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China: There have been new progress in negotiating text of trade deal with US

Some positive headlines for risk at least

  • China and US still conducting talks on trade deal text
  • “Plenty of work” still remaining with US on trade deal
Okay, the follow up comments aren’t so optimistic. Sure, both sides are still progressing towards some semblance of a deal but that is already largely priced in by markets. The fact that they mention that there is still “plenty of work” to be done means we will still have to put this on ice for the time being.

Labour would win EU elections, European Parliament poll shows

The Labour party would emerge as the biggest UK force in the European Parliament in British EU elections, according to new projections which show a surge in support for Nigel Farage’s Brexit party.

Labour would return 19 MEPs to Brussels in an EU election which will need to be held next month if Theresa May cannot pass her Brexit deal through parliament before May 22.

The Tories would be in second with 12 seats, and the Brexit party led by Mr Farage, on 10 MEPs, according to the projections. The UK Independence Party would be in fourth place with nine seats.

The projections are the first time the European Parliament has published new MEP seat forecasts to include the UK. Analysts have warned the estimates for the UK are more unpredictable than most as formal campaigning for the elections has yet to begin in Britain.

An internal poll from the EP, carried out on April 10 and seen by the FT, gave Labour a much bigger lead with 28 MEPs.

The UK’s participation in the elections has been opposed by EU leaders like Guy Verhofstadt, the parliament’s Brexit chief, who think it will import the “poison” of the leave campaign into European politics.

Haven flows dominate as poor Eurozone economic data reignite global growth worries

10-year bund yields slump by 5 bps to just 0.03% now

Germany 10-year bond yields

The sluggish data from Germany and overall Eurozone PMIs are spreading jitters across markets as haven flows start to dominate once again. 10-year bund yields are down by 5 bps to 0.03% while Treasury yields are seen slumping by 4.5 bps to 2.548% currently.
And in the currencies space, that is helping to keep the likes of the dollar, yen and swissie bid on the day. All major currencies are close to session lows currently against the three currencies mentioned as haven/risk-off flows start to dominate proceedings.
According to Markit, they view that the Eurozone economy should only grow by 0.2% in Q1 2019. That’s really awful and it is just going to spread more fear on global growth worries.

Eurozone April flash manufacturing PMI 47.8 vs 48.0 expected

Latest data released by Markit – 18 April 2019

  • Prior 47.5
  • Services PMI 52.5 vs 53.1 expected
  • Prior 53.3
  • Composite PMI 51.3 vs 51.8 expected
  • Prior 51.6
Ouch, these readings are certainly not helping with euro sentiment. Manufacturing is a slight miss on expectations but the services and composite readings overall are softer than expectations and also softer compared to the March readings.
EUR/USD is being dragged lower on the release here to 1.1254 with the dollar and yen staying bid as a result of haven flows. Bund yields and Treasury yields are sinking, resulting in the more risk-off tone as we begin the session.

Nikkei 225 closes lower by 0.84% at 22,090.12

Japanese stocks slump as optimism remains fleeting among equities

Nikkei 17-04

Asian equities are soggy following declines seen in US stocks overnight. The Nikkei is also joined by the Hang Seng and Shanghai Composite as both are also down on the day, falling by 0.6% and 0.2% respectively.

In general, risk sentiment remains rather tepid with Treasury yields also looking heavy to start the day. That is leaving USD/JPY to be a little lower at 111.85 as we begin the European morning session.

More China stimulus on the way? Rumours say yes.

An ICYMI on reports yesterday that China is planning further stimulus.

Take care, sources are unnamed. But hey, rumours and financial markets are never separated for too long!
Bloomberg report:
  • Officials are drafting measures to bolster sales of cars and electronics
The proposals
  • include subsidies for new-energy vehicles, smartphones and home appliances
  • are at a consultation stage with other government branches, with no guarantee that they’ll be approved, the people said.

Link for more. 

Japan Nikkei Manufacturing PMI for April, preliminary: 49.5 (prior 49.2)

The flash reading for this, with the ‘final’ to follow on May 7

Comes in at 49.5
  • an improvement from March’s 49.2
  • still below 50, thus still showing contraction
In the sub measures, the new export index fell at its fastest pace in 3years.
  • to 47.1 (from March’s 48.1)
  • Trade tensions and weaker offshore demand a factor here of course.
 The employment index is higher, at 52.2 (prior 51.4)
Yen has been sleepy the whole morning here so far. A circa 10 point range only for USD/JPY.
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