RANsquawk EU Open Rundown 24.04.17
24 Apr 2017, 06:57
French Presidential Candidates Macron and Le Pen move to the 2nd round run-off after gaining the most votes in the 1st round
The fallout of the French election saw EUR/USD break above 1.0900 to print its highest level in 5 months while Asia-Pac trade saw a general ‘risk-on’ tone
Looking ahead, highlights include German IFO and Fed’s Kashkari
- FRENCH PRESIDENTIAL ELECTION French Presidential Candidates Macron and Le Pen move to the 2nd round run-off after gaining the most votes in the 1st round held on Sunday in which Macron received 23.75% and Le Pen received 21.53% of total votes. (Newswires)Note: At the open of FX markets, EUR/USD rose by around 150 pips and briefly reclaimed the 1.0900 handle to 5-month high on the assumption that Macron will be able to defeat Le Pen in the second round of voting on Sunday May 7th. ASIA Asia equities traded mostly higher amid heightened risk sentiment across asset classes following the French Presidential election 1st round. ASX 200 (+0.1%) was led by financials although underperformance in gold miners limited gains, while Nikkei 225 (+1.3%) outperformed on JPY weakness. Shanghai Comp (-1.6%) and Hang Seng (-0.1%) underperformed with heavy losses in the mainland after the PBoC reduced its liquidity injection and amid regulatory concerns after the CIRC warned of key risks and called for prudent investment plans. T-notes dropped 20 ticks and 10yr JGBs were also weighed as safe-havens suffered from the French election, while slight pressure was also seen following the BoJ Rinban announcement where it reduced its buying in 3yr-5yr maturities.PBoC injected CNY 10bln in 7-day reverse repos, CNY 10bln in 14-day reverse repos and CNY 10bln in 28-day reverse repos.PBoC set CNY mid-point at 6.8673 (Prev. 6.8823). (Newswires)China's CIRC warned on risks facing the insurance industry and stated that companies must guard against liquidity risks with regular cash flow tests and called for a prudent investment scheme to be established to strengthen asset and liability management. Furthermore, there were separate reports that China is expected to implement further deleveraging measures. (CEN/Newswires) EUROPEECB’s Visco said that the ECB has liquidity provision if needed and that central bank should be ready for any shock. (Newswires)Fitch downgraded Italy to BBB from BBB+; outlook to stable from negative and affirmed Cyprus at BB-; outlook positive.S&P affirmed Norway at AAA; outlook stable and affirmed Poland at BBB+; outlook stable. (Newswires) DBRS confirmed Austria at AAA: stable trend and confirmed Portugal at BBB (low), stable trend. (Newswires) UKUK Rightmove House Price Index (Apr) M/M 1.10% (Prev. 1.30%). (Newswires)UK Rightmove House Price Index (Apr) Y/Y 2.20% (Prev. 2.30%)UK Consumer Confidence for Q1 fell to -7 vs. Prev. -6 in Q4 2016, according to survey by Deloitte. (Newswires)US is reported to view EU trade talks as priority over a UK deal. (Times) FXEUR was in focus following the French Election 1st Round result and as polls heavily predict Macron to ultimately win the presidential race which saw EUR/USD briefly break above 1.0900 and print its highest level in 5 months. Meanwhile, safe-haven JPY softened amid the firm risk tone which saw USD/JPY briefly trade above 110.00 and EUR/JPY rally over 3pts at the open. Conversely, commodity linked currencies failed to hold on to most of their gains amid post-election weakness in gold prices. COMMODITIES Gold (-0.7%) lost ground and slipped by as much as USD 18/oz in early trade as safe-havens felt the brunt of the heightened risk sentiment spurred by the French election 1st round results, which underpinned copper prices in turn. Elsewhere WTI crude futures nursed some of last week’s losses with prices approaching the USD 50/bbl level to the upside.US Baker Hughes Rig Count (Apr) 857 (Prev. 847) Iranian oil minister Zanganeh said that OPEC & non-OPEC producers have sent positive signals regarding an extension of production cuts. Zanganeh added that Iran would second any decision made unanimously by OPEC members and commented that one shouldn’t be hopeful about oil prices beyond USD 60/bbl for the time being. (Newswires) GEOPOLITICALNorth Korea said on Sunday it was ready to sink a US aircraft carrier to demonstrate its military might, as two Japanese navy ships joined a US carrier group for exercises in the Pacific. (Newswires)US Vice President Pence stated that denuclearization and peaceful outcome in Korean peninsula remains possible. (Newswires)Twitter sources suggest possibility North Korea may conduct an intercontinental ballistic missile test or worse this Tuesday to mark the 85th anniversary of the founding of its military. (Twitter) USTreasuries firmed tspanoughout the day although pared some of the gains after Trump’s tax comments. Informa noted that screen volumes and flows were below average and was mostly position squaring ahead of the French presidential election. Jun’17 10y T-note futures settled at 126.02, up 3+ ticks.US President Trump said he will unveil a tax plan this week in which businesses and individuals will receive a "massive tax cut" under a tax reform package. Trump stated that the tax cuts will be bigger than any tax cut ever and will be released on Wednesday or shortly thereafter. (AP) However, there were separate reports that that suggested the timing of the tax plan is in dispute as his budget director, Mick Mulvaney, said it might not come until June. (WSJ)US Congress and White House could be facing a government shutdown over administration demands to find funds for a border wall, while other reports suggest officials are unsure if President Trump will sign funding bill without money for the border wall heading into the expiry of the congressional deal to fund government at midnight on Friday. (Politico/Guardian)US Treasury Secretary Mnuchin said faster growth will offset the cost of tax overhaul and that they’re looking at reforms that will pay for themselves. (Newswires)A Senior White House official said that US Senate Budget Committee and White House staff were working on health care deal language, while there were also comments from US House Speaker Ryan who told colleagues they won't be rushed on health care. (Newswires/Axios)