June 6, 2017 - Market Update

Short recap

Asia in red on risk off as plenty of things going on this week

Europe opening lower

US election scandal going more public with DoJ accusing contractor about leaking top-secret documents

PIMCO neutral on Italy after offloading Italian bonds

Italy not leaving EZ but probability of things going wrong is high

UK readying for elections on Thursday amid security issues

China suggesting qualified firms to issue Panda bonds (denominated in CNY, issued by non-China issuer but sold in China)

China looking at expanding futures trading to foreigners

Equities

Lufthansa seeing higher traffic from US and Asia

Knock, knock…Siri from Apple coming to you home via HomePod speaker

GM-Greenlight Capital stock battle keeps going

Blackstone likes Scandinavia and wants to buy Finnish real estate Sponda (USD 2 bln)

GTCR and Carlyle working on buying Albany Molecular Research

Apple and Amazon to join Foxconn to buy chip business from Toshiba

In general, Europe and Japan still look attractive (valuation & flow)

Insurers like Swiss Life, followed by banks can benefit from hiking cycle

Bonds

10-yr Trys yield at 2.17%

10-yr Bund yield at 0.28%

DXY

Higher liquidity support the increase in FX reserves

Rising USD liquidity and excess of USD funding well supporting move to yielding assets despite Fed gradual tightening

Support at 96.44 (38.2% Fibo)

EURUSD

US yields not supporting USD

Market keeps respecting 1.1300

But bids weakening towards 1.1284

Support at 1.1180 (23.6% Fibo)

USDJPY

Below 110.00 and 200 DMA (if we close below, the 108.12 is next)

Support 109.50-60 range (76.4% Fibo)

USD 1.3 bln options sitting between 108.90-109.00

In general, Japanese corporates find the range of 108.00-110.00 as a budget rate zone

What may add additional strength to JPY

Upcoming Data/Events

June 8 – ECB meeting – Draghi being alone but inflation data from US and JP suggesting ECB to carry on with ultra-loose stimulus

ECB likely to adjust the risk to economy wording but no change to asset purchases

June 8 – UK elections including Scotland, if SNP/Sturgeon wins the independence referendum likely to follow

June 8 - Former FBI director James Comey to testify before Senate

June 11/18 – French Legislative (Parliamentary) elections (a big question mark for Macron to gain majority)

June 13/14 – FOMC meeting – Jun hike probability at 95%, Sep at 28% and Dec at 40%. After Friday’s NFPs Sep hike may be skipped if data doesn’t come strong.

June 15/16 – EcoFin meeting to discuss Greece

Should you have any questions feel free to contact me anytime.

Good luck Champs!

Mr Hawk

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