[PODCAST] US Open Rundown 8th October 2020
- European bourses & US futures are firmer in choppy trade amidst limited new fundamental catalysts
- US Vice Presidential debate saw Harris & Pence exchange blows in an attempt to discredit the records of both Presidential candidates; CNN poll shows Harris winning the debate
- FX is relatively rangebound with a choppy DXY meandering the U/C mark at present as antipodeans outperform
- In terms of fixed income, USTs are exhibiting mild flattening in contrast to the steepening action seen throughout the week
- Hurricane Delta has re-strengthened to a Category 2 storm and the Norwegian strikes could cut 966k BOEPD by October 14th
- Looking ahead, highlights include ECB minutes, US weekly jobs data, Fed's Barkin, BoC's Macklem & US 30yr auction
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)
For the UK, 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)
Germany's RKI says it is possible we will see 10k daily new COVID-19 cases in Germany. (Newswires) October 7th saw 2828 additional cases in Germany
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 (+1.1%) 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 (-0.2%) 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.
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)
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)
US President Trump's campaign is considering an event for President Trump in Pennsylvania on Monday. (NYT)
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)
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)
ECB's VP de Guindos says the EUR rate indirectly affects ECB reaction function, but there are no red lines. (Newswires)
SNB President Jordan says CHF value is not particularly threatened by the unprecedented expansion in monetary base in recent years; supply of money can be reduced at any time if demand for CHF weakens; rejects ideas aimed at channelling assets into a sovereign wealth fund. (Newswires)
US, France and Russia are to conduct talks regarding the Nagorno-Karabakh conflict. 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)
Stocks in Europe have waned off best levels but mostly hold onto mild gains (Euro Stoxx 50 +0.5%), with somewhat choppy price action experienced since the cash open despite a distinct lack of fresh catalysts. US equity futures also dipped in tandem but remain in positive territory, with NQ narrowly outperforming ES and YM. On the fiscal front State-side, US House Speaker Pelosi and Treasury Secretary Mnuchin are poised for more stimulus discussions, this time on a narrower deal, with White House Chief of Staff Meadows remarking 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 to a USD 2.2tln stimulus bill and Senate Majority McConnell is willing to consider a separate airline bill. Meanwhile in Europe, negotiations are to continue regarding the legality of the EU budget and Recovery Fund, which threatens a delay to the swift rollout of the package by the touted January 2021 target. Back to bourses, Spain’s IBEX (+1.0%) outperforms as it’s propped up by its heavy-weight banking sector amid tailwinds from the banking consolidation in the region, whilst the FTSE 100 (+0.1%) resides on the other end of the spectrum on currency dynamics. Sectors are mostly in the green with no real risk profile to be derived; the breakdown sees Travel & Leisure outpacing, but Basic Resources and Autos lag. Meanwhile, the Real Estate sector is supported by British home builders after the UK RICS Housing Survey topped forecasts (61 vs Exp. 40); thus translating to gains in Taylor Whimpey (+3.0%), Barratt Developments (+3.0%), British Land (+2.0%), Ashtead (+2.0%). Moving to earnings, GVS (+3.5%) opened higher by ~7% after posting a 12% increase in Q3 revenue and raising core earnings outlook. Elsewhere, ams (-1.1%) clambered off lows after opening lower by 4.5% amid a 13% decline in revenue and plans to issue new bonds. Finally, easyJet (-0.4%) reversed earlier gains as it expects to report a group headline loss before tax of GBP 815-845mln for FY20, whilst sources stated the group informed the government of the potential need for state loans or finance, although just to keep a prudent approach on finances.
Dollar General (DG) are set to open a new brand of stores called Popshelf. (WSJ)
AUD/GBP - The Aussie has maintained some post-RBA momentum and is deriving some external impetus from onshore YUAN gains beyond 6.7250 at one stage in the ongoing absence of official PBoC midpoint fixings during China’s Golden Week holidays. Coupled with the Greenback easing from its peaks prompted by US President Trump calling for a suspension of fiscal stimulus talks and the DXY rotating around 93.500, Aud/Usd has rebounded through 0.7150 to 0.7170 ahead of the RBA’s FSR on Friday. Meanwhile, Sterling has also benefited from the Buck’s pull-back with Cable bouncing firmly from just above 1.2900 to 1.2970, but Eur/Gbp is back below 0.9100 on the back of UK Government reports suggesting a little progress on state aid in discussions with the EU, albeit still some distance between the 2 sides on the issue of fishing.
NZD/NOK - The next best majors, and perhaps surprisingly given dovish rhetoric from the RNBZ overnight as chief economist Young Ha said the Bank would rather do too much too early than vice-versa and assistant Governor Hawkesby promised more on the FLF in November’s MPS, adding that inflation is expected to be under target for the following 3 years. Elsewhere, Norwegian mainland GDP missed consensus, but Eur/Nok is softer near 10.9000 against the back drop of firm crude prices and Nzd/Usd is hovering close to 0.6600 in wake of improvements in ANZ business sentiment and activity outlooks.
SEK/CAD/EUR/CHF/JPY - All narrowly mixed in headline US Dollar reference or Euro cross terms as the Swedish Krona pivots 10.4450, Loonie straddles 1.3250 with some traction from oil awaiting Canadian housing starts and jobs data later today and tomorrow respectively, and Euro roams between 1.1781-56 parameters in advance of ECB minutes. Note also, Eur/Usd looks underpinned by decent option expiry interest from 1.1745 to 1.1735 (1.8 bn) before even bigger expiries on Friday, while comments from de Guindos merely underline the heightened attention on currency developments, but again provide no specifics on tolerance limits. Similarly, the SNB keeps its lines in the sand under wraps, albeit actively intervening as the Franc holds firmly above 0.9200 and a few pips over 1.0800 against the Greenback and Euro respectively. Indeed, latest from chair Jordan simply refers to the fact that monetary accommodation has not really dampened demand for the Chf even though it has not been behaving like a traditional safe haven for some time in contrast to the Yen that is tightly bound around 106.00 vs its US rival as a go to destination for investors seeking a refuge from risk.
EM - After bouts of consolidation and respite, it’s back to all too familiar shaky ground for the Lira due to conflicts and incursions involving Turkey in the Middle East and beyond, with Usd/Try resuming its seemingly relentless course to at least test the resistance and psychological defences at 8.0000.
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)
Spanish bonds are outperforming in wake of the Economy Ministry downgrading its net 2020 issuance remit irrespective of COVID striking again and the prospect of further fiscal support to combat the social and economic impact. However, the 10-year benchmark is testing 164.00 vs Bunds hovering just below their 174.34 Eurex best, Gilts only 5 ticks above par vs 13 ticks over at 135.25 and the T-note around 138-26 ahead of IJC and Fed’s Barkin. More immediately, ECB minutes loom with the focus on any further detail on the divergence between GC hawks and doves at the September policy meet, plus renewed attention on Euro appreciation.
Spanish Economy Ministry says 2020 net debt issuance to be EUR 15bln lower than scheduled. (Newswires)
WTI and Brent front month futures maintain an upward trajectory with the former eyeing USD 40.50/bbl to the upside (vs. low USD 39.76/bbl) and the latter north of USD 42.50/bbl (vs. low USD 41.86/bbl), with the market pricing in supply risk premia as Hurricane Delta looks to make landfall on the Gulf of Mexico tomorrow, whilst Norwegian oil strikes could escalate on Saturday. Regarding the Gulf developments, NHC stated that Hurricane Delta has restrengthened into a Catergory 2 hurricane with hurricane conditions and life-threatening surges expected to begin along portions of the Northern Gulf coast on Friday, whilst BSEE’s estimations yesterday suggest 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 – with Shell and Chevron the latest companies to all halt operations in the vicinity. Over to Norway, the Lederne Union said it has exchanged proposals with associations of oil companies and are planning to continue dialogue today, with 330k BOEPD of production currently shuttered out of the countries ~1.7mln BOEPD total. The Norwegian Oil & Gas Association also said the oil strike is set to impact 966k BOEPD unless conflict with union is resolved by October 14th. Looking ahead, the OPEC World Oil Outlook will be released at 1300BST, with little influence expected in the crude markets given the ever-shifting dynamics possibly proving the release to be stale. Elsewhere, precious metals stand as beneficiaries of the softer Dollar, with spot gold inching closer towards USD 1900/oz having had currently notched a range of USD 1883-1895/oz, whilst spot silver makes headway above USD 24/oz (vs. low 23.72/oz). In terms of base metals, LME copper trades flat within a tight range with eyes on Chilean strikes after two out of five labour at the Candelaria mine rejecting offers, with the mine the first of six mines in the country to have labour talks in the coming months.
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. Has re-strengthened into a Category 2 Hurricane. (Newswires)
Chevron (CVX) has completed the evacuation of all personnel from Gulf of Mexico platforms and has shut in facilities due to Hurricane Delta. (Newswires)
Norway's Lederne Unions says it has exchanged proposals with associations of oil companies and are planning to continue dialogue today. Subsequently, Norwegian Oil & Gas association says the oil strike is set to impact 966k BOEPD unless conflict with union is resolved by October 14th, strike is set to impact Wintershall DEA's Maria field later in the week (Newswires)v