Original insights into market moving news

[PODCAST] EU Open Rundown 27th July 2020

  • Asia-Pac traded choppy as initial optimism petered out, Nikkei underperformed on catch-up play
  • The US flag was lowered at its Chengdu consulate in China shortly after the closure deadline; Chinese military began live-fire drills in the South China Sea on Saturday
  • White House Chief of Staff Meadows said the WH and Senate Republicans have reached a deal "in principle" on the next COVID-19 relief package, likely to be released today
  • UK government announced a 14-day quarantine rule for anyone arriving from Spain over fears of second wave in the country
  • In FX, DXY traded sub-94.000, EUR/USD rose above 1.1700 and USD/JPY tested 105.50
  • In metals, spot gold printed fresh all-time highs whilst spot silver posted gains in excess of 5.5%
  • Looking ahead, highlights include German IFO & US Durable Goods, supply from US
  • Earnings from LVMH, SAP, Ryanair and Hasbro


US CDC reported 64,582 new COVID-19 cases (Prev. +74,818) and deaths increased by 929 (Prev. +1,145) on July 26th. Texas reported 5,810 new COVID-19 cases (Prev. +8,112) and deaths rose by 153 (Prev. +168), current hospitalisation +248 (Prev. -209); according to the State Health Department. Florida reported 9,344 new COVID-19 cases (Prev. +12,199) and deaths increased by 78 (Prev. +126) while hospitalisation fell by 88 (Prev. -285) on Sunday. Arizona reported 1,973 new COVID-19 cases (Prev. +3,748) and deaths increased by 19 (Prev. +144) on Sunday. LA County reported 1,730 new COVID-19 cases (Prev. +3,628) and deaths rose by 10 (Prev. +53) on Sunday with hospitalisations at a record high, but the data is incomplete due to delays in State electronic lab reported, according to the County Health Department. California said current hospitalisation fell by 69, according to state health department. California coronavirus cases increased by at least 4,372 on Sunday, deaths rise by at least 21, according to a major newswires tally. (Newswires)

US Treasury Secretary Mnuchin said the next COVID-19 relief package will be introduced on Monday and wants to act quickly. Mnuchin added that he and WH Chief of Staff Meadows worked on technical issues on Saturday and said the entire relief plan is ready and worth USD 1tln. Mnuchin conceded that President Trump’s payroll tax cuts will not be in the package but stated the package will contain extended unemployment benefits with 70% "wage replacement". On the economy, the Treasury Secretary said parts are doing well and parts are not, but he expects to see a big rebound next quarter. (Fox News/Politico/Newswires)

White House Chief of Staff Meadows said the WH and Senate Republicans have reached a deal "in principle" on the next COVID-19 relief package, legislative proposal likely to be unveiled on Monday but a "handful" of issues still need to be resolved. (Newswires) US Senate Majority Leader McConnell said hopefully we can come together behind some package we can agree on in the next few weeks. Some are still mulling a temporary extension of the existing unemployment benefits to give Congress time to negotiate. (Washington Post) Note: unemployment benefits are set to expire at the end of this week. Multiple GOP Hill aides involved in the stimulus negotiations said they feel Treasury Secretary Mnuchin and White House Chief of Staff Meadows have undermined the legislative process. (Axios)

NIH Dr. Fauci said he does not believe we need to universally go back into lockdown at this time. (Newswires) Harris County and the City of Houston have ordered all public and non-religious private schools to delay reopening for in-person instruction until at least September 8th, according to Houston Chronicle citing county officials. (Houston Chronicle)

Moderna (MRNA) has announced the expansion of the BARDA agreement to support larger Phase III programme for its COVID-19 vaccine. Co. remains on track to deliver around 500mln doses per annum, and possibly up to 1bln doses per year, beginning 2021. (Newswires)

North Korean leader Kim Jong Un issued a state of emergency after a person suspected of having COVID-19 returned from South Korea after illegally crossing the border this month, state media said on Sunday. (Newswires)

Australia's Victoria State reported 532 new coronavirus cases (Prev. 459). (Newswires) 

China reported 61 new COVID-19 cases in Mainland (Prev. 46); 4 new imported cases (Prev. 11) and 44 new asymptomatic cases (Prev. 68). (Newswires)

Vietnam has evacuated 80k tourists from the central city of Danang following a COVID-19 outbreak there, according to a government statement. (Newswires)

UK government announced a 14-day quarantine rule for anyone arriving from Spain over fears of second wave following a spike in cases in Catalonia and Aragon. (BBC) Spain’s Foreign Ministry said the pandemic is under control in Spain and added that cluster outbreaks in Catalonia and Aragon should soon be brought under control and Spain is safe for tourism. Spain’s Foreign Ministry is focusing on convincing the UK government to exclude Canary Islands and Balearic Islands from quarantine rules. (Newswires)

Fears are growing that countries like France and Germany could join Spain on the UK’s quarantine list amid spikes in COVID-19 cases. Telegraph analysis shows most countries on the UK’s “safe list” have seen cases rise sharply over the past week. (Telegraph)

Germany COVID-19 cases rose by 340 (Prev. +305), whilst deaths rose by 0 (Prev. 0), according to RKI. (Newswires)


US federal agents and local law enforcement entered the Chinese consulate in Houston on Friday afternoon after Washington’s deadline for the closing of the diplomatic facility expired. (CNN) Meanwhile, China protested the “forced entry” into the Chinese consulate. (SCMP)

US flag was lowered at its Chengdu consulate in China shortly after the closure deadline. (SCMP)

White House Press Secretary said the US urges China to refrain from tit-for-tat retaliation for the closure of the consulate. (Newswires)

US President Trump reiterated the trade deal with China means less to him now after the virus. (Twitter)

The Chinese military began live-fire drills in the South China Sea on Saturday in a challenge to U.S. freedom of navigation operations there. China has warned civilian vessels not to enter the area. (Nikkei)


APAC stocks traded choppy as initial optimism somewhat abated after Wall Street’s decline on Friday amid a struggle in tech shares coupled with rising US-Sino tensions, with the Dow snapping a three-week winning streek as Intel shares slumped over 15% post-earnings. ASX 200 (+0.3%) nursed earlier losses despite the rising case-count in Victoria, with upside led by strength in mining names. Nikkei 225 (-0.3%) lagged as the index played catch-up to the broader losses seen at the back end of last week, whilst JPY strength kept gains limited. Softbank shares cushioned losses for the index as investors had the first chance to react to reports that its chip arm is reportedly attracting interest from Nvidia. KOSPI (+1.1%) remained firm throughout the session as the case-count in South Korea stays on a downward trajectory. Elsewhere, the Hang Seng (+0.1%) saw initial momentum from the euphoria surrounding the debut of its tech index, of which over 40% comprises of shares from Alibaba (8.53% weighing), Tencent (8.52%), Meituan (8.33%), Xiaomi (8.11%) and Sunny Optical (8.02%), whilst Shanghai Comp (+0.1%) traded between gains and losses as industrial profits saw a rebound in June, although price action is upside was hampered amid the rising tensions between US and China. Finally, Taiwan’s TSMC rose over 9% on the back of the broader tech rally coupled with reports that Apple (AAPL) is setting up an R&D area for display tech at TSMC’s plant.

PBoC injected CNY 100bln via 7-day reverse repos at a maintained rate of 2.20% for a net neutral daily position. PBoC sets USD/CNY mid-point at 7.0029 vs. Exp. 6.9939 (Prev. 6.9938)

Chinese Industrial Profits YY (Jun) 11.50% (Prev. 6.00%). (Newswires) Chinese Industrial Profits YTD (Jun) -12.80% (Prev. -19.3%)

Beijing has resumed the issuance of shopping vouchers, with 1mln offline food & beverage coupons alongside 500k smart product coupons totalling CNY 12.2bln, in a bid to boost consumption. (Global Times)

The number of US IPOs by Chinese firms have more than doubled since the start of the year, according to Dealogic data, with sources stating that the figure could rise substantially with the listing of Chinese fintech Co. Lufax this year. (FT)

BoJ Summary of Opinions stated Japan's economy is likely to improve gradually from the second half of this year, but the pace is expected to be only moderate while the impact of COVID-19 remains; Japan's economy has been in an extremely severe situation, downward pressure on wages is likely to continue for the time being. CPI YY is likely to be negative for the time being, mainly affected by COVID-19 and the past decline in crude oil prices. Thereafter, it is expected to turn positive and then increase gradually, mainly due to economic improvement. (BoJ)

RBA's Assistant Governor Kent reiterates that the RBA is ready to buy bonds if needed to maintain the 0.25% yield target; Term Funding Facility (TFF) take-up at AUD 26bln vs. AUD 150bln allowance; expects banks to draw more from TFF as the deadline nears. RBA's Kent is not overly concerned about the AUD/USD level. (RBA)


UK Chancellor Sunak is said to be mulling a new tax on goods sold online due to mounting concerns over a collapse of the high street, according to the Times. (Twitter)

ECB’s Wiedmann (Hawk) stressed that joint EU debt must not become a regular thing. In terms of Germany’s economy, said that the data overall shows the economy bottomed out in spring and is now gradually recovering. (Newswires)

Italian Finance Minister Gualtieri said that money from the EU Recovery Fund will not come soon enough to avert an autumn liquidity squeeze, whilst urging a formal request to the ESM to unlock EUR 36bln of immediate pandemic loans. (Telegraph)

Fitch affirmed Greece at 'BB'; Outlook Stable. (Newswires)


DXY continues to trickle lower below 94.000 after taking out Friday’s low of 94.315 amid an initial pickup in sentiment, whilst participants fear a State-side fiscal cliff edge later this week, although Treasury Secretary Mnuchin is to unveil the relief package proposal today ahead of negotiations with Democrats over a fine-tuning. G10s largely move on Dollar dynamics with EUR/USD extending gains above 1.1650 to breach 1.1700 to the upside with little action emanating from UK’s surprise withdrawal of Spain “safe” travel status, whilst speculation remain over Germany and France’s positions on said list following a spike in COVID-19 cases in both countries. Furthermore, Italy has warned of a domestic autumn funding crisis as the Recovery Fund cash will come too late. Cable reclaimed 1.2800 on Dollar tailwinds as the pair topped the June high of 1.2812 and briefly rose above 1.2850. USD/JPY initially latched on to the cautious tone as it lost its 106.00 handle and drifted lower throughout the session with Japanese players back in the market following last week’s domestic holidays as they received the first chance to react to China’s tit-for-tat retaliation for the closure of the Chinese consulate in Houston. However, the bulk of the move seemed more on the Dollar weakness as the pair breached 105.75 to the downside to test 105.50. Technicians flag 105.19 as potential support should 105.50 fail to hold, which marks the 61.8% Fib from the March 9th rebound to the 24th. Antipodeans were ultimately firmer on the back of the Greenback’s losses, albeit the AUD was initially cautious amid the rising cases in Australia’s second largest state Victoria as it continues to post record new infections. Finally, USD/CNY gapped lower around the 7.000 mark before dipping below the level on the aforementioned USD softness and a rebound in Chinese June industrial profits.

S&P affirmed Turkey at B+; Outlook stable. (Newswires)


WTI and Brent futures traded choppy with no real conviction as news flow for the complex remained light, although some downside was experienced after the NHC downgraded Hanna to a Tropical Storm after it made landfall in Southern Texas as a category one hurricane. WTI and Brent September futures traded on either side of 41/bbl and 43/bbl respectively within 0.3-0.4/bbl ranges. Elsewhere, precious metals again took focus as spot gold prices tore past its prior record high around 1920/oz to a fresh all time high above 1935/oz, whilst spot silver similarly gained over 5.5% as the metals were bolstered by USD weakness, breaks through technicals and woes of a resurging pandemic. Copper prices meanwhile saw upside on the weaker Buck.

Hanna has been downgraded to a Tropical Storm after making landfall in the Southern Texas Coast on Saturday as a category one hurricane. (NHC) South Texas called for evacuations ahead of the landfall. (Newswires)

Mexico is reportedly looking to launch its annual oil hedge, according to sources, who expect the hedge to be smaller this year due to the elevated prices of options. (Newswires)

Marathon's 585k BPD Galveston Bay, Texas refinery is said to be restarting its units following a two-month overhaul, sources state. (Newswires)

Baker Hughes US rig count (w/e July 25th): Oil +1 at 181, Nat Gas -3 at 68, Total -2 at 251. (Newswires)


US Special Envoy to Iran Hook said Iran continues repeatedly violate the arms embargo and added that the dispute among Gulf Arab states has continued for too long. (Newswires)

Israeli military said one of its drones crashed inside Lebanon. (Newswires) Explosions have been reported at a military compound inside Southern Baghdad, with the cause yet unclear, according to a military statement. (Newswires)

EU Commission said a WTO panel report confirms the legality of specific EU anti-dumping rules against Russia WTO law, while raising certain issues as regards their practical application. (Newswires)

Germany Foreign Minister said Germany has rejected US President Trump's proposal to let Russia back into the G7. (Newswires)

South Korea and US are to hold scale down military drills next month. (Newswires)


The bull-flattener came to a pause on Friday after a week of yields edging lower, although the long bond did richen modestly (30s -2bps at 123bps, 10s unch. at 58 bps). There haven’t been many new catalysts to move the needle for rates markets on Friday, although the subdued equity performance, with the overarching US/China tensions and US fiscal cliff approaching, is not giving participants much cause to let the curve steepen either, especially in light of COVID sustaining its grip on the US. It was an acutely low week for volumes in USTs, typical of summer trade, although the FOMC meeting this Wednesday looms on what will be the busiest week of Q2 earnings season, which could bring some action into the Treasury curve; the 57bps resistance level in the 10-year has been well respected so far. On the corporate landscape, earnings have generally been in line to slightly firmer, with respective sell-offs (particularly in the large momentum names, i.e. TSLA/MSFT) being attributed to “profit-taking” from frothy valuations rather than a shift in sentiment. Participants will be looking to the likes of AAPL, AMZN, FB and GOOG this week to confirm their macro narrative. T-NOTE FUTURES (U0) SETTLED 1+ TICKS LOWER AT 139-18+

Apple (AAPL), Amazon (AMZN), Facebook (FB) and Google (GOOGL) CEO congressional hearing has officially been delayed until Wednesday. (Axios)

Google (GOOG) - Australia's ACCC has launched federal court proceedings against the Co. over allegedly misleading consumers about expanded use of personal data and related changes to privacy policies. Co. intends to defend its position against the ACCC allegations. (Newswires)