Gold Supported By Safe Haven Demand

Jan 06 20, 07:07 GMT

General Trend:

As tensions rise over Iran and Iraq, safe haven flows flooded into the yen and Brent oil tops $70/bbl for the first time in 3-months
Energy companies trade broadly higher in Asia
Japanese equity markets underperform in the face of catch-up selling after recent holidays; Topix Marine/Transportation index declines over 4%
Financials lead losses in Australia as government bond yields decline, airlines weighed down by higher oil prices; Aussie gold miners track strength in gold prices
Bega Cheese declines over 9% in Australia as the company gave an update on the impact of the bushfires
Decliners in Hong Kong include tech, financial and property firms
Shanghai Composite outperforms amid gains in the IT, Consumer Discretionary and Industrial sectors
Tesla’s China suppliers gain (Ganfeng Lithium +10%), the company previously said it plans to start delivering China-made Model 3 vehicles to the public on Jan 7th (Tuesday)
Australia PM committed at least A$2.0B in spending over 2 years for bushfire recovery, said Australia’s budget surplus is no focus during wildfire recovery

Headlines/Economic Data

Australia/New Zealand

ASX 200 opened -0.2%
(AU) Australia Dec Performance of Manufacturing Index: 48.3 v 48.1 prior
(AU) Australia Dec Final CBA PMI Services: 49.8 v 49.5 prelim (2nd consecutive month of contraction); Composite: 49.6 v 49.4 prelim (2nd consecutive month of contraction)
BGA.AU Issues update on bushfires in Bega region: Fires have not directly impacted the company’s two sites in NSW
BFG.AU Guides FY19 Pretax A$46M, +30% y/y
(AU) Australia PM Morrison: Committing A$2.0B over 2-years for bushfire recovery, additional funds will be provided if needed
(AU) Australia Insurance Council sees A$431M in losses form fire season

Japan

Nikkei 225 opened -1.4%
4901.JP Fuji Xerox to End Technology Agreement with Xerox Corporation on Scheduled Expiration Date of March 31, 2021
(JP) Japan Dec Final PMI Manufacturing: 48.4 v 48.8 prelim (8th consecutive contraction and lowest since Oct 2019)
(JP) Japan said to consider law that would restrict certain technology imports from China – US financial press
(JP) Japan Fin Min Aso: Japan economy is improving, super low interest rates wont go away easily
(JP) Bank of Japan (BOJ) Gov Kuroda: Need to remain vigilant about overseas developments, will keep a close watch on risks

Korea

Kospi opened -1.0%
(KR) South Korea Dec Foreign Exchange Reserves $408.8B v $407.5B prior (record high)
(KR) South Korea PM Choice Chung Sye-kyun supports efforts to resume economic projects in cooperation with North Korea as soon as conditions are met – written answer to parliament ahead of his confirmation hearing
(KR) South Korea allocates research budget of KRW1.5T for 2020 (+KRW414.4B from 2019) to help small and medium-sized enterprises (SMEs) develop technologies – Yonhap
(KR) North Korea: Will not wait for the lifting of international sanctions and called for self-reliant measures to overcome the situation – Rondong Sinmun

China/Hong Kong

Hang Seng opened -0.4%; Shanghai Composite opened -0.4%
(CN) China PBOC Outlines key policies and tasks for 2020: To maintain prudent monetary policy with moderation and flexibility; making “smooth” progress on digital currency; trade deal may lead to more policy easing
(CN) According to China Index Academy, a property research institution Dec China Home Prices Y/Y: 3.3% v 3.1% prior – Xinhua
(CN) CHINA DEC CAIXIN PMI SERVICES: 52.5 V 53.2E; PMI Composite: 52.6 v 53.2 prior
(CN) China trade delegation to travel to Washington DC Jan 13th to sign Phase 1 trade deal – SCMP
(CN) China replaces its Hong Kong liaison, Wang Zhimin, with Luo Huining
(HK) Hong Kong Dec PMI: 42.1 v 38.5 prior (highest reading since July 2019)
(CN) China PBoC Open Market Operation (OMO): Skips reverse repos for the 10th consecutive session; Net drain CNY50B v drain CNY150B prior
(CN) Reminder: China PBOC RRR cut announced Jan 1st, goes into effect today, releasing more than CNY800B in long term funds

Other Asia

(SG) Singapore Dec PMI: 51.0 v 50.4 prior (2nd consecutive expansion and highest since July)

North America

(US) President Trump: “These Media Posts will serve as notification to the United States Congress that should Iran strike any U.S. person or target, the United States will quickly & fully strike back, & perhaps in a disproportionate manner. Such legal notice is not required, but is given nevertheless!” – tweet
(US) Fed’s Williams (moderate, voter): Low global interest rates are here to stay, which should lead Central Bankers to renew commitments to inflation goals; stresses need to stick to 2% target – US Financial Press Interview
BA Follow Up: US FAA is expected to make formal decision by as early as Feb about whether mandatory flight-simulator training is required before US pilots can resume operating the 737 Max – US financial press
(US) US House of Representative expected to vote on war powers resolution later this week to limit US Pres Trump on Iran

Europe

(UK) Britain on track for Jan. 31st Brexit after PM Johnson won approval for his Brexit deal in parliament – financial press
(EU) Former ECB chief Draghi: EU faces the risk of slipping into a Japan style deflation, but can be avoided if it takes decisive policy measures – comments via video
(IE) ECB’s Lane (Ireland, chief economist) underlying CPI gauges are moving up (update)
(IQ) Iraq PM Adil preparing a memo for legal steps to remove foreign troops from the country after parliament approved resolution asking the government to end the presence of any foreign troops on Iraqi soil and prevent them from using (its) territory, water and air space for any reason – press
(IR) Iran lifts all limits on uranium enrichment; will no longer abide by limits of 2015 nuclear deal – Iran State Media

Levels as of 12:15ET

Hang Seng -0.6%; Shanghai Composite +0.6%; Kospi -0.8%; Nikkei225 -2.0%; ASX 200 0.0%
Equity Futures: S&P500 -0.3%; Nasdaq100 -0.3%, Dax -0.6%; FTSE100 -0.2%
EUR 1.1172-1.1156; JPY 108.12-107.77; AUD 0.6956-0.6934; NZD 0.6666-0.6650
Commodity Futures: Gold +1.7% at $1,579/oz; Crude Oil +2.4% at $64.56/brl; Copper +0.2% at $2.79/lb