FT.
The Italian government has acted to limit the impact of the surprise windfall tax on banks whereby the levy on banks’ net interest income will be capped at 0.1% of risk-weighted assets, which is a fifth of the level analysts had suggested the levy could reach, according to The Times.