Original insights into market moving news

[PODCAST] European Open Rundown 5th October 2020

  • US President Trump’s condition continued to improve and he may be discharged from the hospital as early as Monday, according to his medical team
  • Asian equity markets and US equity futures began the week with a constructive tone as the regional bourses reopened from recent holiday closures
  • The latest election polls showed a widening lead for former VP Biden following last week’s presidential debate
  • The DXY was softer amid the positive risk tone, providing some support to its major counterparts (ex-JPY)
  • UK PM Johnson set a deadline of October 15th to secure a Brexit deal with the EU and both sides agreed to 11 days of “intensified” talks to finalise an agreement
  • US Senate Majority Leader McConnell said we are getting closer on stimulus negotiations
  • Looking ahead, highlights include Final EZ, UK & US services PMIs, ISM non-manufacturing, BoE's Haldane, ECB's de cos, Fed's Evans


US President Trump’s condition continued to improve and may be discharged from the hospital as early as Monday, according to his medical team. The medical team also noted that President Trump had a high fever on Friday morning and oxygen levels were dipping, while they recommended supplemental oxygen at that time but added that he had remained without fever since then and had completed a 2nd dose of Remdesivir, while his vital signs are stable with oxygen level at 98% and liver and kidney function was normal. (Newswires) Medical experts suggested that many of the details that President Trump’s medical team divulged would suggest that the President was suffering a more severe case of the virus than the physicians acknowledge. (New York Times)

US President Trump said in video message that he is getting great reports from the hospital, while he also conducted a motorcade drive by outside the Walter Reed Hospital to wave to supporters and the press. US President Trump earlier tweeted that he is feeling well and that the US wants and needs stimulus. (Twitter/Newswires)

US COVID-19 cases rose to a total 7.36mln from 7.32mln and deaths rose to a total 208.8k from 208.1k. (Newswires)

New York City Mayor De Blasio asked the state for permission to close around 300 schools and reimpose restrictions for non-essential businesses in some areas due to increasing infections. (Newswires)

White House officials have raised objections to FDA's proposed standards for deciding whether a COVID-19 vaccine should be approved, according to sources. (WSJ)

UK COVID-19 cases +22,961 (Prev. +12,872); the government noted the jump in cases was due to a reporting delay and that numbers in the upcoming days would include additional cases. (Newswires)

UK PM Johnson said he hopes and believes that the scientific equation will change in the next few weeks and it is too early to know if local measures in parts of the country are working. UK PM Johnson also noted that progress on vaccines and testing will allow us to take a different approach and that scientists are unanimous that things will be radically different in Spring. (Newswires)

A mass roll-out of a COVID-19 vaccine in the UK could be completed in as little as three months, which raises the prospect that all adults in the country could receive the vaccine as soon as Easter, according to The Times. However, there were other reports in FT that the head of the government’s vaccine task force noted that the vaccination of everyone in the country will not happen and that they just need to vaccinate everyone at risk. (The Times/FT)

A new 3-tiered lockdown is reportedly planned for England which includes tougher measures that could be imposed locally or nationally if the increases in COVID-19 cases are not brought under control. (The Guardian)

Irish National Public Health Emergency Team recommended the country be moved to the highest level of COVID-19 restrictions. (RTE)

France COVID-19 cases +12,565 (Prev. +16,972 record increase) and deaths +32 (Prev. +49). French PM’s Office announced that the Parisian region has been placed on maximum alert level due to COVID-19 and that additional restrictive measures will be imposed, while it was reported that bars in Paris are to shut from Tuesday. (Newswires)

New Zealand PM Ardern said there is a high probability the coronavirus cluster in Auckland will be eliminated, while she announced to lift coronavirus restrictions in Auckland from Wednesday with the alert status to move to level 1. (Newswires)


Asian equity markets and US equity futures began the week with a constructive tone as the regional bourses reopened from recent holiday closures and participants also digested the positive updates regarding President Trump’s condition, which was said to have continued to improve and he could be discharged from hospital as early as today. In addition, some also attributed the positive tone to the latest polls which showed a widening lead for former VP Biden following last week’s presidential debate. ASX 200 (+2.5%) outperformed with the broad gains led by a surge in energy and financials on the eve of the budget announcement, where Australia’s national debt ceiling is expected to be raised to above AUD 1.1tln and income tax cuts valued at billions are set to be backdated in an effort to provide immediate economic stimulus. Nikkei 225 (+1.2%) traded positively as exporters reaped the benefits of a weaker currency that was spurred by the risk tone and alongside some murmuring of Gotobi demand. Hang Seng (+1.3%) was also upbeat as participants returned following the holidays although mainland China is to remain shut for most this week and won’t reopen until Friday, while there were some weak spots including SMIC shares which have dropped over 6% after the US informed its suppliers they will be subject to additional export restrictions. Finally, 10yr JGBs were weaker amid the gains in riskier assets but with downside stemmed by support near the 152.00 level and with the BoJ present in the market for a total JPY 840bln of JGBs with 1-3yr and 5-10yr maturities.

US announced guidance on immigration laws that will make it near-impossible for members of a Communist party or similar, to be granted permanent residence or citizenship in America. (SCMP)

USDA Secretary Purdue is not sure China will meet its Phase 1 agricultural purchase commitments but added they are trying and that non-agricultural trade issues get in the way of China's fulfilment of Phase 1 agricultural purchases. (Newswires)

Chinese chipmaker Semiconductor Manufacturing International Corporation conducted "preliminary exchanges" with the US Bureau of Industry and Security regarding export restrictions. Furthermore, it noted that US export curbs may have a potential material adverse impact on its future production and operation, while it confirmed that the US issued a letter to certain suppliers regarding restriction on sale of certain raw materials. (Newswires)

China's Global Times tweeted that the Hong Kong government and China’s Office of the Commissioner of the Ministry of Foreign Affairs of PRC in HKSAR expressed strong opposition to the US defamation of Hong Kong police’s law enforcement against illegal assembly on National Day and urged the US to stop interfering in China's internal affairs. (Twitter)

China military aircraft entered the Taiwan air defence identification zone on Sunday. (Newswires)


UK PM Johnson set a deadline of October 15th to secure a Brexit deal with the EU and both sides agreed to 11 days of “intensified” talks to finalise an agreement. PM Johnson also commented that there is a deal to be done but there are some difficult issues that need to be fixed, while he added that we’re asking the EU to offer terms they offered to Canada and he does not particularly want the Brexit transition period to end without a trade deal in place but believes that Britain could live without one. However, other reports suggested negotiators will be given additional time to reach a deal and that there was no mention of a target date for a resolution in the joint statement following talks between UK PM Johnson and European Commission President Von der Leyen. (Newswires/Sunday Times/Evening Standard) UK PM Johnson’s office said the Chief Brexit Negotiator Frost has been instructed to work intensively to try and bridge the gaps in discussions with the EU. (Newswires)

There were prior reports that UK PM Johnson was to demand that French President Macron caves in regarding UK demands on fishing as the price for a trade and security deal at the meeting with European Commission President Von Der Leyen. (Guardian)

Some voices within the UK government were reportedly expressing doubts on whether to bother reaching a deal with the EU. (BBC) However, other reports noted that UK officials remain upbeat about breaching divides with regards to state aid and broader level-playing field, with one government official stating that "it's looking better than it has for a good while but we're not there yet." (FT)

European Commission President Von der Leyen commented about the state of play in negotiations and stated that while progress had been made, significant gaps remain. Furthermore, she added that both sides agreed it is important to find an agreement as strong basis for a strategic relationship. (Twitter)

S&P affirmed France at AA; Outlook Stable, affirmed Germany at AAA; Outlook Stable and affirmed Poland at A-; Outlook Stable. Fitch affirmed Belgium at AA-; Outlook Negative and affirmed Cyprus at BBB-; Outlook Stable, while Moody’s raised Slovenia sovereign rating from Baa1 to A3; Outlook Stable. (Newswires)


The DXY was softer as the positive risk tone sapped haven demand, with the lacklustre USD benefitting EUR/USD which broke above its 100-hour and nearby 50-hour moving average levels of 1.1724 and 1.1730 respectively. GBP/USD sat near Friday’s highs but with upside capped by resistance at 1.2950 and tentativeness after UK and the EU agreed to 11 days of “intensified” talks to finalise a Brexit deal, as PM Johnson also noted that although he does not want the Brexit transition period to end without a trade deal in place, he believes that Britain could live without one. Elsewhere, USD/JPY and JPY-crosses were underpinned by the firm risk appetite and with some suggestions of Gotobi demand, while antipodeans took advantage of their high-beta statuses win which AUD/USD approached closer towards the 0.7200 handle ahead of tomorrow’s RBA and budget announcements, while NZD/USD eked mild gains amid the lifting of COVID-19 restrictions in Auckland. Furthermore, notable strength was seen in the CHF which some analysts noted was likely influenced by M&A factors after reports that Japan’s NEC was planning to acquire Swiss software maker Avaloq for USD 2.2bln.

Australian NAB Business Confidence (Sep) -4 (Prev. -8). (Newswires) Australian NAB Business Conditions (Sep) 0 (Prev. -6)


WTI crude futures nursed some of last week’s losses with prices testing USD 38/bbl to the upside, while reports noted an escalation of the Norway oil workers’ strike is to begin today which could impact 8% of its oil and gas production or around 330k bpd. Conversely, gold failed to hold on to the USD 1900/oz level as the lack of safe haven demand offset the tailwinds from a weaker greenback and copper was also subdued despite the positive risk tone with prices trading sideways amid the continued absence of its largest purchaser China.

Baker Hughes Rig Count (02/Oct): Oil rigs +6 to 189 (prev. +4 at 183), natgas rigs -1 to 74 (prev. +2 at 75) and total rigs +5 to 266 (prev. +6 at 261). (Newswires)

Saudi Arabia September oil production was at 8.97mln bpd vs. Prev. 8.99mln bpd in August, while oil exports were at 6.1mln vs. Prev. 6.0mln in August. (Newswires)

Norway Oil Industry Association stated that oil workers will begin an expansion of the strike on Monday. (Newswires)


The conflict between Armenia and Azerbaijan over the disputed region of Nagorno-Karabakh reportedly escalated dramatically after Baku accused Armenian forces of firing rockets at Azerbaijan's second-largest city of Ganja, which is located outside the contested territory. It was also reported that the Nagorno-Karabakh region stated that 18 civilians were killed and over 90 were wounded in a week of fighting. (Guardian/Newswires)

Russian Foreign Minister Lavrov urged for a ceasefire and told the Armenian Foreign Minister that Moscow is ready to seek a solution through the Organization for Security and Co-operation in Europe. (Newswires)

A bus carrying Russian and Armenian journalists, as well as a US volunteer has reportedly been hit with artillery fire in Nagorno-Karabakh region, according to reports citing witnesses. (RIA)

Germany urged for the EU to impose sanctions against Russia over Navalny poisoning. (Newswires)


Treasuries bear steepened as traders raised their expectations of fiscal support in the wake of Trump catching COVID. By settlement, 2s unch. at 13.3bps, 10s +2bps at 69.7bps, and 30s +2.8bps at 148.4bps; futures volumes were strong again amid the earlier sell-off. Initially, there had been little movement in bonds on the announcement of Trump catching the virus, despite the kneejerk sell-off in stocks. However, rates began to sell after the NFP print, which was slightly light on the headline, although hardly a big miss when compared to the gyrations of some recent reports. Additionally, the risk tone perked up further as Pelosi hit the wires with a new-found optimism for COVID stimulus, saying that the dynamic of the negotiations had changed and that talks were continuing. This saw the bear-steepener become more pronounced as participants placed reflation-like trades (note that cyclical sectors outperformed in stocks). It’s also possible that some of that selling was driven by Trump testing positive for COVID, where some were raising their expectations of a Dem sweep with Trump potentially unable to campaign effectively. Furthermore, with many polls leading in Biden’s favour significantly, as the election looms nearer there is likely to be more investors who begin to adjust their portfolios accordingly. Yields moved sideways in later trade, leaving a nice concession ahead of next week’s auctions (3s,10s, 30s). T-note (Z0) futures settled -3+ ticks at 139-14.

Fed's Kaplan (voter) reiterated that rates should stay at zero until pandemic is weathered and on track to meet goals, which could take 2.5-3 years, while he wants to be careful with using more QE as a tool and said that inflation moderately above 2.00% means 2.25%, not 2.50% or 3.00%. (Newswires)

Fed's Kashkari (voter) said we are a long way from returning to pre-crisis levels in the job market and the jobs report today was disappointing, while he added that without further fiscal aid, more business failures would occur and the recovery will slow. (Newswires)

Fed’s Mester (voter) stated that monetary policy will be calibrated for the economy and expect inflation to end the year below 2%, while she added that a lack of fiscal support poses a significant risk to the economic outlook. (Newswires)

US House Speaker Pelosi said that they are making progress on coronavirus relief legislation. There were also separate reports that House Speaker Pelosi and Treasury Secretary Mnuchin held a private phone call with Fed Chair Powell on Thursday to discuss state and local funding, as well municipal lending, according to Politico which added that call had not yet been reported and underscored the lengths to which they were going to try to get a deal. (CBS/Politico)

US Senate Majority Leader McConnell said we are getting closer on stimulus negotiations, although it was separately reported that Senate Republican sources gave low odds to another pandemic stimulus bill. (Newswires/Fox/Twitter)

US Senate cancelled legislative work until at least October 19th after at least 3 senators tested positive for COVID-19. (Newswires)

Republican advisers said the party has now largely given up on US President Trump in November and focus is on him keeping it close and the GOP keeping the Senate, although situation can change "on a dime", according to FBN's Gasparino. (Newswires)

NEC Director Kudlow said we are in the neighbourhood of USD 1.5trln for a stimulus deal (unchanged from previous White House offer), while he added there is considerable disagreement in state aid which can be addressed later. (Newswires)

POLL: NBC/WSJ Poll showed former VP Biden ahead of US President Trump nationally among registered voters by 14 points at 53% vs. 39% (Prev. 8 point lead), conducted after Tuesday’s first presidential debate but prior to President Trump’s Covid-19 announcement. (Twitter)