I. Yesterday's News International News 1. U.S. President Donald Trump warned Republican lawmakers on Tuesday that voters could punish them if they do not approve a plan he favours to dismantle Obamacare. In the visit he made to the U.S. Capitol, Trump told fellow Republicans in the House of Representatives they would face "political problems". While Republicans control both the House and Senate, the party's leaders face a difficult task in uniting their members behind the healthcare bill, just the first in a series of reforms that Trump has promised, including overhauls of the tax system and business regulations.
2. British inflation last month shot past the Bank of England's 2 percent target for the first time since the end of 2013 and looks set to climb further due to the Brexit hit to the pound and rising global oil prices. Consumer prices leapt by a stronger-than-expected 2.3 percent in annual terms, their biggest increase since September 2013 and up sharply from 1.8 percent in January, the Office for National Statistics said. The ONS said transport costs, which were pushed up by rising fuel costs, were the biggest driver of inflation in February. Excluding oil prices and other volatile components such as food, core consumer price inflation rose to 2.0 percent, above economists' expectations of a 1.8 percent rise.
3. Banks in London that relocate operations to the euro zone after Brexit are likely to be spared a lengthy entry test by regulators, making it easier for them to shift, according to two officials with knowledge of the matter. It is set to temporarily waive an examination of the financial models that big retail lenders and investment banks use to determine the risk of a default on a mortgage or derivative - as long as the banks meet the standards of British regulators, they said. Any such decision by the ECB would be chiefly for practical rather than political reasons and would, said one of the people, aim to minimise disruption to European finance after Britain leaves the EU.
4. Federal Reserve Bank of Cleveland President Loretta Mester said on Tuesday that if the economic data holds up she supports the U.S. central bank taking steps that would begin to reduce its $4.5 trillion balance sheet. Mester added that such a move would be consistent with the Fed's oft-repeated phrase that it would look at reducing the size of its balance sheet when normalization of interest rates was well under way. In her speech, Mester said that while she did not expect the Fed to raise rates at every meeting, if the economy remains strong the pace should not be as slow as the once-a-year increases seen over the past two years.
Domestic News 5. China's Premier Li Keqiang warned that "the State-owned assets are the common wealth of all of China's people" and must never become the easily gained, ill-gotten possessions of any single person, saying that the goal is to "ensure the safe operation of State-owned assets and that their value is maintained or increased".
6. Chinese Premier Li Keqiang's official visit to Australia is expected to see an alignment between the China-proposed Belt and Road Initiative. But Australia may take some time to make promise, two sources familiar with this matter said.
7. China's economic growth is likely to slow to 6.5 percent this year and cool further to 6.3 percent in 2018, the OECD said, though exports are set to pick up as global demand strengthens.
8. China announced the introduction of new regulations on housing market in first- second, and third-tier cities, echoing the statement in the Central Economic Work Conference held at the end of last year on keeping the country's property market under check. China's central bank said it will strictly tighten housing loans, adding to the regulations on prevent risks and curb bubble in housing market.
II. Market Overview FX 1. Global Market The dollar dipped to a near-four month low against the Japanese yen on Tuesday as concerns about how quickly the Trump administration can implement pro-growth policies pushed stocks lower and kindled safe-haven demand for the Japanese currency. The dollar fell 0.86 percent to 111.58 yen, its lowest since Nov. 28. The dollar index, which measures the greenback against a basket of six major currencies, dipped below the 100 level for the first time since Feb. 7. The euro rose to its highest level since Feb. 2 of $1.0812, up 0.69 percent. Sterling jumped 1.1 percent to its highest level in three weeks, after data showed British inflation in February above the Bank of England's 2 percent target for the first time since the end of 2013.
2. Home Market China's yuan rose against the dollar on Tuesday, with midpoint rate falling slightly. Yuan reversed early losses as a stronger euro in the afternoon session pushed the dollar index down, adding to a tightening liquidity in yuan in triggering stop-loss by market bulls on the dollar.
Precious Metals Gold rallied to the highest level in nearly three weeks on Tuesday after a strong debate performance from French centrist presidential candidate Emmanuel Macron and as fading expectations for near-term U.S. interest rate hikes pushed the dollar lower. Spot gold was up at $1,244.50 an ounce, just off the session high of $1,247.60, its highest level since March 2. U.S. gold futures for April delivery settled up 1 percent at $1,246.50.
Commodities 1.Crude Oil Oil prices fell on Tuesday, with U.S. crude dropping to its lowest since November, as concerns about new supplies overshadowed the latest talk by OPEC that it was looking to extend output cuts beyond June. Brent futures for May delivery fell 66 cents, or 1.3 percent, to settle at $50.96 a barrel, its lowest since March 14.
2.Base Metals Copper hit a one-week low on Tuesday as talks to resolve a strike at the world's biggest copper mine in Chile were set to resume and production at another huge mine in Indonesia restarted. Benchmark copper on the London Metal Exchange ended down 1.8 percent at $5,776 a tonne. The metal had earlier touched $5,761, its lowest since March 14. Cash copper was trading at a discount of $27 a tonne to the three-month price, its weakest since mid-January and indicating ample supply. Zinc ended down 1.2 percent at $2,829, while sister metal lead closed flat at $2,273. Tin rose 0.3 percent to $20,400, having earlier hit its highest since late January. Aluminium climbed 0.3 percent to $1,927, having earlier hit its highest since early March.
U.S. Treasuries 1. U.S. bonds U.S. Treasury yields fell to three-week lows on Tuesday as stock markets tumbled, raising demand for low-risk U.S. government debt, with analysts citing frustration with the pace of the Trump administration's fiscal plans as a factor behind the move. Benchmark 10-year U.S. Treasuries gained 11/32 in price to yield 2.43 percent, the lowest yield since March 1 and down from 2.50 percent earlier on Tuesday.
2. Chinese bonds China's interbank money rates extended gains with the most active 10-year government bonds edging higher, while few shorter-dated debts and credit debts were traded due to low liquidity. The IRS rose across board, led by one-year IRS that rallied almost 10 bps, narrowing down the spread with five-year IRS.
Stock Market 1. U.S. Equities Wall Street fell sharply on Tuesday as investors worried that President Donald Trump will struggle to deliver promised tax cuts, with nervousness deepening ahead of a key healthcare vote. The S&P 500 and Dow Jones Industrial Average lost over 1 percent in their worst one-day performances since before Trump's election victory in November. The S&P financial index sank 2.87 percent, its biggest daily fall since June. The Dow Jones Industrial Average dropped 237.85 points or 1.14 percent to end at 20,668.01 points, while the S&P 500 lost 29.45 points or 1.24 percent to 2,344.02. The Nasdaq Composite fell 107.70 points or 1.83 percent to 5,793.83. The CBOE Volatility index, Wall Street's "fear gauge", jumped 10 percent.
2. Hong Kong Equities Hong Kong stocks climbed to a near 20-month high on Tuesday, bolstered by continued inflows from Chinese investors and signs of global economic recovery. The benchmark Hang Seng index rose for a fourth straight day, adding 0.4 percent to end at 24,593.12, its highest close since July 31, 2015. The Hong Kong China Enterprises Index gained 0.6 percent, to 10,644.15.
3. China Equities China stocks closed in the positive territory for the second consecutive day in a tight range on Tuesday. The gains in the white wine, home appliances were offset by losses in steel, nonferrous metals. Liquidity problem also capped gains. The Shanghai Composite Index closed up 11.4 points or 0.35 percent to 3,262.2. The trading volume of Shanghai A shares rose to RMB 218.9 billion from RMB 213.8 billion. CSI 300 ended at 3,466.67, up 0.49 percent.
|