Original insights into market moving news

[PODCAST] European Open Rundown 8th October 2020

  • Asian equity markets traded mostly positive as the region took its cue from the rebound in the US
  • FOMC minutes provided little in the way of fresh information with no greater clarity on how far the Fed would permit inflation to overshoot its target
  • In FX markets, the DXY is modestly softer, but above 93.50, EUR/USD is little changed and GBP/USD extended gains above 1.2900
  • The US Vice Presidential debate saw Harris and Pence exchange blows in an attempt to discredit the records of both Presidential candidates
  • Looking ahead, highlights include German trade balance, ECB minutes, US weekly jobs data, ECB's Schnabel, de Guindos, Mersch, Fed's Barkin, BoC's Macklem, US 30yr auction


FOMC Minutes stated that officials raised the bar for interest-rate increases at that meeting and signalled they expected it would be at least three years before they would near the new threshold. Participants judged it would be appropriate over coming months for the Federal Reserve to increase its holdings of Treasury securities and agency MBS at least at the current pace and some participants noted it would be appropriate in future meetings to further assess and communicate how the Committee’s asset purchase program could best support the achievement of the Committee’s maximum employment and price-stability goals. Several Fed officials expressed concern at the prospect of delayed or reduced fiscal support after expanded unemployment benefits and support for small businesses expired this summer, while some officials said their more optimistic forecasts were based on at least USD 1 trillion in additional spending. Furthermore, the minutes noted that while the outlook for inflation was viewed as highly uncertain, a number of participants projected that inflation would run below the 2% longer-run objective for a significant period before moving moderately above 2% for some time. (Newswires)


US COVID cases +38,984 (prev. 39,548) and deaths +672 (prev. +371), while a major newswire tally stated that US cases rose by at least 51,354 to a total of 7.58mln and deaths rose by at least 944 to a total of 211.9k. New York COVID cases +1,360 (prev. +1,393) and deaths +8 (prev. +9). (Newswires)

US President Trump said he didn't have to go to hospital but was convinced by medical professionals and that the Regeneron (REGN) drug was key to feeling good again, while he also mentioned Eli Lilly’s (LLY) drug and wants both drugs to be available free to Americans. (Twitter)

White House Chief of Staff Meadows said President Trump spent most the afternoon in the Oval Office and that the White House is keeping access to the Oval Office extremely limited, while he hopes Regeneron therapy proves to be a ground-breaking drug. (Newswires/Fox)

AstraZeneca (AZN LN) COVID-19 vaccine is facing missing a key deadline to give participants another vaccine shot amid the US trial still being on pause, according to experts. There were also reports that AstraZeneca, which had promised not to profit from its COVID-19 vaccine during the pandemic, has the right to declare the end of the pandemic as soon as July next year, making the drug maker eligible to profit from its potential vaccine. (FT)

France COVID cases increased by a record 18,746 (prev. +10,489) and deaths +80 (prev. +65). (Newswires)

BBC's Kuenssberg tweeted that after a lot of chatter, it sounds like the government is heading for an announcement about the next phase of COVID on Monday. (Twitter) Reports suggest that Monday could see the unveiling of a new "traffic light" system of local lockdowns which could lead to the closure of bars and restaurants in badly affected areas, most likely in northern England. (Telegraph) 


Asian equity markets traded mostly positive as the region took its cue from the rebound in the US where all major indices reclaimed the losses triggered by President Trump’s recent announcement to walk away from COVID-19 relief negotiations, as investors found solace from President Trump's calls for piecemeal measures including airline aid, PPP and stimulus checks. ASX 200 (+1.0%) and Nikkei 225 (+1.0%) were higher as Australia extended on its post-budget outperformance with healthcare, tech and materials frontrunning the broad-based gains in the index, while the Tokyo benchmark coat-tailed on the recent favourable currency moves after USD/JPY briefly reclaimed the 106.00 handle. Elsewhere, the KOSPI was kept afloat but with upside capped after shares in index heavyweight Samsung Electronics failed to capitalize on stronger than expected preliminary results for Q3 despite flagging a 58% increase in operating profits, and the Hang Seng (-1.0%) was the laggard in which it breached the 24,000 level to the downside with notable weakness seen in gambling names after underwhelming early gaming revenue numbers from Golden Week holidays with JPMorgan also neutralizing its bullish view on Macau gaming due to poor re-opening trends. Finally, 10yr JGBs were lacklustre following spillover selling from T-notes and amid the mostly positive tone in stocks, although stronger results at the 5yr JGB auction provided some mild support in late trade.

US is reportedly exploring restricting Alibaba (9988 HK) affiliate Ant Group and Tencent (700 HK) payment systems over national security reasons, although a final decision was not imminent, according to sources. (Newswires)


A UK Gov't source says there has been a little bit of progress regarding state aid and at present the largest gaps remain in fishing. (Sky News)

ECB's Villeroy said even if there is a Brexit trade deal, things will change significantly for financial services and that firms operating under the European passport must quickly finalise their EU relocation if they want to operate here as of next year. (Newswires)

UK RICS Housing Survey (Sep) 61 vs. Exp. 40 (Prev. 44, Rev. 13); highest since June 2002. However, RICS also stated that 12-month sales expectations turned more negative in September. (Newswires)


The USD pulled back during Wall Street hours amid the recovery in stocks, although price action since then has been range bound with the DXY sideways above 93.50 throughout Asia trade after the FOMC minutes provided little in the way of new information. The minutes noted officials raised the bar for interest-rate increases and signalled they expected it would be at least three years before they would near the new threshold, while it also stated that economic activity and employment picked up in recent months but remained well below pre-pandemic levels and that members agreed it would be appropriate to maintain an accommodative stance of monetary policy until their objectives were achieved. EUR/USD was also little changed with the single currency stuck around its 50-Hour moving average at 1.1765 and GBP/USD prodded above 1.2900 after finding encouragement from the increased optimism regarding Brexit talks. USD/JPY and JPY-crosses were mostly higher after recent haven outflows and antipodeans consolidated with a bout of pressure seen in NZD/USD after comments from RBNZ officials that noted we'd rather be aggressive with stimulus and rather do too much too soon than too little too late.

RBNZ said recent monetary policy actions are working to lower rates in New Zealand and that they are actively working on negative interest rates, as well as a funding-for-lending programme. There were also comments from RBNZ Chief Economist Young Ha who said we'd rather be aggressive with stimulus and rather do too much too soon than too little too late, while he added they are looking at a tiering regime for the negative rates plan. Furthermore, Assistant Governor Hawkesby said inflation is seen below target for next 3 years and that there will be more information regarding funding for lending with November MPS. (Newswires)

New Zealand ANZ Business Confidence (Oct) -14.5 (Prev. -28.5). (Newswires) New Zealand ANZ Activity Outlook (Oct) 3.6 (Prev. -5.4)


WTI crude futures traded both sides of the USD 40/bbl level as downward pressure from the slightly larger than expected crude builds in this week’s inventory reports and the dashed hopes of a large COVID-19 relief bill, was counterbalanced by the positive risk tone, calls for piecemeal stimulus measures and as Hurricane Delta caused a shut-in of an estimated 80% of production in the Gulf of Mexico. Elsewhere, gold traded sideways with the precious dispirited after its recent retreat from the USD 1900/oz level and after the FOMC minutes proved to be a non-event, while copper prices were marginally lower to give back some of yesterday’s risk-fuelled gains but remained above the USD 3/lb level.

UAE's ADNOC set November Murban crude OSP at minus USD 0.35/bbl to Platts Dubai which is USD 0.15/bbl higher than the prior month. (Newswires)

NHC said Delta is expected to re-strengthen during the night and Thursday while moving through southern and central Gulf of Mexico, with a life-threatening storm surge and damaging winds likely in parts of the northern Gulf Coast from Friday. (Newswires)

BSEE estimated that Hurricane Delta has shut-in 80% offshore crude oil production (prev. 29%) and 49% of natural gas output (prev. 9%) in the Gulf of Mexico. (BSEE)


US, France and Russia are to conduct talks regarding the Nagorno-Karabakh conflict. In related news, there were also reports that 2 Turkish F-16s were spotted at the Ganja International Airport in Azerbaijan on October 3rd. (CGTN/NYT)

US is to impose sanctions on Iran on Thursday which will target the country's financial system. (Washington Post)

US President Trump tweeted we should have the small remaining number of troops serving in Afghanistan home by Christmas, while there were earlier comments by US National Security Adviser O'Brien that the US will reduce troops in Afghanistan to 2500 early next year. (Newswires/Twitter)


The Treasury curve returned to bear-steepening on Wednesday as the market shrugged off Tuesday’s Trump stimulus bombshell and continued to price in a fiscal-boosted outlook under a Biden presidency. At pixel time, 2s +1bps at 15.7bps, 10s +4.9bps at 78.9bps, and 30s +5.8bps at 159.5bps; futures volumes were decent. The rates sell-off had begun overnight as Trump proposed some piecemeal stimulus proposals after eliminating chances of a complete COVID aid bill before the election, with stocks retracing their losses too. Duration also came under pressure in the wake of the FOMC minutes, where there was no indication of imminent changes to the Fed’s asset purchases. There had been some expectations of the bank increasing the average duration of its Treasury purchases as part of a manoeuvre to a more traditional QE, rather than a “smooth market functioning” one. With the market more confident that additional Fed involvement in the Treasury market was not on the imminent horizon, the curve was free to steepen further into settlement. Prior to the minutes, there had been little cause four any counter-trend strength after the average USD 35bln 10-year note auction saw the 0.765% high yield come in on the screws with slightly above average non-dealer participation. Thursday’s USD 23bln 30-year bond auction is up next. T-note (Z0) futures settled 10+ ticks lower at 138-23.

Fed's Williams (voter) said the US economy has started to recover but nowhere where we want it to be and the economic outlook is highly uncertain, while he added that forward guidance allows the Fed to respond to changes as they happen and that the goal of a "moderate" overshoot on inflation is specific to circumstances and where the economy is. Furthermore, Williams also commented that the Fed is not willing to accept very high inflation or persistently high inflation nor is the Fed targeting inflation expectations which he stated cannot be measured exactly. (Newswires)

Fed's Evans (non-voter) says US economy is far from robust and inflation far beneath the 2% target, while he added a period of inflation above 2% will be necessary after 2023 to reach 2% on average and that economic fallout is uneven which is widening disparities. Fed’s Evans also commented the Fed has capacity to do more asset purchases but does not see a need for it now and that the Fed will get to a point when it will need to provide more explicit guidance regarding pace and type of asset purchases. (Newswires)

White House Chief of Staff Meadows said the administration believes there is broad base of support to reach a limited deal on coronavirus relief, while he added that House Speaker Pelosi is sticking with USD 2.2tln stimulus bill and that Senate Majority McConnell is willing to look at a separate airline bill. (Newswires)

US House Speaker Pelosi and Treasury Secretary Mnuchin conducted a 20-minute phone call yesterday to discuss a standalone airlines bill and agreed to talk again today. (Newswires)

US VP Pence said in the Vice Presidential debate that President Trump's decision to ban travel from China saved hundreds of thousands of American lives and that Democrat Presidential Candidate Biden's plan against COVID looks like plagiarism which VP Pence claimed was something Joe Biden knows a lot about. US Senator Harris that American people are witnessing the greatest failure of any Presidential administration in regards to COVID-19 and mentioned President Trump's tax payments, while she claimed President Trump lost the trade war with China and that the US economy is in a catastrophe because of failure of leadership of this administration. Following the debate, a CNN poll showed 59% thought Senator Harris won vs. 38% for VP Pence. (Newswires/CNN)

Reuters/Ipsos poll of likely voters in Florida showed 49% back Biden vs 45% for Trump (prev. 47% vs 47%), while Real Clear Politics average of polls has Biden lead at +4.6. (Newswires)

US President Trump's campaign is considering an event for President Trump in Pennsylvania on Monday. (NYT)