Cautious start seen on Wall Street losses, Gulf tensions


SYDNEY, July 22 (IFR) - Asian risk markets may take a small backward step this morning, following a Wall Street slippage last Friday on receding expectations of an aggressive 50bp rate cut at the July 30-31 FOMC.

Increasing tensions in the Gulf, after Iran seized a British-flagged oil tanker, provides further justification for a cautious start to the week.

Hopes for a 50bp reduction had soared on Thursday when New York Fed President John Williams and Fed Board of Governors Vice Chair Richard Clarida outlined the case for quick action to support the US economy.

His clarification, alongside a Wall Street Journal report that a 25bp cut was likely, saw expectations of a 50bp move slump from as high as 71% on Thursday to 22.5%, according to CME's FedWatch tool.

US shares more than reversed their early Friday gains as easing assumptions were reassessed to leave the Dow Jones, S&P 500 and Nasdaq Composite down 0.25%, 0.62% and 0.74% on the day.

Most European benchmark equity bourses managed to post modest gains with the FTSE 100, DAX and CAC 40 edging 0.21%, 0.26% and 0.03% higher, respectively.

The FTSE Milan was the notable exception, dropping 2.03% on elevated political concerns as tensions grew between the coalition government's two main political parties.

The Treasury curve flattened to reflect fading 50bp rate cut prospects, with US two-year yields climbing 4bp to 1.82%, while the 10-year and 30-year both firmed 1bp to 2.05% and 2.58%.

In the European rates market 10-year Bund and Gilt yields eased 1bp and 2bp to minus 0.32% and 0.74%, while 10-year BTP yields climbed 4bp to 1.60%.

Primary markets

Chinese private school operator Bright Scholar Education Holdings, rated Ba3/BB- (Moody's Fitch) will meet investors in Hong Kong, Singapore and London from today for a proposed debut US dollar senior note offering. JP Morgan is global coordinator and bookrunner.

Westpac New Zealand (A1/AA-/AA-) has set guidance at mid-swaps plus 85bp-90bp for a self-led New Zealanddollar five-year MTN, due to price on Wednesday.

People's Choice Credit Union is due to launch a A$500m (US$353m) Light Trust 2019-1 RMBS offering this week. NAB is arranger and joint lead manager with ANZ, Macquarie and Westpac.

RedZed is expected to launch an indicative A$400m non-conforming RMBS issue this week, via RedZed Trust Series 2019-1. NAB is arranger and joint lead manager with CBA.

This article appears in: Stocks , World Markets , Politics

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