Original insights into market moving news

[PODCAST] European Open Rundown 22nd September 2020

  • Asian equity markets were lower across the board with weakness stemming from the uninspiring performance in global peers
  • The DJIA registered losses of over 500 points, although a late resurgence in tech helped the Nasdaq 100 finish in the green
  • UK PM Johnson is to announce that bars, pubs and restaurants in England will be forced to shut at 10pm as of Thursday
  • Fed Chair Powell said the Fed will do what it can and for as long as it takes to support the recovery
  • In FX markets, the DXY remains above 93.50, EUR/USD was subdued below 1.1800 and GBP/USD sits on a 1.28 handle
  • Looking ahead, highlights include Riksbank & Hungarian rate decisions, US existing home sales, BoE Governor Bailey, Riksbank's Ingves, ECB's Panetta, Lane, Fed Chair Powell, Evans, Barkin


US COVID cases 37,417 (prev. +42,561), while a major newswire tally stated US cases increased by at least 44,027 to a total of 6.87mln and deaths rose by at least 337 to a total of 199.9k. It was also reported that New York cases +573 (prev. +862) and deaths +1 (prev. +4). (Newswires)

Spain's government said it was ready to take further measures to fight the resurgence of COVID-19 in Madrid. (FT)

White House officials are exploring options to quickly fix its plan to make COVID-19 vaccines free for all citizens. (WSJ)

UK COVID-19 alert level was raised to 4 from 3. PM Johnson is to announce bars, pubs and restaurants in England will be forced to shut at 10pm from Thursday, while he reportedly told MPs he will be telling the nation that people should work from home if they can. (Newswires/Telegraph)

UK London Mayor Khan said he is planning new restrictions for London and later commented that without adequate testing or contact tracing in London there is no choice but to look at other measures to slow the spread of the virus, while he met with local leaders and public health experts to agree a new plan to slow the spread. Furthermore, he reiterated the plan includes some new restrictions as he will be proposing 15 different measures and will collectively ask the government to implement the plan ASAP, as well as discuss it with the PM on Tuesday. (Newswires)


Asian equity markets were lower across the board with weakness stemming from the uninspiring performance in global peers after risk appetite in Europe was dragged by pandemic-related concerns and with spillover selling on Wall St where the DJIA briefly slumped below the 27,000 level and registered losses of over 500 points, although a late resurgence in tech helped the Nasdaq 100 finish in the green. ASX 200 (-0.6%) was pressured by underperformance in mining names and losses in the largest weighted financials sector as some of the Big 4 banks could reportedly face increased scrutiny in light of the recent FinCEN revelations, but with downside limited by resilience in tech and defensives. Japanese markets remained closed for Autumnal Equinox holiday and KOSPI (-2.0%) suffered amid the broad risk aversion, but with some bright specks seen including Samsung Biologics which was awarded a USD 331mln supply agreement with AstraZeneca. Hang Seng (-0.4%) and Shanghai Comp. (-0.1%) were negative with HSBC and Standard Chartered extending on the losses related to the recent money laundering allegations and with dark clouds looming over the TikTok deal after US President Trump warned the US will not approve the deal if Walmart and Oracle do not control the company and China’s Global Times editor Hu Xijin suggested that Beijing won't approve the current agreement as it would endanger China's national security, interests and dignity. Tensions regarding Taiwan also continues to polarize ties between the world 2 largest economies with China’s Foreign Ministry announcing to take countermeasures against high ranking US officials due to their visits to Taiwan, and China’s military released a video which showed a simulated attack on an island which resembled Guam. Nonetheless, the losses in Chinese markets were only moderate amid PBoC liquidity efforts in which it conducted a total net injection of CNY 350bln.

PBoC injected CNY 200bln via 7-day reverse repos and CNY 150bln in 14-day reverse repos for a net daily injection of CNY 350bln, with the 7-day and 14-day reverse repo rates maintained at 2.20% and 2.50% respectively. (Newswires) PBoC set USD/CNY mid-point at 6.7872 vs. Exp. 6.7767 (Prev. 6.7595)

White House fighting over the TikTok deal continues and US President Trump is said to be "stung by continued major Chinese involvement", according to FBN's Gasparino. (Fox Business News/Twitter)

China's Global Times tweeted that US President Trump's apparent reneging on a TikTok deal is just another negotiation trick and China’s government and firms are set to fight back, even if it means the situation will turn into a lose-lose one, citing experts. (Twitter)

Chinese leaders are reportedly split over releasing a blacklist of US companies, according to WSJ citing sources, while reports added that Cisco (CSCO) is among those US companies seen likely to be included. (WSJ)


UK FCA told banks to ramp up preparations for all Brexit scenarios, while it is said to have some painful lessons from pending reviews and noted strong regulatory standards go hand-in-hand with the UK's position as a global financial centre. (Newswires)

A group of senior UK state aid lawyers have offered UK PM Johnson help in designing a post-Brexit subsidy regime in order for the UK to break the current deadlock in negotiations. (FT)

German Chancellor Merkel and European Commission President Von Der Leyen agreed in a call for the need of a quick agreement with European parliament on EU budget and recovery plan that is needed to guarantee EU programs can start as planned from January 2021. (Newswires)


The DXY trickled lower from yesterday’s highs but held on to most of its recent gains above 93.50 after having strengthened throughout Monday’s trade due to the broad risk-averse tone, which saw it approach just shy of 93.80 to the detriment of its major counterparts. Momentum in the greenback has since quietened overnight with the release of Fed Chair Powell’s testimony to Congress doing little to spur price action, in which he reiterated the Fed will do what it can and for as long as it takes to support the recovery, while he noted that the path ahead for the economy remains highly uncertain. EUR/USD was subdued below 1.1800 after the resurgence in the USD. GBP/USD languished just above 1.2800 with the currency mired by lockdown concerns after the UK moved to alert level 4 and with an emergency COBRA meeting set for today to discuss what steps are to be taken. Furthermore, UK PM Johnson is reportedly set to announce that bars, pubs and restaurants in England will be forced to shut at 10pm from Thursday and will tell the nation that people should work from home if they can. USD/JPY pulled back and JPY-crosses were lacklustre due to recent haven flows and absence of Tokyo bidders, while antipodeans suffered from the negative risk tone and AUD/USD briefly dipped below the 0.7200 handle after comments from RBA Deputy Governor Debelle in which he noted that the central bank continues to assess other policy options which includes purchasing longer dated bonds, cutting rates with and without going negative, as well as FX intervention. However, he caveated that it was not clear if FX intervention would be effective as AUD was aligned with fundamentals.

RBA's Deputy Governor Debelle said the board continues to assess other policy options such as buying bonds further out along the curve to lower rates at longer maturities and FX intervention is an option but added it is not clear if it would be effective as AUD is aligned with fundamentals, while he stated that a 3rd option is to lower cash rate without going into negative territory and the 4th option is negative rates. Debelle also commented that he still expects unemployment rate to increase from current 6.8% and estimates Victoria lockdown cut 2% from national GDP in September quarter but later added it is plausible the worst is behind us. (Newswires)


WTI crude future languished around the USD 39.50/bbl level after its retreat from USD 41/00/bbl amid pandemic-related concerns and supply side factors with Libya’s output expected to reach 260k bpd next week following the lifting of its blockade, while focus for the complex turns to the latest stockpile count beginning with the private sector inventory report due later today. Elsewhere, gold seemed demoralized after the yesterday’s collapse where the precious metal briefly fell below USD 1900/oz on the weight of a firmer USD and copper mildly outperformed as it steadily nursed Monday’s price rout. 

OPEC delegates are concerned about the local lockdowns in Europe and rising cases in India, whilst also warning that crude and petroleum product stockpiles are not depleting as fast as initially thought. One delegate said "we might have to [act] soon". (FT)

BSEE: 8.4% of current oil production in Gulf of Mexico has been shut in (prev. 9.7%); natgas 6% (prev. 7.7%. (BSEE)

NHC said Beta is slowing moving towards the Texas coast with tropical storm force wind gusts and heavy rains in the central Texas coastal areas. (Newswires)

Libya's NOC said total output is expected to reach 260k bpd next week, while it added that carriers will arrive from Wednesday to ship available crude in reservoirs and from rest of the safe ports within the next few days. (Newswires)


US Secretary of State Pompeo tweeted that they welcome UK, Germany, and France's rejection of China's unlawful maritime claims in the South China Sea at the UN. Pompeo added that China must abide by international norms and that the US joins allies in rejecting the idea of "might makes right". (Twitter)

China's Global Times tweeted US is reportedly planning to sell sea mines to the island of Taiwan, but Taiwan's use of them to slow down a potential PLA amphibious landing will not succeed, thanks to the PLA's minesweeping vessels. (Twitter)


The Treasury curve was flatter, although yields were off their lows following earlier haven flows; rates vol remains markedly subdued when compared to equity vols. By settlement, 2s unch. at 13.5bps, 10s -2.5bps at 67bps, and 30s -2.5bps at 143bps; futures volumes were lower than average. The rally in USTs got going in European trade as the sell-off in stocks seen last Friday post-opex extended, and this time, a wider cross-asset reaction was seen, richening sovereigns. The US 10-year yield hit a low of 65bps before paring back a couple of bps into US trade, and then remaining in a tight range through the rest of the session. The Treasury market has reversed the mild steepening seen post FOMC, in which no decision was made around a longer-end weighted, more formal QE programme, where the latest haven flows have kept a lid on any further cheapening of rates. However, analysts do question whether the market will maintain its composure in light of a duration heavy supply calendar. Participants now look to this week’s auctions (2s, 5s, and 7s), with Jobless Claims and Durable Goods the key data points in the US this week. T-note (Z0) futures settled 5 ticks higher at 139-18.

Fed Chair Powell reiterated in the pre-release of his testimony to Congress that the Fed will do what it can and for as long as it takes to support the recovery, while he added that many economic indicators show a marked improvement but despite improvement from depth of crisis, the path ahead for economy remains highly uncertain. (Newswires)

Fed's Kaplan (voter, dissented hawkishly against FOMC language) expects zero rates will be appropriate for the next 2.5-3 years and believes the costs of the new low rate commitment was now worth the benefits, while he is concerned about excess risk taking. (Newswires)

Fed's Bullard (non-voter) said he supported FOMC decision last week and that the Fed’s new approach to increase inflation will be successful, while he added the Fed will be much less pre-emptive regarding increasing rates and may have enough fiscal aid in the pipeline for a recovery. (Newswires)

Fed's Bostic (non-voter) said the Fed has acted fast and boldly, while he added the Fed will not step away until everyone gets to a better place. (Newswires)

US House of Representatives filed legislation to fund US government through December 11th which does not include USD 21.1bln the White House sought for farm incomes, as expected. Furthermore, the US House bill proposed USD 14bln in funding for struggling US airports in its stopgap funding bill and an aide stated that the House expected to vote on the Stopgap funding bill on Tuesday. (Newswires)

US President Trump met with potential Supreme Court nominee Amy Coney Barrett at the White House on Monday and was said to be leaning towards Barrett for the nomination, according to source reports, although he earlier stated that he may meet other potential Supreme Court nomination candidate Barbara Lagoa on Friday in Miami. Furthermore, President Trump said he will probably announce a pick for SCOTUS on Saturday and he would rather have a senate vote before the election. (Newswires)

US Vice President Pence is set to play a key role in the Supreme Court nomination process and will interview each of the 5 candidates US President Trump is considering, while other reports noted that Senate Republicans do not have 4 holdouts to stop the confirmation of a Supreme Court nominee. (CBS/NYT)

Manhattan District Attorney’s office, which has been in a battle to obtain President Trump's tax returns, suggested in a filing that it had grounds to investigate President Trump and his businesses for tax fraud. (NY Times)