2018Feb

FC: EUROPEAN OPENING REPORT: FRIDAY – 2ND – FEBRUARY – 2018 February 02, 2018 at 05:12AM

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US cash equity markets ended the session mixed after retreating from their best levels. Financial and energy names outperformed the broader market, while we saw heavy declines for UPS and PayPal shares after their respective corporate reports. In fixed, US government bond yields rose to fresh multi-year highs (30-year above 3%) after some stronger-than-expected US macro releases – ISM manufacturing beat at 59.1 (f/c. 58.8) and construction spending rose +0.7% (f/c. +0.4%). Higher borrowing costs, however, failed to shift the Greenback higher with the USD index firmly lower while the Euro closed the strongest among the G10s. The single currency gained after an ECB sources report said policymakers want to give a clearer signal on how long rates will remain unchanged. Governing Council member Nowotny later added that in his view they should end the bond-buying program. Elsewhere, oil prices finished higher with US crude futures settling at $65.80 (+$1.07) after a bullish note from Goldman Sachs on commodities.

Before the open in Asia, New Zealand building permits plunged 9.6% m/m December, while consumer confidence jumped 4.2% m/m in January.

Asian stocks mostly declined in the final session of the week. In FX space, the Yen sharply declined against a basket of currencies after the BoJ lifted purchases of 5 to 10-year JGBs to ¥450 Bln from ¥410 Bln in previous operation. The BoJ also announced an unlimited fixed-rate operation to buy 10yr JGBs at 0.110%, the first unlimited fixed-rate operation since July 2017.On the data front, Japan’s monetary base climbed 9.7% y/y in January. Down under, Australian producer prices ascended in in Q4, up 0.6% q/q and 1.7% y/y. There were also remarks from Japanese Finance Minister Aso, he said he expects the BoJ to continue with monetary easing as before to hit 2% inflation goal. Elsewhere, Australia sold A$500 Mln 2047 bonds at an average yield of 2.44% with a bid-to-cover of 2.53.

Ahead of the European open, UK Trade Secretary Fox said the UK wants London and Shanghai to connect as soon as possible, adding with post-Brexit vision, customs union is incompatible.

Looking ahead, at 08:00 GMT, we get unemployment rates for Spain at 08:00 GMT and Norway at 09:00 GMT, followed by the UK’s construction PMI at 09:30 GMT. Next at 10:00 GMT, we get Euro Zone PPI and Italian CPI, followed by Irish industrial production. Also of note, we look for possible comments from ECB’s Coeure at 10:00 GMT.

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