Original insights into market moving news

[PODCAST] EU Open Rundown 14th May 2020

  • Asian stocks traded negatively with global risk appetite dampened by ongoing US-China tensions and questions about reopening efforts
  • China will soon impose countermeasures on US individuals and entities filing lawsuits seeking COVID-19 damages from China, according to sources
  • US President Trump extended the executive order protecting the US supply chain from Huawei and ZTE for an additional year, according to a statement
  • US President Trump said he likes negative interest rates and feels strongly the US should have negative rates
  • In FX, DXY maintains 100.00, EUR/USD and GBP/USD above 1.0800 and 1.2200 respectively, AUD lags post-jobs data
  • Looking ahead, highlights include German CPI (F), IEA Monthly Oil Report, US Initial Jobless Claims, Banxico rate decision, BoJ's Kuroda, BoC's Poloz & Wilkins, ECB's de Guindos, Fed's Kashkari, supply from the UK


US COVID-19 cases rose 1.5% to 1,364,061 (Prev. +1.4%) and death toll rose 1.8% to 82,246 (Prev. +1.3%), while AFP tweeted there were over 1800 deaths in US from coronavirus in 24 hours, citing the Johns Hopkins tracker. (Newswires/AFP/Twitter)

US President Trump said the US surpassed 10mln virus tests, while he thinks the US should reopen schools and that the virus has little effect on young people. President Trump said he was surprised by Dr. Fauci’s comments regarding risks of reopening too soon which is not an acceptable answer and that Fauci wants to play both sides of the equation, while he also suggested that the House stimulus bill is dead on arrival. (Newswires)

US Treasury Secretary Mnuchin said it will be a pretty bad quarter but if we open the economy carefully, there will be an improvement in the subsequent quarters, while he added the most of the USD 3tln stimulus is not yet in the economy and that they will spend more money down the road if needed to aid the economy, although not in a rush to do so this week. Mnuchin also commented the House Democrat stimulus bill is not in the spirit of bipartisanship and there is a risk of too much damage to the economy if US waits too long to reopen. (Newswires)

New Jersey Governor Murphy took steps towards a reopening of the economy citing declines in the coronavirus spread, while he stated that non-essential construction and retail pick up can start on May 18th. Elsewhere, LA County issued a new stay at home order with no end date specified, while the Wisconsin Supreme Court ruled against the Governor's stay-at-home extension. (Newswires/LA Times)

New York University said Abbott's (ABT) rapid coronavirus tests misses nearly 50% of positive cases and that this is the same kit used in the White House. (Newswires)

WHO’s Ryan warned that the coronavirus may never go away and that even if a vaccine is discovered, a great effort would still be needed to control the virus. (BBC)

A COVID-19 antibody test kit has gained approval from Public Health England in a decision that could play a key role in easing lockdown restrictions in the UK. (Telegraph)


Asian stocks traded negatively with global risk appetite dampened by ongoing US-China tensions and ongoing questions about reopening efforts. ASX 200 (-1.2%) was led lower by energy and financials after similar underperformance of the sectors stateside and with participants digesting alarming employment data that showed a near-600k decline in jobs. Nikkei 225 (-1.3%) remained under the influence of a firmer currency and with earnings releases also providing a catalyst for price action including Sony. Elsewhere, Hang Seng (-1.3%) and Shanghai Comp. (-0.5%) were both downbeat as US-China tensions turned up a notch after source reports noted China will soon impose countermeasures on those seeking COVID-19 damages from China and after US President Trump extended the executive order protecting the US supply chain from Huawei and ZTE for an additional year, while the PBoC also disappointed expectations for an MLF announcement and associated 20bps rate cut which both failed to materialize. Finally, 10yr JGBs were initially higher as prices benefitted from the risk aversion and gains in T-notes, but with upside later reversed after a mixed 30yr auction which resulted in lower accepted prices.

PBoC skipped open market operations and were net neutral on the day, while it refrained from conducting MLF operations despite CNY 200bln of MLFs expiring today. (Newswires) PBoC set USD/CNY mid-point at 7.0948 vs. Exp. 7.0980 (Prev. 7.0875)

China will soon impose countermeasures on US individuals and entities filing lawsuits seeking COVID-19 damages from China, according to sources, while US states suing China are highly likely to face business and trade consequences, according to China's Global Times. Furthermore, it later tweeted that Missouri is likely to suffer severe consequences after some GOP ramped up “Blame China” and left China extremely dissatisfied, while it adds at least 4 Republicans and 2 entities will be put on China sanction list citing experts. (Global Times)

US President Trump extended the executive order protecting the US supply chain from Huawei and ZTE for an additional year, according to a statement. (Newswires)


BoE Governor Bailey said he hopes fiscal authorities will consider all choices and that the BoE can help spread the cost out of COVID over time, when asked about austerity policies. BoE Governor Bailey also signalled the bank is likely to increase government bond purchases and noted it is pretty clear the markets assumption is that there will be more QE, while he added the latest data confirms we have a very sharp move into a recession. (Newswires/ITV)

UK PM Johnson has been warned by senior MPs within his own party that the economic impact from COVID-19 could become entrenched if he opts to raise taxes or lower spending. (Times) 

UK is drawing up plans to reduce tariffs on US agricultural imports to advance progress on a UK-US trade agreement. (FT)

UK RICS Housing Survey (Apr) -21 vs. Exp. -38.0 (Prev. 11.0, Rev. 9). UK RICS said 80% of surveyors in its survey have seen people pull out of transactions since the lockdown began, while most surveyors expect house prices to drop when market reopens and recover in an average of 11 months. (Newswires)


The DXY maintained it’s footing above the 100.00 level with the greenback’s major counterparts subdued in which EUR/USD languished at the prior day’s lows and near the 1.0800 level where there is a EUR 1.2bln option expiry rolling off at today’s New York cut, while GBP/USD tested 1.2200 to the downside with further monetary easing likely on the way for the UK as raised by BoE Governor Bailey. Elsewhere, USD/JPY and JPY-crosses were pressured by the risk-averse tone, while antipodeans were constrained after Australian jobs data showed a record contraction in Employment Change and although the Unemployment Rate was not as high as expected at 6.2% vs. Exp. 8.3%, this coincided with an unprecedented drop in the Participation Rate and warnings from officials of more pain ahead. NZD/USD also marginally extended on its losses after the New Zealand Budget which forecasts wider budget deficits and a contraction in GDP of 4.6% vs. Prev. forecast of 2.3% expansion.

Australian Employment Change (Apr) -594.3k vs. Exp. -575.0k (Prev. 5.9k) Australian Unemployment Rate (Apr) 6.2% vs. Exp. 8.3% (Prev. 5.2%) Australian Participation Rate (Apr) 63.5% vs. Exp. 65.2% (Prev. 66.0%)

Australian Bureau of Statistics said underemployment increased by 4.9pts to 13.7% in April and that an unusual number of employed and unemployed leaving the labour force resulted to an unprecedented decline in the participation rate. (Newswires)

Australian PM Morrison said it has been a tough day for Australia and he knew there would be hard news regarding job losses, while he suggested they must brace for further hard news. There were also comments from Treasurer Frydenberg that the economic numbers will get worse before they get better but noted lifting restrictions will help people return to work. (Newswires)

RBNZ Governor Orr said the NZD 60bln is a limit and not a target for its QE programme, while he also noted that monetary policy will play a role by keeping interest rates low for the foreseeable future. Furthermore, Governor Orr said QE program is the best option for now and that operational challenges still remain for negative interest rates, while he does not rule out direct purchase of government bonds. (Newswires)

New Zealand 2020 Budget stated there will be NZD 50bln for COVID-19 response and recovery fund and NZD 4bln in business support package including targeted wage subsidy extension. New Zealand Budget Balance was seen at a deficit of 32.03B (Prev. -5.15B) and  sees 2020/21 cash deficit at 43.3bln vs. Prev. HYEFU forecast of NZD 7.97bln surplus, while it forecasts 2020 GDP at -4.6% vs. HYEFU forecast of 2.3%. (Newswires)


WTI crude futures were choppy around the USD 25.50/bbl level as the global risk averse tone effectively nullified recent bullish EIA inventory data. Elsewhere, gold prices pulled back overnight but still remains north of USD 1700/oz despite the firmer greenback, as it benefits from its safe-haven status, while copper was subdued and stuck near this week’s lows due to the downbeat sentiment.

US DoE is to purchase 1mln bbls of oil from small to mid-size producers for the SPR and stated that the purchases will serve as a test of conditions of the physical crude oil available to the reserve, while it noted the purchase of 1mln bbls is far less than the original plan for up to 30mln bbls. (Newswires)

Saudi Arabia cut June oil export volumes to at least 2 term buyers in Asia, while Iraq's acting Oil Minister confirmed its full commitment to the OEPC+ oil cut. (Newswires)


The Treasury curve bull-flattened amid a souring of risk appetite (SPX sell-off), with yields falling lower despite the record Treasury 30-year issuance and other supply. T-Notes went into the US session with a modest bid, to then see a spike higher upon the Fed Chair Powell speech text release, which saw a pushing-out of the NIRP pricing along the FF term structure. The bias on the day was for a flatter curve amid risk pressure, nonetheless, and the curve resumed its bull-flattening heading into the 30-year auction. The auction tailed the 1.334% WI by 0.8bps, although the internals weren’t bad given the Bond has been heavily bid in the past few session: covered 2.30x (vs avg. 2.40x), dealers took 21.38% (vs avg. 19.8%), indirects 65.69% (vs avg. 63.8%). By settlement, the Treasury curve was flatter, with yields lower by a basis point or so at the front-end and down by over 4bps in the 30-year. US T-note futures (M0) settled 8+ ticks higher at 139-07.

US President Trump said he likes negative interest rates and feels strongly the US should have negative rates, while he added that despite differences with Fed Chair Powell on negative rates, he feel's Powell's performance as Fed Chair has improved. (Newswires)

Fed's Mester (voter, hawk) said negative rates are not being discussed and there are lots of problems with them, while she added we are in the early days of assessing the risks to the outlook and there is a lot of pain out there. (CNBC)

Fed’s Daly (non-voter, dove) said the economic recovery will be slow as states cautiously reopen to avert a flare up of coronavirus cases and stated that there will be a need for further support. (Newswires)

NY Fed will discontinue three-month repo operations during this monthly period in light of more stable repo market conditions, although it will continue the overnight repo operation once per day and one-month repo operations once per week. Furthermore, it will continue to adjust repo operations as appropriate to support effective policy implementation and the smooth functioning of short-term U.S. dollar funding markets. (Newswires)

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