European Morning Briefing 19.05

European Morning Briefing 19.05

• Asian equities traded with little in the way of firm direction amid light newsflow after US stocks posted a modest rebound from Wednesday’s losses
• GBP staged another ‘flash crash’ falling around 100 pips in 12 seconds during US hours amid no new fundamental news
• Looking ahead, highlights include Canadian retail sales, ECB’s Praet, Coeure, Constancio and Fed’s Bullard

ASIA

Asia equity markets were mixed after the region somewhat shrugged off the positive lead from Wall St where stocks rebounded from their biggest loss in 8 months, as a lack of drivers kept price action relatively muted ahead of the weekend. ASX 200 (-0.2%) failed to maintain opening gains with underperformance in financials and miners weighing on the index, while Nikkei 225 (+0.1%) was choppy alongside JPY price action. Indian markets were the biggest gainers after officials kept the majority of items under the Goods and Services Tax scheme below the 18% tax rate, while Shanghai Comp. (-0.1%) and Hang Seng (+0.2%) were indecisive after the PBoC refrained from operations today, although its efforts for the week still amounted to a net liquidity injection of CNY 160bln vs. Prev. CNY 120bln drain.

PBoC refrained from open market operations, for a net weekly injection of CNY 160bln vs. Prev. CNY 120bln drain. (Newswires)
PBoC set CNY mid-point at 6.8786 (Prev. 6.8612)

EUROPE/UK

Greek parliament voted to approve the reforms agreed with EU & IMF required for the disbursement of EUR 6bln of bailout funds and which paves the way for debt relief talks by its creditors on Monday. (FT)

FX

FX markets were relatively uneventful during Asia trade with no tier-1 data or key speakers scheduled. Nonetheless, USD/JPY and JPY crosses were pressured, although are off worst levels, with some attributing the flows into JPY on reports the US Navy moved a 2nd aircraft carrier near North Korea. Elsewhere, GBP/USD was quiet as participants mulled over yesterday’s flash crash in which the pair dropped over 100 pips in a matter of seconds, after it took out an intraday floor alongside USD-support as focus turned to a video of former FBI Director Comey that suggested he had not had any investigation obstructed.

There were initial reports that Brazilian President Temer could resign amid accusations of bribery. However, Brazilian President Temer later said he will not resign and that he has nothing to hide, while he also denied authorising payments for silence of potential witnesses in a corruption probe. In related news, Brazil's popular socialist party announced it left Temer's governing coalition. (Newswires)

COMMODITIES

WTI crude futures marginally extended on gains to move closer towards the USD 50/bbl level amid optimism regarding an output deal extension heading into next week’s OPEC meeting. Copper traded sideways alongside an indecisive risk tone in the region, which in turn supported gold prices and placed the precious metal on track for its biggest weekly gain in a month.

GEOPOLITICAL

US Navy is said to have moved a 2nd aircraft carrier near North Korea, according to US press reports. (Newswires)

US

Fed's Mester (Non-Voter, Hawk) said further hikes will be necessary if economy evolves as expected and that delaying hiking too long could cause a recession. (Newswires)

A video of former FBI director Comey showed him testifying on May 3rd that he had not had any investigations obstructed by the DoJ or Attorney General. (Zerohedge)

US President Trump states he didn't ask Comey to back down on the Flynn probe, while he added that there was no collusion with Russia and that the investigation is a witch hunt. (Newswires)

US President Trump budget may include USD 200bln for infrastructure spending over a decade and is expected to provide incentives for at least USD 800bln of infrastructure spending. (Newswires)

US House Republicans reportedly may have to rewrite health care legislation if CBO concludes it doesn't save at least USD 2bln. (Newswires)


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