Original insights into market moving news

[PODCAST] European Open Rundown 2nd October 2020

  • Asian equity markets trade lower and the E-mini S&P is showing losses in excess of 1% after US President Trump tested positive for COVID-19
  • In FX markets, the USD subsequently saw strength with the DXY moving back towards 94.00, pulling EUR/USD nearer to 1.1700
  • EU leaders reached an agreement regarding Belarus in which they will impose sanctions on the nation for violence and its election process
  • The US House voted in favour of the USD 2.2trl Democrat stimulus plan after House Speaker Pelosi announced the failure to agree a deal with the White House
  • The House plan will ultimately be rejected by the Senate with Majority Leader McConnell stating that he supports additional stimulus but it must be a narrow package
  • Looking ahead, highlights include EZ CPI, US NFP, Factory Orders, Uni. of Michigan (F), Fed's Harker, European Council Special Meeting


US COVID cases +45,342 (prev. +38,764) and deaths +1,030 (prev. +774). New York COVID cases +1,382 (prev. +1,000) and deaths +11 (prev. +9), while positivity rate 1.27% (prev. 1.02%) and the positivity rate in 20 hot spots was at 6.5% (prev. 5.5%). It was also reported that 159k restaurant jobs could be lost in New York and half of the city's restaurants could close permanently due to COVID-19, according to reports citing state audit estimates. (Newswires/FT)

US President Trump said he and the First Lady will begin the quarantine process after testing positive for coronavirus. (Newswires/Twitter)

Australian PM Morrison confirmed a Trans-Tasman bubble which will permit quarantine free travel between Australia and New Zealand. (Newswires)


Asian equity markets trade lower and the E-mini S&P is showing losses in excess of 1% after US President Trump tested positive for COVID-19. ASX 200 (-1.1%) reversed yesterday’s strength in which energy and mining-related sectors led the downside following weakness across the commodities complex and as a lacklustre financials sector also contributed to the losses for the index. Nikkei 225 (-0.8%%) was initially buoyed at the open as it played catch-up on return from yesterday’s surprise trading halt in Tokyo due to hardware issues, which Japan’s FSA is reportedly to consider a punishment for. This subsequently weighed on Japan Exchange Group shares and Fujitsu was also pressured given that the Co. is the hardware provider for the market operator, while most the gains in the benchmark index were gradually pared alongside a broad tentative tone and with a lack of participants due to closures in China, Hong Kong, Taiwan, South Korea and India. Finally, 10yr JGBs were rangebound amid the mixed risk tone and with price action stuck near the 152.00 focal point, while a tepid Rinban announcement by the BoJ which were present in the market for JPY 570bln, also ensured the lackadaisical price action for government bonds.

China’s Ambassador to the US said the countries should lose no time in taking US-China bilateral relations on to the right track. (Newswires)

Hong Kong deployed thousands of police against pro-democracy protests. (FT)

Japan is to start work on a new stimulus package by year-end which will be submitted to parliament when it convenes for a regular session in January. Japanese Finance Minister Aso says not considering now compiling a 3rd extra budget, adds now is the time to make full use of emergency budget reserve to respond to the COVID-19 crisis. (Newswires)


EU leaders reached an agreement regarding Belarus and Turkey in which they will impose sanctions on Belarus for violence and its election, although President Lukashenko was not included in the sanctions, while it warned that Turkey could face sanctions if it continues with its gas exploration in Cypriot waters. European Council President Michel said the next 2 weeks will be crucial with Turkey and the summit deal opened a path for dialogue but also showed firmness, while they will return to the Turkey question at the December summit. Furthermore, German Chancellor Merkel said EU leaders agreed they want constructive relations with Turkey and hope for negotiating dynamic with the country. (Newswires)

EU Chief Brexit Negotiator Barnier will not be briefing EU leaders about Brexit tomorrow at the Brussels summit, BBC reports. (Twitter)


The DXY was firmer and rose back towards the 94.00 handle following news that US President Trump tested positive for COVID-19. The greenback’s major counterpart were softer overnight in which EUR/USD pulled back from resistance at 1.1750 and moved towards 1.1700 amid USD strength. GBP/USD was subdued below 1.2900 but with price action calm in comparison to the prior day’s whipsawing amid a flurry of Brexit newsflow. USD/JPY and JPY-crosses were mixed and antipodeans traded softer due to the cautious risk tone and USD-resilience.

Australian Retail Sales (Aug) M/M -4.0% vs. Exp. -4.2% (Prev. 3.2%). (Newswires)


WTI crude futures fell beneath USD 40/bbl level and briefly tested USD 38/bbl to the downside before eventually finding a floor, with the weakness in prices due to bearish demand-side factors including the continued increases in COVID-19 cases and amid a lack of breakthrough in coronavirus relief talks. Elsewhere, gold pulled back beneath the USD 1900/oz level as the USD gradually strengthened overnight and copper remained dispirited after its recent slump beneath USD 3/lb with prices impacted by the cautious risk tone and amid the numerous holiday closures.

Planned Black Sea exports of CPC blend crude oil have been revised up to 4.81mln tons for October from 4.73mln ton in the preliminary plan. (Newswires)

Libya's Zueitina terminal is to load 3.8mln bbls of crude oil on 5 tankers in October. (Newswires)


US President Trump instructed the government to withhold nonhumanitarian assistance to 9 countries including North Korea, China, Cuba, Iran and Russia until they meet minimum standards on human trafficking. (Yonhap)

Russia Foreign Minister Lavrov and Turkish Foreign Minister Cavusoglu confirmed readiness for close coordination to stabilize situation regarding Armenia-Azerbaijan conflict. (Newswires)


Treasuries were unchanged by settlement after a choppy session of month/quarter-turn flows working against mixed data and stimulus hopes/gyrations. By settlement, 2s unch. at 13.1bps, 10s unch. at 67.6bps, and 30s unch. at 145; October 1st volumes in futures were markedly higher than recent averages. Treasuries had been selling off into the US session, accentuated by a better than expected Jobless Claims data release. However, buyers soon nibbled as the 10-year yield hit a peak of 72bps. There was a slew of technical buying today from passive indexers and portfolio duration extension, in addition to the Fed buying in the long-end. Furthermore, there were tactical/fast-money type buyers that added to that buying in US trade as stimulus hopes faded and the ISM Manufacturing survey came in less-than-expected, led by declines the leading New Orders component. Meanwhile, the Treasury announced next week’s auction sizes: 52bln of 3-year notes (exp. 52bln); 35bln of 10-year notes (exp. 35bln); 23bln of 30-year bonds (exp. 23bln); there could be some concession in the next few sessions if activity dies down and dealers carry out respective hedging flows. Separately, the Fed also announced that it would be extending the ban on share buybacks for banks through the end of the year, something to which analysts have said should ease fears of funding market pressure as dealer balance sheets should become “more free”. T-note (Z0) futures settled half a tick higher at 139-17+.

US President Trump said he likes his debates with Biden just how they are and is against potential changes that seeks to avert a repeat of the chaos from their first debate. (AFP)

US House voted 214-207 to pass the USD 2.2tln Democrat stimulus plan, which the Senate Republicans oppose. (Newswires) This came after US House Speaker Pelosi said there was no agreement on a COVID-19 relief last night, while she added that additional stimulus will also be required in 2021. (Newswires) White House said the House Democrats COVID-19 aid plan was not serious and the White House is willing to look at a clean bill for airline workers. There were also comments from Senate Democratic Leader Schumer that House Speaker Pelosi and the Trump administration were not in agreement on COVID aid. (Newswires) US Senate Majority Leader McConnell said he supports additional stimulus but it must be a narrow package and that if Pelosi and Mnuchin reach a deal, he will take a look at it, while he also noted that he has not decided on a date to vote on Judge Barrett. (Newswires)

Some vulnerable GOP Senators are reportedly concerned about the impasse on relief and are fretting facing voters without a new COVID-19 aid in place. (Politico)