Original insights into market moving news

[PODCAST] US Open Rundown 20th May 2020

  • European bourses, and sentiment in general, has been choppy this morning but continues to drift higher ahead of the entrance stateside; US futures outperform with gains over 1%
  • Lowe’s (LOW) beat on EPS & revenue this morning as did Target (TGT) however they declined to provide FY guidance
  • FX sees the USD softer and DXY towards the bottom of a relatively compact range for the session; benefitting major counterparts & antipodeans in particular
  • China's Foreign Ministry says China will take necessary countermeasures on US' wrong behaviours (regarding Taiwan), adds US must bear the consequences
  • Looking ahead, highlights include Canadian CPI, EZ consumer confidence, DoEs, FOMC minutes, BoE's Bailey, Broadbent, Cunliffe, & Haskel, BoC's Lane, supply from US (20yr)


US CDC stated US coronavirus cases rose 1.7% to 1.5mln and the death toll rose 1.0% to 90,340. In related news, AFP tweeted that there were over 1500 coronavirus related deaths in US during the past 24 hours citing the Johns Hopkins tracker and that US virus deaths are projected to surpass 113000 by mid-June citing models. (AFP/Twitter)

Reports that President Trump expressed opposition to the USD 600 per week unemployment benefit boost once it expires in July, according to sources. (Newswires/Washington Post)

US extended the ban on non-essential travel with Mexico and Canada to June 22nd, while President Trump was also considering a travel ban on visitors from Brazil. (Newswires)

European Commission Executive Vice-President Dombrovskis says Excessive Deficit Procedures will not be implemented against EU countries exceeding the EU's 3% deficit/GDP ceiling amid the pandemic. (Newswires)

Singapore government is in discussions with Australia, New Zealand, China and South Korea on reopening borders. (Newswires)


Asian equity markets traded indecisively following the soured mood on Wall St amid ongoing US-China tensions and with the major indices pressured heading into the close as vaccine hopes were knocked by reports that Moderna's COVID-19 vaccine did not produce data critical to its assessment. ASX 200 (+0.2%) was initially subdued by weakness in the utilities and energy sectors, while a record decline in preliminary retail sales and deteriorating relations with China added to the lacklustre tone, before a recovery in financials and strength in tech helped overturn the losses. Nikkei 225 (+0.8%) was underpinned by stimulus hopes after the BoJ announced to hold an off-schedule meeting this Friday to discuss a new loan scheme for firms impacted by the virus and with the Japanese government to set up a JPY 50bln fund with the private sector to inject capital into businesses. However, weakness was seen in Fujifilm on reports its Avigan drug was not showing apparent efficacy as a coronavirus treatment and earnings releases were also a catalyst for price action with both Sharp and Mitsubishi Motors suffering from weaker results in which the latter posted a full-year loss. Hang Seng (U/C) and Shanghai Comp. (-0.5%) mirrored the choppy trade after the PBoC kept its Loan Prime Rates unchanged as expected and following the verbal jousting between China and the US. Finally, 10yr JGBs attempted to nurse the prior day’s losses following the recent rebound in T-notes and following stronger results at the 20yr JGB auction although the gains were eventually reversed amid outperformance in Japanese stocks.

PBoC skipped open market operations and were net neutral for the day. PBoC set USD/CNY mid-point at 7.0956 vs. Exp. 7.1070 (Prev. 7.0912)

PBoC 1-Year Loan Prime Rate (May) 3.85% vs. Exp. 3.85% (Prev. 3.85%). PBoC 5-Year Loan Prime Rate (May) 4.65% vs. Exp. 4.65% (Prev. 4.65%)

NPC are to hold a press conference in Beijing at 21:40CST/14:40BST, ahead of the annual two sessions meeting, China People's Daily. (Twitter)

Japanese Machinery Orders (Mar) M/M -0.4% vs. Exp. -7.1% (Prev. 2.3%). Japanese Machinery Orders (Mar) Y/Y -0.7% vs. Exp. -9.5% (Prev. -2.4%)

South Korean Finance Minister Hong said they need to aggressively create jobs and that measures to create jobs will be central to the bi-annual economic policy plan due early next month, while South Korea is to create a KRW 10tln fund to buy corporate bonds which will be expanded to KRW 20tln if needed. (Newswires)

China's Foreign Ministry says China will take necessary countermeasures on US' wrong behaviours (regarding Taiwan), adds US must bear the consequences. (Newswires)

Japanese Ruling Party proposal for COVID-19 stimulus notes that the Gov't and Central Bank must maintain a strong policy mix. Japanese Ruling Party member says the budget reserves must be boosted in case of a second or third coronavirus outbreak, a number of lawmakers are floating a JPY 100tln second package. (Newswires)


White House economic adviser Kudlow reiterated that he sees some early glimpses of a recovery and called for middle-class tax cuts and for the US to make good trade deals. Furthermore, Kudlow said US President Trump is not saying he was tearing up the China trade deal but noted that President Trump is in a bad place over China's virus mistakes and that China must be held accountable. (Newswires)

White House Economic Advisor Hassett said they are watching and planning if more stimulus is needed after the COVID-19 outbreak. (Fox News)


Iranian Navy said it will continue with its activities in the Persian Gulf despite US warnings, reported via ISNA.


UK CPI YY (Apr) 0.8% vs. Exp. 0.9% (Prev. 1.5%); MM (Apr) -0.2% vs. Exp. -0.1%

-        Core CPI YY (Apr) 1.4% vs. Exp. 1.5% (Prev. 1.6%); MM (Apr) 0.1% vs. Exp. 0.2% (Prev. 0.1%)

EU HICP Final YY (Apr) 0.3% vs. Exp. 0.4% (Prev. 0.4%)

EU HICP-X F&E Final YY (Apr) 1.1% vs. Exp. 1.1% (Prev. 1.1%)

EU HICP Final MM (Apr) 0.3% vs. Exp. 0.3% (Prev. 0.5%)

French Finance Minister Le Maire acknowledges it will be "difficult" to convince "some" member states (Austria, Denmark, Sweden, Netherlands) on the proposed German-Franco recovery fund, namely the loans vs grants aspect (BBC HARDtalk)


A choppy and overall mixed session thus far in the European equity space [Eurostoxx 50 +0.3%], with little conviction amid light news flow and despite a mostly positive APAC handover. That being said, US equity futures grind higher and nurse the losses seen following yesterday’s Moderna disappointment. Sectors are mixed with clear outperformance seen in defensives vs. cyclicals ex-IT, reflecting more risk-aversion-heavy trade. The breakdown also paints a similar picture with Healthcare the outperformer whilst Autos, Banks, and Travel & Leisure all reside towards the bottom. In terms of individual movers, Fiat Chrysler (-3.2%) shares were halted amid doubts raised about the Co’s USD 6bln dividend following talks for a 3yr long EUR 6.3bln loan facility, with sources stating that Italy could look into Fiat Chrysler’s planned pay-out, with Peugeot (-3.4%) also lower in sympathy. On the flip-side Marks & Spencer (+4.5%) sees post-earnings gains after revenue printed in-line with forecasts. Fresenius SE (+3.9%) holds onto gains on the back of a broker upgrade at Morgan Stanley.

Lowe's Companies Inc (LOW) Q1 20 (USD): adj. EPS 1.77 (exp. 1.32), Revenue 19.7bln (exp. 18.32bln). SSS +12.3% (exp. +3.44%), Comp sales +11.2% (exp. +4%) Higher by 4.4% in the pre-market

Target Corp (TGT) Q1 20 (USD): Adj. EPS 0.59 (exp. 0.40), Revenue 19.62bln (exp. 19.04bln). Comp sales +10.8% (exp. +7.5%); did not provide FY guidance. Lower by 2% in the pre-market


NZD/AUD - Hot on the heels of RBNZ Deputy Governor Bascand’s wait-and-see policy guidance on Tuesday, Governor Orr has echoed sentiments overnight by stating that negative rates are not on the current agenda, but an option for consideration much later. Hence, the Kiwi remains some distance ahead of the chasing G10 pack on the 0.6100 handle vs its US counterpart and closer to 1.0700 against the Aussie that is still hampered by deteriorating trade relations with China and a stark reality check on the retail side as sales slumped in April by more than double the magnitude of the prior month’s rise. In response, Aud/Usd has slipped back under 0.6550 after another test and rejection of recent highs around 0.6570 and now eyeing May PMIs for further direction.

CHF/EUR - The Franc and Euro are both holding gains relative to a broadly soft Dollar, as the DXY continues to pivot 99.500 ahead of FOMC minutes after little new from Fed chair Powell in testimony yesterday, but perhaps more impetus via his opening remarks at an event on Thursday. Eur/Usd is establishing a firm base above 1.0900 and decent option expiry interest between 109.30-35 (1 bn), while Usd/Chf straddles 0.9700 and Eur/Chf rotates either side of 1.0600 following its sharp spike from near 1.0500 multi-year lows in wake of Germany and France reaching agreement on a common EU debt funded COVID-19 rescue package.

CAD/JPY/GBP - All narrowly mixed vs the Greenback as the Loonie maintains momentum within 1.3960-16 parameters with ongoing assistance from firm crude prices awaiting Canadian CPI, while the Yen has pared more losses following a 3rd test of resistance just above 108.00, but crucially from a technical perspective no further approach towards the 200 DMA. Next up, Japanese trade data tomorrow before the BoJ’s bank lending inter-schedule policy meeting on Friday. In contrast, Sterling has succumbed to more ‘sell in May’ and chart-inspired downside pressure with stops, albeit light so far, tripped at 1.2225 in Cable that represents one side of in inverse head and shoulders formation, but the Pound has regained some poise post-soft UK inflation data and pre-BoE testimony to a TSC.

SCANDI/EM - Somewhat contrasting fortunes for the Scandinavian Crowns as Eur/Sek resumes its bearish tendencies towards 10.5500, but Eur/Nok rebounds from sub-10.9000 in wake of the Riksbank’s latest FSR and a Norges Bank economist survey both highlighting the adverse impact and risks related to the coronavirus. Meanwhile, the Turkish Lira looks apprehensive in the run up to tomorrow’s CBRT rate decision even though the Bank’s swap line to Qatar has been boosted by Usd10 bn to Usd15 bn, but the SA Rand is heading back down with more purpose after breaching a prior May peak ahead of retail sales and the SARB on Thursday with another 50 bp ease seemingly priced in.

Australia Preliminary Retail Sales for April fell 17.9% vs. Prev. increase of 8.5%, according to the Australian Bureau of Statistics. ABS stated this was the largest seasonally adjusted decline on record with turnover in clothing, footwear, personal accessories, cafes, restaurants and takeaways around half the level of April last year, while  the food retailing industry, which increased strongly in March, slipped 17.1% since then. (Newswires)


UK debt remains relatively resilient vs peers, but in truth trade is choppy and turnover lacklustre with prices well within recent ranges awaiting a clear break or definitive change of direction. Markets are still weighing up the economic benefits of COVID-19 restrictions being gradually removed against the risk of another flare up or so-called 2nd wave without the back-stop of a reliable cure or vaccine. Nevertheless, Gilts just edged a slender new Liffe peak at 137.83 and Bunds are back in mild positive territory vs 29 ticks below par at one stage and an even deeper base on Tuesday (172.26 vs 172.51 low so far today). Meanwhile, US Treasuries have reverted to marginal bull-flattening mode even though 20 year supply looms, and perhaps taking cues from the very short end amidst further recalibration along the FFF strip to unwind negative rate expectations.


WTI and Brent front-month crude futures trade choppy and swing between gains and losses. WTI June expired yesterday whilst holding up above USD 30.0/bbl at USD 32.50/bbl, whilst June/July settled in backwardation – which some suggested show a clear significantly shift in sentiment MM. That being said, short-covering and low vol/open interest may have also influenced the June price action. Underlying fundamentals seem to be broadly improving, but “poor refinery margins suggest that this strength is unlikely to be sustainable in the near term.” ING says, “. We would need to see strength in refinery margins in order to persuade refiners to increase utilisation rates, but at current levels, there seems little incentive for them to do so.” On the geopolitical front, Iranian Navy said it will continue with its activities in the Persian Gulf despite US warnings, reported via ISNA, which follows remarks by the US navy that "Armed vessels approaching within 100 meters of a US naval vessel may be interpreted as a threat". Private inventories yesterday printed a headline draw of 4.84mln barrels. Investors will be eyeing the DoEs for confirmation. Elsewhere in the States, North Dakota’s oil and gas regulators will be meeting today to discuss mandated cuts, albeit little is expected from the meeting and the State only pumps ~1.4mln BPD vs. Texas’ 5mln BPD. In terms of metals, spot gold trades modestly firmer around USD 1750/oz and seems to be deriving strength from a weaker Dollar amid light news flow in early European trade. Copper similarly remains little changed within a tight intraday band.

US Private Inventory Crude Stocks (w/e 15th May) -4.8mln (exp. +1.2mln, prev. -0.7mln)

Russia has resumed oil production exports to North Korea, according to Interfax/ (Ifx)

Standard Chartered raised its gold price forecast to USD 1689/oz for 2020 and sees prices averaging USD 1750/oz In Q4. (Twitter)

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