[PODCAST] US Open Rundown 13th October 2020
- European bourses are subdued in a scaling back of yesterday’s gains with similar performance in ES & Dow but Nasdaq outperforms +0.7%
- Johnson & Johnson (JNJ) COVID-19 study paused due to unexplained illness in a participant
- White House has reportedly asked Congress to approve three separate arms packages to Taiwan; sparking pushback from China
- Chinese Customs spokesman said they are paying attention to the impact of the USD/CNY fluctuations
- FX features a firmer but rangebound USD to the mild detriment of major peers while debt is little changed overall as the US yield curve flattens somewhat
- Looking ahead, highlights include US CPI, Fed Discount Rate Minutes, Apple Event, OPEC MOMR, EU Ministers on Brexit & Amazon Prime Day
- 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 President Trump tested negative for COVID-19, Trump has tested negative for consecutive days, according to the WH Physician. (Newswires)
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)
US NFIB Business Optimism Idx (Sep) 104.0 (Prev. 100.2). (Newswires)
EU Chief Brexit Negotiator Barnier has informed EU Ministers that there has been some movement in Brexit discussions but not sufficient thus far, according to a source. (Newswires) Separately, 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) German Minister of State for Europe Roth says that Germany expects substantial progress from the UK on governance, level playing field and fisheries. (Newswires)
UK BRC Retail Sales YY (Sep) 6.1% (Prev. 4.7%) UK Barclaycard Consumer Spending +2.0% YY, largest rise since February
German ZEW Economic Sentiment (Oct) 56.1 vs. Exp. 73.0 (Prev. 77.4); Current Conditions (Oct) -59.5 vs. Exp. -60.0 (Prev. -66.2)
- EU ZEW Survey Expectations (Oct) 52.3 (Prev. 73.9)
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)
European equities (Eurostoxx 50 -0.2%) have seen a mild scaling back of yesterday’s gains with a decline in US equity index futures alongside the EU cash open dictating the sate-of-play early doors; although, the NQ is the mornings outperform with gains of 0.7%. In terms of the current key themes for the market, little in the way has changed in the Presidential election or stimulus front since yesterday’s close, whilst on the vaccine front, Johnson & Johnson announced that it has paused all dosing in its Janssen COVID-19 vaccine trial due to an unexplained illness. Johnson & Johnson caveated the announcement by noting that such incidents are an expected part of any clinical study, especially of this size. On the vaccine front, even in the event of a more material disruption to the trial process, desks will likely be cognizant of the volume of vaccine candidates in the pipeline and therefore would likely remain confident that a vaccine of some description will materialise at some stage. Across Europe, losses are relatively broad-based across major indices with sectoral performance mixed. To the downside, banking names are notably softer this morning as the sector remains out of favour with investors; Pantheon Macro highlights that the Eurostoxx bank index is down 40% YTD compared to losses of 12% for the broader index. Travel & leisure stocks are also softer with the tenor of updates on the COVID front continuing to come in on the negative side for the sector. To the upside, telecom and utilities names are faring better than peers with the later supported by SSE (+4.0%) after the Co. disposed of its 50% stake in Multifuel Energy Limited for GBP 995mln. Elsewhere, Maersk (+1.9%) have seen mild support after the Co. upgraded its 2020 adj. EBITDA outlook, Airbus (-3.1%) trade softer after signing a labour deal with French unions and being downgraded at JP Morgan, whilst stock-specific newsflow is otherwise relatively light this morning. Looking ahead, increasing focus will likely be placed on US earnings with Johnson & Johnson, BlackRock, JP Morgan, Delta Airlines and Citi all due to report before the opening bell today.
Apple (AAPL) has been increasing production ahead of the 5G iPhone debut; Foxconn (2354 TW) and Pegatron (4938 TW) have been running at full production speed during China's two most important holidays. (Newswires)
AUD/NZD - Ironically, a significantly narrower trade surplus due to imports exceeding consensus by a huge margin in China has not helped the Aussie at all given the fact that the latter is now tightening levels of custom checks for coal and related products from the former after banning other goods. Indeed, Aud/Usd has now lost grip of the 0.7200 handle and the Aud/Nzd cross is testing support/bids at the psychological 1.0800 mark to provide the Kiwi with some relative support above 0.6600 vs its US peer. Ahead, Aussie consumer sentiment before a speech by RBA Governor Lowe on Wednesday and jobs data the day after.
USD – The Dollar seems to be benefiting at the expense of others rather than in its own right, though a downturn in risk sentiment after Monday’s excesses on Wall Street may also be impacting alongside some consolidation after the DXY held above 93.000 yesterday and subsequently eclipsed the 50 DMA, albeit unconvincingly so far within 93.273-034 parameters as attention turns to US CPI data and the start of Q3 earnings.
CAD/JPY/CHF/EUR/GBP - All softer against the Greenback, though to varying degrees as the Loonie gleans some encouragement from stabilising oil prices to stay within reach of 1.3100 and the Yen holds above 105.50 amidst reports that new Japanese PM Suga is mulling further economic support measures to be rolled out in November. Meanwhile, the Franc remains anchored around 0.9100, the Euro is striving to keep sight of 1.1800 where even bigger option expiries (2.5 bn) align with the 50 DMA and Sterling has survived another test of 1.3000 in wake of mixed UK labour and retail survey data in the run up to another speech from BoE Governor Bailey and a report on Brexit trade negotiations from EU Ministers. Note, Eur/Usd has slipped a few pips on the back of a pretty downbeat October German ZEW survey.
SCANDI/EM - Softer than forecast Swedish CPI readings have not hampered the Swedish Crown given the Riskbank’s insistence that inflation undershoots are transitory blips and likelihood that Governor Ingves will stick to that script if he mentions the data later. Elsewhere, the Norwegian Krona is also deriving a degree of traction from the aforementioned recovery in crude awaiting a trio of Norges Bank commentators including chief Olsen, while the SA Rand could receive some independent impetus from Gold and overall mining production as Usd/Zar hovers under 16.5000, Eur/Sek eyes 10.3500 and Eur/Nok probes 10.7800.
Bunds appear to have lost impetus after finally touching 175.00 and failing to push on even though Germany’s ZEW findings were significantly worse than anticipated or previous in terms of expectations, while Gilts seem to be keeping some powder dry for the 2nd DMO auction after a solid 6 year sale following a rally to 135.73. Similarly, BTPs are digesting supply details following their breach of 150.00 and Bonos have pulled back from 165.00+ before Spanish issuance later this week. Elsewhere, US Treasuries are not far from overnight session highs awaiting the return of cash markets, Q3 earnings and CPI before Fed discount rate minutes.
WTI & Brent prices have been choppy throughout the morning but at present are supported as attention moves from the trio of supply-side factors that were impacting benchmarks yesterday and turns towards the sessions events with the OPEC MOMR due for release today (timing TBC); ahead of the IEA equivalent due tomorrow. Currently, WTI and Brent futures are at the top end of session ranges, USD 40.22/bbl and USD 42.43/bbl respectively, seemingly moving in tandem to the grinding upside seen in US futures; but, as mentioned, have been choppy thus far printing both fresh session highs and lows in the European morning. Elsewhere and ahead of today’s OPEC MOMR, thus far this month the EIA STEO cut both 2020 and 2021 world oil demand growth by 300k and 280k BPD respectively; note, attention from an OPEC perspective is perhaps more on the upcoming JMMC meeting on October 19th for any potential alterations to the output cut schedule given returning Libyan demand among other factors. Separately, updates from the IEA overnight saw them forecast oil demand -8% this year alongside a -5% drop in global energy demand; such commentary comes ahead of the IEA monthly report tomorrow and as a reminder in September the agency cut their demand forecast for both this year and next. Moving to metals, where spot gold is essentially unchanged on the session and has been relatively steady ~USD 1920/oz for the morning given the USD’s rangebound performance and lack of fundamental catalysts thus far.
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)
Iraq set November Basra light crude price to Asia at Oman/Dubai +0.3/bbl, unchanged MM. (Newswires)