Original insights into market moving news

[PODCAST] US Open Rundown 7th May

  • Sentiment is bolstered on trade updates; as such, European bourses and US futures are comfortably positive with US futures outperforming
  • US and China Trade Chiefs are said to plan a phone conversation as soon as next week on progress in implementing the trade deal
  • BoE left rates at 0.1% and maintained Gilt purchases, 2 dissenters on QE who wanted an extra GBP 100bln
  • Norges Bank defied consensus, cutting rates to 0.0% & announced further F-loans; but, do not envisage making further cuts
  • FX has seen the USD softer for much of the session, but the DXY has recently reclaimed the 100.00 handle and returned to positive territory
  • Saudi Aramco raises June Arab Light Official Selling Prices to Asia by USD 1.40 to USD -5.90
  • Looking ahead, highlights include, US initial jobless claims, ECB's de Guindos, Fed's Harker
  • Earnings: Bristol-Myers Squibb, Danaher, Raytheon Technologies, Becton Dickinson


US Secretary of State Pompeo said he knows China did not act fast enough regarding the virus, while he added the US is in active talks with China regarding origins of the virus and reiterated he has seen evidence the virus came from a lab in China. (Newswires)

Kao Corp (4452 JT) and Kitasato University are reported to have succeeded in acquiring VHH antibody that has ability to suppress infection against the coronavirus and which should lead to drug development. (Newswires)

Tokyo has 23 new cases of COVID-19, according to Fuji TV. (Newswires)

Japanese Economy Minister says there is a chance that some areas will see the state of emergency lifted in some areas around May 14th. (Newswires)


Asian equity markets traded mixed following the uninspiring handover from US where risk appetite was sapped by US-China tensions and a decline in the energy complex in which oil prices snapped a 5-day win streak, with the region also mulling over key releases from China including Caixin PMIs and the latest trade data. ASX 200 (-0.4%) was lower with the declines led by losses in energy names and gold miners due to the pressure in oil and after the precious metal gave up the USD 1700/oz status, while financials suffered with the largest bank CBA downbeat on speculation the Co. could have been impacted the worst from the coronavirus among the big 4 banks ahead of next week’s quarterly update. Nikkei 225 (+0.3%) initially underperformed on return from the 5-day Golden Week closure to take its first opportunity to digest the nationwide state of emergency extension in Japan, with index heavyweight Fast Retailing pressured pre-earnings and Softbank shared depressed after being sued by WeWork, although the losses in the index were retraced amid favourable currency moves. Hang Seng (-0.7%) and Shanghai Comp. (-0.2%) were both cautious due to the increased US-China tensions and after Caixin Services and Composite PMI figures remained in contraction territory, although losses were stemmed by the Chinese trade data which showed a higher surplus and surprise expansion in exports despite imports remaining at a significant contraction. Finally, 10yr JGBs were lower as prices tracked the recent downside in T-notes which had been weighed after a larger than expected US Treasury quarterly refunding announcement, although the losses were stemmed amid the BoJ’s presence in the market for nearly JPY 800bln of JGBs.

PBoC skipped open market operations and were net neutral on the day. (Newswires) PBoC set USD/CNY mid-point at 7.0931 vs. Exp. 7.1011 (Prev. 7.0690)

Chinese Trade Balance (CNY)(Apr) 318.2B vs. Exp. 39.5B (Prev. 139.4B). Chinese Exports (CNY)(Apr) Y/Y +8.2% vs. Exp. -14.1% (Prev. -3.5%) Chinese Imports (CNY)(Apr) Y/Y -10.2% vs. Exp. -12.2% (Prev. -2.4%)

Chinese Trade Balance (USD)(Apr) 45.34B vs. Exp. 6.35B (Prev. 19.9B, Rev. 19.93B). Chinese Exports (Apr) Y/Y 3.5% vs. Exp. -15.7% (Prev. -6.6%) Chinese Imports (Apr) Y/Y -14.2% vs. Exp. -11.2% (Prev. -0.9%, Rev. -1.0%)

Chinese Caixin Services PMI (Apr) 44.4 vs. Exp. 50.1 (Prev. 43.0). Chinese Caixin Composite PMI (Apr) 47.6 (Prev. 46.7)

EU Ambassador to China says breakthrough in EU-China negotiations is needed for a comprehensive investment agreement and that China needs to show much more ambition than it has demonstrated so far, while the ambassador added that an increase in US-China tensions is problematic to all sides. (Newswires)

US and China Trade Chiefs are said to plan a phone conversation as soon as next week; on progress in implementing the trade deal. (Newswires)

Chinese Commerce Ministry survey notes that foreign trade enterprises are still suffering from cancelled or delayed orders, logistics problems and difficulty in securing new order. (Newswires)


UK BOE Bank Rate (May) 0.1% vs. Exp. 0.1%, unanimous decision; total purchases maintained at GBP 645bln (QE vote split 7-2, 2 preferring an increase of GBP 100bln) - existing monetary policy stance is appropriate, Stand ready to take further action as is necessary to support the economy. Economic forecasts can be found on the headline feed here. BoE Governor Bailey says we are not out of monetary policy tools and expects to continue to come up with appropriate responses. It remains appropriate that the bank continues with aggressive pace of asset purchases for the moment and will take stock of it.

Norges Bank cuts its Key Policy rate to 0% vs. Exp. 0.25%; decision unanimous; does not envisage making further policy rate cuts. Economic forecasts can be found on the headline feed here. Norges Bank Governor Olsen says it is possible to set negative rates but does not expect a reduction below 0%

ECB’s VP de Guindos says ECB monetary policy will continue to provide the necessary support so that liquidity gets through to the people of Europe and the real economy. But our response will be made more powerful if all policies reinforce each other. (Newswires)

EU Trade Commissioner Hogan dismissed call by US President Trump for American pharmaceutical companies to move production back to US, while he suggested it could be 2024 before EU economies fully recover. (RTE)


US President Trump vetoed the Iran war powers resolution as expected according to the White House. There were also reports that US said it will move ahead with 120-day waiver to permit Iraq to import electricity from Iran, according to the State Department. (Newswires)


European equities hold onto gains [Euro Stoxx 50 +0.8%] amid a turnaround from the mostly negative APAC session, as sentiment is underpinned amid hopes US and China will iron out their differences in a call next week among top negotiators. That being said, it is difficult to pre-judge what the sentiment will be during the call, notably due to recent rhetoric emanating from the two nations, whilst US-China trade data does not bode well regarding the Phase One deal. Nonetheless, broad-based gains are seen across Europe, albeit the SMI (+0.3%) lags the region as its heavyweight healthcare names remain in modest negative territory, potentially on a risk-move as the sector lags. Energy and Materials meanwhile show slight outperformance as the oil and base metal complexes regain ground. The sector breakdown reflects a similar performance. In terms of individual movers – Telefonica (+0.2%) gave up most of its opening gains after rising some 3% on the back of a finalised deal with Liberty Global to merge UK assets worth just over GBP 31bln, set to reshape the UK telecom market. As such, Vodafone (-0.9%) and BT (-9.6%) see losses with the latter also exacerbated by dividend cancellation alongside its earnings. The Telefonica/Liberty deal is subject to regulatory approval.  AB InBev (+2.5%) holds onto gains post-earnings after the metrics were less severe than feared, but the group expects Q2 results to be materially worse than Q1. Air France (-4.1%) shares fell following detrimental earnings, with Q2 capacity seen down 95% and no expectations of a recovery to pre-crisis levels for several years. Meanwhile, Carnival (-2.0%) remains in the red after the Co’s Princess Cruises have extended halt in global operations through to the end of 2020 summer season, whilst Seabourn has extended its pause into October and November 2020.

Tesla (TSLA) - Have reportedly suspended car production at a Chinese factory


NOK/GBP/SEK - Not the biggest G10 movers, but in focus and divergent after the Norges Bank delivered an unexpected 25 bp ease to pull the benchmark depo rate back down to zero and supplemented the additional stimulus with an extension of F-loans through to the end of August. Conversely, the BoE stuck to the script on conventional policy and QE, albeit with 2 dovish MPC dissenters calling for asset purchases to be upped by Gbp 100 bn. In response, the Norwegian Krona lost momentum through resistance at 11.0527 and before the big figure to retest 11.1500+ vs the Euro amidst further declines against the Swedish Crown that retains a hawkish hold Riksbank bid to compound its outperformance relative to a weaker single currency near 10.6000, while Cable rebounded from new 2 week lows to 1.2400+ at best and Eur/Gbp retreated towards 0.8700 after extending gains further beyond the 200 DMA.

AUD/NZD/CAD - Already boosted by encouraging export elements in Aussie and Chinese trade data overnight, the Antipodean Dollars have welcomed reports that officials from the US and China are planning to hold a call in relation to progress on the Phase 1 trade agreement next week given that relations between the 2 countries have become increasingly strained over the coronavirus. Aud/Usd is consolidating around 0.6450 and comfortably above a hefty option expiry at 0.6415 (1.2 bn), while Nzd/Usd has regained a firm foothold over 0.6000. Elsewhere, the Loonie has pared losses vs its US counterpart following a sharp slide to a fresh wtd trough circa 1.4173 on Wednesday by a full point in similar vein to crude prices after their midweek setback, eyeing Canadian Ivey PMIs on the eve of the big NA jobs showdown.

JPY/EUR/CHF - The return of Japanese participants from their Golden Week holidays has dampened demand for the Yen along with the aforementioned US-China trade talk news, with Usd/Jpy bouncing from 106.00 to 106.50 or so and the base of decent 1 bn+ expiry interest at the half round number, but not reaching those sitting between 106.65-75 in the same amount. In contrast, expiries may help the Euro deeper depreciation below 1.0800 after yet more worrying Eurozone economic releases, as 1.4 bn resides from 1.0780-75, though recoveries could also be thwarted by 2.3 bn at the 1.0800 strike or 1 bn just above (1.0805-10), especially if the DXY continues to make headway on the 100.000 handle having eclipsed its pre-month peak at 100.270.

EM - Most regional currencies are benefiting from a broad upturn in risk sentiment and oil returning to its recovery path, but for the Lira very little respite as Usd/Try rallies through the apex of Turkey’s 2018 crisis and remains in a seemingly endless uptrend approaching 7.2600. Elsewhere, CPI data looms for the Mxn and a 50 bp rate cut for the Czk, while the Brl will soon reflect on a bigger than expected ¾ point ease to a new 3% record low for the Selic.

Australian Trade Balance (AUD)(Mar) 10.6B vs. Exp. 6.8B (Prev. 4.4B). (Newswires) Australian Exports (Mar) M/M 15.0% (Prev. -5.0%) Australian Imports (Mar) M/M -4.0% (Prev. -4.0%)

New Zealand RBNZ 2yr Inflation Expectations 1.2% (Prev. 1.9%). (Newswires)

Brazilian Central Bank cut the Selic rate by 75bps to 3.00% vs. Exp. 50bps cut via unanimous decision, while it stated that April data so far shows economic contraction will be significantly larger than forecast at last COPOM meeting. Furthermore, it noted that for next meeting, depending on fiscal and economic outlook, the rate-setting committee is mulling a final cut of no more than 75bps. (Newswires)


Bunds have regained some composure after delving beneath the 173.00 mark, but holding just above multi-week trend-line support at 172.83 and returning to 173.07, but their UK peer has retreated further into negative territory at 137.24 following no change in QE from the BoE even though the decision was not unanimous and some in the market were looking for Gbp 200 bn more vs +Gbp 100 bn advocated by 2 dissenters. However, US Treasuries appear to have calmed down and found a base after yesterday’s pronounced bear-steepening on supply issues as attention shifts to more anecdotal jobs data (Challenger and initial claims) ahead of NFP on Friday.


WTI and Brent front month futures initially traded within a tight range relative to recent performance, with the benchmarks fluctuating between gains and losses in early trade. The contracts found a floor early-doors amid reports of a phone call next week between the top US and Chinese negotiators. Looking at the oil market itself, the forward Brent curve has tightened in recent days, reflecting an ease in the oil market glut – aided by production cuts and reviving demand as economies re-open from lockdown. On that front, Saudi Aramco raised its Arab Light OSPs to Asia following two consecutive cuts – signaling resurfacing demand in the region. That being said, Equinor’s CEO does not believe in a quick rebound in the oil market and added it could take until 2022 to see oil markets back normalise. The CEO said deeper cuts would improve the situation. WTI June now resides north of USD 25/bbl, and extends its intraday range (low USD 23.41/bbl), whilst Brent July sees itself printing fresh session highs, having rebounded from a low of USD 29.22/bbl. Elsewhere, spot gold saw some impetus from a softer Buck but remains below the USD 1700/oz mark (daily range USD 1685-1693.40/oz). Copper prices meanwhile remain underpinned by the rebound in the Chinese Trade Balance, coupled with upside seen in stocks supported by the US-China headlines.

Saudi Aramco raises June Arab Light Official Selling Prices to Asia by USD 1.40 to USD -5.90 vs. Oman/Dubai average (Prev. USD -7.30); NW Europe at USD -3.70 vs. ICE Brent (Prev. USD -10.25); US at USD +0.75 vs. ASCI (Prev. -0.75)

Iraq approved Mustafa Al-Kadhimi as its new PM although the vote for Iraq Oil Minister in parliament was postponed after no candidate was agreed on, according to lawmakers. (Newswires)

Source: Newsquawk

Does this mean we can ignore any draws from this week's energy inventories?