2018Feb

FC: EUROPEAN OPENING REPORT : MONDAY – 5TH – MARCH – 2018 March 05, 2018 at 06:10AM

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US bourses rebounded on Friday afternoon ending the session in mostly positive territory, after declining at the open on the proposed US import tariffs from the Trump administration. According to sources, it was reported that the EU are considering applying a 25% tariff on around $3.5 Bln of imports if the US tariff plan goes ahead. Meanwhile, the IMF said US import restrictions on steel and aluminium is likely to cause damage not only outside the US, but also to its own economy, adding steel and aluminium tariffs announced recently by Trump are likely to damage to the US economy, including construction and manufacturing sectors. The Mexican Chief NAFTA Negotiator said he thinks Mexico and Canada should excluded from US tariffs on steel, adding Mexico, US and Canada are in a position to leave NAFTA talks. In fixed, investors appeared to be focused on the possible inflationary impact with US yields higher. In FX, the USD index dipped below 90 earlier in the session, while the Japanese Yen remains the outperformer among the G10’s after Kuroda hinted they could think about an exit from easy monetary policy in fiscal 2019. Elsewhere, US crude oil futures settled at $61.25 (+$0.26) after the Baker Hughes rig count rose by 1 to 800.

Over the weekend, Germany’s SPD members voted in favour of coalition deal with Merkel’s CDU/CSU with a vote of 66.02%. On US steel tariffs, a spokesman for China’s NPC said China does not want a trade war with the US. Meanwhile, the WSJ reported that there will be no exemptions to the US steel tariff. Minneapolis Fed Governor Kashkari said he is nervous about cost to economy of sending tough message to China.

Before the open in Asia, Australia’s AiG performance of services index fell to 54.0 in January, while the CBA services PMI rose to 54.2 and composite PMI up to 54.3. In Europe, exit polls in Italy suggested that the result will be a hung parliament.

Asian stocks begun the week on the back foot. Data wise, China’s Caixin services PMI fell to 54.2 (f/c 54.3) in February, while the composite PMI dropped to 52.2. Meanwhile, Japan’s February Nikkei services and composite PMIs fell to 51.7 and 52.2, respectively. Down under, Australian building approvals for January rebounded after sharp declines in December, rising 17.1% (f/c +5.0%) m/m and 12.0% (f/c -0.6%) y/y, while Q4 company operating profits climbed 2.2% (f/c +1.5%) q/q and Q4 inventories gaining 0.2% (f/c +0.5%) q/q. Chinese Premier Li kicked off the NPC, he said they are targeting 2018 GDP growth of around 6.5% and CPI for 2018 around 3%. Li stated China’s survey based urban unemployment rate kept within 5.5%. He also said China will keep prudent monetary policy neutral, adding liquidity will be maintained reasonably steady. Li said China will leave proactive fiscal policy unchanged, adding they will achieve substantial progress in supply-side reform. He also stated they will hold macro leverage ratio basically steady, adding they will maintain continuity and stability in macro policy. On the yuan, Li said they will keep the yuan basically stable. There was also remarks from PBoC Deputy Governor Yi, who said the yuan is stable and the rate is decided by the market. In currency space, the Euro surrendered earlier gains after the Italian election looks set to end in a hung parliament. The latest figures for the Senate seat projection, majority is 158 seats, show 5-Star on 102-122 seats, League on 52-62 seats, Forza Italia on 46-56 seats and PD on 42-54 seats. The Lower House (majority is 316 seats) projection, however, showed 5-Star on 216-236 seats, the centre-right on 248-268 seats and the centre-left on 107-127 seats.

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