• Once again, none of the Brexit indicative motions reached a majority in the House of Commons, though a customs union moved closer to passing
• European indices are largely unchanged as the data driven momentum fades
• Dollar is outperforming G10 counterparts buoyed from yesterday’s data and the underperformance of AUD, NZD & GBP
• Looking ahead, highlights include US Durable Goods, APIs & Fed’s Kaplan

ASIA-PAC

Asian equity markets were mostly higher as the regional bourses picked up the bullish baton from Wall St where sentiment was underpinned and growth fears were eased by strong PMI data from US and China. ASX 200 (+0.4%) and Nikkei 225 (U/C) traded positive with tech, energy and financials leading the upside in Australia and with price action in the Japanese benchmark mainly currency-driven. Furthermore, participants had been awaiting any dovish clues from the RBA, as well as the Federal Budget which is seen as a platform for upcoming elections and is expected to include income tax cuts, billions for infrastructure spending and its first surplus in 12 years of AUD 4.1bln. Hang Seng (+0.2%) and Shanghai Comp. (+0.2%) remained upbeat after the recent recovery in factory data and amid optimism ahead of this week’s US-China trade talks in Washington, while outperformance was seen in gambling names following the better than expected Macau gaming revenue figures. Finally, 10yr JGBs were lower on spill-over selling from USTs and as the positive risk tone continued to dampen safe-haven demand, although some of the losses were pared following stronger demand and lower supply in today’s 10yr JGB auction.

PBoC skipped open market operations for a net neutral daily position. (Newswires) PBoC set CNY mid-point at 6.7161 (Prev. 6.7193)

PBoC Adviser Sheng Songcheng said China may decide whether to lower RRR after the release of Q1 data, while Sheng added the chance of a cut in China's benchmark interest rate this year is not big. (Newswires)

RBA kept the Cash Rate Target unchanged at 1.50% as expected and reiterated that low rates are supporting the economy and that the labour market remains strong, while inflation remains low and stable. Furthermore, the RBA added that downside risks to global economy have increased and the board will monitor developments as well as set policy to support growth. (Newswires)

Australia sees 2019/20 budget surplus at AUD 7.1bln vs. AUD 4.1bln seen in December.

- 2020/21 budget surplus at AUD 11bln vs AUD 12.5bln seen in December

- Sees net debt as a share of GDP falling to 18%  of GDP in 2019/20

- See GDP growth at 2.75% in 2019/20, and 2.75% 2021/22

- See CPI inflation at 2.25% in 2019/20 and remaining at that level for 2021/22

- See unemployment rate at 5% in 2019.20 & 2020/21

- Government proposes AUD 158bln in tax cuts

- Australian Treasurer says the economy is sound but that 'genuine and clear' risks are emerging

UK/EU   

UK Parliament rejected all 4 Brexit options in indicative votes as MPs voted 273 For vs. 276 Against Motion (C) on Customs Union and voted 261 For vs. 282 Against Motion (D) for a Common Market 2.0, while MPs voted 280 For vs. 292 Against Motion (E) which called for a Confirmatory Public Vote and 191 For vs. 292 Against Motion (G) on Parliamentary supremacy. (Newswires)

Following the rejection of all four options, Conservative Remainer MP Boles (one of the architects of the indicative vote plan) left the party stating “I accept I have failed. I have failed chiefly because my party refuses to compromise”. (Telegraph)

UK Chancellor Hammond is to tell the Cabinet on Tuesday that Tories may have to consider a referendum as neither party nor country can afford an election, according to Times political editor. Prior to the Cabinet Meeting reports indicated that it has been delayed and shortened, ministers are now going in at 09:30BST-11:30BST and there may be no afternoon session; source adds 'maybe last night was not what was expected'., Daily Mail's Doyle. Today’s cabinet meeting was initilally supposed to be 5 hours long, with a ‘political cabinet’ initially to discuss party matters, followed by a traditional cabinet meeting.

There is an increasing consensus within the UK cabinet to reluctantly accept a customs union if PM May's deal loses during a run-off final round of indicative votes which is expected on Thursday, while reports also noted that some Brexiteer Cabinet ministers will demand PM May issue a final ultimatum to the EU to improve the backstop otherwise it will be a No Deal on April 12th. (The Sun)

PM May says Brexit is now choice between a confirmatory referendum or her Brexit deal ratified by MPs subject to further ratification in a people's vote, according to ITV's Peston citing PM May's ministers. (Twitter)

Trade talks between EU and US are said to face delays as governments across the bloc struggle to agree on a mandate to start discussions with the US, which reports suggests could risk provoking a backlash from US President Trump. (Newswires)

UK Markit/CIPS Cons PMI (Mar) 49.7 vs. Exp. 49.8 (Prev. 49.5)

EQUITIES

A subdued session for European equities thus far [Eurostoxx 50 +0.2%] after the bullish momentum seen on Wall Street and Asia faded wherein major bourses were buoyed by the risk appetite. UK’s FTSE 100 [+0.5%] remains the outperformer as the export-heavy index benefits from the Brexit-beaten Pound. Sectors are relatively mixed with defensive sectors gaining as jittery investors hedge downside. In terms of individual movers, Pandora (-5.3%) fell to the foot of the of the Stoxx 600 (Unch) after Carnegie noted concern over the company’s Q1 results, adding that they would sell the stock at current levels. Elsewhere, Roll-Royce (-1.7%) nursed some losses after opening at the foot of its index Singapore Airlines grounded some planes due to their Rolls-Royce engines. On the more optimistic note, Pernod Ricard (+1.3%), Remy Cointreu (+1.1%) and Carlsberg (+0.4%) are all benefiting from an overweight initiation at Barclays. In recent US newsflow sources indicate that Exxon (XOM) hopes to raise USD 3bln for the potential sale of both onshore & offshore oil and gas assets in Nigeria.

FX

AUD/NZD/GBP - The clear G10 underperformers, with Aud/Usd extending post-RBA declines to 0.7065 from a knee-jerk peak around 0.7130 on the back of much stronger than expected Australian building approvals overnight. The RBA maintained rates as widely expected, but alongside an ongoing neutral policy stance there was a tweak to the accompanying statement suggesting that keeping the status quo may not be enough to support growth as it has for the past 2 ½ years. Instead, data and developments will be monitored to see if the Cash Rate requires an adjustment. Note, little reaction to the pre-election Budget despite a significant rise in the projected 2019/2020 surplus vs December’s forecast and a proposed Aud158 bn tax cut package as the Government also acknowledged the emergence of genuine and clear downside risks that might impact an otherwise sound domestic economy. Elsewhere, Nzd/Usd has fallen in sympathy from circa 0.6804 to 0.6768, but also independently in response to a marked deterioration in Q1 NZIER sentiment, while Cable has retreated further from 1.3100+ highs due to UK-specific factors as yet another round of IVs in the HoC found no common ground on any of the 4 alternative Brexit strategies put forward, albeit with the CU motion moving a lot closer gaining a majority. Cable has pared some losses from a 1.3025 low and Eur/Gbp has eased back from a whisker under 0.8600 on a firmer than forecast UK construction PMI, though still sub-50. Technically, 1.3030 is daily chart support for Cable and the 200 DMA is 1.2977, while flow-wise a hefty 1.2 bn option expiry between 1.3045-55 may cap a firmer rebound, as could 1 bn rolling off in Aud/Usd at the 0.7100 strike.

CAD/EUR/CHF/JPY - All weaker vs the Greenback, as the DXY edges closer towards 97.500 and ytd peaks in wake of yesterday’s upbeat US manufacturing PMI and profiting from the demise of major rivals. Usd/Cad remains above 1.3300 after Monday’s disappointing Canadian PMI, while the single currency is struggling to keep hold of the 1.1200 handle where a hefty option expiry sits (1 bn) and has dipped just a few pips short of key Fib support (1.1187/6) protecting the 2019 low at 1.1177. Elsewhere, slightly above consensus Swiss CPI has not held the Franc recover vs the Buck within a par-0.9984 range, but it is holding just above 1.1200 against the Euro. Usd/Jpy has nudged up towards 111.50 and the 200 DMA (111.48) after its recent range break and clearance of chart resistance, but may yet be drawn back to the 111.00-20 region given 2.4 bn expiries.

EM - The Lira continues to underperform regional counterparts on political grounds and renewed Turkish-US tensions following the latter’s decision to suspend deliveries of F-35 jets, with Usd/Try back up near the upper end of a 5.6125-5.4775 range.

Australian Building Approvals (Feb) M/M 19.1% vs. Exp. -1.0% (Prev. 2.5%). (Newswires) Australian Building Approvals (Feb) Y/Y -12.5% vs. Exp. -27.0% (Prev. -28.6%)

FIXED INCOME

Notwithstanding, or irrespective of seemingly unrelenting Brexit uncertainty, investors showed little if any qualms about the growing risk of a no deal scenario in less than 2 weeks as the latest DMO issuance was well oversubscribed and came with a relatively clipped tail. Hence, Gilt futures are holding firm between 128.97-129.21 parameters, like Bunds and US Treasuries as curves re-flatten ahead of more US data and surveys before Fed’s Kaplan.

COMMODITIES

WTI (+0.9%) and Brent (+0.5%) futures extended earlier gains as supply-side developments keep the benchmarks afloat. Supply in Venezuela has been disrupted after its main oil port had to shut due to a lack of electricity, and with the US eyeing secondary sanctions on Iran, traders are speculating about further supply upsets. “Oil prices should move higher over the next two quarters as supply fundamentals remain constructive, with OPEC+ making good progress on pledged  output cuts” says BNP Paribas Global Head of Commodities.

Elsewhere, gold (Unch) trades lacklustre and remains near its lowest levels in over 3 weeks amid a firmer greenback and as safe-havens were shunned, while copper was steady and took a breather from recent advances amid the tentative tone around the market. Finally, Dalian iron ore futures hit a record intraday high with further supply concerns as BHP warned that iron ore output will fall by 6-8mln tonnes after damage caused by cyclones in Western Australia last week.

US official said US is considering additional sanctions on Iran, aiming at parts of the economy that have not been hit before and reiterates previous goal to get Iran oil exports as close to zero as possible. (Newswires) 

Venezuela's main Jose oil terminal has halted operations due to lack of electricity supply, according to sources. (Newswires)

Russia's March oil output 47.78mln tonnes, according to Interfax. (Newswires)

Russian Energy Minister Novak says Russia oil output is lower by 225k BPD, as a part of the global oil deal; though adds that this does exclude PSA projects. (Newswires)

- Ministry adds that Russia's oil output is down by 130k BPD since October, and this includes PSA projects

- Russia's April oil output will be in-line with the levels that have already been agreed to

Libyan oil output reaches 150k BPD after Waha oil field resumed production, according to Waha oil company Administration Specialist. (Newswires)

UK sells 3bln 1.0% 2024 Gilt. b/c  (Prev. 1.99), average yield  (Prev. 0.966%) & tail  (Prev. 0.6bps)