[PODCAST] European Open Rundown 13th October 2020
- APAC markets traded mixed; Australia outperformed, Hong Kong trade was cancelled
- Johnson & Johnson confirmed they have paused all dosing in Janssen COVID-19 vaccine candidate trials due to an unexplained illness
- Chinese Customs spokesman said they are paying attention to the impact of USD/CNY fluctuations
- White House has reportedly asked Congress to approve three separate arms packages to Taiwan
- In FX, DXY was firmer, EUR/USD dipped below 1.1800, AUD underperformed, USD/CNH rose above 6.7500
- ECB sources said several policymakers are reluctant to follow Fed's Average Inflation Targeting (AIT)
- Looking ahead, highlights include German CPI (Final) & ZEW, UK Unemployment, US CPI, Fed Discount Rate Minutes, Apple Event, OPEC MOMR, EU Ministers on Brexit & Amazon Prime Day, supply from UK & Italy
- Earnings: JPMorgan, Citi, J&J, Delta, Blackrock
Johnson & Johnson (JNJ) COVID-19 study paused due to unexplained illness in participant. (Stat News) Johnson & Johnson confirmed they have paused all dosing in Janssen COVID-19 vaccine candidate trials due to an unexplained illness but noted "Adverse events – illnesses, accidents, etc. - even those that are serious, are an expected part of any clinical study, especially large studies. " (JNJ)
US COVID-19 (D/D): Cases +46,069 (prev. +53,363); death toll +494 (prev. +577). (Newswires) New York COVID stats: +1029 (prev. +1143); positivity rate 1.1% (prev. 0.96%), Hospitalisations 878 (prev. 820); deaths +12 (prev. +5).
US President Trump tested negative for COVID-19, Trump has tested negative for consecutive days, according to the WH Physician. (Newswires)
France reported 8,505 additional COVID-19 cases (prev. +16,101), 7-day moving average of new cases sat above 16,000 for the third day in a row. Germany reported 4,122 (Prev. +2,467) additional COVID-19 cases, whilst deaths rose by 13 (Prev. +6), according to RKI. (Newswires)
G20 Finance Ministers and Central Bank Governors are to hold a virtual meeting on Wednesday to discuss how to support rapid and sustainable global economic recovery, via Saudi State Agency. (Newswires)
Dozens of Conservative MPs are set to rebel against PM Johnson’s plans to introduce stricter lockdowns in England, according to senior members of the party. (Telegraph)
Asia-Pac equities traded mixed following the upbeat performance on Wall Street where the Nasdaq posted its best session in around month as the tech-sector led the gains and Apple shares closed higher by over 6% ahead of the Apple Event and the much-anticipated unveiling of the iPhone 12. Sentiment softened following a firm re-opening of cash Treasuries, which could’ve encouraged defensive flows in other assets, whilst the risk-mood further waned following reports that Johnson & Johnson paused its COVID-19 study (ahead of earnings) amid an unexplained illness in a participant – with the company later confirming and caveating that adverse events are an expected part of any clinical study, especially large ones. Nonetheless, ASX 200 (+1.2%) was supported by advances in its heavyweight financials as the broader sector eyes US bank earnings set to kick off with JP Morgan and Citi, meanwhile mining names in the index retrace some of yesterday’s upside. Nikkei 225 (unch) was choppy and gave up opening gains at one point as shares in heavyweight Softbank reversed course following the announcement of its Vision Fund mulling a special purpose acquisition company (SPAC) and is seeking outside investments, albeit it may reportedly put its own capital in the vehicle. Elsewhere, KOSPI (-0.5%) continued grinding lower as South Korea’s new COVID-19 cases rebounded to over 100 a day after the country eased restrictions. Meanwhile, Shanghai Comp (-0.4%) was lacklustre after the PBoC skipped open market operations for a net daily drain of CNY 100bln – with little reaction to September exports and imports hitting record highs in Yuan terms, whilst the Hang Seng session was cancelled due to tropical storm Nangka. Finally, broader defensive flows have kept JGBs supported, with the 5yr outperforming in cash and futures.
PBoC sets USD/CNY midpoint at 6.7296 vs. Exp. 6.7209 (Prev. 6.7126) (Newswires)
PBoC skipped open market operations for a net daily drain of CNY 100bln.
Chinese Trade Balance USD (Sep) 37.00B vs. Exp. 58.0B (Prev. 58.93B) Chinese Exports YY (Sep) 9.9% vs. Exp. 10.0% (Prev. 9.5%) Chinese Imports YY (Sep) 13.2% vs. Exp. 0.3% (Prev. -2.1%)
· Soybean imports: 9.79mln tonnes (Prev. 9.60mln tonnes)
· Oil imports: 48.48mln tonnes (Prev. 47.48mln tonnes)
· Copper imports (incl. Semi): 772.45k tonnes (Prev. 668.486k tonnes)
· Iron ore imports: 108.55mln tonnes (Prev. 100.36mln tonnes)
Chinese Jan-Sep trade with US +2% YY; imports from US +2.8% YY; exports to US +1.8% YY; agricultural imports from US +44.4%, according to China Customs spokesman
Chinese Customs spokesman said they are paying attention to the impact of the USD/CNY fluctuations. Chinese Customs added the international landscape is becoming increasingly grim and complicated (Newswires)
Chinese Passenger Car Sales (Sep) +7.4% YY, according to industry association - Tesla (TSLA) sold 11,329 (Pre. 11,800) China-made model 3 vehicles in September. (Newswires)
Chinese Customs, in response to reports that China has ordered a halt to imports of Australian coal, said that it will strengthen import supervision on related products, asking reporters to consult relevant authorities for further information, Global Times reported. (Twitter)
UK Trade Department said UK and Australia shared draft chapter text, groundwork was laid for an initial exchange of tariff offers in second round talks. (Newswires)
EU leaders will discuss preparatory plans for a potential break down in trade discussions with the UK when they meet later this week, according to officials. (Newswires)
BoE Governor Bailey said the BoE will do everything we can to prevent high unemployment. Bailey said he thinks risks are to the downside. On negative rates, Bailey said the MPC does not know precisely when they could be implemented, will depend on consultation with banks and are not thinking about negative rates now (Newswires)
ECB sources said several policymakers are reluctant to follow Fed's Average Inflation Targeting (AIT), some fear AIT would tie their hands and create unrealistic expectations. Instead, sources suggest some policymakers want to retain flexibility to judge each situation on its own merits. Most ECB policymakers who spoke to newswires were leaning towards a definition whereby the inflation target is set at 2% over an unspecified medium term. Sources gave their own opinions, and the Governing Council is yet to discuss the matter formally. (Newswires) This comes after ECB’s Chief Economist Lane over the weekend said that the ECB may allow inflation to overshoot and the ECB is to pursue the inflation target as aggressively as the Fed.
UK BRC Retail Sales YY (Sep) 6.1% (Prev. 4.7%) UK Barclaycard Consumer Spending +2.0% YY, largest rise since February
In FX, DXY was on a firmer footing after initially being contained within a tight range just above the 93.000 handle as it tested the level to the downside in early hours, but thereafter the index saw a bout of inflows which coincided with a firm re-opening of cash Treasuries, and with a distinct lack of fresh fundamental news flow to drive price action at the time. As such, EUR/USD declined below the 1.1800 psychological mark which also overlaps with its 50 DMA after being unreactive to ECB sources highlighting reluctance among policy members to follow the Fed’s Average Inflation Targeting framework, as it could give markets the wrong impression with regards to future policy decisions based on where the average lies at any given point. EUR/USD also sees a sizeable EUR 2.7bln in OpEx at strike 1.1800 for the NY cut. Cable dipped below 1.3050 amidst the aforementioned Dollar strength, with Sterling fixated on Brexit developments as the pivotal EU summit looms, and technicians also highlight the 50% Fib of the September decline residing at 1.3079. USD/JPY was relatively flat throughout most of the session as USD strength was countered by safe-haven flows, whilst antipodeans succumbed to the Buck and the downbeat sentiment, with little reaction seen upon the release of the Chinese trade data as China’s customs said the international landscape is becoming increasingly grim and complicated. AUD/USD surrendered its 0.7200 handle whilst NZD/USD lost further ground below 0.6650, although losses for the Kiwi were cushioned by the AUD/NZD cross falling below 1.0800. Elsewhere, USD/CNH was propelled initially above 6.7500 following the reopen of cash Treasuries, however the pair trimmed some gains after the PBoC fixing and was at first unfazed by the Chinese trade numbers, with Chinese customs also remarking that they are paying close attention to the impact of the USD/CNY fluctuations.
WTI and Brent front-month futures traded flat throughout the APAC session as the complex consolidated from the recent supply-side led declines. WTI Nov traded on either side of USD 39.50/bbl whilst Brent Dec oscillated around USD 41.75/bbl. Complex-specific news flow remained light overnight with the only notable headlines surrounding the resumption of operations in the Gulf of Mexico. Looking ahead, participants will be eying the OPEC Monthly Oil Market report for its monthly global oil demand forecasts ahead of the JMMC meeting next week. As a reminder, last week’s EIA STEO cut its global oil demand growth forecast by 300k BPD whilst downgrading the 2021 forecast by 280k BPD, while the IEA overnight said it sees 2020 oil demand -8%, ahead of its monthly oil market release tomorrow. Elsewhere, precious metals fell victim to the firmer Dollar, with spot gold declining from overnight resistance at USD 1925/oz whilst spot silver gave up its USD 25/oz+ status. Finally, copper futures were lacklustre amid broader losses across Chinese markets.
BSEE said 69% of offshore Gulf of Mexico crude oil production has been shut in (prev. 91.01%); natural gas 47% (prev. 62.15%). BP said its Gulf of Mexico facilities are re-manned and they are in the process of bringing operations and production back online. (Newswires)
IEA sees oil demand -8% in 2020 and sees global energy demand -5% in 2020. (Newswires)
Libyan crude oil output from the three Agoco-operated fields currently online has climbed to around 200k BPD, according to a source cited by Argus. (Newswires)
Iraq set November Basra light crude price to Asia at Oman/Dubai +0.3/bbl, unchanged MM. (Newswires)
Total (FP FP) workers at Grandpuits refinery (100k BPD) in France vote in favour of a 24-hour strike including a halt to fuel shipments, according to CGT; workers to set up a picket line at 05:30am local time on Tuesday. (Newswires)
White House has reportedly asked Congress to approve three separate arms packages to Taiwan. China's Washington Embassy reiterated that China consistently and firmly opposes US arms sales to Taiwan. (Newswires)
A trilateral summit between Japan, South Korea and China most likely will not be held this year as Japan want progress on settling its spat with South Korea with regards to compensation for wartime labour, SCMP sources. (SCMP)
Belarusian Deputy Interior Minister said security forces in Belarus could fire on protestors if deemed necessary. (Guardian)
Wall Street banks drawing up plans for "at least modest workforce reductions" amid COVID and changes in the business, according to Fox’s Gasparino. (Twitter)