Original insights into market moving news

[PODCAST] European Open Rundown 18th September 2020

  • Asian equity markets were mildly positive after shrugging off the weak lead from the US where the Nasdaq led the retreat
  • ByteDance and Oracle (ORCL) are reportedly planning an IPO of TikTok’s global business on a US stock exchange in about a year, according to sources
  • Sources told Fox that US President Trump is comfortable with the deal TikTok and Oracle (ORCL) made with the CFIUS
  • In FX markets, the DXY consolidated below 93.00, EUR/USD is currently capped by 1.1850, GBP/USD is hovering around the 1.2950 mark
  • The Saudi Energy Minister warned speculators not to bet against OPEC+ and that those that want to gamble on the oil market will be “ouching like hell”
  • Looking ahead, highlights include UK retail sales, Uni. of Michigan Sentiment, CBR rate decision, ECB's de Guindos, Schnabel, Fed's Bullard, Bostic and quadruple witching


US COVID cases +41,464 (prev. +34,240) and deaths +1,224 (prev. +961), while it was separately reported that Global confirmed COVID-19 cases surpassed 30mln, according to Johns Hopkins data. (Newswires)

Advisers to the UK government have proposed a 2-week national lockdown coinciding with October school half term to try to address the increasing COVID-19 infections, according to FT. In relevant news, stricter lockdown measures are expected to be imposed in Lancashire, UK. (FT/Sky News)

Eli Lilly (LLY) Baricitinib in combination with remdesivir reportedly reduces time to recovery in hospitalised patients with COVID-19 in an NIAID-sponsored ACTT-2 trial and met the primary endpoint of reduction of time to recovery. In other news, Moderna (MRNA) executive said they have not seen any cases of transverse myelitis in its COVID-19 vaccine trial. (Newswires)


Asian equity markets were mildly positive after shrugging off the weak lead from the US where the Nasdaq led the retreat once again to extend on the losses following the FOMC policy announcement and heading into quadruple witching. ASX 200 (-0.1%) and Nikkei 225 (+0.1%) were rangebound after failing to build upon opening momentum with strength in Australia’s commodity-related sectors offset by losses in the broader market including the top-weighted financials, while the Japanese benchmark treaded water amid a lack of fresh catalysts to instigate price action and with the latest inflation data all conforming to expectations. Hang Seng (+0.2%) and Shanghai Comp. (+0.6%) were initially indecisive with outperformance eventually seen in the mainland following the PBoC’s liquidity efforts in which it utilized both 7-day and 14-day reverse repos for the first time this month, although some cautiousness remains after recent mixed reports concerning the Oracle-TikTok deal heading into President Trump’s verdict which sources suggested could be within the next couple of days, while substantial pressure was also seen in Tencent shares due to recent underperformance in the tech sector and with its gaming stakes said to draw US national security scrutiny. Finally, 10yr JGBS were higher after recently breaking through the stubborn resistance at the 152.00 level, but with gains limited by the improving risk tone and following slightly weaker demand at the enhanced liquidity auction for 2yr-20yr JGBs.

PBoC injected CNY 110bln via 7-day reverse repos and CNY 60bln in 14-day reverse repos for a net daily injection of CNY 80bln and net weekly injection of CNY 260bln vs. Prev. CNY 230bln injection last week. (Newswires) PBoC set USD/CNY mid-point at 6.7591 vs. Exp. 6.7572 (Prev. 6.7675)

ByteDance and Oracle (ORCL) are reportedly planning an IPO of TikTok’s global business on a US stock exchange in about a year, according to sources. There were also source reports that a new term sheet has been agreed between US Treasury and ByteDance stated that Oracle (ORCL), Walmart (WMT) and ByteDance US investors will own a majority stake of TikTok, and the three parties will eventually own at least 60% of TikTok's global business. Furthermore, the term-sheet agreed between the Treasury and ByteDance calls for US to inspect TikTok's code and that TikTok is to have a US board of directors with a majority US citizens, while its CEO must also be a US citizen. (Newswires)

There were initial reports that US President Trump told advisers he is uncomfortable with the pending deal for Oracle (ORCL) to become TikTok’s US technology partner, according to WSJ sources. However, sources later told Fox that US President Trump is comfortable with the deal TikTok and Oracle (ORCL) made with the CFIUS and that the deal with CFIUS goes way beyond anything any other company has subjected itself to, making TikTok US the most secure platform in the US, according to FBN's Moynihan. (WSJ/Fox Business News) US Treasury Secretary Mnuchin reportedly believes the structure on the TikTok/Oracle (ORCL) deal meets national security concerns for approval, but scepticism remains from US Secretary of State Pompeo and AG Barr, according to FBN sources. However, there were later reports that Secretary of State Pompeo was moving closer to backing the deal and that ByteDance was gaining confidence Beijing will approve the deal. (Newswires/Fox Business News)

Tencent’s gaming stakes have reportedly attracted some scrutiny from US related to national security. In other news, US President Trump's ban on Tencent’s WeChat app may face a temporary halt by a US judge due to the order being vague. (Newswires/SCMP)

US Senate Democrats announced a USD 350bln plan to confront China, which aims to strengthen the US medical supply chain, support new technology such as 5G and oppose China’s ‘predatory economic behaviour. (SCMP)

Japanese National CPI (Aug) Y/Y 0.2% vs. Exp. 0.2% (Prev. 0.3%). (Newswires) Japanese National CPI Ex. Fresh Food (Aug) Y/Y -0.4% vs. Exp. -0.4% (Prev. 0.0%) Japanese National CPI Ex. Fresh Food & Energy (Aug) Y/Y -0.1% vs. Exp. -0.1% (Prev. 0.4%)


US House Speaker Pelosi said UK Foreign Minister Dominic Raab was positive about the Good Friday Accords and assured us there would be no construction of barriers at the border. (Newswires)


The USD was subdued after the prior day’s initial strength faded as yields tumbled throughout yesterday’s session and although yields eventually recovered, the DXY continued to dwindle and fell below the 93.00 level where price action has since consolidated. As such, EUR/USD held onto its gains but with upside capped by resistance at 1.1850 and nearby 100-Hour MA level at 1.1844. GBP/USD was lacklustre beneath 1.2950 as it resumed its post-BoE fluctuations. The heightened expectations of negative rates in the UK saw the currency breach 1.2900 to the downside, before fully recovering to briefly test 1.3000. Elsewhere, USD/JPY and JPY-crosses were steady with marginal support seen from the mild improvement in risk tone, which coupled with a 5th consecutive firmer PBoC CNY fix, also helped keep antipodeans afloat.


WTI crude futures extended on the prior session gains to break above the USD 41.00/bbl level in the aftermath of the OPEC+ JMMC which refrained from any changes to the output cut agreement, although there were some spirited comments from the Saudi Energy Minister who stated that OPEC+ can call an extraordinary meeting next month to take extra measures if the situation warrants and warned speculators not to bet against OPEC+ and that those that want to gamble on the oil market will “ouching like hell”. Elsewhere, gold prices found marginal support from the lacklustre greenback and rose back above the USD 1950/oz level, while copper was also supported overnight amid the mild improvement in risk appetite.

Saudi Energy Minister said we don't have to wait until December and we will be pro-active, while he warned oil speculators not to bet against OPEC+ and that he is going to make sure whoever gambles on this market will be “ouching like hell". (Argus)

UAE Energy Minister said they will compensate for overproduction in October and November and will have 100% compliance with output cuts in September. (Newswires)

OPEC+ official said further necessary measures could be needed. (Newswires)

Nigeria lowered its October Qua Iboe OSP to -0.56/bbl and lowered Bonny Crude OSP to -0.37/bbl versus dated Brent. (Newswires)

BSEE estimated that Hurricane sally cut 30.7% (prev. 27.5%) of US Gulf oil production and Natgas production shut in was estimated at 24.7% (prev. 29.7%). (Newswires)

NHC said tropical depression has formed in the southwestern Gulf of Mexico, which is expected to move slowly over the western Gulf into early next week. (Newswires)

Shell said output at Appomattox platform in Gulf of Mexico is ramping up and expected to return to normal tonight, while it added that non-essential personnel were being evacuated from Perdido in Gulf of Mexico as a precaution to Tropical Depression 22. (Newswires)


US President Trump reportedly plans an executive order allowing him to sanction non-US actors who trade arms with Iran and is looking to reinforce the UN Arms embargo, according to sources. (Newswires)

China announced the PLA are to conduct military exercises near Taiwan Strait which is in response to situation in the Taiwan Strait, while it added that it is a dead end for Taiwan’s Democratic Progressive Party to collude with the US. There were also reports that Taiwan investigators shared information with the US concerning Chinese hackers. (Newswires)


Treasuries were slightly firmer after the earlier risk-off rally reversed into latter trade. By settlement, 2s -0.5bps at 13.5bps, 10s -0.5bps at 68bps, and 30s -2bps at 142.5bps; T-Note volumes were modestly firmer than the prior few session but still below averages. There was a pronounced bull-flattener at work heading into the US session as equity futures, led by the NQ, tumbled to the downside. Furthermore, there was likely some momentum on the back of the BoE meeting, which saw the Gilt complex bid on raised market expectations of negative rates in the Anglosphere. However, after stocks began to rise from the cash open, USTs completely reversed their earlier rally, and even more intriguing, a renewed test of the lows for stocks in latter trade failed to renew the bid for rates. The strength behind the second equity sell-off had less velocity behind it than that seen earlier in the session, perhaps keeping haven Treasury flows at bay. The Fed had also stepped out of the market by that point, whereas the earlier rally front-ran long-end Fed purchases. It’s also possible that rates participants begin to focus more on Wednesday’s FOMC decision in which there was no indication of a terming out of the Fed’s asset purchases in a transition to more traditional QE in the face of chunky supply into year-end. However, as has been the case throughout the week, low trading activity makes it harder to read into directional moves with so many seemingly on the sidelines (holiday?). T-note (Z0) futures settled flat at 139-14+.

US Fed released 2 hypothetical scenarios for 2nd stress tests of large banks this year with the results to be published by year-end and the Fed will also announce by end of this month if it will continue prohibiting bank share repurchase & limiting dividends for Q4. The Fed stated that second stress tests are needed due to continued uncertainty amid the pandemic and it will test banks against 2 hypothetical recessions over the next 9 quarters with varying severity and also test banks with large trading businesses against an unexpected default of largest counterparty. (Newswires)

US President Trump confirmed the administration will provide additional USD 13bln of relief to farmers. (Newswires)

NEC Director Kudlow said a USD 1.5trln stimulus package is in a range of plausibility for US President Trump and that GOP have sought to cap aid package at USD 1trln. However, there were separate comments from GOP Senator Grassley said there is zero chance for a deal unless House Speaker Pelosi needs something. (Newswires)

US lawmakers are nearing a spending deal to avert a government shutdown at the end of the month, which a bipartisan group seeks to unveil today. Furthermore, there were earlier reports that House Majority Leader Hoyer told lawmakers the House will take up new stopgap early next week to prevent government shutdown on September 30th. (Newswires)