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Sterling jumps as Corbyn supports second referendum, May mulls Brexit delay

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    Sterling jumps broadly as UK opposition Labour said they’re ready to back second referendum. Also, Prime Minister Theresa May is said to be considering delaying Brexit. Labour leader Jeremy Corbyn has been against another public vote on Brexit but finally bowed down to pressure inside his party. He formally said on Monday evening that “one way or another, we will do everything in our power to prevent no-deal and oppose a damaging Tory Brexit based on Theresa May’s overwhelmingly rejected deal,”. And, “that’s why, in line with our conference policy, we are committed to also putting forward or supporting an amendment in favor of a public vote to prevent a damaging Tory Brexit being forced on the country.”

    Separately, Bloomberg reported that May will finally allow Cabinet discussion on extending Article 50 beyond March 29 on Tuesday. The Sun went further and said May would propose formally ruling out a “no-deal” Brexit scenario. May will chair a Cabinet discussion today in London morning, and that update the Parliament on discussions after noon. The government will propose motions on Brexit state-of-play by Tuesday night. The motion will be debated and voted on Wednesday.

    Fed Clarida: US economy in a good place right now

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      Fed Vice Chair Richard Clarida attended a Dallas Fed event on Global Perspectives, with Dallas Fed President Robert Kaplan. There Clarida said that “the U.S. economy is in a good place right now….It’s a good situation to be in, and we really want to do whatever we can to help support and maintain the economy.”

      Clarida also noted that slowdown in Asia and Europe are “definitely a relevant factor” to Fed policy. Since other central banks are still having interest rates stuck in crisis-fighting mode, “that obviously, on balance, makes the global economy more fragile.” He also tried to talk down the implication of yield curve inversion. He said “you can’t be handcuffed” to financial market signals . There are factors like global demand for US treasuries that pushes yields down at the long end.

      Kaplan indicated that “you want to run maybe a little hotter, but you don’t want to go too far.” And, since “inflation is not running away from us”, Fed “might have the luxury of trying to do more to get more people into this workforce on a sustainable basis …”

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      Trump: China trade deal in advanced stages, very close to signing summit

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        Trump indicated overnight that the US is “very, very close” to completing a trade agreement with China. And there will be a “signing summit” with Chinese President Xi Jinping soon. Trump said that “we’re going to have another summit, we’re going to have a signing summit” and “so hopefully, we can get that completed. But we’re getting very, very close.”

        He later also tweeted that “China Trade Deal (and more) in advanced stages. Relationship between our two Countries is very strong. I have therefore agreed to delay U.S. tariff hikes. Let’s see what happens?” “If a deal is made with China, our great American Farmers will be treated better than they have ever been treated before!”

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        Trump decided to delay new tariffs on USD 200B of Chinese imports beyond March 1. For not, there is no information on how long that would that be postponed. A spokeswoman for the U.S. Trade Representative’s Office said the agency had no announcements at this time beyond the president’s remarks.

        Separately, Trump has left for a summit with North Korean leader Kim Jong-un in Vietnam. An initial one-on-one meeting is scheduled for Wednesday, followed by dinner with advisers.

        EU Tusk: We’ll face an alternative, chaotic Brexit, or an extension

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          European Council President Donald Tusk said in a new conference in Egypt that ” in the situation we are in, an extension would be a rational decision”, referring to Brexit. But he also noted that “Prime Minister May still believes she will be able to avoid this scenario”.

          Tusk added that “for me, it’s absolutely clear that there is no majority in the House of Commons to approve a deal. We will face an alternative, chaotic Brexit, or an extension.”

          And, “the less time there is until the 29th of March, the greater the likelihood of an extension. And this is an objective fact, not our plan or our objective, but an objective fact.”

          Into US session: Canadian Dollar weakest on oil selloff, Yen follows

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            Entering into US session, Australia and New Zealand Dollar are taking turns to be the strongest one today. Sentiments are generally supported after Trump postponed the March 1 trade truce deadline with China. Chinese customs data also showed that US soybeans imports nearly doubled in January from a month ago. But it should be noted that other than the strong rally in Chinese stocks, market reactions elsewhere are relatively muted. Aussie is limited well above last week’s higher against Dollar and Euro. Yen is also held in familiar range against Dollar, Euro and Sterling.

            Canadian Dollar taking over Yen as the weakest one for today. WTI crude oil is down sharply, now below 56, comparing to Friday’s high at 57.83. It’s reacting negatively as Trump complains that oil prices are too high with his tweets again.

            In Europe, currently:

            • FTSE is down -0.09%.
            • DAX is up 0.56%.
            • CAC is up 0.33%.
            • German 10-year yield is up 0.016 at 0.112.

            Earlier in Asia:

            • Nikkei rose 0.48%.
            • Hong Kong HSI rose 0.50%.
            • China Shanghai SSE rose 5.60%.
            • Singapore Strait Times rose 0.07%.
            • Japan 10-year JGB yield rose 0.0056 to -0.034

            EU still assume UK to leave on March 29

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              European Commission spokesman Mina Andreeva said that EU’s assumption is that UK will still leave as planned on March 29. Brexit Minister Stephen Barclay and Attorney General Geoffrey Cox will meet EU chief negotiator Michel Barnier again on Tuesday.

              Andreeva also noted “good progress was being made” on the EU-UK political declaration on future ties and on “alternative arrangements” and “possible additional guarantees” on the Irish backstop. She added that both sides “agreed on the need to conclude this work in time before the European Council (of March 21)”.

              WTI oil dips after Trump urges OPEC to relax

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                WTI crude oil drops notably today after Trump’s tweet. He said “Oil prices getting too high. OPEC, please relax and take it easy. World cannot take a price hike – fragile!”

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                With today’s sharp fall, WTI should have formed a short term top at 57.83. Focus is now immediately on 4 hour 55 EMA (now at 56.06). Sustained break there should at least bring deeper fall to trend line support (now at 54.48).

                In the bigger, rise from 42.05 is seen as a corrective move. Hence, strong resistance will likely be seen around 61.8% projection of 42.05 to 55.85 from 51.49 at 60.01 to limit upside. That is is actually close to 50% retracement of 77.06 to 42.05 at 59.55. 55 week EMA (now at 59.60) is also in proximity.

                China Shanghai SSE targets 3500 in medium after breakaway rally

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                  The news that Trump delays the US-China trade truce deadline gives risk markets a general lift today. But performance in Chinese stock is overwhelming. The Shanghai SSE blew our expectations and closed up 5.60% at 2961.28. 38.2% retracement of 3587.03 to 2440.90 at 2883.84 was taken out with ease.

                  Technically speaking, it’s early to declare that China SSE is now in a long term bull market. The strong break of 55 week EMA is nevertheless a strong bullish development. Now, the corrective down trend from 5178.19 should have completed with three waves down to 2440.90, on bullish convergence condition in weekly MACD.

                  Current rise should extend through 3000 handle to 38.2% retracement of 5178.19 to 2440.90 at 3486.54. The reaction to resistance zone of 3486/3587 will reveal whether the SSE is really in a long term up trend.

                  Fed Bostic: Room to run with rate hikes if economy runs fine

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                    Atlanta Fed President Raphael Bostic said there is “room to run” with Fed’s rate hikes. as long as the economy is “running fine” and there is no sign of contraction. He expects the economy growth between 2.2-2.5% this year. But inflation is expected to rise above 2% target.

                    Bostic is still aiming at lifting Federal funds rate to neutral. And a slow approach is a good path for Fed. He’s currently seeing one rate hike this year and one in 2020.

                    BoE, FCA and CFTC announced measures to ensure continuity of derivatives trading and clearing post-Brexit

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                      Bank of England, UK’s Financial Conduct Authority and US Commodity Futures Trading Commission announced measures today to ensure Brexit, in whatever form “will not create regulatory uncertainty regarding derivatives market activity between the UK and US”. Measures include continued supervisory co-operation, extension of existing CFTC relief to EU firms to UK after Brexit. Also, US trading venues, firms and CCPs will be able to continue providing services in the UK.

                      In a joint statement, BoE Governor Mark Carney said “As host of the world’s largest and most sophisticated derivative markets, the US and UK have special responsibilities to keep their markets resilient, efficient and open.

                      “The measures we are announcing today will do that. Market participants can be confident that the clearing and trading of derivatives between the UK and US will maintain the high standards of today when the UK leaves the EU”.

                      Carney also warned that “The biggest issue from a financial stability perspective, from a market integrity perspective, from a continuity perspective, is a no-deal scenario by the end of March.”

                      Full statement here.Full statement here.

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                      Into European Session: China SSE up 5% on trade, AUD & NZD strongest

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                        Entering into European session, Australian and New Zealand Dollar are the strongest ones for today so far. Market sentiments are generally lifted by the “substance progress” in US-China trade talks. And, Trump announced to delay the March 1 trade truce deadline. He’s also planning a summit with Xi at Mar-a-Lago to seal the deal.

                        The strongest reactions are seen in Chinese stocks with Shanghai SSE hitting the highest level since June 2018. 3000 handle is now within touching distance.

                        Canadian Dollar is the weakest one for now but it’s merely paring some of last week’s strong gains. It’s followed by Dollar and then Yen. Sterling is also mildly firmer after UK delays another Brexit meaningful vote from Wednesday to March 12, just 17 days ahead of the formal Brexit date.

                        The economic calendar is rather light today. Focus will be on BoE Governor Mark Carney’s speech, as well as comments from Fed Vice Chair Richard Clarida.

                        In Asia:

                        • Nikkei closed up 0.48%.
                        • Hong Kong HSI is up 0.35%.
                        • China SSE is up 4.98%.
                        • Singapore Strait Times is down -0.02%.
                        • Japan 10-year JGB yield is up 0.006 at -0.034.

                        Japan Hamada: BoJ can drops the 2% inflation target

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                          Koichi Hamada, an advisor to Japanese Prime Minister Shinzo Abe said the BoJ could abandon the 2% inflation target. He told Reuters that “prices don’t need to rise much. From the perspective of people’s livelihood, what’s more desirable is for prices to fall, not rise.”

                          And, the inflation target is only “a tool for achieving full employment”. Hamada added “it can be abandoned. It isn’t absolutely crucial”, and the “appropriate target level of inflation can be decided by the central bank”.

                          On current monetary policy, Hamada said “the world economy faces substantial turbulence, the BOJ can wait”. There is no need for loosen up policy too as “Demand is exceeding supply now. As long as this trend continues, we don’t need to worry too much.”

                          UK delays Brexit vote to Mar 12, EU mulls 21-month extensions

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                            UK Prime Minister Theresa May announced that a Brexit “meaningful vote” would not take place this week. Instead, the vote on the withdrawal agreement is rescheduled to March 12, just 17 days before the March 29 Brexit date. Though, the Parliament will still hold a series of Brexit votes on Wednesday. Also, May insisted that “we still have it within our grasp to leave the European Union with a deal on the 29th of March and that’s what I’m going to be working at”.

                            On the other hand, Bloomberg reported that EU is mulling an Article 50 extension for as long as 21 months beyond March 29. The idea of a short three-month delay has been floating for some time. But it’s seen by EU as insufficient to break the deadlock. A three-month extension is only meaningful if for completing legal processes if UK Parliament approves the agreement.

                            Trump delays new tariffs on China, Yuan jumps to 7-month high

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                              Trump tweeted on Sunday that there was “substantial progress” made in US-China trade talks on “important structural issues including intellectual property protection, technology transfer, agriculture, services, currency, and many other issues”. Hence he will be delaying the scheduled March 1 tariff increase. In other words, trade truce now extends beyond the date.

                              Trump added that assuming there is additional progresses, he is planning a summit with Chinese President Xi Jinping at Mar-a-Lago resort in Florida to conclude the agreement.

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                              Later, Trump also said there could be “very big news over the next week or two” if all goes in well. He added that “China has been terrific. We want to make a deal that’s great for both countries and that’s really what we’re going to be doing.”

                              China’s Xinhua also said the US and China have made “substantial progress” on specific issues in the latest round of trade talks.

                              USD/CNH (offshore Yuan), resumes recent decline and hits a seven month low after the news. It’s now heading back to 61.8% retracement of 6.2359 to 6.9804 at 6.5020.

                              US-China trade talks extend through Sunday, no more MoUs

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                                US-China trade talks appeared to have made some important progress and are extended by two days through Sunday in Washington. In the Oval office while meeting Chinese Vice Premier Liu He, Trump said “we both feel there’s a very good chance a deal will happen.” He added that “both parties want to make this a real deal” and “we want to make this a deal that’s going to last for many, many years and a deal that’s going to be good for both countries.”

                                The final deal would be signed off at a summit with Chinese President Xi Jinping and Trump said he hoped to meet with in the “not-too-distant future.”  The current March 1 trade truce deadline could be extended by another month. Meanwhile, the final agreement might extend beyond trade to encompass Chinese telecommunications companies Huawei Technologies and ZTE Corp. Treasury Secretary Steven Mnuchin said the summit is tentatively scheduled for late March at the Mar-a-Lago resort in Florida.

                                Chinese Vice Premiere also said at the White House that there had been “great progress”. And, “from China, we believe that (it) is very likely that it will happen and we hope that ultimately we’ll have a deal. And the Chinese side is ready to make our utmost effort”. Later in a statement published by Xinhua, Liu said “the two countries have conducted fruitful negotiations and made positive progress in areas including the trade balance, agriculture, technology transfer, intellectual property protection, and financial services.”

                                Both teams are now working on Trade Agreements directly, rather than Memorandum of Understandings, as Trump dislikes MoUs. The original idea was to have six MoUs covering  cyber theft, intellectual property rights, services, agriculture and non-tariff barriers to trade, including subsidies. It’s uncertain what the new structures of the agreement would be. Mnuchin also said both sides have made an agreement on currency, without details.

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                                Fed Williams: Philips curve is alive and well

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                                  New York Fed President John Williams said in a speech that the Philips curve is the “connective tissue” between the Fed dual mandate of maximum employment and price stability. It’s “alive and well” and remains an “empirical basis for forecasting and for monetary policy analysis.” He said he “wholeheartedly” agree that Fed “must not be complacent about inflation expectations becoming unmoored, whether at too high or too low a level.”

                                  He noted that Fed policymakers “must remain vigilant regarding a sustained takeoff in inflation.” That include the risk that “very tight labor markets could eventually lead to a resurgence of inflation and unmoor expectations, as in the 1960s.” But at the same time “We must be equally vigilant that inflation expectations do not get anchored at too low a level.” And the current “persistent undershoot of the Fed’s target risks undermining the 2 percent inflation anchor.”

                                  Full speech here.

                                  Canadian Dollar shrugs mixed retail sales, follows oil higher

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                                    Canadian Dollar shrugs off mixed retail sales data, but follows oil prices higher. Headline retail sales dropped -0.1% mom in December versus expectation of -0.3% mom. Ex-auto sales dropped -0.5% mom versus expectation of -0.3% mom.

                                    WTI Crude oil’s rally resumes today and hits as high as 57.85 so far. Rise fro 42.05 is in progress and should target 61.8% projection of 42.05 to 55.85 from 51.49 at 60.01. For now, we’d continue to expect strong resistance around 60, which is close to 50% retracement of 77.06 to 42.05 at 59.55. 55 week EMA (now at 59.48). Upside should be capped there to bring near term reversal.

                                    German Ifo dropped to lowest since Dec 2014, economic situation remains weak

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                                      German Ifo Business Climate dropped to 98.5 in February, down from 99.3 and missed expectation of 98.9. That’s also the lowest level since December 2014, and the sixth decline in a row. Expectations index dropped to 93.8, down from 94.2 and missed consensus of 94.2. Current Assessment index also dropped to 103.4, down from 104.3 and missed expectation of 103.9.

                                      Clemens Fuest, President of ifo Institute said “these survey results as well as other indicators point to economic growth of 0.2 percent in the first quarter. The economic situation in Germany remains weak.”

                                      Full release here.

                                      China denies banning Australian coal at Dalian ports

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                                        Australian Dollar is lifted mildly after Chinese Ministry of Foreign Affairs spokesman Geng Shuang denied the report that Australian coal imports are banned by Dalian port. He said in a regular press briefing that china’s Australian coal imports continue as normal. Nevertheless, customs administration has stepped up environment and safety checks on foreign cargoes.

                                        Australia’s Minister for Trade, Simon Birmingham also said that “the application of those quotas combined with different testing and the quality assurance and environment is testing centres, may be slowing down the processing of costing data of coal in certain parts of China.” He added that “we have no basis to believe that there is a ban on Australian coal exports into China, or into any part of China.”

                                        Australian Prime Minister Scott Morrison also said “This is not the first time that on occasion local ports make decisions about these matters. “There is no evidence before me or us that would suggest it has the connotations that it has anything to do with anything more broadly than that. This happens from time to time.”

                                        According to Australian Bureau of Statistics, China is the largest buyer of Australian coal. Up to 89m tonnes were shipped last year, worth AUD 15B.

                                        Into European session: NZD weakest, AUD recovers

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                                          Entering into European session, New Zealand Dollar is the weakest one for today. RBNZ’s proposal to raise capital requirements for top banks apparent hurt sentiments towards the Kiwi. Such a move might tighten up financial conditions which eventually force the central bank to cut interest rates again. Yen is trading as the second weakest followed by Canadian. Rally in oil prices appear to be losing some momentum. Loonie will look into retail sales data today for renewed strength.

                                          Australian is the strongest one for today, paring some of this week’s losses. Officials have been trying to talk down the importance of China Dalian port’s ban of Australian coal imports. Swiss Franc and Euro are the next strongest for now.

                                          Over the week, Sterling is still the strongest one despite the lack of concrete breakthrough in Brexit impasse. Swiss Franc is the second strongest, followed by Euro. New Zealand Dollar, Australian Dollar and Yen are the worst performing ones.

                                          In Asia:

                                          • Nikkei closed down -0.18%.
                                          • Hong Kong HSI is up 0.17%.
                                          • China Shanghai SSE is up 1.62%.
                                          • Singapore Strait Times is down -0.26%.
                                          • Japan 10-year JGB yield is up 0.0018 at -0.038.

                                          Overnight:

                                          • DOW dropped -0.40%.
                                          • S&P 500 dropped -0.35%.
                                          • NASDAQ dropped -0.39%.
                                          • 10-year yield rose 0.034 to 2.688
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