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[PODCAST] EU Open Rundown 29th July 2020

  • Asian equity markets traded somewhat indecisively following a lacklustre handover from Wall St
  • Moderna has stated that its COVID-19 vaccine is able to induce a robust immune response and protect against infection in non-human primates
  • The DXY just about snapped a 7-day losing streak yesterday although has since given back some gains
  • US President Trump said there are some parts of the Republican coronavirus relief bill he does not support but didn’t specify which parts
  • It was also reported that US Senate Republicans are deeply divided regarding their coronavirus package
  • Looking ahead highlights include, FOMC Rate Decision & Press Conference. Supply from UK & Germany
  • Earnings: BASF, Deutsche Bank, Telefonica Deutschland, Santander, Sanofi, Barclays, GlaxoSmithKline, Boeing, General Electric

CORONAVIRUS UPDATE

US President Trump gave a press conference in which he referred to the pandemic as the "China virus" and also noted that Pfizer vaccine is heading in a very positive direction, while he congratulated Kodak on the production deal with US to produce critical pharmaceuticals and stated the DPA is being used to provide USD 675mln loan to launch Kodak Pharmaceuticals. (Newswires)

Moderna's (MRNA) COVID-19 vaccine (MRNA-1273) induced robust neutralizing antibodies and dose dependent increases in T-cell responses, while the vaccine reportedly led to protection against COVID-19 infection in lungs and nose of non-human primates, according to new publication in the New England Journal of Medicine. Furthermore, it was also reported that Moderna is pitching its virus vaccine at USD 50-60 per course for US and other high-income countries which it intends to prioritize. (Newswires)

US COVID-19 cases rose by 54,448 (prev. +61,795) and deaths increase by 1,126 (prev. +564), while AFP later tweeted that US coronavirus deaths rose by nearly 1,600 which is the most in 2 and a half months. (Newswires/Twitter)

California COVID-19 cases rose by 6000 or 1.3% (prev. +6,891, +1.5%) and deaths increased by 73 (prev. +29), although a major newswires tally later stated that California coronavirus cases increased by at least 10,063 and deaths rose by at least 171 which would be the largest on record. Texas coronavirus cases rose by 8,432 to 394,265 (prev. +4,267) and deaths rose by 164 to 5,877 (prev. +44), while a major newswire tally stated that coronavirus cases increased by at least 10,029 to a total of 412,121 and the death toll rose by at least 221 to 6,506 which would be a record increase. (Newswires)

Russia is reportedly preparing for the world's first approval of a Covid-19 vaccine by mid-August, although questions remain regarding safety and effectiveness. In other news, US officials alleged that Russia is spreading coronavirus disinformation through 3 English-language websites. (Newswires/AP)

UK Gov’t vaccine task force Chair Bingham has said it is more likely a vaccine which provides only a year's immunity or mitigates symptoms will be developed, rather than a ‘silver bullet’. (FT)

Hong Kong Chief Executive Lam has warned the city is on the verge of a large scale community outbreak given increasing COVID-19 cases. (BBC)

ASIA

Asian equity markets traded somewhat indecisively following a lacklustre handover from Wall St where participants pondered over a slew of mixed earnings and as the looming FOMC conclusion and approaching fiscal cliff added to the cautious tone. ASX 200 (-0.2%) and Nikkei 225 (-1.3%) were subdued with Australia contained by underperformance in the commodity-related sectors and tech, as well as the ongoing second wave fears which has prompted Queensland state to shut all borders to the greater Sydney area in New South Wales, while Tokyo stocks were hampered by detrimental currency flows and with focus also centred on earnings updates. This includes Nissan which shares slumped around 10% after it flagged a record loss for the year and Canon shares suffered double-digit declines following an 80%  drop in H1 net, while McDonald's Holdings Japan were also heavily pressured on news McDonald's Corp plans to substantially reduce its stake in the Co. to around 35% from 49.99%. Hang Seng (+0.1%) and Shanghai Comp. (+1.1%) swung between gains and losses with early opening weakness eventually pared after the PBoC’s marginal liquidity effort and with headlines also dominated by earnings updates. Finally, 10yr JGBs gained as they took their cue from the bull flattening in US and subdued risk appetite in Tokyo, while the presence of the BoJ added to the support with the central bank in the market for JPY 800bln heavily focused on 1yr-5yr maturities.

PBoC injected CNY 30bln via 7-day reverse repos for a net injection of CNY 30bln PBoC set USD/CNY mid-point at 6.9969 vs. Exp. 6.9964 (Prev. 6.9895) 

Fitch affirmed Japan’s sovereign rating at A; but revised the Outlook to Negative from Stable. Fitch said it sees Japan's economy contracting 5% this year before rebounding to 3.2% growth next year, while it expects the BoJ to maintain current interest rate settings through at least end-2022 under YCC framework. (Newswires)

UK/EU

UK BRC Shop Price Index (Jul) Y/Y -1.3% (Prev. -1.6%). (Newswires)

Curtailing the UK furlough scheme in October will be a "mistake" that will cost 1.2mln jobs in 2020, according to Niesr. (The Times) 

ECB's Stournaras says the bank will make a decision on when to unwind its pandemic stimulus program largely based on inflation developments, suggesting that emergency asset purchases could go on for longer than initially expected. (Newswires) 

FX

The DXY just about snapped a 7-day losing streak yesterday although has since given back some of the gains ahead of the FOMC announcement later where no major policy tweaks are anticipated. In addition, an approaching fiscal cliff contributed to the tentativeness as the enhanced USD 600 in weekly unemployment benefits is set to expire by the weekend and the next relief bill is reportedly unlikely to be agreed upon and advanced by the end of the week, with Senate Republicans said to be deeply divided regarding their own relief package and the Democrats unwilling to budge on demands for extending the supplemental unemployment benefit. The greenback’s major counterparts were mixed with EUR/USD rangebound at the 1.1700 handle with the single currency predominantly reacting to the USD price action, and GBP/USD gradually trickled lower after recently hitting resistance at its 4-month high around 1.2950. Elsewhere, USD/JPY continued to test support at 105.00 amid the underperformance in Japanese stocks and where there is also an option expiry of nearly USD 1bln rolling off for today’s New York cut, while antipodeans were indecisive following mixed Australian CPI data which showed a narrower than expected contraction in headline inflation but was still the largest Q/Q decline on record.

Australian CPI (Q2) Q/Q -1.9% vs. Exp. -2.0% (Prev. 0.3%). (Newswires) Australian CPI (Q2) Y/Y -0.3% vs. Exp. -0.4% (Prev. 2.2%) Australian Trimmed Mean CPI (Q2) Q/Q -0.1% vs. Exp. 0.1% (Prev. 0.5%) Australian Trimmed Mean CPI (Q2) Y/Y 1.2% vs. Exp. 1.4% (Prev. 1.8%) Australian Weighted Median CPI (Q2) Q/Q 0.1% vs. Exp. 0.1% (Prev. 0.5%) Australian Weighted Median CPI (Q2) Y/Y 1.3% vs. Exp. 1.2% (Prev. 1.7%)

COMMODITIES

Commodities were lacklustre overnight following the prior day’s retreat owing to the lacklustre risk appetite and as the ongoing resurgence of COVID-19 stokes demand concerns, while the surprise draw in headline private crude inventories did little to boost WTI crude prices which have found a floor around the USD 41.00/bbl level. Elsewhere, gold prices took a breather after having recently reached a record high earlier this week, with the marginal pullback in the precious metal coinciding with the DXY snapping a 7-day losing streak while there are mixed views from banks with Goldman Sachs raising its 12-month forecast to USD 2300/oz from USD 2000/oz although JP Morgan anticipate the rally to peter out in the approaching months. Meanwhile, copper prices traded sideways amid the overall uneventful picture across the complex and indecisive risk tone.

US Private Inventory Crude Stocks crude -6.8mln vs. Exp. +0.4mln. (Newswires)

GEOPOLITICAL

US Secretary of State Pompeo said the US will keep working with partners to reassert rule of law in the South China Sea. In related news, China's Global Times tweeted that rumours say the US could launch attacks on Chinese islands and reefs in the South China Sea, but this is basically impossible as US knows this will lead to an all-out war, citing an expert. (Newswires/Tweeter)

Yemen’s government and southern separatists reached an agreement regarding power sharing. (Newswires)

US

The TPLEX richened amid the lacklustre risk appetite and the firm US 7-year note auction. By settlement, 2s -2bps at 14bps, 7s -3bps at 43bps, 10s -3bps at 58bps, and 30s -3bps at 122bps. The strength had got going in European trade as the risk tone waned bringing the 10-year back beneath 60bps following Monday’s rate back-up. Yields were rangebound from the US cash equity open until the Treasury’s 7-year auction, which gave the complex a second wind higher as participants looked past the weak offerings from Monday. The USD 44bln auction was generally a decent one, stopping through the 0.452% WI by 0.6bps, dealers took 19.26%, lower than the six-auction average of 24%, although it was covered 2.45x, less than the average 2.54x. Simultaneously, USD 24bln 20-year FRNs were sold, which also went down well. There also wasn’t too much corporate supply today either for participants to digest. Attention now draws to the FOMC meeting on Wednesday with little fireworks expected, although if Powell and Co leave a less-dovish-than-expected tilt in the market’s mouth, the recent duration strength could pare. T-note (U0) futures finished electronic trade higher by 7.5 ticks at 139.22+.

US President Trump said there are some parts of the Republican coronavirus relief bill he does not support but didn’t specify which parts, while he responded that they are going to take care of the people when questioned regarding expiring federal unemployment benefits. (Newswires)

US Treasury Secretary Mnuchin that there has been progress made in stimulus talks. However, it was also reported that US Senate Republicans are deeply divided regarding their own coronavirus package and White House Chief of Staff Meadows commented that Democrats indicated they are unwilling to negotiate down their demand for extending the USD 600/week supplemental unemployment benefit. (Newswires/The Hill)

US Senate Majority Leader McConnell said he wants all non-coronavirus measures out of the coronavirus bill and that liability protection is not up for negotiation, while he suggested it will be difficult to predict when both chambers will be able to pass a bipartisan stimulus bill. (CNBC)

US Senate Democratic Minority Leader Schumer said the business liability requirement in GOP coronavirus relief plan is unacceptable. There were also separate comments from US House Speaker Pelosi that she does not believe US Senate Majority Leader McConnell is ready to make a deal regarding virus relief, while she intends to meet with him on Wednesday and that both sides are airing differences. (Newswires)

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Kodak $KODK chairman when asked about his share purchases before the government contract announcement https://t.co/1FDc77zS0n