Original insights into market moving news

[PODCAST] US Open Rundown 31st July 2020

  • European bourses trade modestly firmer with US futures posting similar performance as fundamental newsflow is light going into month-end
  • Apple, Alphabet, Amazon and Facebook all beat on top and bottom lines in after-market releases
  • US Treasury Secretary Mnuchin said we are going back to the negotiating table and that the best-case scenario is that a deal is made in the next few days
  • Hong Kong Gov't announce the September legislative council elections are to be postponed
  • USD has firmed up slightly but remains capped by 93.00 in DXY terms with major peers mixed but not too far moved at present
  • Looking ahead highlights include US PCE & Core PCE Price Index, Chicago PMI & University of Michigan (Final), Canadian GDP
  • Earnings include Exxon, Chevron, Phillips 66, Merck, Colgate


Major newswire reported that US coronavirus cases rose by at least 67,783 to 4.51mln and deaths rose by at least 1,187 to 152,383. (Newswires)

Spain COVID-19 cases rose by 2,789 (Prev. +2,031) which was the largest rate of increase since the lockdown was lifted on June 21st, while France’s Health Agency warned that COVID-19 spread is accelerating and people in ICU units are up for the first time in more than 16 weeks. (Newswires)

UK government announced a major local lockdown for Greater Manchester, East Lancashire and parts of West Yorkshire, while the news rules would permit households to can go to restaurants and pubs although new guidelines will elaborate that 2 households should not go to hospitality together, according to ITV's Paul Brand. (ITV/Twitter) Subsequently, UK Health Secretary Hancock says, regarding a second wave, we are not there yet but can see one in Europe. (Newswires)

UK ONS says there is now evidence to suggest a slight increase in the number of people in England who have tested positive for COVID-19 in recent weeks. (Newswires)


Asian equity markets traded lacklustre heading into month-end after somewhat mixed Chinese PMI data with the region failing to take advantage of the momentum from US, where futures were boosted after-hours following big tech earnings in which Apple, Alphabet, Amazon and Facebook all beat on top and bottom lines. ASX 200 (-2.0%) was dragged lower by underperformance in the commodity related sectors and with the top-weighted financials also heavily pressured, while there were reports that Australian PM Morrison recently held emergency discussions with the Victoria state Premier which included possible further restrictions for movement within Melbourne and a shutdown of non-essential businesses. Nikkei 225 (-2.8%) was hampered by unfavourable currency flows and although Industrial Production data beat expectations for June, quarterly output was at a decline of 16.7% which was the largest drop according to comparable data since 2015. Furthermore, the biggest movers were driven by earnings including Panasonic, while SoftBank shares also suffered due to the currency effects despite a share repurchase announcement of up to 12.3% of shares for JPY 1tln. Hang Seng (-0.5%) and Shanghai Comp. (+0.7%) were both initially positive with outperformance in the mainland after the PBoC’s liquidity efforts resulted to a net weekly injection of CNY 120bln, although this eventually faded following the latest mixed data releases in which Chinese Official Manufacturing PMI topped estimates but Non-Manufacturing PMI missed and Composite PMI slowed although all figures remained in expansionary territory. Finally, 10yr JGBs eked mild gains amid the soured risk appetite in the region and with the BoJ present in the market for JPY 450bln of JGBs predominantly concentrated in the belly of the curve.

PBoC injected CNY 20bln via 7-day reverse repos for a weekly net injection of CNY 120bln vs. Prev. weekly net drain of CNY 170bln and it maintained the 7-day reverse repo rate at 2.20%. (Newswires) PBoC set USD/CNY mid-point at 6.9848 vs. Exp. 6.9781 (Prev. 6.9902)

Chinese Manufacturing PMI (Jul) 51.1 vs. Exp. 50.7 (Prev. 50.9) Chinese Non-Manufacturing PMI (Jul) 54.2 vs. Exp. 54.5 (Prev. 54.4) Chinese Composite PMI (Jul) 54.1 (Prev. 54.2)

US Department of Transport refused to approve flights from Chinese carriers and blamed Chinese government actions of restricting airlines. (Newswires)

Japanese Industrial Production (Jun) M/M 2.7% vs. Exp. 1.2% (Prev. -8.9%). (Newswires) Japanese Industrial Production (Jun P) Y/Y -17.7% vs. Exp. -19.3% (Prev. -26.3%)

Japan’s government raised its assessment on Industrial Production in which it stated that the fall has stopped and is picking up, although a METI official said that April-June output decline of 16.7% was the largest quarterly drop according to comparable data since 2015. (Newswires)

Hong Kong Gov't announce the September legislative council elections are to be postponed. (Newswires)


US Secretary of State Pompeo said US will widen Iran metals-related sanctions to 22 additional materials. (Newswires)

Iranian Supreme Leader Khamenei says the nation will not halt its nuclear or ballistic missile programmes as demanded by the US. (Newswires)


US President Trump said he wants temporary extension of extra unemployment benefits and is asking Democrats to help approve legislation on eviction moratorium, while he also commented that he does not want a delay of 2020 election but thinks mail-in ballots will cause issues and also blamed China for the impact from COVID-19. (Newswires)

US Treasury Secretary Mnuchin said we are going back to the negotiating table and that the best-case scenario is that a deal is made in the next few days but added it will take time to reach an unemployment deal. (Twitter)

White House Chief of Staff Meadows said it is too late to avert a gap on unemployment insurance and had been hopeful regarding a deal for unemployment but later noted that he was not even optimistic about next week. (Newswires/Twitter)

US House Speaker Pelosi and House Minority leader Schumer will talk today on the phone with administration officials on the coronavirus bill, according to Fox's Pergram. (Twitter)


Confederation of British Industry warns most companies lack time and resources to prepare for a no-deal Brexit with 20% of firms said to be less prepared than they were at the start of the year due to disruptions form the pandemic, according to the FT. (FT)

EU GDP Flash Prelim QQ (Q2) -12.1% vs. Exp. -12.0% (Prev. -3.6%); YY (Q2) -15.0% vs. Exp. -14.5% (Prev. -3.1%)

-        EU HICP Flash YY (Jul) 0.4% vs. Exp. 0.2% (Prev. 0.3%)

-        HICP-X F&E Flash YY (Jul) 1.3% vs. Exp. 0.7% (Prev. 1.1%)

-        HICP-X F,E,A&T Flash YY (Jul) 1.2% vs. Exp. 0.8% (Prev. 0.8%)


European equities (Eurostoxx 50 +0.6%) trade modestly firmer across the board in what has been another busy morning of corporate updates whilst incremental macro newsflow remains relatively light since yesterday’s close. Although stocks are attempting to recoup some of yesterday’s heavy losses, the extent of the recovery is relatively mild with the Eurostoxx still lower by some 2.5% on the week heading into month-end. Some of the positivity in Europe is a by-product of the fallout from US mega-cap stocks earnings’ in which Apple, Alphabet, Amazon and Facebook all beat on top and bottom lines and were seen higher in after-market trade, prompting outperformance in Nasdaq 100 futures and the tech sector in Europe this morning. Also supporting the tech sector in Europe today is Nokia (+12.2%) post-earnings in which the Co. raised its guidance. Banking names have posted a strong performance in Europe following earnings from BNP Paribas (+2.1%) and Natwest Group (+1.1%), although gains for the sector have been capped by performance in the periphery following disappointing earnings from Spanish-listed Caixabank (-2.6%) and Sabadell (-2.0%). Elsewhere, travel & leisure names have been unable to join in on the mild positivity seen in Europe this far following earnings IAG (-9.1%) in which the Co. announced a EUR 1.37bln operating loss and proposed a capital increase of EUR 2.75bln; easyJet (-3.0%), Ryanair (-3.2%) and Deutsche Lufthansa (-2.2%) are seen lower in sympathy. Performance for telecom names has been hampered by BT (-3.4%) with the Co. warning over the impact of coronavirus on its revenues and earnings after posting a decline in profits. Looking ahead, asides from US participants continuing to digest the latest updates from Apple, Alphabet, Amazon and Facebook, focus will also be on pre-market updates from Exxon, Chevron, Phillips 66, Caterpillar, Merck and Colgate.

Alphabet Inc Class C (GOOG) (Communication Services/Interactive Media & Services) Q2 20 (USD): EPS 10.13 (exp. 8.21/8.29 reported); Revenue 38.3bln (exp. 37.37bln). Additional 28bln Class C share buybacks authorized. Revenue breakdown: Advertising: 29.87bln (exp. 29.74bln). YouTube ads revenue: 3.82bln (prev. 4.04bln). Cloud: 3.00bln (exp. 3.09bln). Other bets: 0.148bln (exp. 0.152bln). Traffic acquisition costs: 6.69bln (exp. 6.71bln). Saw increased revenue for the Play store due to active buyers amid lockdown, CFO noted a gradual improvement in its advertising business has been seen throughout Q2. Co. shares were seen higher by 0.5% in after-market trade. Inc. (AMZN) (Consumer Discretionary/Internet & Direct Marketing Retail) Q2 20 (USD): EPS 10.30 (exp. 1.46/1.34 reported); Revenue 88.9bln (exp. 81.56bln). Segment breakdown: AWS: 10.81bln (exp. 10.93bln). Online stores: 45.9bln (exp. 40.23bln). Other: 4.2bln (exp. 3.90bln). Physical stores: 3.77bln (exp. 4.48bln). Subscription services: 6.01bln (exp. 5.98bln). Third party seller services: 18.2bln (exp. 15.62bln). Worldwide quarterly shipping costs: 13.65bln (prev. 10.94bln). Guidance: Q3: Revenue 87-93bln (exp. 86.34bln). Saw high prime membership engagement during the quarter. Co. shares were seen higher by 5% in after-market trade.

Apple (AAPL) Q3 2020 (USD): EPS 2.58 (exp. 2.04); Revenue 59.69bln (exp. 52.25bln), Co. announces 4:1 stock split effective August 24th, refrains from Q4 guidance. Revenue breakdown: iPhone: 26.42bln (exp. 22.37bln). Services: 13.16bln (exp. 13.18bln). Mac: 7.08bln (exp. 6.06bln). iPad: 6.58bln (exp. 4.88bln). Wearables: 6.45bln (prev. 6.28bln) expects to see current iPhone performance to persist in the September quarter although anticipates new iPhone supply to be delayed. Seeing higher switcher rate from Android after the iPhone SE release. Q3 sales boosted by strong iPhone SE launch and stimulus. CEO Cook is “profoundly optimistic” about future of the co, while customers response to its new MacBook’s is extremely strong; expects to see Mac performance in Q3 continue into Q4. The new iPhone will be launched a few weeks later than usual. On its Apple TV+, it is yet to meaningfully restart production of Apple TV+ series due to COVID-19. Co. shares were seen higher by 6.4% in after-market trade.

Caterpillar (CAT) Q2 2020 (USD); Adj EPS 1.03 (exp. 0.64/0.68 reported); Revenue 9.2bln (exp. 9.38bln); does not provide outlook for 2020

Facebook, Inc. (FB) (Communication Services/Interactive Media & Services) Q2 20 (USD): EPS 1.80 (exp. 1.39); Revenue 18.7bln (exp. 17.4bln). EPS 1.80 (exp. 1.39); Revenue 18.7bln (exp. 17.4bln). Advertising revenue: 18.3bln (exp. 16.79-17.31bln) expect full quarter year-over-year ad revenue growth rate for the third quarter of 2020 will be roughly similar to this July performance. Users: Expects the number of Facebook DAUs and MAUs to be flat or slightly down in most regions in the third quarter of 2020 compared to the second quarter of 2020. DAUs: 1.79 bln (exp. 1.75bln). MAUs: 2.7bln (exp. 2.62bln). Co. shares were seen higher by 6.5% in after-market trade.

Nvidia (NVDA) are reportedly in advanced discussions to purchases Softbank's (9984 JT) chip Co. Arm. (Newswires)


DXY - It seemed to start with a tweet, but Dollar losses accumulated after Thursday’s plunge in Q2 GDP and IJC data into the NY close and as APAC participants entered the fray for their final trading day of July to push the index further below 93.000 where it remains. The latest rise in unemployment benefit claims is especially worrying as Congress remains at odds over the next fiscal support package that looks certain to leave an overhang when the current jobless insurance measures expire, and with White House Chief of Staff Meadows not confident about reaching a deal next week. All this on top of the ongoing resurgence of COVID-19 across many US states plus the prospect of even more Greenback selling for month end, especially around the 4 pm London fix, amidst a growing number of bank models flagging bearish portfolio rebalancing signals. However, the DXY is holding between 92.539-969 parameters as the Buck pares some declines across the board.

EUR/GBP/JPY – The aforementioned sell Dollar for the July/August turn dynamic is said to be strongest against the Euro and has propelled the single currency through touted resistance between 1.1815-51 to just over 1.1900 temporarily, but Sterling is keeping pace and actually forming a firmer base on its next psychological/round number level at 1.3100. Similarly, the Yen has broken free of tethers that were restraining rallies beyond 105.00, but has retreated ahead of 104.00 following the first signs of alarm about FX developments from Japan’s MoF. Back to Eur/Usd, decent option expiry interest at the 1.1900 strike (1 bn) may be capping attempts to the upside.

CAD/CHF/AUD/SEK/NOK – All narrowly mixed vs their major counterparts in consolidative mode, with the Loonie just below 1.3400 and eyeing a tentative recovery in crude prices, but perhaps more intently aware that unusually large expiries run off at the big figure (2.2 bn) after Canadian GDP and PPI. Elsewhere, the Franc has drifted back towards 0.9100 from circa 0.9057 in wake of a marked slowdown in Swiss retail sales and the Aussie has lost momentum above 0.7200, but the Scandinavian Crowns are benefiting from the Euro’s fade from best levels to maintain upward trajectories within 10.3155-2840 and 10.7825-7240 respective ranges.

NZD - The major underperformer or laggard, as the Kiwi loses grip of the 0.6700 handle and retreats from 1.0750+ in Aud/Nzd cross terms, perhaps taking heed of a stark warning from ANZ overnight about a double dip NZ recession in Q4.

EM - Broad depreciation vs the Usd but the Yuan is extending gains from a firmer PBoC Cny fix and end of month 7-day liquidity injection to supplement mixed, but comfortably above 50 Chinese PMIs, while the Lira has rebounded from lows presumably with the aid of yet more Turkish state bank intervention.


Debt futures appear to have found a base after a relatively abrupt reversal from early peaks, with Gilts actually notching a new Liffe high in recent trade at 138.77 (+12 ticks vs -7 ticks at one stage) and within a whisker of Thursday’s 138.81 contract best. Meanwhile, Bunds have bounced from 177.52 (-17 ticks) and are now less than 1/4 point below their Eurex top as the partial rebound in EU stocks abates and US Treasuries are holding above parity with the curve fractionally flatter ahead of the final raft of data for the month. However, trade remains choppy and direction dependent on how much cross-asset positioning is left for the end of July given only an average UST index duration.


WTI and Brent have been rangebound throughout the morning as sentiment more broadly remains modestly elevated as we close out the busiest week of earnings season, with a number of energy names still on the schedule ahead including Exxon & Chevron. As it stands, the benchmarks are going to finish the week in the red by some USD 1/bbl for WTI; albeit, such a close would leave it just about in positive territory for the month as a whole. Aside from the aforementioned earnings, the energy schedule is again very light and we haven’t see any new thus far aside from inflammatory rhetoric from Iranian Supreme Leader Khameni against the US, following the sanctions yesterday, who also said they should not be dependent on oil exports. Moving to metals, in which spot gold is bolstered once more after soft APAC trade and the continuing decline for the USD; albeit, the DXY is currently modestly firmer. Yellow metal resides in the top half of a USD 30/oz range so far but off the USD 1984/oz session peak thus far. At present, spot gold is up by ~10% for the month and is on target for the biggest monthly gain in over 4-years; even given the recent upside desks still believe the rally has further to go with Goldman Sachs envisaging USD 2300/oz; however, JP Morgan believe the pace will decline later into the year. For reference, BofA Flow Show saw the second largest inflows into gold ever, totalling USD 3.9bln.