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[PODCAST] EU Open Rundown 10th September 2020

  • Asia-Pac bourses were mostly positive after taking advantage of the constructive handover from the US where tech staged a rebound
  • The EU is reportedly mulling legal action against the UK for its attempt to override parts of the Withdrawal Agreement
  • The DXY was lacklustre following the prior day’s weakness, EUR/USD trades above 1.18 on ECB day whilst GBP/USD remains sub-1.30
  • Saudi Arabia reportedly plans to keep oil production steady despite a recent slump in prices, according to the FT
  • Looking ahead, highlights include Norwegian & Swedish CPI, ECB policy announcement, US weekly jobs, US PPI, DoEs, ECB's Lagarde, BoC's Macklem, supply from Italy, UK and US

CORONAVIRUS UPDATE

US COVID cases +23,301 (prev. +26,146) and deaths +459 (prev. +175), while a major newswire stated US cases increase by at least 33,550 to a total of 6.38mln and deaths rose by at least 1,150 to a total of 190.9k. California COVID cases +1,616 (prev. +2,676) and deaths +83 (prev. +32), while Texas cases +4,000 (prev. +1,421) and deaths +139 (prev. +61). (Newswires)

US government will stop conducting enhanced screening of passengers on inbound international flights for COVID-19 from September 14th. (Newswires/Yahoo Finance)

US Surgeon General Adams said over half of the US population will need to be vaccinated to achieve herd immunity against COVID-19. (Newswires)

AstraZeneca’s CEO told investors the participant had symptoms consistent with a rare spinal inflammatory disorder but is improving and suggested the possibility the patient could be discharged from hospital yesterday. The Co. later noted reports that the COVID-19 vaccine trial was halted due to case of transverse myelitis were incorrect and a final diagnosis is pending, while it added that a trial pause in July due to a volunteer with multiple sclerosis was deemed unrelated to the vaccine. (FT/Newswires)

Two UK companies are to launch, on Thursday, rapid saliva-based COVID-19 tests, with results to be delivered in 20 seconds, according to its developer iAbra. (FT) 

ASIA

Asia-Pac bourses were mostly positive after taking advantage of the constructive handover from the US where tech rebounded from the recent sell-off to lift the Nasdaq out of a correction, while vaccine concerns also abated amid reports AstraZeneca may resume trials next week. ASX 200 (+0.1%) and Nikkei 225 (+0.6%) gained from the open with tech and mining names leading the advances in Australia but with upside later reversed amid weakness in financials and ongoing tensions with its largest trading partner China after reports that 6 Chinese citizens either left or were denied entry into Australia for alleged espionage or foreign interference. The Japanese benchmark was kept afloat by recent favourable currency moves and better than expected Machinery Orders data, while Tokyo also lowered its virus alert level by one notch. Hang Seng (-0.1%) and Shanghai Comp. (+0.3%) were somewhat cautious after mixed US-China related headlines with the US said to have revoked more than 1000 visas of Chinese nationals as of September 8th due to ties with the Chinese military, although there were also reports that TikTok’s parent, ByteDance, was in discussions with the US government on possible arrangements that would allow the app to avoid a full sale of its US operations. Focus was also on Yum China shares which declined 4% on an underwhelming Hong Kong debut, although Beigene shares were boosted on its inclusion in the HK-mainland stock connect program, while hefty losses were seen in the IDX Composite (4.9%) which triggered a circuit breaker intraday after the Jakarta Governor announced to reimpose large-scale social restrictions. Finally, 10yr JGBs were lacklustre following the recent mild weakness in T-notes and rebound in equity markets, with price action in 10yr JGBs also hampered by resistance at the 152.00 level and as all metrics suggested a weaker than previous 20yr JGB auction.

PBoC injected CNY 140bln via 7-day reverse repos at a rate of 2.20% for a net daily injection of CNY 20bln. (Newswires)

PBoC set USD/CNY mid-point at 6.8331 vs. Exp. 6.8329 (Prev. 6.8423)

A US official said the US is blocking visas of certain Chinese graduate students and researchers to prevent them stealing sensitive research. The State Department later stated that the US had revoked more than 1000 visas of Chinese nationals as of September 8th due to ties with the Chinese military, but added that the US continues to welcome legitimate Chinese students and scholars who do not further the CPC's goals of military dominance. (Newswires)

TikTok’s parent, ByteDance, is discussing with the US government possible arrangements that would allow the app to avoid a full sale of its US operations, according to sources. (WSJ)

Japanese Machinery Orders (Jul) M/M 6.3% vs. Exp. 1.9% (Prev. -7.6%). (Newswires) Japanese Machinery Orders (Jul) Y/Y -16.2% vs. Exp. -18.3% (Prev. -22.5%)

UK/EU

EU-UK joint committee is holding an extraordinary meeting today to ‘better understand & analyse potential conflicts’ amid a ‘very serious risk WA not implemented in event of no deal’, according to an EU source, while there were comments from an EU Commission spokesman that the EU seeks clarification from the UK regarding a complete and timely implementation of the Withdrawal Agreement. (Sky News/Newswires)

EU is reportedly mulling legal action against the UK for its attempt to override parts of the Withdrawal Agreement, while Brussels reportedly accused UK PM Johnson of deliberately wrecking trade negotiations and pushing Britain towards a no-deal. (Telegraph/The Times)

Irish Foreign Minister said he thinks a Brexit deal can be done, but it is now much more difficult, while a joint committee meeting with the UK has been requested and will hopefully occur in the coming days. (Newswires)

US House Speaker Pelosi commented that if UK violates the international treaty and Brexit undermines the Good Friday accord, there will be absolutely no chance of a US-UK trade agreement passing Congress, according to Twitter sources. (Twitter)

French Finance Minister Le Maire said it is clear the US does not want an agreement on digital tax at the OECD level and that if the US blocking of a deal on digital tax at the OECD level is confirmed by year-end, EU should have a tax ready for early 2021. (Newswires)

UK RICS Housing Survey (Aug) 44 vs. Exp. 25.0 (Prev. 12.0, Rev. 13). RICS said 83 of surveyors expect an increase of demand for homes with gardens although declines are expected for urban and tower block homes, while it added that 12-month sales expectations worsened last month. (Newswires)

FX

The DXY was lacklustre following the prior day’s weakness with outflows spurred by the improved risk tone and ongoing pessimism regarding stimulus relief ahead of today’s Senate procedural vote on the ‘skinny’ stimulus bill. EUR/USD benefitted from the USD weakness and recently reclaimed the 1.1800 status which has since provided a floor for overnight price action ahead of the ECB meeting later today where the central is expected to keep policy settings unchanged, although participants will be on the lookout for any jawboning of the single currency and the latest economic projections. GBP/USD consolidated overnight with upside capped by resistance at the 1.3000 level and heightened prospects of a no-deal Brexit with Brussels said to be considering legal action and accusing PM Johnson of deliberately sabotaging negotiations after details of the Internal Market Bill were unveiled which annuls parts of the Withdrawal Agreement, while the sides are to conduct a Brexit Joint Committee extraordinary meeting today in London. USD/JPY and JPY-crosses held on to most their recent gains owing to the improved risk appetite and antipodeans were relatively steady overnight helped by their high beta statuses and softness in the greenback.

COMMODITIES

Commodities were lacklustre overnight with yesterday’s risk-fuelled rebound in oil prices stalling amid several bearish factors including the surprise build in private sector headline crude stockpiles. As such, WTI traded sideways below the USD 38.00/bbl level as the weak demand narrative persisted with EIA STEO cutting world oil demand growth forecasts for this year and next, while there were also recent reports of commodity trading firms chartering very large crude carriers to store crude and refined oil as the demand recovery stalls. Gold held on to its recent gains owing to the weaker greenback but with further upside contained by resistance at the USD 1950/oz level and copper underperformed  with prices failing to benefit from the mostly improved risk appetite.

US Private Energy Inventories (w/e Sept 4th) crude +3mln (exp. -1.3mln, prev. -6.4mln). (Newswires)

EIA STEO cut 2020 world oil demand growth forecast by 210k BPD to 8.32mln BPD and cut 2021 forecast by 490k BPD to 6.53mln BPD. (Newswires)

Saudi Arabia reportedly plans to keep oil production steady despite a recent slump in prices, with a fear that any larger output cuts would see its OPEC rivals to increase supply. (FT)

NNPC Chief said all four of Nigeria's refineries are currently shut down and that Nigeria is in talks over "NLNG model" for operating refineries where government becomes a minority shareholder. (Newswires)

GEOPOLITICAL

A US whistleblower alleged that US Homeland Security Secretary Wolf instructed him to stop providing intelligence assessments of the threat of Russian interference in the US and instead to focus on China and Iran. (Newswires)

US

Treasuries were modestly lower on Wednesday, where duration came under some pressure from the busy supply slate as well as the wider bounce in risk appetite. By settlement, 2s +0.5bps at 14.5bps, 10s +2.5bps at 70.5bps, 30s +4bps at 146bps; volumes were lighter today. While Treasuries moved lower from Europe into the US close, the pace of such was by no means extreme when taking into account the large Treasury auctions on the radar, nearly 20 IG dollar issuers, and the multi-percent gains in stocks; something of a perfect trifecta for bears to nibble at, although follow-through was modest. The risk tone was not quite firm enough to bring the 10-year yield back to its post NFP highs of around 72bps. The 10-year note auction was lacklustre, although not a disaster: tailed by 0.8bps with below-average investor participation, particularly Indirects, which some view as a proxy for foreign demand. The disappointing auction saw T-Notes print a few ticks lower after a few hours of sideways trade, coinciding with the 10-year yield printing a session high of 71bps, briefly. The 30-year Bond auction tomorrow will be the key focal point for the Treasury market, where participants will be cognizant of any supply indigestion similar to last month’s dismal auction, although the ECB meeting will also be of note. T-note (Z0) futures settled 3 ticks lower at 139-09+.

US House Speaker Pelosi said Senate Majority Leader McConnell does not have the votes to pass the Republican aid bill, while there were also reports that Senate Majority McConnell sounded as negative as he could on prospects for COVID relief in which he stated he doesn’t know and hopes that it not the case regarding whether Congress will leave for election without a relief bill. (Twitter/Politico)

US Senate Minority Leader Schumer said after Thursday’s vote on the GOP skinny bill, there may be a real chance for a bigger deal, as he noted that Republicans are under pressure and will be forced to do something. (Newswires/Twitter)

The White House is said to have discussed unilateral aid for airlines among other executive orders. (Washington Post)

SurveyUSA Minnesota poll showed Biden at 49% vs. President Trump at 40%, conducted Sept. 7th. (Newswires)

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