[PODCAST] EU Open Rundown 14th February 2020
- Asian equity markets were mostly higher following the near recovery seen on Wall St
- China's Hubei province reported 4823 new coronavirus cases and 116 additional deaths as of February 13th
- China is reportedly considering postponing its annual parliamentary meeting (scheduled for March 5th)
- US filed a superseding indictment on Huawei which includes a new racketeering conspiracy count and accused the company of trade theft
- NY Fed Cut O/N Repo Operations limit to USD 100bln (prev. 120bln); cuts Tuesday and Thursday Term repos to USD 25bln (prev. 30bln) for February and again to USD 20bln for March
- Looking ahead, highlights include German GDP (Flash), EZ Employment & GDP (Flash), US Import & Export Prices, Retail Sales, Industrial Production and Manufacturing Output, Business Inventories, University of Michigan Sentiment (Prelim), Fed’s Mester
- Earnings: Credit Agricole, Wirecard, AstraZeneca, RBS
China's Hubei province reported 4823 new coronavirus cases and 116 additional deaths as of February 13th vs. Prev. 14840 additional cases and 242 deaths the previous day. Furthermore, China’s total coronavirus cases is now at 63851 and death toll at 1380, while 6723 patients have been discharged. (Newswires)
China is reportedly looking for plasma donors to develop a treatment for the coronavirus according to New York Times. Furthermore, other reports noted comments from the President of the Jinyintan Hospital in Wuhan that therapy for the novel coronavirus which involves the plasma of recovered patients, has started to show effects including a decline in indicators of inflammation and a hike in lymphocytes among other favourable turns. (NYT/China Daily)
China is reportedly considering postponing its annual parliamentary meeting (scheduled for March 5th) due to the coronavirus, according to Global Times. Furthermore, Global Times tweeted that Thursday's plunge in daily reports of confirmed coronavirus cases in Hubei does not indicate an optimistic situation in the province citing an analyst. (Global Times)
US President Trump said China is handling the coronavirus "professionally" according to a radio interview. Conversely, there were separate comments from NEC Director Kudlow that the US is quite disappointed in China’s nCoV response and that there does not appear to be good transparency. Kudlow added that he is disappointed that China has not accepted the invitations for assistance from the CDC and noted the US economy would be at 3% growth if it weren’t for the virus and Boeing (BA) issues. (Newswires)
NYT reporter tweeted that Shanghai is banning all people and cars entering the city starting midnight on February 14th due to the coronavirus, although the tweet was deleted shortly after. (Twitter)
Asian equity markets were mostly higher following the near recovery seen on Wall St and as some coronavirus fears abated after the latest update from the epicentre of the outbreak showed a slowdown in the daily additional cases to 4823 and deaths at 116 vs. the prior day’s 14840 surge in new cases and 242 deaths. ASX 200 (+0.4%) was positive in which financials resumed their recent earnings-driven outperformance but with gains capped by weakness in gold miners and concerns of the potential ramifications after Australia extended the ban on foreign nationals travelling from its largest trading partner China. Nikkei 225 (-0.4%) was the laggard with attention fixated on a slew of earnings including Nissan. Hang Seng (+0.4%) and Shanghai Comp. (+0.3%) were kept afloat but with early indecision in the mainland due to the outbreak and with the rumour mill rife including reports that China is considering postponing its annual parliamentary meeting, as well as a tweet that Shanghai is banning all people and cars entering the city which was uncorroborated and later deleted. Finally, 10yr JGBs were subdued amid the improved risk appetite for most the region and after prices slipped through support at the 152.50 level, while the results of today’s enhanced-liquidity auction for longer-dated JGBs also pointed to weaker demand.
PBoC skipped open market operations for neutral daily position. (Newswires) PBoC set USD/CNY mid-point at 6.9843 vs. Exp. 6.9843 (Prev. 6.9785)
US filed a superseding indictment on Huawei which includes a new racketeering conspiracy count and accused the company of trade theft. However, it was also reported that the US Commerce Department extended Huawei’s temporary general license through April 1st. (Newswires/WSJ)
UK PM Johnson suspended plans to travel to the US until June which reports note risk widening tensions with US President Trump who is eager to seal a trade agreement ahead of his re-election campaign. (The Sun)
The greenback continued make headway above 99.00 albeit a gradual pace after the mixed US CPI figures, although it has benefitted from recent declines in EUR/USD which slumped to its weakest level since April 2017. GBP/USD was steady around 1.3050 as it held on to gains in the aftermath of PM Johnson’s cabinet reshuffle and shock resignation of Sajid Javid. Elsewhere, USD/JPY consolidated as the sentiment in Tokyo lagged its regional peers, while a light overnight calendar kept antipodeans rangebound with AUD/USD and NZD/USD also contained near their 200-Hour MA levels at 0.6720 and 0.6444 respectively.
South African President Ramaphosa said we need to accept that for Eskom to undertake maintenance and improve reliability, load shedding will remain a possibility, while he added they will take measures to “rapidly and significantly” raise generation capacity outside of Eskom and a ministerial determination will be issued to get more capacity from renewables. (Newswires)
Commodities traded sideways overnight in which WTI crude futures oscillated within a tight range around USD 51.50/bbl level which was in contrast to the prior day’s swings. Nonetheless, price action has steadied with participants eagerly awaiting Russia’s decision on the OPEC+ agreement, while there also notable comments from the US Energy Secretary that downplayed the current impact to market from the coronavirus. Elsewhere, gold defied a firmer greenback and improved in risk sentiment to hold on to the bulk of its recent gains, while copper also conformed to the uninspiring price action across the complex.
US Energy Secretary Brouillette said there has been some slowing down of Chinese energy purchases although the impact from the coronavirus is marginal so far, while he suggested that if China demand is cut by 500k BPD, there will be no dramatic market impact. (Newswires)
Libya's oil output was at 163,684 BPD on Thursday vs. Prev. 191,475bpd as of Wednesday, according to the NOC. (Newswires)
Rocket attacks hit an airbase in Northern Iraq hosting US troops, according to AFP. (Twitter)
Twitter sources reported strong explosions in Damascus, Syria due to an IAF attack which activated Syrian air defences, while Syria was said to have downed several hostile targets in its airspace. (Twitter)
IRGC warned that Iran will hit Israel and the US if they make the slightest mistake. In related news, the US Navy seized weapons of “Iranian design and manufacture” in Arabian Sea bound for Iranian-backed Houthis in Yemen including anti-tank missiles, surface-to-air missiles, drone parts, weapon scopes, according to the Department of Defence. (Newswires)
US Senate passed the Iran war powers resolution although US President Trump is expected to veto the bill. (Newswires)
Treasuries settled modestly bid after coming off their highs found overnight. The TPLEX found a leg higher on the sudden spike higher in nCoV cases and deaths reported out of China due to the altering of their methodology. However, yields found their lows in early European trade, alongside risk appetite, paring back most of the prior move lower through the session. A couple of factors were being cited for the reversal, one being that some drew attention to the increased reported cases being a technical adjustment that is more backward looking, supporting the thesis that China now has the virus well contained. Others cited the Gilt sell-off in the UK, following Chancellor Javid announcing his resignation, as weighing on the TPLEX and EGBs. Additionally, a slew of IG corporate issuance, including a jumbo USD 9.25bln 6-parter from Carrier Global, in addition to anticipation of the 30-year Bond auction, weighed on Fixed Income heading into the US session. The 30-year Bond auction gave some impetus behind the underlying’s bid in the later part of the session, stopping through the 2.061% WI by 0.7bps to mark the lowest ever 30-year auction, covered by 2.43x (vs six-auction avg. 2.32), while the takedown indicated strong demand as both directs and indirects took more than their averages as dealers took less. The strong auction saw the entire curve flatten by settlement, with the 30-year yield lower by 2bps and the 2yr unchanged. US T-note futures (H20) settled 2+ ticks higher at 130-24+.
NY Fed cut Overnight Repo Operations limit to USD 100bln (Prev. 120bln) starting today and cut Tuesday and Thursday Term repos to USD 25bln (Prev. 30bln) for February and again to USD 20bln for March, while NY Fed maintained monthly Treasury Bill purchases at USD 60bln through mid-March. (Newswires)
Fed's Williams (Voter, Neutral) thinks the economy is in a 'very, very good place'. Fed's Williams also commented that the balance sheet will have to grow modestly over time, while he expects inflation to pick back up close to 2% and noted that risks to the outlook include global growth, low inflation, China and coronavirus. (Newswires)