European Closing Report 11 Apr 2018

Risk sentiment soured in the latter stages of the European session after Saudi news outlets confirmed two missiles had been intercepted over Riyadh. Oil prices spiked with US crude futures reaching their highest level since December 2014 at $67.45 (+$1.89).

European Closing Report (by Sigma Squawk)

Perceived safe-haven assets also rose with the Japanese Yen and gold prices firmly in the green. Geopolitical tensions were already in focus after US President Trump pledged to launch missile attacks on Syria and said relations with Russia are worse now than ever before. Equities have fallen in response as support from recent positive trade developments appeared to run out of steam. 

European bourses are broadly lower although we have seen outperformance in UK stocks (FTSE -0.1%, DAX -0.8%, CAC -0.6%). Wall Street slipped to new lows in recent trade. In fixed, Treasuries are onside with minimal reaction shows to US CPI data which was largely in line with expectations. 

Core EU bonds are also onside with weaker-than-expected UK industrial production data providing support. Turning to currencies, the Dollar Index is lower for the day having slipped to a fresh two-week low in recent trade. 

Sterling saw only a modest softening on the weaker data as comments from EU Brexit Minister Barnier offered support – he said the EU would be willing to change their red lines if the UK did the same, adding that everything is possible. Still to come today, a $21.0 Bln 10-year note auction at 18:00 BST and the FOMC minutes at 19:00 BST.

Key Headlines/Data:

* Bank of Japan Governor Kuroda said they will continue with powerful QE to meet the inflation target. He added that the economy is improving but her are still some distance from the 2% price target

* Saudi Energy Minister al-Falih said OECD stocks have returned to normal and fundamentals in the oil market are good. He added that they do not want prices to move to an unreasonable level.

* Bank of France Industrial Sentiment (Mar) 103 versus 104 expected, previous 105

* EU Brexit Minister Barnier sad the UK still has enough time to revaluate the relationship it wants with the EU post Brexit. He said the EU would be willing to change their red lines if the UK did the same and said everything is possible.

* UK Industrial Production/Manufacturing Production/Construction Output (Feb):
– Industrial Production M/M +0.1% versus +0.4% expected, previous +1.3%
– Industrial Production Y/Y +2.2% versus +2.9% expected, previous +1.6% revised to +1.2%
– Manufacturing Production M/M -0.2% versus +0.2% expected, previous +0.0%
– Manufacturing Production Y/Y +2.5% versus +3.3% expected, previous +2.7% revised to +2.2%
– Construction Output M/M -1.6% versus +0.7% expected, previous -3.4% revised to -3.1%
– Construction Output Y/Y -3.0% versus -2.5% expected, previous -3.4% revised to -2.1%

* UK Trade Balance (Feb) -£10.2 Bln versus -£12.0 Bln expected, previous -£12.3 Bln revised to -£12.2 Bln

* US President Trump (via @realDonaldTrump):
– Russia vows to shoot down any and all missiles fired at Syria. Get ready Russia, because they will be coming, nice and new and “smart!” You shouldn’t be partners with a Gas Killing Animal who kills his people and enjoys it!
– Our relationship with Russia is worse now than it has ever been, and that includes the Cold War. There is no reason for this. Russia needs us to help with their economy, something that would be very easy to do, and we need all nations to work together. Stop the arms race?

* In response, a spokesman for the Russian Foreign Ministry said smart missiles should fly towards terrorists and not legal governments.

* ECB President Mario Draghi said he was confident that inflation will rise to the ECB’s goal. He added that wages and inflation will rise as the economy improves. He also said the direct impact of US tariffs on the Euro Zone are not big.

* ECB Governing Council member Hansson said little change in the ECB’s projections over several quarters provides comfort in the inflation outlook. He did note that the recent improvement in the Euro Zone economy will accelerate inflation.

* AXIOS: Speaker Paul Ryan told House Republicans this morning that he will not run for re-election in November.

* UK NIESR GDP Estimate 3M/3M (Mar) +0.2% versus +0.3% expected, previous +0.3%

* US CPI Data (Mar):
– CPI M/M -0.1% versus 0.0% expected, previous +0.2%
– CPI Y/Y +2.4% versus +2.4% expected, previous +2.2%
– Core CPI M/M +0.2% versus +0.2% expected, previous +0.2%
– Core CPI Y/Y +2.1% versus +2.1% expected, previous +1.8%

* DoE Crude Inventories +3.3 Mln versus -0.2 Mln expected, previous -4.6 Mln.

* Two loud blasts have been heard in the Saudi capital of Riyadh. Saudi TV later reported that Saudi air defence forces intercepted a rocket over Riyadh.

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US Closing Report 10 Apr 2018


US Closing Report 11 Apr 2018

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