Original insights into market moving news

[PODCAST] European Open Rundown 21st September 2020

  • Asian equity markets were subdued and US equity futures traded choppy after last Friday’s losses on Wall St
  • US President Trump gave his blessing to the deal between TikTok, Oracle and Walmart
  • UK PM Johnson warned that the UK is now seeing a second wave of coronavirus and further measures will be imposed if the disease progresses
  • The ECB has launched a sweeping review of its EUR 1.35tln PEPP program, which will assess the impact of its bond-buying
  • In FX markets, the DXY pulled back below 93.00, to the benefit of its major counterparts
  • US Democrats and White House officials were nearing a deal on Friday on a stopgap spending bill to fund the government, which was hampered by a dispute over funding for farmers
  • The death of Supreme Court Associate Justice Ginsberg has opened another front in the election battle with President Trump intending to make a nomination in the week ahead
  • Looking ahead, highlights include ECB's Lagarde, Fed's Brainard, Williams and Kaplan


US CDC reported total coronavirus cases rose to 6.75mln from 6.71mln and total deaths rose to 198.8k from 198.1k. Furthermore, US CDC reversed COVID-19 guidance that had stated people without symptoms that were exposed to the virus may not need a test. (Newswires/CNBC) US President Trump said the US is on track to have 100mln doses of a COVID-19 vaccine by year-end and expects every American to have a vaccine by April. (Newswires)

AstraZeneca (AZN LN) stated that its vaccine trial in the US remains on hold. (Newswires)

UK coronavirus cases rose by 3,899 (prev. +4,422). UK PM Johnson said we're now seeing a second wave coming in, while he does not want a second national lockdown and wants to keep economy open, but added that we will have to take extra measures if the disease progresses. (Newswires) However, reports note that senior members of the Conservative party are planning to prevent PM Johnson from imposing limits on people's freedom without scrutiny by forcing Parliament to have the final say on measures. (Telegraph) UK Health Minister Hancock stated that officials were to hold a meeting on Sunday to discuss what further measure may be required for London and suggested that a further national lockdown is possible if rules are not followed. (Newswires/BBC) England Chief Medical Officer Whitty said UK coronavirus trend is moving in wrong direction and the country is at a critical point in the pandemic with a very challenging winter approaching. (Newswires) London Mayor Khan is to recommend lockdown measures for London after a meeting with council leaders on Monday. (LBC/Newswires)

France coronavirus cases rose by 10,569 (prev. +13,498 record increase). (Newswires)


Asian equity markets were subdued and US equity futures traded choppy after last Friday’s losses on Wall St amid quadruple witching and continued tech woes, with risk appetite also dampened by holiday conditions as Japanese participants observe a 4-day weekend. ASX 200 (-0.6%) was negative with losses in metal miners and financials underperforming in the broad weakness across its sectors aside from Health Care and Energy, while KOSPI (-0.2%) swung from gains and losses on varied COVID-19 headlines with South Korea to extend level 2 social distancing curbs by an additional week but will also be distributing emergency funds from the 4th extra budget within days. Hang Seng (-1.2%) and Shanghai Comp.(-0.4%) were downbeat with HSBC shares slumping to a 25-year low in Hong Kong after a leaked document noted that the bank had permitted GBP 62mln to be moved to Hong Kong in suspicious transactions during 2013-2014 despite being warned by a regulator, while Standard Chartered also declined after being implicated by the ‘FinCEN’ leak, and other reports noted concerns HSBC and Standard Chartered could be frozen out of the US banking system in the event of a further escalation US-China tensions. Elsewhere, Tencent shares were pressured amid uncertainty regarding its US future despite a California judge halting President Trump's ban on WeChat downloads, while weekend news that President Trump gave his blessing to the TikTok-Oracle-Walmart deal, also did little to spur risk appetite.

PBoC injected CNY 100bln via 7-day reverse repos CNY 40bln via 14-day reverse repos for a net daily injection of CNY 60bln, with rates on the 7-day and 14-day operations maintained at 2.20% and 2.35% respectively. (Newswires) PBoC set USD/CNY mid-point at 6.7595 vs. Exp. 6.7663 (Prev. 6.7591)

PBoC 1-Year Loan Prime Rate 3.85% vs. Exp. 3.85% (Prev. 3.85%) PBoC 5-Year Loan Prime Rate 4.65% vs. Exp. 4.65% (Prev. 3.65%)

ByteDance said TikTok Global will launch an IPO and conduct a small pre-IPO round that will make it an 80% owned subsidiary of ByteDance, while it noted that Oracle (ORCL) has security access to TikTok's US source code and that the current plan does not include the transfer of algorithms or technologies. (Newswires)

US President Trump said he gave his blessing to the deal between TikTok, Oracle and Walmart, while he also stated that companies agreed to make a USD 5bln contribution to an education foundation. However, other reports in FT noted that the sides agreed to create an initiative following a request by President Trump but had no discussions about a USD 5bln commitment and will not create an education programme which seeks to teach American history tailored to any specific bias, according to sources. Furthermore, the US Commerce Department announced to delay the order issued that would have banned TikTok updates and downloads by a week to September 27th so the sides can finalize a deal. (Newswires/FT)

A California judge halted President Trump's ban on WeChat downloads and stated that users who filed a lawsuit showed “serious questions” in their claim that the ban threatens their First Amendment rights. (CNN)

WeChat owner Tencent (700 HK) said it held multiple rounds of discussions with the US government recently to find a solution, but the two sides have not been able to find one and will continue to communicate to develop a long term solution. Tencent also commented that further evaluation is being conducted to assess the impact of identification of prohibited transactions on the group. (Newswires) China had stated on Saturday that it resolutely opposed the US ban on the Chinese-owned mobile apps Tiktok and WeChat and vowed to take countermeasures. (SCMP)

China issued rules regarding its proposed unreliable entities list, while it reportedly did not have a timetable or pre-set names of companies but warned that if foreign firms violate the nation’s laws or commit “illegal acts” they could be included in the list and face measures. (Newswires) Experts have noted that given the provisions, the foreign entities that play a role in the block and cutting-off of supplies to Chinese firms could be targeted, media reports have hinted at many US firms as potential targets of the list, including Qualcomm (QCOM), Cisco (CSCO), Apple (AAPL) and FedEx (FDX). (SCMP)

Chinese President Xi said the nation’s economy remains resilient despite increasing external risks, while he noted that Beijing has ample policy tools at its disposal. (Newswires)

US Secretary of State Pompeo is planning to hold his first China dialogue with his European Union counterpart this month, discussing increasing shared concerns about China, according to a senior EU diplomat. (SCMP)

Washington stepped up economic dialogue with Taiwan with an eye on the island's extensive semiconductor industry as tensions between the US and China escalate. (Nikkei)


UK Chancellor Sunak is expected to announce plans to extend four loans schemes this week to support businesses amid worsening spread of the virus. (FT) Sunak is reportedly looking into scrapping increases in welfare payments and public sector pay which are linked to inflation alongside convincing the PM to allow him to break the pension ‘triple lock’. (CityAm)

EU officials, in a closed-door meeting on Friday, reportedly said UK PM Johnson's changes to the Internal Markets Bill has not addressed the bloc's fundamental objections to the bill. (FT)

BoE’s Haldane stated the UK’s economy is recovering faster than anticipated although noted that better incentives and access to finance are required for businesses to invest in technology. (Sunday Times)

ECB has launched a sweeping review of its EUR 1.35tln PEPP program, which will assess the impact of its bond-buying scheme, which some policymakers anticipate could result to changes to its other programs. ECB are said to consider how long the measure should continue and whether some of its extra flexibility should be transferred to the ECB’s longer running asset-purchase schemes. (FT)

ECB’s De Guindos stated that the PEPP is a temporary emergency programme which is serving its purpose and suggested the ECB has to act for as long as price stability objective is not met, while he added the exchange rate is not an objective but will monitor it which will be an input for models used to calculate inflation projections. (Newswires)

EU wants new powers to address the big tech firms including the ability to force them to break up or sell some of their European operations if their market dominance threaten the interests of customers and smaller competitors, according to EU Commissioner for Internal Market Breton. (FT)

S&P affirmed Spain at A; Outlook revised to Negative from Stable. (Newswires)

UK manufacturers reportedly see no evidence of a V-shaped recovery, according to Make UK/BDO quarterly survey in which the gauge for investment intentions declined to -32% from -26%. (Newswires)

UK Rightmove House Prices (Sep) M/M 0.2% (Prev. -0.2%). (Newswires) UK Rightmove House Prices (Sep) Y/Y 5.0% (Prev. 4.6%)


The DXY was lacklustre and pulled back beneath 93.00 amid tentativeness heading into this week’s events including Fed Chair Powell and Treasury Secretary Mnuchin’s testimony before the Senate Banking panel on the COVID-19 response and after reports that US Democrats and White House officials were nearing a deal on Friday on a stopgap spending bill to fund the government, which was hampered by a dispute over funding for farmers. Furthermore, the recent death of Supreme Court Associate Justice Ginsberg has opened another front in the election battle as President Trump intends to make a nomination in the week ahead, while reports noted that nominating a candidate such as Cuban-American Federal Judge Lagoa could help President Trump clinch the key state of Florida. Elsewhere, EUR/USD gained against the subdued greenback but with upside only marginal alongside reports the ECB launched a sweeping review of its EUR 1.35tln PEPP program, which will assess the impact of its bond-buying and could have ramifications for its other asset purchase programs, while GBP/USD strengthened above 1.2950 alongside expectations Chancellor Sunak is to extend loans schemes to support businesses alongside increased fears of a second national lockdown. Elsewhere, USD/JPY weakened amid the subdued risk tone and absence of support from Japanese participants, while antipodeans gained due to the USD woes and after the PBoC kept the reference rate relatively stable.


WTI crude futures were choppy around USD 41.00/bbl, while recent reports of tropical storm Beta forming in the Gulf of Mexico which is to approach the Texas coast on Monday and last week’s news that Libya is to resume oil production and exports had little ramification for prices. Elsewhere, gold was stuck around the USD 1950/oz level with a subdued greenback providing only minimal support for the precious metal and copper flatlined amid the uninspiring risk tone.

Baker Hughes (Sept. 18th): Oil -1 at 179 (prev. Oil -1 at 180), NatGas +2 at 73 (prev. -1 at 71), Total +1 at 255 (prev. -2 at 254). (Newswires)

BSEE estimated 9.69% (Prev. 17.46%) of oil production in the Gulf of Mexico was shut in and around 7.72% (Prev. 12.5%) of natgas output was shut-in. (Newswires)

NHC said tropical storm Beta had formed in the Gulf of Mexico and will threaten the Texas coast which is expected to strengthen with hurricane force winds within 36 hours and threatens heavy rains, as well as a storm surge in the Texas coast in the approaching days. (Newswires)

Port of Houston is reportedly fully operational with all facilities open for Monday. (Newswires)

Goldman Sachs said end of Libya's export restrictions shouldn't derail oil market rebalancing, while it reiterated its year-end 2020 Brent forecast of USD 49/bbl and expects prices to increase to USD 65/bbl by Q3 2021. (Newswires)


US is to sanction more than 24 individuals and entities for involvement in Iran’s nuclear and arms programs on Monday, according to a US official. Furthermore, the official stated that US believes Iran could have sufficient fissile material for a nuclear bomb by year-end and stated that both Iran and North Korea have resumed collaboration on long-range missiles. (Newswires)

Iranian President Rouhani said the US is approaching inevitable defeat and a negative response from the international community regarding its sanctions move and that Iran will never yield to US pressure, while he added that Iran is ready to fully respect the nuclear agreement when all other sides do. (Newswires)

Bahrain reportedly foiled a terror attack backed by Iran Revolutionary Guards, according to Saudi state TV. (Newswires)

Chinese military conducted a drill on Saturday in which 19 aircraft reportedly crossed the mid-line of the Taiwan Strait again, which followed a similar breach by 18 aircraft on Friday. (Newswires)

New Delhi police arrested a veteran Indian journalist on suspicion of spying for China, amid border stand-off. (FT)

Vague talk on Twitter noted reports that Saudi King Salman was in a critical condition – unconfirmed. (Twitter)


Treasuries were modestly steeper on continued minimal volume, with the stock rout failing to drive any haven flows. By settlement, 2s +0.5bps at 14bps, 10s +1.5bps at 69,5bps, and 30s +2.5bps at 145bps; volumes were very low, likely influenced by the Rosha Shana holiday, as well as Japanese players stepping away for a four-day long-weekend. There had been some strength in sovereigns in earlier Europe trade although this reversed as US participants came into the fray. Reports of larger German debt issuance also added selling pressure on rates. The latter part of trade was uneventful for Treasuries, with little bid emerging as stocks tumbled lower post opex, nor any support from Pelosi’s latest remarks indicating that lawmakers are still far apart from a stimulus bill. Looking back on the week, Treasury yields have barely budged, despite the FOMC, which ultimately provided little new for the market to ponder on, although some concerns of the Fed not setting out a more formal, longer-dated QE package did not ultimately manifest in any material sell-off in rates, with initial modest steepener completely reversing. T-note (Z0) futures settled 1+ ticks lower at 139-13.

Fed's Kashkari (voter, dovish dissenter) said he wanted a stronger commitment to zero interest rates for the Fed to vow to wait on rate hikes until core inflation is at 2% for roughly a year, while he also noted that under the new forward guidance the Fed may still raise rates before achieving goals. (Newswires)

US Democrats and White House officials neared a deal on Friday on a stopgap spending bill to avert a shutdown and fund the government through to December 11th according to two people familiar with the plans, but the agreement remained unfinished amid a last-minute dispute over funding for farmers. (NYT).

US House Speaker Pelosi said she remains at her USD 2.2trln figure for COVID relief and continues to push for higher state and local aid. Furthermore, when asked if something is better than nothing on a bill, she responded “No, it is a missed opportunity". (Newswires)

The death of Supreme Court Associate Justice Ginsberg has opened another front in the election battle with President Trump intending to make a nomination in the week ahead which he said will be a woman, while Democrats and Republican Senators Murkowski and Collins prefer for the winner of the election to make the nomination. There were also comments by Democratic Presidential Candidate Biden who said we should honour Ginsburg’s wish to wait till after the election for a replacement and Biden urged Republicans to do what is right when seeking to replace Ginsburg. (FT/Newswires) US House Speaker Pelosi refused to rule out impeachment proceedings to prevent President Trump's US Supreme Court pick from being confirmed to the bench, adding that Democrats will “use every arrow in our quiver” to block the eventual nominee. (Fox News)