• Swedish PM, Lofven is said to not call a snap election and is to re-arrange cabinet
  • Yields have continued to soften across Europe
  • Looking ahead, highlights include US Durables, Wholesale Inventories and Weekly Jobs

ASIA-PACIFIC

Asia equity markets were mostly higher following the gains on Wall St, where stocks marginally extended on advances amid earnings and following a somewhat dovish-perceived FOMC. As such, mild upside was observed in ASX 200 and Nikkei 225, with the former led by strength across the commodities complex. Elsewhere, Shanghai Comp. and Hang Seng. traded mixed with underperformance in the mainland bourse after the PBoC reduced its liquidity operations, while participants also digested mixed Industrial Profits data. 10yr JGBs were higher despite the mostly positive tone in the region, as yields tracked the declines in their US counterparts following the aforementioned FOMC, while today’s 2yr auction results failed to impact prices as the results were mixed.

  • China Industrial Profits (Jun) Y/Y 19.1% (Prev. 16.7%); YTD (Jun) 22.0% (Prev. 22.7%). (Newswires)
  • PBoC injected CNY 60bln 7-day reverse repos. (Newswires)
  • PBoC set CNY mid-point at 6.7307 (Prev. 6.7529)

UK/EU

The EU has warned that the next phase of Brexit negotiations will be delayed for two months because of the UK’s refusal to engage with Brussels on the so-called ‘Brexit divorce bill’, according to the Telegraph

UK Home Secretary Rudd said the government would seek a transitional Brexit arrangement, which would likely to include free movement to avoid a “cliff edge” for employers or EU nationals in the country. (Guardian)

Swedish PM, Lofven is said to not call snap election and is to re-arrange cabinet according to Aftonbladet.

– Further stating that he will rearrange the government
– To put this in context, the government were under pressure following a flawed IT out-sourcing deal.
– Subsequently, the PM was left with three options after a no-confidence vote by opposition. 1) re-arrange cabinet, 2) resign, 3) call snap elections.

Equities

European equities are pretty choppy this morning with today being without a doubt the busiest session so far in Europe on the earnings front, as the majority of Europe’s largest reported before the open. All eyes on AstraZeneca (-15%) as they look set for their worst day on record after initial reports in their lung cancer trial failed to meet primary objectives. Consequently, the healthcare sector underperforms noticeably with the sector slipping 1.5%. On a brighter note, AB InBev and Diageo are enjoying sizeable gains after firm financial results.

US Listed: BMY & Merck have direct competitor drugs the AstraZeneca lung cancer drug.

Fixed Income

EGBs higher this morning with the German curve slightly flatter this morning, notable activity has been seen going through in futures with reports of one black trade of 5k at 162.29 with some believing this to be a buyer. Bund’s

FX

USD selling continued last night post the FOMC meeting in which the central bank was slightly more downbeat on inflation. Subsequently, this prompt the USD sell-off to benefit major FX pairs, with the greenback at 2Y lows against the EUR. Notable size in the options market with 1.3bln worth of vanilla options situated at 1.17.


SEK: Sweden are currently gripped by a political crisis after opposition parties called for a no confidence vote in PM Lofven’s minority government (potentially for August) following handling of an IT out-sourcing deal. With suggestions that the option on the table were possibly for the PM to call a snap election EURSEK broke the early morning range of 9.5680-9.5870 to breach 9.6000. However, the weakness in SEK had been pared after the PM announced that he would reshuffle cabinet.

Commodities

Commodity currencies supported largely by the aforementioned USD weakness, USD/CAD breach the 2016 low at 1.2461, with the pair hitting a low of 1.2416. Additional support had been down to the upside in oil prices following a drawdown across the board in yesterday’s DoE report. AUD broke through the 0.80 handle to move to levels last seen since May’15, now eying resistance at 0.81.

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