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[PODCAST] EU Open Rundown 11th February 2020

  • Asian equity markets were higher across the board after taking the cue from US peers
  • China reported 2478 new coronavirus cases and 108 new deaths as of Feb. 10th
  • The ECB could announce a decision on whether to change its inflation goal by the Summer
  • Fed's Daly said inflation a bit above target is 'far better' than a bit below
  • Looking ahead, highlights include UK GDP (Q4 Prelim & Dec), Industrial and Manufacturing Output, US New Hampshire Democratic Primary, Fed’s Powell, Quarles, Kashkari and Bullard, ECB’s Lagarde, Lane and Schnabel, BoE’s Carney and Cunliffe, US 3yr Note, EIA STEO
  • Earnings: Dominion Energy, Exelon Corp, Progressive, Hilton, Daimler


China reported 2478 new coronavirus cases and 108 new deaths as of Feb. 10th vs. 3062 new cases and 97 additional deaths for Feb. 9th, to bring the total amount of cases to 42638 and death toll to 1016. (Newswires)

China Human Resources Ministry said overall jobs situation was stable amid coronavirus outbreak, while it added that China implemented specific measures and will support SMEs in employment. In related news, China Ministry of Transport said an estimated 160mln people in China will return to cities to resume work by February 18th. (Newswires) Chinese government research reiterated that China GDP growth could take a 1ppt hit from the coronavirus. (Newswires) China’s Hubei Province has dismissed their Communist Party boss as well as the health commission’s provincial director; anti-corruption body reported they have been dismissed for unspecified reasons with Wang Hesheng to replace them. (Newswires)


Asian equity markets were higher across the board after taking the cue from US peers which looked past the ongoing coronavirus concerns and resumed last week’s rally to lift the S&P 500 and Nasdaq to unprecedented levels. ASX 200 (+0.6%) was led by outperformance in tech and with firm gains in the largest weighted financials sector. Chinese markets were also upbeat despite the PBoC liquidity drain and continued rise in the casualties from the coronavirus in which the death toll has now surpassed 1000, although the pace of additional confirmed cases slowed from the prior day. Following yesterday’s reassurances offered by Chinese President Xi, the Hang Seng (+1.4%) and Shanghai Comp. (+0.6%) traded positively with the former buoyed by property names and with Geely Auto the frontrunner in Hong Kong as it explores a merger with its Volvo unit, while Japanese markets remained shut for National Day holiday.

PBoC injected CNY 100bln via 7-day reverse repos for a net daily drain of CNY 280bln. (Newswires) PBoC set USD/CNY mid-point at 6.9897 vs. Exp. 6.9904 (Prev. 6.9863)


UK PM Johnson is expected to approve HS2 in its entirety, but the Northern Phase 2 will be placed under review; additionally, in an attempt to placate rebellious MPs the statement will include GBP 5bln funding for bus and cycle links outside of London. Could see up to 60 Tory MPs rebel. (BBC/Sky) For reference, the Conservative party has an 80 seat majority.

UK Chancellor Javid ha stated that Ministers are working on a white paper designed to outline a vision for the financial services sector after the Brexit transition period, to be published in the Spring. Designed to retain regulatory autonomy while seeking ‘a “reliable equivalence process”, on which a “durable relationship” can be built.’. On equivalence, notes that it will only be granted if each side believes the others regulations are compatible; however, this does not mean identical – full range of equivalence assessments to be conducted by June. (City AM)

UK BRC Sales Like-For-Like (Jan) Y/Y 0.0% (Prev. 1.7%); BRC Total Retail Sales Y/Y 0.4% (Prev. 1.9%). (Newswires)

Barclaycard UK consumer spending rose 3.9% Y/Y in January, while 42% of consumers felt confident in January survey (highest since Sept. 2016) vs. 41% in December. (Newswires)

The ECB could announce a decision on whether to change its inflation goal by the Summer, in what is being described as a “rushed agenda”, according to officials. The review will be split into 8-parts; inflation goal, measuring inflation, policy instruments, macroeconomic modelling, de(globalisation), digitalisation, communication, climate change. (Newswires)

Ireland Election Final Results: Fianna Fail at 38 seats, Sinn Fein at 37 seats, Fine Gael at 35 seats. (Newswires)

US President Trump said it is time to negotiate "very seriously" with the EU on trade. (AFP)


DXY traded rangebound and plateaued after the recent strong US jobs data, with upside capped by resistance at its YTD highs around 98.88 ahead of today’s New Hampshire Democrat Primary and Fed Chair Powell’s testimony at Congress. The greenback’s major counterparts were subdued in which EUR/USD languished around 1.0915 where there is a notable option expiry for today’s New York cut and amid political uncertainty in Germany, while GBP/USD remained uneventful with price action stuck near the 100-DMA of 1.2913. Elsewhere, USD/JPY was lifted on the improved risk appetite despite the absence of Tokyo participants and antipodeans were firmer with AUD/USD the outperformer to reclaim the 0.6700 handle after somewhat mixed data.

Australian Home Loans (Dec) M/M 4.4% (Prev. 1.8%). (Newswires) Australian NAB Business Confidence (Jan) -1 (Prev. -2.0) Australian NAB Business Conditions (Jan) 3 (Prev. 3.0)


Commodities were mostly higher overnight after benefitting from the heightened risk appetite which lifted WTI crude futures back above the USD 50.00/bbl to recoup nearly all of Monday’s losses which had been triggered by ongoing demand concerns related to the coronavirus and as markets await Russia’s stance on additional cuts, while focus also shifts to the latest inventory data beginning with the private sector inventories due later today. Elsewhere, gold was subdued due to the lack of safe-haven demand and as the DXY lingered around YTD highs, while copper was also buoyed by the risk sentiment and alongside the early strength in Chinese commodity prices.

Algeria Energy Minister said OPEC and Non-OPEC states remain in discussions over the JTC's recommendation to extend the output cut, according to state media. (Newswires)

Wood Mackenzie said the impact of coronavirus on China gas demand will depend on severity and time required to contain the virus, sees FY gas demand reduction of 6bcm-14bcm and downside impact to Chinese LNG demand between 2.6mln-6.3mln tons in a more prolonged case. (Newswires)


Twitter sources reported that the Turkish Army was heavily shelling multiple positions of the Syrian Army in the Idlib countryside, while Russian fighter jets were said to flown over the Turkish Army observation posts. (Twitter)

North Korea continued to enhance its nuclear and ballistic missile programmes in 2019 in violation of UN sanctions, according to a confidential UN report. (Newswires)


The TPLEX was bid on Monday as woes continued to linger on the coronavirus outbreak and its transmission globally. Desks note the "wash out" of speculative shorts ahead of a duration heavy US Treasury issuance schedule for the week (3s, 10s, and 30s), additionally, with the majority of S&P 500 constituents now out of their earnings blackout, further IG corporate supply can be expected. The T-Note found its lows in the overnight before the Western front came and brought it back to highs as equity futures drifted lower somewhat before the cash open. However, the equity complex turned positive not long after the open, coinciding with strength in the greenback, keeping the 10-year yield anchored around 1.56% for a short while before it continued to move lower through till settlement, taking it just beneath 1.55%; curve spreads were little changed, with the belly seeing a slightly larger bid than the short and long end. US T-note futures (H20) settled 9 ticks higher at 131-11+.

Fed's Harker (Voter, Neutral) said the Fed should hold rates steady for a while and watch how developments as well as the data unfolds before taking action. Harker also stated that the economy is in good shape and expects economic growth of 2%, while he added inflation is on track to achieve the 2% target. Furthermore, Harker added the Fed would need to discuss the economy if coronavirus situation worsens although it is not currently at that point and suggested that a rate cut would not do anything to boost business investment. (Newswires)

Fed's Daly (Non-voter, Neutral) said inflation a bit above target is 'far better' than a bit below in today's environment and noted historically low unemployment does not mean labour market is historically tight, while she added that lower inflation and rates mean less monetary policy space is available to fight the next downturn. (Newswires)

US President Trump proposed USD 4.8trln budget which suggests a reduction in social-safety-net programmes and foreign aid, whilst it is said to raise outlays for defense and veterans. (WSJ)

Reuters/Ipsos poll showed national poll showed Sanders at 20%, Biden 17%, Bloomberg 15%, Warren 11%, Buttigieg 8%, Yang 5% and Klobuchar 3%. (Twitter)

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