Original insights into market moving news

[PODCAST] European Open Rundown 29th September 2020

  • Asian equity markets traded mostly higher, although the region struggled to make the most of the firm tailwinds from Wall St
  • Major US indices notched respectable gains, led by cyclicals and amid month and quarter-end flows
  • Brussels has reportedly dropped its demands for a broad agreement with the UK on all outstanding issues before drafting a Brexit agreement, according to the Times
  • In FX markets, the DXY remained lacklustre above 94.00, EUR/USD was steady around recent levels and GBP retained 1.28 status
  • House Democrats proposed a new USD 2.2tln coronavirus relief bill; talks between House Speaker Pelosi and Treasury Secretary Mnuchin will resume Tuesday
  • Looking ahead, highlights include German Prelim CPI, EZ Economic Sentiment, US Consumer Confidence, Fed’s Williams, Harker, Clarida, Quarles, BoE’s Bailey, ECB’s Mersch, Riksbank’s Ingves, supply from Italy and UK


Global coronavirus death toll has surpassed 1mln, according to the Johns Hopkins University. US COVID cases +86,206 which was a record daily increase (prev. +49,871) and deaths +295 (prev. +853). New York COVID cases +834 (prev. +866) and deaths +11 (prev. +6). New York City is considering stricter COVID measures in some neighbourhoods where cases are surging, while New York Governor Cuomo extended the state moratorium on COVID-related residential evictions until January 1, 2021. Elsewhere, the Chicago Mayor loosened COVID-19 related capacity restrictions for businesses including bars, restaurants & health clubs. (Newswires/New York Post)

US President Trump said that Abbott (ABT) is to release 150mln COVID-19 tests in the coming weeks, while he also commented that vaccines are coming and are coming fast. (Newswires)

US State Department said it lifted the global health advisory for coronavirus, with alert advisories for countries including Honduras and Nicaragua lowered. (Newswires)

Canada's Quebec Province said Montreal bars and restaurant dining rooms will shut for 28 days beginning Thursday due to the coronavirus. (Newswires)


Asian equity markets traded mostly higher although the region struggled to make the most of the firm tailwinds from Wall St where all major indices notched respectable gains led by cyclicals and amid month and quarter-end flows. ASX 200 (Unch.) and Nikkei 225 (+0.4%) were mixed throughout most of the session with Australia kept afloat by outperformance in tech after PM Morrison confirmed an AUD 800mln commitment for measures related to new digital technology but with upside capped by weakness in consumer and mining-related sectors, while the Tokyo benchmark initially lagged on a retreat from the 23,500 level before mounting a late recovery, with NTT DoCoMo in focus after news that NTT was mulling taking the Co. private. This resulted to a glut of buy orders for NTT DoCoMo which was untraded and weighed on the shares of its parent, while telecom rivals KDDI and SoftBank Corp were hit as the buyout deal could speed up the Suga government’s agenda for lower fees considering that the government is also the largest shareholder in NTT. Hang Seng (-0.4%) and Shanghai Comp. (+0.5%) diverged with indecision seen after another PBoC liquidity drain, as well as heading into tomorrow’s PMI data and the start of Golden Week holidays on Thursday, with Hong Kong lacklustre as yesterday’s HSBC-led surge petered out and amid IPO-related developments with ZTO Express debuting in the HKEX. Finally, 10yr JGBs were choppy alongside similar indecision in Japanese stocks with early gains in JGBs spurred as Japanese stocks initially lagged and with support just above the 152.00 psychological level, although the moves were later retraced as sentiment in Tokyo gradually improved and following mixed results at the 2yr JGB auction.

PBoC injected CNY 100bln via 14-day reverse repos at rate of 2.35% for a net daily drain of CNY 100bln. (Newswires) PBoC set USD/CNY mid-point at 6.8171 vs. Exp. 6.8133 (Prev. 6.8252)

World Bank said growth in the East Asia and Pacific Region is seen at 0.9% this year which is the lowest since 1967, while it sees China growth at 2.0% and the rest of East Asia and Pacific Region to contract 3.5% this year. (Newswires)

China’s Global Times editor Hu Xijin said based on what he has learnt, President Trump's government could take the risk to attack China's islands in the South China Sea to aid his re-election campaign and if it happens, the PLA will fight back fiercely. (Twitter)

BoJ Summary of Opinions from the September meeting stated that monetary easing measures conducted since March have had positive effects but added that the pace of recovery is moderate so they must be vigilant. BoJ noted it is appropriate for the Bank to maintain the current monetary policy for the time being and, as before, take additional measures if necessary while closely monitoring the impact of COVID-19, while it also stated that Japan's economy is likely to follow an improving trend, but the pace is expected to be only moderate while the impact of COVID-19 remains worldwide. (Newswires)

Tokyo CPI (Sep) Y/Y 0.2% vs. Exp. 0.1% (Prev. 0.3%) Tokyo CPI Ex. Fresh Food (Sep) Y/Y -0.2% vs. Exp. -0.3% (Prev. -0.3%) Tokyo CPI Ex. Fresh Food & Energy (Sep) Y/Y 0.0% vs. Exp. -0.2% (Prev. -0.1%)


UK PM Johnson is to unveil measures to help the unemployed retrain for work in growth sectors, which includes offering a free college place on certain vocational courses for those without A-levels or similar qualifications. (FT)

EU said it is prepared to begin writing a joint legal text of a trade agreement with UK, according to The Times. The EU has reportedly abandoned its demands for a broad agreement between the two sides on all outstanding issues before drafting an agreement if the UK engages in detailed discussions on fishing quotas and state-subsidies post-Brexit. (Times)

EU Commission President Von Der Leyen stated the EU wants a post-Brexit deal agreement and is still convinced an agreement is possible. (Newswires)

Institute for Fiscal Studies said UK Chancellor Sunak will struggle to deliver Tory manifesto pledges without borrowing a lot more or hiking taxes, while it recommended that government department and local authority budgets should be limited amid high uncertainty. (FT)

Finland, Netherlands, Sweden and Denmark believe the German proposed rule of law mechanism over the recovery fund gives too much power to illiberal European governments by handing single country a "brake" that would delay the suspension process. Furthermore, they believe the German draft causes too high of a legal threshold for the mechanism to be triggered when there are measures undermining the rule of law, including the erosion of judicial independence and media freedom. (Newswires)


The USD remained lacklustre and consolidated near the prior day’s lows after the constructive tone on Wall St sapped demand for the haven, although DXY still held on to the 94.00 status with downside stemmed after the stock momentum moderated in Asia. In addition, House Democrats proposed a new USD 2.2tln coronavirus relief bill and talks between House Speaker Pelosi and Treasury Secretary Mnuchin will resume Tuesday morning, although it is difficult to see how the latest offer will receive approval from GOP Senators which have previously rejected a lower cost relief bill. EUR/USD was steady after yesterday’s ECB source reports and comments from President Lagarde. GBP/USD was mildly lifted amid reports the EU is prepared to begin writing a joint legal text of a trade agreement with UK, although the support later petered out as although there is increased optimism, a lack of a solid breakthrough in negotiations remains elusive. Elsewhere, USD/JPY was choppy around 105.50 after Tokyo CPI data which despite printing better than expected, still showed Core CPI in negative territory, while antipodeans held on to gains against the greenback which follows the PBoC setting a firmer reference rate for the first time in 7 days.


Mild weakness was seen in oil prices as the upbeat risk momentum from Wall Street moderated in Asia hours to drag WTI crude futures below USD 40.50/bbl, although prices are off intraday lows amid a lack of pertinent news flow and with focus for the complex turning to the latest stockpile reports beginning with the private sector inventories later today. Elsewhere, gold was flat and failed to benefit from the lacklustre greenback and copper prices are steady as it eyes another test of the USD 3.00/lb resistance.

G20 energy ministers reaffirmed commitment to ensure the energy sector continues to make a full and effective contribution to overcoming the pandemic, while they emphasize importance of stimulus packages to spur inclusive economic activities, according to the statement. (Newswires)

China's copper TC/RC floor was set by smelter group at USD 58/ton or 5.8cents/lb for Q4 vs. Prev. USD 53/ton or 5.3cents/lb in Q3, according to sources. (Newswires)


US President Trump administration is reportedly considering fresh sanctions on Iran's financial sector, according to sources. (Newswires)

Nagorno-Karabakh region stated that at least 26 more troops were killed in fighting with Azeri forces on Monday. (Newswires)


The TPLEX was modestly steeper in the long-end amid the pick-up in global risk appetite on Monday, although the moves were by no means ecstatic. By settlement, 2s unch. at 13bps, 10s unch. at 66bps and 30s +2bps at 142.5bps; futures volumes were beneath recent averages. The 10-year yield continues to anchor at the 66/67bps region, where real money accounts extending duration for month/quarter-end were said to be on the bid, while algo/tech-based accounts were reportedly on the offer. There were a handful of corporate deals today across the dollar market, including several Eurobonds, moving swap spreads wider. T-Note (Z0) futures settled half a tick lower at 139-20.

Fed's Mester (voter) sees US unemployment rate to end the year in the 7-8% range and sees inflation slightly above 1% at year-end, while Mester added that monetary policy is well calibrated and asset purchases are providing accommodation. (Newswires)

US House Speaker Pelosi announced that the Democrats unveiled an updated coronavirus relief legislation, in which the USD 2.2tln bill includes new funding to avert catastrophe for schools, small businesses, performance spaces, airline workers and others. Furthermore, House Speaker Pelosi and Treasury Secretary Mnuchin spoke via phone call last night and agreed to speak again in the morning, according to Pelosi's Deputy Chief of Staff. (Newswires/Twitter)

US House Majority Leader Hoyer said he believes the revamped coronavirus bill is a reasonable compromise that meets the needs we identified in the Heroes Act that passed the House in May, while he added that doing nothing must not be an option, according to Fox News' Pergram. (Twitter)