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TradeFred Daily Briefing
Fri 15-03-2019 12:00

In Brief:

  • GBP edges higher as parliament backs Article 50 extension
  • Oil prices flat
  • SEC sues Volkswagen over emissions scandal
  • New home prices in China slow down dramatically

The British Pound edged up on Friday in Asia after lawmakers approved a motion setting out the option to ask the European Union (EU) for a short delay if parliament can agree on a Brexit deal by March 20, or a longer delay if no deal can be agreed in time. Sterling was mostly steady after the motion was passed late on Thursday. The GBP/USD pair last traded at 1.3246 by 11:12 PM ET (03:12 GMT) on Friday, up 0.05%.

Earlier this week, British Prime Minister Theresa May’s Brexit deal suffered a second defeat in Parliament. A new vote on her twice-rejected deal is likely next week, according to various media reports. Lawmakers must now decide whether to back a deal they feel does not offer a clean break from the EU, or reject it and accept that Brexit could be watered down or even thwarted by a long delay.

Meanwhile, the USD/JPY pair edged down 0.1% to 111.62 following the Bank of Japan’s (BoJ) decision to keep its short-term interest rate target at minus 0.1% as expected. The central bank maintained the 10-year JGB yield target around 0%, also in line with expectation.

Oil prices were near flat on Friday in Asia after rising to near four-month highs the previous day. US Crude Oil WTI Futures was up 0.01% at $58.63 by 10:37 PM ET (02:37 GMT). International Brent Oil Futures edged up 0.1% to $67.27. Traders’ attention now turns to the International Energy Agency (IEA) for its monthly publication due later today, with analysts expecting it to underline concerns on oil demand.

The US Securities and Exchange Commission sued Volkswagen AG and its former chief executive Martin Winterkorn over the German automaker's diesel emissions scandal late Thursday, accusing the company of perpetrating a "massive fraud" on US investors. The SEC said in its complaint filed in San Francisco that from April 2014 to May 2015, Volkswagen issued more than $13 billion in bonds and asset-backed securities in US markets at a time when senior executives knew that more than 50,000 US diesel vehicles grossly exceeded legal vehicle emissions limits.

Tesla Inc unveiled its Model Y electric sports utility vehicle on Thursday evening in California, promising a much-awaited crossover that will face competition from European car makers rolling out their own electric rivals. Chief Executive Elon Musk said the compact SUV, built on the same platform as the Model 3, would first debut in a long-range version with a range of 300 miles priced at about $47,000. A standard version, to be available sometime in 2021, would cost about $39,000, he said.

The number of Americans filing applications for unemployment benefits increased more than expected last week, suggesting the labour market was slowing, but probably not to the extent implied by a near-stall in job growth in February. While other data on Thursday showed import prices rising by the most in nine months in February, the trend in imported inflation remained weak. Import prices dropped on a year-on-year basis for a third straight month in February.

News on the housing market remained downbeat, with new home sales falling more than expected in January. The stream of data remains broadly supportive of the Federal Reserve's pledge to be "patient" before raising interest rates further this year. Sales of new US single-family homes fell more than expected in January, suggesting the housing market weakness persisted early in the first quarter, despite a moderation in mortgage rates.

The Commerce Department said on Thursday new home sales declined 6.9% to a seasonally adjusted annual rate of 607,000 units. December's sales pace was revised higher to 652,000 units from the previously reported 621,000 units. Economists polled by Reuters had forecast new home sales, which account for about 11% of housing market sales, slipping 0.6% to a pace of 620,000 units in January.

Japan's financial watchdog will conduct stress tests on regional banks around mid-year and review rules to prod them to speed up efforts to boost profitability, a government official with direct knowledge of the matter said on Friday. The move comes in the wake of growing concern among policymakers over the plight of regional banks, which have seen profits hit by years of ultra-low interest rates and an exodus of borrowers moving to bigger cities as the population shrinks.

Under current regulation aimed at pre-empting bank failures, the Financial Services Agency (FSA) focuses on whether commercial banks meet minimum capital adequacy ratios and past data in determining whether they are deemed financially viable. Japan's Nikkei newspaper reported on Friday that the FSA will review such guidelines to focus more on the future business outlook of the banks and whether their profitability is resilient to chronic pressure such as low rates and an aging population.

New home prices in China grew at their slowest pace in 10 months in February in sign of slackening demand as the economy cools further, leaving authorities walking a tight rope between loosening some existing curbs and flushing out speculators. Consumer and business confidence has slipped over recent quarters in the wake of heightened economic uncertainty and a yet-unresolved Sino-US trade dispute, discouraging residential investment.

Average new home prices in China's 70 major cities rose 0.5% in February, slowing from a 0.6% gain in January and marked the lowest growth rate since April 2018, according to Reuters calculation of data released by the National Bureau of Statistics (NBS) on Friday.

Latest Daily Reviews

In Brief:

  • GBP edges higher as parliament backs Article 50 extension
  • Oil prices flat
  • SEC sues Volkswagen over emissions scandal
  • New home prices in China slow down dramatically

The British Pound edged up on Friday in Asia after lawmakers approved a motion setting out the option to ask the European Union (EU) for a short delay if parliament can agree on a Brexit deal by March 20, or a longer delay if no deal can be agreed in time. Sterling was mostly steady after the motion was passed late on Thursday. The GBP/USD pair last traded at 1.3246 by 11:12 PM ET (03:12 GMT) on Friday, up 0.05%.

TradeFred Daily Briefing

In Brief:

  • Rupee bulls rejoice over longest stretch of gains for 1 year
  • Cabinet Ministers defy May to vote against No Deal Brexit
  • Chinese tariffs hurting US soybean exports
  • Mixed day for cryptocurrencies

As Rupee bulls rejoice over the longest stretch of gains in more than a year, the currency’s advance appears to be causing discomfort for India’s central bank. The Reserve Bank of India late Wednesday announced plans to hold a $5 billion foreign-exchange swap auction to supply funds to banks for a longer duration. Currency watchers say the move also serves as an intervention as the Rupee heads for a fifth straight weekly gain.

TradeFred Daily Briefing

TradeFred Daily Briefing

In Brief:

  • GBP edges higher as parliament backs Article 50 extension
  • Oil prices flat
  • SEC sues Volkswagen over emissions scandal
  • New home prices in China slow down dramatically

The British Pound edged up on Friday in Asia after lawmakers approved a motion setting out the option to ask the European Union (EU) for a short delay if parliament can agree on a Brexit deal by March 20, or a longer delay if no deal can be agreed in time. Sterling was mostly steady after the motion was passed late on Thursday. The GBP/USD pair last traded at 1.3246 by 11:12 PM ET (03:12 GMT) on Friday, up 0.05%.

Earlier this week, British Prime Minister Theresa May’s Brexit deal suffered a second defeat in Parliament. A new vote on her twice-rejected deal is likely next week, according to various media reports. Lawmakers must now decide whether to back a deal they feel does not offer a clean break from the EU, or reject it and accept that Brexit could be watered down or even thwarted by a long delay.

Meanwhile, the USD/JPY pair edged down 0.1% to 111.62 following the Bank of Japan’s (BoJ) decision to keep its short-term interest rate target at minus 0.1% as expected. The central bank maintained the 10-year JGB yield target around 0%, also in line with expectation.

Oil prices were near flat on Friday in Asia after rising to near four-month highs the previous day. US Crude Oil WTI Futures was up 0.01% at $58.63 by 10:37 PM ET (02:37 GMT). International Brent Oil Futures edged up 0.1% to $67.27. Traders’ attention now turns to the International Energy Agency (IEA) for its monthly publication due later today, with analysts expecting it to underline concerns on oil demand.

The US Securities and Exchange Commission sued Volkswagen AG and its former chief executive Martin Winterkorn over the German automaker's diesel emissions scandal late Thursday, accusing the company of perpetrating a "massive fraud" on US investors. The SEC said in its complaint filed in San Francisco that from April 2014 to May 2015, Volkswagen issued more than $13 billion in bonds and asset-backed securities in US markets at a time when senior executives knew that more than 50,000 US diesel vehicles grossly exceeded legal vehicle emissions limits.

Tesla Inc unveiled its Model Y electric sports utility vehicle on Thursday evening in California, promising a much-awaited crossover that will face competition from European car makers rolling out their own electric rivals. Chief Executive Elon Musk said the compact SUV, built on the same platform as the Model 3, would first debut in a long-range version with a range of 300 miles priced at about $47,000. A standard version, to be available sometime in 2021, would cost about $39,000, he said.

The number of Americans filing applications for unemployment benefits increased more than expected last week, suggesting the labour market was slowing, but probably not to the extent implied by a near-stall in job growth in February. While other data on Thursday showed import prices rising by the most in nine months in February, the trend in imported inflation remained weak. Import prices dropped on a year-on-year basis for a third straight month in February.

News on the housing market remained downbeat, with new home sales falling more than expected in January. The stream of data remains broadly supportive of the Federal Reserve's pledge to be "patient" before raising interest rates further this year. Sales of new US single-family homes fell more than expected in January, suggesting the housing market weakness persisted early in the first quarter, despite a moderation in mortgage rates.

The Commerce Department said on Thursday new home sales declined 6.9% to a seasonally adjusted annual rate of 607,000 units. December's sales pace was revised higher to 652,000 units from the previously reported 621,000 units. Economists polled by Reuters had forecast new home sales, which account for about 11% of housing market sales, slipping 0.6% to a pace of 620,000 units in January.

Japan's financial watchdog will conduct stress tests on regional banks around mid-year and review rules to prod them to speed up efforts to boost profitability, a government official with direct knowledge of the matter said on Friday. The move comes in the wake of growing concern among policymakers over the plight of regional banks, which have seen profits hit by years of ultra-low interest rates and an exodus of borrowers moving to bigger cities as the population shrinks.

Under current regulation aimed at pre-empting bank failures, the Financial Services Agency (FSA) focuses on whether commercial banks meet minimum capital adequacy ratios and past data in determining whether they are deemed financially viable. Japan's Nikkei newspaper reported on Friday that the FSA will review such guidelines to focus more on the future business outlook of the banks and whether their profitability is resilient to chronic pressure such as low rates and an aging population.

New home prices in China grew at their slowest pace in 10 months in February in sign of slackening demand as the economy cools further, leaving authorities walking a tight rope between loosening some existing curbs and flushing out speculators. Consumer and business confidence has slipped over recent quarters in the wake of heightened economic uncertainty and a yet-unresolved Sino-US trade dispute, discouraging residential investment.

Average new home prices in China's 70 major cities rose 0.5% in February, slowing from a 0.6% gain in January and marked the lowest growth rate since April 2018, according to Reuters calculation of data released by the National Bureau of Statistics (NBS) on Friday.

TradeFred Daily Briefing

In Brief:

  • Rupee bulls rejoice over longest stretch of gains for 1 year
  • Cabinet Ministers defy May to vote against No Deal Brexit
  • Chinese tariffs hurting US soybean exports
  • Mixed day for cryptocurrencies

As Rupee bulls rejoice over the longest stretch of gains in more than a year, the currency’s advance appears to be causing discomfort for India’s central bank. The Reserve Bank of India late Wednesday announced plans to hold a $5 billion foreign-exchange swap auction to supply funds to banks for a longer duration. Currency watchers say the move also serves as an intervention as the Rupee heads for a fifth straight weekly gain.

The British Pound fell on Thursday in Asia after UK lawmakers voted to reject leaving the EU without a withdrawal agreement. The Yuan also slid following the release of below-forecast factory output data. On Wednesday, Parliament voted by 312 to 308 for an amendment that ruled out a ‘no deal’ Brexit. Lawmakers are now expected later today to vote for a delay to Article 50. The GBP/USD pair initially rallied more than 2% following the news but gave up some of its earlier gains today. The pair last traded at 1.3242 by 12:30 AM ET (04:30 GMT), down 0.7%.

Meanwhile, the USD/CNY pair edged up 0.1% to 6.7108 after data showed China’s industrial output grew at the slowest pace in 17 years for the first two months in 2019. Factory output rose 5.3% year-on-year in January and February, the National Bureau of Statistics (NBS) reported on Thursday, the lowest since 2002. But investment picked up speed as the government fast-tracked more road and rail projects, offering some relief for policymakers as they work to avert a sharper slowdown, data showed on Thursday.

China is ramping up support for the economy this year as growth looks set to plumb 29-year lows. Premier Li Keqiang last week announced hundreds of billions of dollars in additional tax cuts and infrastructure spending, even as officials vowed they would not resort to massive stimulus like in the past.

Gold prices fell on Thursday in Asia even after China reported weaker-than-expected industrial output data. Gold Futures for April delivery were down 0.5%, at $1,303.35 per ounce on the Comex division of the New York Mercantile Exchange by 1:11 AM ET (05:11 GMT). The precious metal remained above the key $1,300 level after hitting a near two-week peak of $1,309.60 on Wednesday.

US farmers are gearing up to plant what could be their third-largest soybean crop ever despite failing to sell a mountain of beans from their last harvest due to the US-China trade war that remains unresolved. Soybeans were the single most valuable US agricultural export crop and until the trade war, China bought $12 billion-worth a year from American farmers. But Chinese tariffs have almost halted the trade, taking the biggest buyer out of the market and leaving farmers with crops they cannot sell. The US government estimates farmers will have 900 million bushels, or approximately $8 billion, of last year's soybeans in storage silos around the country when they start harvesting the next crop.

Oil prices traded higher on Thursday in Asia as the US reportedly would start cutting more Iran’s crude exports from May. Citing two sources who were briefed by the Trump administration on the matter, Reuters reported that Washington is targeting to cut Iran's crude exports by about 20% to below 1 million barrels per day (bpd) from May. "The goal right now is to reduce Iranian oil exports to under 1 million barrels per day," one of the sources said. The cut would be achieved by requiring importing countries to reduce purchases to avoid US sanctions, the source added. A complete halt of Iran’s oil in the short term is unlikely however, as the Trump administration remained concerned that it would trigger a global oil price spike. US Crude Oil WTI Futures gained 0.3% to $58.41 by 11:50 PM ET (03:50 GMT), while the international Brent Oil Futures was up 0.4% at $67.83.

Deliveries of Boeing's best-selling 737 MAX jets were effectively frozen on Wednesday, though production continued, after the United States joined a global grounding of the narrow-body model over safety concerns, industry sources said. The 737 MAX is banned from flying in most countries across the world following an Ethiopian Airlines crash on Sunday that killed all 157 people on board. It was the second deadly incident for the relatively new Boeing (NYSE:BA) model in five months. Airlines, aircraft industry experts and financiers said that although the ban would theoretically not prevent some domestic deliveries, most airlines would avoid taking a jet banned from entering service on the wake of two crashes in five months.

New orders for key US-made capital goods rose by the most in six months in January and shipments increased, but the trend in both measures of business spending on equipment remained soft, leaving forecasts for weak first-quarter economic growth intact. The slowing economy is helping keep inflation tame, with other data on Wednesday showing producer prices barely rising in February, resulting in the smallest annual increase in more than 1.5 years. This environment supports the Federal Reserve's wait-and-see approach to further interest rate hikes this year.

Japan's government is considering a slight downgrade to its assessment of the economy in its monthly report for March as exports and factory output fell due to slowing demand from China, the Nikkei business daily reported on Thursday. In February, the government said the economy was recovering but noted weak data on corporate sentiment, capital expenditure and exports showed the US-China trade war is hurting the outlook for the world's third-largest economy.

Regulators in some Asian countries are getting tougher on auditors after landmark defaults, in an increasingly high-stakes game as investors call for earlier warning signs amid expectations for debt failures to mount. High-profile collapses of commodities trader Noble Group Ltd and India’s shadow lender Infrastructure Leasing & Financial Services Ltd have rocked investors over the past year. In China, a spate of defaults has raised concerns over the quality of financial reports.

Cryptocurrencies delivered a mixed performance on Thursday morning in Asia, though price movements in both directions were slight. Traditional finance players took another shot at digital assets. The Basel Committee on Banking Supervision (BCBS), an international banking regulator, warned of the threat that crypto assets pose to banks and financial stability. The BCBS is a committee of banking supervisory authorities backed by the Bank for International Settlements (BIS) whose members include 60 of the world’s central banks.