Original insights into market moving news

[PODCAST] US Open Rundown 20th July 2020

  • Sentiment has strengthened in Europe but remains mixed/flat stateside as we await the EU Council recommencement
  • EU leaders are yet to formally agree on the scale of grants in the Recovery Fund as talks enter a fourth day, leaders will reconvene today at 16:00CEST/15:00BST
  • Frugal EU members have further eased their stance on grants, but asked Southern Europe and France to meet them halfway; France sees a path towards a deal
  • Trump admin and GOP leaders to meet at White House today morning to discuss the next round of stimulus funding, according to CNBC's Tausche citing sources
  • PBoC stood pat on its 1yr and 5yr Loan Prime Rates as expected & China has pushed back on reports UK are to suspend HK extradition treaty
  • Looking ahead highlights include, the EU summit, BoE’s Haldane & Tenreyro, ECB’s Lane & de Guindos, UK Foreign Minister Raab


US CDC reports 67,574 new COVID-19 cases (Prev. +74,710) and 877 new deaths (Prev. +918) as of yesterday. Texas coronavirus cases increased by 7,300 on Sunday (vs. +10,158 on Saturday) to a total of 352,030; deaths rose by 93 to total of 3,958; hospitalization down 66, down from record high; according to the State Health Department. Florida COVID-19 cases rose by 12,478 on Sunday to a total of 350,047 cases, marking the fifth straight day of +10,000 daily cases. Florida hospitalisation +131 in the past 24 hours. Arizona COVID-19 cases +1.7% vs. 7-day average 2.4%. South Carolina COVID-19 cases rose by 2,374 on Sunday, the largest single-day increase since the pandemic started, according to a newswires tally. Los Angeles County COVID-19 cases rose by 2,848 on Sunday (Prev. +2,770 on Saturday); Deaths +11 (Prev. +37). California coronavirus cases increased by at least 5,790, according to a major newswire tally (Newswires)

Ohio Governor has warned that Ohio is heading in the wrong direction and “could become Florida”. (CNBC)

US President Trump said he will not consider a national mandate on mask wearing. (Fox News)

US Senate Republicans are seeking temporary COVID liability protections for businesses, healthcare facilities, schools, churches, charities, and government agencies, according to a draft document. It was also reported US travel groups have written to Congress seeking billions in assistance for industry and new tax breaks. (Newswires)

Trump admin and GOP leaders to meet at White House today morning to discuss the next round of stimulus funding, according to CNBC's Tausche citing sources. (Twitter) Senate Majority Leader McConnell plans to release his phase four legislation this week and will be around USD 1tln; measures include payroll tax cuts, extension of the Payment Protection Program and increased funding for COVID-19 testing, Axios reported. (Axios)

Germany COVID-19 cases rose by 249 (Prev. +202) to 201,823 whilst deaths rose by 2 (Prev. +1) to a total of 9,086, according to RKI. (Newswires)

Beijing is to lower its COVID-19 emergency response level to level 3 from level 2 starting July 20th, according to an official. (Newswires) China reported 22 new COVID-19 cases in the Mainland (Prev. 16); 13 new asymptomatic cases (Prev. 42) and 5 new imported cases (Prev. 3). (Newswires)

Australia's Victoria state reports 275 new COVID-19 cases (Prev. +363). Victoria state introduced a mask wearing rule over the weekend. (Newswires)

Britain's business ministry have signed an in-principal with AstraZeneca (AZN LN) for 1mln doses of a treatment containing COVID-19 neutralising antibodies for those who cannot receive a vaccine. Additionally, signed a deal with Valneva for 60mln doses, and then a further 40mln, for their COVID-19 vaccine candidate. (Newswires)

Synairgen announced initial findings of their COVID-19 treatment, which suggest the odds of a patient in hospital developing a severe disease have been cut by 79%. (BBC) Note, the results have not been published in a peer-reviewed journal, nor has the full data been made available – as such, claims cannot be verified


APAC stocks traded choppy after the region initially took its cue from Wall Street’s mixed close on Friday as the decline in Netflix shares kept other large tech stocks at bay ahead of another earnings-abundant week, with 92 S&P 500 companies alongside eight Dow 30 constituents bracing to report their numbers – including the likes of Tesla, Microsoft, Twitter, IBM and some major US airlines. ASX 200 (-0.5%) lost steam after the open as Australia remained subdued by the outbreak in its second largest state of Victoria– which prompted authorities to announce a mandatory mask-wearing rule over the weekend. Nikkei 225 (+0.1%) swung between gains and losses after seeing initial pressure as Japan’s June trade balance printed a significantly wider-than-expected deficit in JPY terms, but with losses somewhat cushioned on currency dynamics. Meanwhile, Hang Seng (-0.1%) conformed to the downside across the region at the open and as Hong Kong is set to tighten restrictions following a spike in COVID-19 cases, but later erased losses, whilst Shanghai Comp (+3.1%) outperformed as reports noted that Beijing is to lower its COVID-19 alert level as cases are back under control, whilst the PBoC also injected a net CNY 50bln via 7-day reverse repos. Finally, JGB futures traded lower in early Tokyo trade, whilst most of the curve saw some cheapening, but the longer-end held despite 20yr supply tomorrow.

PBoC set USD/CNY mid-point at 6.9928 vs. Exp. 6.9954 (Prev. 7.0043)

PBoC injected CNY 100bln via 7-day reverse repos for a net daily injection of CNY 50bln at a maintained rate of 2.20%

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

PBoC said China will connect its interbank and exchange bond markets in a bid to unify bond markets and facilitate monetary policy transmission and macroeconomic management. (CGTN)

China will be extended an anti-dumping investigation into imports of cresol from the US, EU and Japan due to complexity in the case; investigation extended to January 2021 from the initiation in July 2019, according to MOFCOM cited by Global Times. (Twitter) Note, cresol has antibacterial and insecticidal properties

US Secretary of State Pompeo said China is crushing Hong Kong’s freedom and cheating on international deals. (Newswires) Global banks in Hong Kong are combing through their client lists for people at risk as the US prepares to move forward with sanctions against Chinese officials and possibly other individuals in the city over a national security law, SCMP sources state. (SCMP) Bankers at Credit Suisse (CSGN SW), HSBC (HSBA LN), Julius Baer (BAER SW), UBS (UBSG SW), among others, are examining whether their clients in Hong Kong have links to pro-democracy movements, sources state. (Newswires)

RBNZ bought NZD 390mln (Prev. NZD 230mln) of NZGBs in today's LSAP, matching the amount it sought to purchase. (Newswires)

BoJ Minutes from its June meeting stated that members agreed that tensions in global financial markets have abated due to aggressive fiscal and monetary policy; members shared view that markets continue to be nervous due to high uncertainty. (Newswires)

Ant Group is to plan simultaneous IPOs in Shanghai and Hong Kong, according to reports. (Newswires) Previously reported to be targeting a valuation above USD 200bln.


Washington Post-ABC poll shows Democratic candidate Biden leading Trump 55% to 40% (vs. 53% to 43% in May). Poll was conducted between July 12-15 and comprised of 845 registered voters with an error margin +/- 4ppts. (Washington Post)

US House Democrats have demanded investigation into the use of force by law enforcement agents from Justice and Homeland Security departments in Portland, Oregon. (Newswires)

US President Trump and top officials are reportedly privately mulling a controversial strategy to act without legal authority to enact new federal policies, starting with immigration, according to Axios citing sources. (Axios)

US Commerce Secretary Ross was admitted into hospital on Friday night for a “minor” unrevealed illness, according to sources cited by Fox (Fox News)


EU leaders are yet to formally agree on the scale of grants in the European Recovery Fund as the meeting ran into Monday. European Council President Michel proposed cutting grants to EUR 400bln from EUR 500bln and raising loans share to EUR 350bln from EUR 250bln. Frugal member Denmark said it is ready to accept the EUR 400bln in grants under the new compromise proposal, whilst officials stated that cracks are starting to appear on the Frugal front. Frugal members now see EUR 390bln (Prev. EUR 375bln; original EUR 350bln) as the red line for grants in the Recovery Fund, but they need southern Europe and France to meet them halfway, according to FT's Khan (Newswires/Twitter) More recently, reports noted that hardliners (Frugals) are reportedly prepared to accept the EUR 390bln in grants, according to Officials. However, FT’s Khan suggests that the Frugals willingness to accept the EUR 390bln figure will be subject to the group pushing for additional rebates in budget talks. French President Macron opposed Recovery Fund grants being cut to EUR 375bln, according to Politico citing officials, but an official stated that France now sees a path to a recovery fund deal (Politico/Newswires) ECB President Lagarde stated it is better for EU leaders to agree on an ambitious package as opposed to reaching a quick deal under any costs. (Newswires) EU27 are to reconvene at 16:00CEST/15:00BST, according to the European Council Spokesman. (Twitter) Click here for a detailed round-up

UK government has reportedly asked Japan for help with 5G as an alternative to China’s Huawei, according to sources. British officials have said that Japan’s NEC (6701 JT) and Fujitsu (6702 JT) could replace Huawei, with the former already in discussions with the UK. (Nikkei) Chinese experts said China will make its "principled stance" over the Huawei ban clear to the UK, but there remains room for positive engagement and negotiations before the two sides to address the disputes, reported via Global Times. (Twitter)

China's Foreign Ministry urges the UK to avoid going further down the wrong path. (Newswires) Ahead of UK Foreign Secretary Raab expected to suspend the HK Extradition Treaty, speaking today at 15:30BST/10:30ET.

According to the latest Deloitte survey, nearly half of CFO’s surveyed forecast that demand for goods and services will not return to pre-lockdown levels in Britain until July 2021 at the earliest. (Times)

UK Rightmove House Price Index (Jul) MM 2.4% (Prev. 1.9%). Rightmove said a mini housing market boom was gathering pace after a tax cut by Chancellor Sunak. (Newswires)


UK Foreign Secretary Raab signalled that the UK will suspend its extradition treaty with Hong Kong following the implementation of the National Security Law. Raab is set to update Parliament today on extradition arrangements with Hong Kong. (Newswires)

The White House is mulling troops cuts in South Korea amid disagreement between the two sides over cost sharing, according to WSJ. (WSJ) South Korea’s defence ministry stated that there have been no such discussions. (Yonhap)

Germany, France and Italy are said to be mulling sanctions if the violations of arms embargo on Libya does not cease, according to reports. (Newswires)


European equities (Eurostoxx 50 +0.3%) kicked the session off on the backfoot before paring losses as market participants eye events in Brussels and the COVID situation in the US. Despite some of the harsh words spoken between EU leaders over the weekend, the latest state of play indicates that some form of agreement on the recovery fund could be on the cards as the so-called “frugal four” appear to have settled on a figure of EUR 390bln for the grants component of the fund (subject to pushing for additional rebates from the EU budget). As such, it is now on EU members external to the frugals to meet the group “halfway”. Talks have currently taken a pause and will resume once again later today at 1500BST. Despite a potential agreement being on the horizon and upside for the EUR currency (suggesting the market is taking a favourable view of the situation), stocks took a little while to recover off lows with indices now broadly flat/marginally firmer.  Stateside, COVID concerns remain at the forefront with the US reporting +67k cases yesterday and as according to Fulcrum economists, the r-rate is above 1 in 45 of the 50 US states, which between them account for 95% of U.S. GDP. From a sectoral standpoint, sectors trade mixed with some of the more cyclical names such as travel & leisure and autos faring worse than peers. For the former, it is worth noting that reports suggest Barcelona could have to return to lockdown within the next two weeks, such a development would be troubling given it is such a tourist hotspot for Europe and a potential sign of things to come for other such destinations. Elsewhere, losses for health care names are shallower than most with AstraZeneca (+3.2%) lending some support after signing an in-principal agreement with Britain’s business ministry for 1mln doses of a treatment containing COVID-19 neutralising antibodies for those who cannot receive a vaccine. Note, markets also await data from the Co.’s early-stage human trials due to be published in The Lancet later today (timing TBC). Other notable movers include Natixis (-7.3%) after BPCE pushed back on FT speculation that it was looking to purchase the remaining 30% shares of Natixis they do not already control. To the upside, UBI Banca (+12.4%) sit at the top of the Stoxx 600 after reports noted that Intesa Sanpaolo increased its bid for UBI, offering EUR 0.57/shr in addition to 1.7 shares for each UBI share.

Chevron (CVX) is reportedly close to a deal to purchase Noble Energy (NBL) for ~USD 5bln, WSJ citing sources. (WSJ)


USD - The Dollar is mixed vs major rivals and seems to be settling into relatively narrow ranges that often mark the start of a new week, albeit after some volatility in certain Usd/G10 pairings overnight and in early EU trade. The index is rotating around 96.000 within a 95.792-96.183 band and maintaining an underlying bid on broad risk aversion to counter losses against a few counterparts and the latest more specific US COVID-19 developments that include record rises of confirmed cases in some states again.

EUR - Renewed hope of a deal on the EU Recovery Fund at the next meeting of leaders is keeping the Euro elevated amidst stops on a break of last week’s peak vs the Greenback that pushed the pair up to circa 1.1467 at one stage. However, an agreement is far from certain as the so called ‘frugals’ continue to contest the total size of the crisis package and composition between grants and loans – for a more in depth look at the current state of play and latest proposals check out the headline feed at 9.03BST. In terms of technical factors, Eur/Usd resistance is seen at the 1.1495 ytd high from March 9 ahead of 1+ bn expiries at 1.1500, while even heftier option expiry interest at the 1.1400 strike (2.6 bn) should add to psychological support and underlying bids.

CHF/JPY - Both weaker vs the Buck, with the Franc back below 0.9400 and Yen under 107.00, albeit off worst levels through 107.50 on the back of worse than forecast Japanese trade data, while the former will have taken note of a Chf 5 bn or so jump in Swiss domestic bank sight deposits. Indeed, Eur/Chf is also higher alongside Eur/Jpy, eyeing 1.0775 and 123.00 ahead of CPI and trade respectively on Tuesday.

GBP/NZD/CAD/AUD - All essentially flat relative to the US Dollar, with Sterling gleaning some traction from the single currency’s advance as Eur/Gbp fails to extend beyond last Friday’s high and drifts back down towards 0.9100, while the Kiwi rotates around 0.6550 on marginally favourable Aud/Nzd cross flows in the run up to RBA minutes and a speech from Governor Lowe that are keeping the Aussie contained/capped at 1.0675 and near 0.7000. Elsewhere, the Loonie is meandering between 1.3600 and 1.3570 awaiting Canadian housing data, retail sales and CPI over the next 48 hours for some independent impetus following the BoC and July MPR that was bereft of economic estimates.

EM - Another strong rally in Chinese equities, a firmer PBoC Usd/Cny midpoint fix and net injection of 7-day liquidity all keeping the Yuan afloat above 7.0000 and close to resistance near 6.9800 that has been tested twice so far in July, but the Lira remains rigid between 6.8500-8600 ahead of Thursday’s CBRT policy meeting even though the Turkish CB jacked up the FX RRR by 300 bp to raise reserves by some Usd 9 bn.

S&P affirmed Russia at “BBB-“; outlook Stable. (Newswires)


Bunds are still underperforming, but have reclaimed 176.00+ status even though Eurozone periphery bonds are deriving more support from Recovery Fund hopes, if not quite firm expectations and the Dax is front-running a recovery in EU stocks to probe 13k in futures terms. Meanwhile, Gilts have got to within a single tick of parity at 137.75 and US Treasuries are grinding higher with the curve fractionally flatter, albeit rangy overall and volumes light. Ahead, a blank US agenda and no supply leaving the stage clear for ECB and BoE speakers as EU leader reconvene to try and hammer out a fiscal deal.


WTI and Brent have begun the week on the backfoot, as sentiment in general has been subdued for much of the session after a choppy APAC handover following a mixed US close and a number of updates from the EU Council meeting. For the crude complex itself newsflow has been slow, attention was grabbed by reports that the Saudi King Abdulaziz was admitted to hospital; but, ultimately did not cause a price reaction as the reason was testing for an infection. For the week itself there isn’t anything scheduled on the crude front of note, aside from the usual weekly private inventories, DoE’s & Baker Hughes updates. As such, the complex may well itself more at the whim of broader sentiment/USD action – barring any unscheduled updates of course. Most recently, Sinopec are cutting refining rates for July due to demand being impacted by severe flooding, according to sources. Moving to metals where spot gold is currently little changed on the day and is comfortably above USD 1800/oz handle and withing proximity to the high of circa USD 1812/oz. Citi, on the precious metal, writes that a rally to record prices is only a matter of time and ascribes a 30% chance to USD 2000/oz by Christmas; given, record ETF inflows, increased gold asset allocations & low real yields among other factors.

Saudi King Salman bin Abdulaziz has been admitted into hospital for medical tests due to a gallbladder infection, according to Saudi press. (SPA)

China's Sinopec are to lower refining rates in July according to sources, reducing it due to demand being impacted by severe flooding. (Newswires)