Original insights into market moving news

[PODCAST] US Open Rundown 14th May 2020

  • European bourses follow, and extend on, the negative APAC lead; US futures have been either side of U/C throughout the session
  • US President Trump is reportedly looking into Chinese Co’s listed on NYSE and NASDAQ, adds he is very disappointed in China and reiterated preference for NIRP
  • Trump said it is a great time to have a strong USD; remarks which sent the DXY to fresh session highs just shy of the 100.44 May peak
  • UK is drawing up plans to reduce tariffs on US agricultural imports to advance progress on a UK-US trade agreement
  • IEA cuts 2020 oil demand growth forecast by 690k BPD; Decline in oil demand in H1 is not as steep as initially feared
  • Looking ahead, highlights include US Initial Jobless Claims, Banxico rate decision, BoC's Poloz & Wilkins, ECB's de Guindos, Fed's Kashkari


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)

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)

Japanese Economy Minister says will look to obtain expert view on lifting the state of emergency in Tokyo and Osaka around May 21st. (Newswires) Thereafter, Japanese PM Abe confirms that the gov't will lift the State of Emergency in 39 prefectures but will be maintained in Tokyo and Hokkaido. (Newswires)


Asian stocks traded negatively with global risk appetite dampened by ongoing US-China tensions and ongoing questions about reopening efforts. ASX 200 (-1.7%) 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 (-1.7%) remained under the influence of a firmer currency and with earnings releases also providing a catalyst for price action including Sony. Elsewhere, Hang Seng (-1.5%) and Shanghai Comp. (-1.0%) 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)

Chinese Global Times 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)

Chinese GT Business Source notes that starting today, China will allow imports from the US of a variety of agricultural products including barley. (Newswires)

BoJ Governor Kuroda expects Japan's economy to be negative and substantially suppressed in Q1 and Q2

-Under YCC the BoJ will purchase any amount of JGBs to keep the 10yr yield around 0%. This would automatically enhance monetary and fiscal coordination.

- Would not hesitate to carry out further easing if required, adding that there are many tools to do so

- Current measures such as unlimited JGB purchases are temporary and are to be gradually reduced once the virus has been contained

- Does not believe it is necessary to deepen negative rates


US President Trump is reportedly looking into Chinese Co’s listed on NYSE and NASDAQ, adds he is very disappointed in China, Fox Business; a great time to have a strong USD & 'I feel strongly we should have negative rates'. (Fox Business)

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)

China Global Times Editor Hu Xijin says US and China "increasingly dislike each other, various conflicts are rising, therefore, risk for a military clash is increasing. But meanwhile, they both don't want a war.". (Twitter)

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)


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)


Europe has taken the downbeat lead from the APAC session (Euro Stoxx 50 -1.9%) as rising tensions between US and China continue to weigh on sentiment, whilst Fed Chair Powell’s heavy downplaying of NIRP does not aid the equity complex. Major bouses see broad-based losses with no real stand-out across major indices. Sectors reside firmly in the red across the board with steeper losses seen in cyclicals (ex-telecoms). The sector breakdown sees Auto and Parts alongside Travel & Leisure as the laggards. Telecommunications reside at the top of the list – losses in the sector are cushioned by earrings from Deutsche Telekom (+0.6%) who topped Adj. EBITDA estimates, confirmed guidance, and said the outbreak is having a limited impact on Co’s financials. Sticking with German earnings, Merck (+1.1%) remains underpinned after topping estimates on all Q1 metrics, whilst guidance printed in-line with analyst estimates. Other earnings-related DAX constituents include: Wirecard (-0.7%), RWE (-0.7%). Elsewhere, Fiat Chrysler (-1.7%) and PSA (-1.1%) are pressured after simultaneously pulling FY20 dividend; the dividend was a component of their merger. Finally, Roche (+0.2%) remains afloat after its COVID-19 antibody test had been approved by Public Health England. Co. is in talks with the NHS and the UK government regarding a phased roll-out of tests as soon as possible. UK government is in negotiations to purchase millions of kits.

Cisco (CSCO) - Q3 2020 (USD): Adj EPS 0.79 (exp. 0.69), revenue 12.0bln (exp. 11.7bln). Q4 guide: Adj EPS: 0.72-0.74 (exp. 0.69). Gross margin: 64.9% (exp. 64.6%). Total products: 8.6bln (exp. 9.01bln). Services: 3.4bln (exp. 3.33bln). Infrastructure platforms: 6.4bln (exp. 7.05bln). Applications: 1.3bln (exp. 1.43bln). (Newswires) Co. shares rose 2.3% after-market.


AUD/NZD - Not quite role reversal, but the pecking order has changed down under to an extent following a near 600k plunge in Aussie payrolls, a marked rise in the participation rate and predictions for more pronounced jobs market pain to come. Aud/Usd has duly pulled back further from 0.6500+ peaks to pivot 0.6450 and Aud/Nzd is losing momentum below 1.0800 even though the Kiwi remains under pressure post-RBNZ on heightened NIRP expectations and the NZ Government boosting its COVID-19 recovery fund to the tune of 20% of GDP. Indeed, Nzd/Usd has now lost grip of the 0.6000 handle ahead of April’s manufacturing PMI.

JPY - The Yen continues to buck the overall trend and outperform an otherwise strong Dollar, with the DXY looking more comfortable above 100.000 within a 100.420-140 range, as risk-off positioning intensifies and keeps Usd/Jpy capped on advances through 107.00. No adverse reaction to more dovish rhetoric from BoJ Governor Kuroda balanced with the unflinching belief that Japan will not return to deflation and it is not necessary to ease benchmark rates further even though recession will continue in Q2.

GBP/SEK/NOK - The Pound continues to fall victim to bearish historical patterns and increasingly negative technical impulses as Cable relinquished another round number at 1.2200 to test deeper support ahead of 1.2150 (circa 1.2166) before finding underlying bids, with perhaps some fundamental weakness emanating from BoE Governor Bailey acknowledging that markets are anticipating more QE. Meanwhile, the aforementioned risk aversion has knocked the Swedish Krona out of its stride and back under 10.6000 vs the Euro, but firm crude prices following a less downbeat IEA monthly report in terms of global demand destruction are helping Eur/Nok in a downward trajectory near 11.0000, albeit off Wednesday’s sub-10.9250 two month lows.

CAD/CHF/EUR - Buoyant oil is also underpinning the Loonie either side of 1.4100 vs its US counterpart in the run up to the BoC’s FSR, while the Franc is back in a bind or divergent position given Usd/Chf holding above 0.9700 in contrast to Eur/Chf edging back down towards 1.0500, as the single currency straddles 1.0800 against the Greenback after light stops were tripped at the big figure, but not larger ones said to be sitting beneath at 1.0775. Note, Eur/Usd is shrouded in a cluster of big option expiries today spanning 1.0750 to 1.0930 – check out the headline feed at 7.23BST for full details and the other major strikes in play.

EM - Not even the deteriorating mood amidst heightened COVID-19 2nd wave and US-China relations or rising crude costs can dent the Try’s ardour it seems, as the Lira remains above 7.0000 and drawing traction currently from hopes that the CBRT can arrange swap lines with foreign peers..

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)


Broad risk sentiment remains bearish, but debt futures have pared back after reaching heady heights early in the EU session with Bunds back under 174.00 and Gilts only just keeping their noses in front of 138.00. Conversely, equity markets have trimmed some declines, though are still looking prone to bouts of selling pressure and long liquidation after significant retracement and storm clouds gathering again over the coronavirus plus US-China relations. Back to bonds, US Treasuries have been largely side-lined and holding a flatter bias even though President Trump continues his NIRP campaign, awaiting initial claims and arch Fed dove Kashkari.

Major FX Option Expiries, NY Cut:

-          EUR/USD: 1.0750 (1.8BLN), 1.0800 (1.5BLN), 1.0870-80 (900M), 1.0900 (1.4BLN), 1.0905-15 (1.3BLN), 1.0925-30 (1.5BLN)

-          EUR/GBP: 0.8700 (300M), 0.8750 (540M), 0.8800 (850M)

-          AUD/USD: 0.6350 (1.7BLN), 0.6400 (725M), 0.6500 (1.1BLN), 0.6550 (1.4BLN)

-          USD/JPY: 106.10-25 (1BLN), 106.75-85 (900M), 107.00-05 (1.2BLN), 107.15-25 (500M), 107.35-40 (500M)


WTI and Brent front-month futures remain on the front foot after a somewhat choppy APAC trading session, with fresh modest impetus across the complex derived from the latest IEA oil market report – which proved more optimistic vs. its OPEC and EIA counterparts. The agency cut their 2020 demand growth forecast by 690k BPD (vs OPEC’s 2.23mln BPD and EIA’s 2.9mln BPD) while stating that the decline in H1 oil demand is not as steep as originally feared – with an improvement in the balance seen amid deep production curbs and reopening economies, however, IEA Chief Birol stated that he does not believe the recently announced cuts (i.e Saudi, UAE, and Kuwaiti over-compliance) are enough to balance the markets. Elsewhere, Saudi Arabia has reportedly cut oil sales by half to the US & Europe, deeper cuts than for Asia, as output has been reduced, according to sources. Shipments to some US and European buyers will fall by 60-70% vs. normally contracted volumes. This comes in the context of Aramco raising OSPs across the regions, lower sales to Europe and the US could be a function of the lower demand from lockdowns. Aside from that, news-flow has been light for the complex – WTI June resides around session highs north of USD 26/bbl (vs. low 25.18/bbl), whilst Brent July similarly sees itself north of USD 30/bbl (vs. low 28.88/bbl). Elsewhere, spot gold remains relatively flat north of USD 1700/oz and around the middle of today’s tight USD 1712-1719/oz range awaiting fresh macro stimulus or Dollar action. Copper prices meanwhile tracked losses across equities alongside the soured sentiment, and reside in proximity to USD 2.400/lb, having tested support at USD 2.3350/lb earlier in the session.

IEA cuts 2020 oil demand growth forecast by 690k BPD; Decline in oil demand in H1 is not as steep as initially feared; sees oil market improving amid the drop in production and economies reopening

-          Global oil supply set to fall by 12mln BPD in May to a 9yr low of 88mln BPD

-          Oil demand set to fall 25.2mln BPD in April YY, 21.5mln BPD in May and 13mln BPD in June

-          US set to be the biggest contributor to global supply reductions by year-end

-          IEA Head Birol says we are see early signed of gradual oil market rebalancing, but does not believe the recently announced cuts are sufficient to balance the market

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)Additionally, Saudi Arabia have reportedly cut oil sales by half to the US & Europe, deeper cuts than for Asia, as output has been reduced, according to sources. Shipments to some US and European buyers will fall by 60-70% vs. normally contracted volumes. (Newswires)

Iranian oil exports were seen hitting lowest level on record in April, no increase has been seen thus far in May, according to Petro-logistics. (Newswires)

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