[PODCAST] European Open Rundown 16th October 2020
- Asia-Pac equities traded mostly lower following on from another downbeat handover from Wall Street
- WHO trial indicates Gilead's remdesivir appeared to have little or no effect on 28-day mortality or in-hospital course of COVID-19 patients
- In FX, DXY was uneventful, holding onto the prior day’s gains, EUR/USD hovers above 1.17 and GBP/USD trades sub 1.29
- Mills in China are reportedly being told to stop buying Australian cotton. Government sources said the cotton industry could face tariffs as high as 40%.
- UK Chief Brexit Negotiator Frost said he was “surprised” that the “EU is no longer committed to working ‘intensively’ to reach a future partnership”
- Looking ahead, highlights include EZ CPI (Final), US Retail Sales & University of Michigan, European Council Summit (2/2) and Fed’s Williams
WHO interim results in Solidarity Therapeutics Trial indicate Gilead's (GILD) remdesivir appeared to have little or no effect on 28-day mortality or in-hospital course of COVID-19 patients. Furthermore, hydroxychloroquine, lopinavir/ritonavir and interferon regiments appeared to have little or no effect on 28-day mortality. Newer antiviral drugs, immunomodulators and monoclonal antibodies are being considered for evaluation at solidarity trial. (WHO) Gilead said it is unclear if any conclusive findings can be drawn from the study results. (Newswires) Earlier reports stated Gilead's (GILD) remdesivir has added to WHO list of prequalified medicines for COVID-19. (Newswires) Note: Gilead previously stated that Phase 3 remdesivir data shows mortality reduction. The drug was also used as therapy for US President Trump.
US reported 59,761 (prev. +47,459) new COVID-19 cases and 831 (prev. +748) additional deaths. New York reported 1,460 (prev. +1,232) new COVID-19 cases; positivity rate 1.09% (prev. +1.1%), Hospitalisations 897 (prev. 938); deaths +13 (prev. +7) (Newswires)
France reported +30,621 (prev. +22,951) new COVID-19 cases and +88 (prev. +104) additional deaths. Germany reports 7,334 (Prev. 6,638) new COVID-19 cases and 24 (Prev. 33), according to RKI. UK reported +18,980 (prev. 19,724) new COVID-19 cases and +138 (prev. +137) additional deaths. (Newswires)
China's CNBG COVID-19 vaccine candidate triggered antibody-based immune response in all candidates; did not cause serious side effects. (Newswires) Fujifilm (4901 JT) has filed application for changes to drug Avigan to indicate COVID-19 compatibility. (Newswires)
Asia-Pac equities traded mostly lower following a string of lacklustre cash opens, and after another downbeat handover from Wall Street, where the major indices posted a third consecutive down-day as pre-election stimulus hopes fizzle out and with parts of Europe reimposing targeted COVID-19 restrictions amid the resurgence of the virus. European and US equity futures drifted higher throughout most of the night before erasing the bulk of their gains heading into the European open and with no specific news flow driving price action. ASX200 (-0.5%) was flat for a large part of the session as strength in financials were countered by a weak performance across travel and leisure names, whilst concerns mounted over Australia’s deteriorating relationship with China. Nikkei 225 (-0.5%) was caged in a tight band for most of the session and losses accelerated after a downside breach of the 23,500 level, but Fast Retailing shares rose some 4.5% at one point despite revenue and profits declining in the 12-months ending August, as same-store-sales rebounded over 20% in Q4 which drove expectations for a FY21 recovery. KOSPI (-0.7%) remained in negative territory with participants pinning the losses on virus woes. Shanghai Comp. (-0.3%) opened with modest gains as the PBoC underwent another liquidity injection via 7-day reverse repos at a maintained rate, but the index later erased gains with reports also resurfacing that China is set to pass a new law that would restrict sensitive exports vital to national security. Hang Seng (+0.5%) outperformed in a reversal from yesterday’s sub-par performance, and as SMIC shares opened higher by 6% after a guidance upgrade. Finally, 10yr JGB futures firmed overnight before waning off best levels as it tracked USTs.
PBoC set USD/CNY midpoint at 6.7332 vs. Exp.6.7295 (Prev. 6.7374) (Newswires) PBoC injected CNY 50bln via 7-day reverse repos at the maintained rate of 2.20%.
China is set to pass an export control law that would restrict sensitive exports that are vital to national security. This will regulate the export of sensitive materials and technologies that appear on a control list. (Newswires) NB. this is similar to a Nikkei article posted on Oct 9th which stated that China is set to advance a new export control law that would ban Chinese suppliers from dealing with specific foreign companies on national security ground. “Such a blacklist would likely include American corporations, further stoking tensions between the U.S. and China. But companies in Japan and other countries could also face a risk if they abide by U.S. export restrictions on China.” (Nikkei)
Mills in China are reportedly being told to stop buying Australian cotton. Government sources said the cotton industry could face tariffs as high as 40%. (ABC)
Japan has informed the US that it will not partake in Trump admin's plan to exclude Chinese firms from telecom networks. (Newswires)
German Chancellor Merkel says there has been intensive and constructive Brexit talks, things have moved in some areas on Brexit but there is still work to do in other areas. (Newswires)
UK Chief Brexit Negotiator Frost said he was “surprised” that the “EU is no longer committed to working ‘intensively’ to reach a future partnership”, as agreed with European Commission President von der Leyen on October 3rd. (Twitter)
EU leaders reportedly said they will not reopen negotiations on the EU budget and recovery fund despite the European Parliament asking for some additional money, according to EU officials cited by Politico Playbook. (Politico)
US President Trump said if the EU strikes back in the Boeing (BA) case, US will strike back harder; does not believe that the EU wants to do anything. (Newswires)
In FX, DXY was uneventful and held onto the prior day’s gains that were induced by risk aversion. From a technical standpoint, upside levels for the index include yesterday’s high at 93.910 (ahead of 94.000) and to the downside the 21DMA at 93.728 followed by 93.500 and the 50DMA at 93.298. EUR/USD was also flat and just north of 1.1700 as the psychological figure provided support, whilst GBP/USD traded on either side of 1.2900 heading into the EU council summit day two as EU leaders agreed to extend trade discussions with the UK for a few weeks whilst stepping up preparations for a no-deal. USD/JPY drifted lower but amidst a lack of fresh catalysts to drive price action and with the pair contained within recent ranges, but USD/JPY sees a hefty USD 2.8bln opex rolling off at strike 105.00 at the NY cut and a further USD ~1bln at 105.40. Antipodeans were modestly softer with the AUD/USD seeing more pronounced downside than its Kiwi counterpart amid escalating tensions with China, as the latest reports suggest Chinese mills are reportedly being told to stop purchasing Australian cotton, a week after reports emerged that China ordered the halt of Australian coal imports. AUD/USD remains below the 0.7100 mark and its 100 DMA (0.7096) whilst NZD/USD ticks on either side of 0.6600.
WTI and Brent Dec contracts drifted lower in APAC hours with the former dipping below USD 41/bbl and the latter trading sub-43/bbl, and with overnight news flow from a crude-specific standpoint on the lighter side. However, some supply side developments kept the complex pressured. OPEC delegates suggested that non-OPEC members under-complied in September, with Russia among one of the top straddlers alongside Iraq. Furthermore, Libya’s rising output continues to pose a headache for OPEC+, with the country’s crude production reportedly reaching 500k BPD vs. ~1.2mln BPD output in Q4 2019. Elsewhere, spot gold and spot silver were uneventful overnight and narrowly above USD 1900/oz and USD 24/oz respectively as the precious metals tracked the Dollar. Copper prices traded with losses amid the overall lacklustre tone, and as Chile's Codelco mine said it is now producing at 100% and expects to meet its annual production targets.
OPEC-10 September compliance 105% and non-OPEC at 97% (100% incl. Mexico), according to delegates cited by Energy Intel’s Bakr. (Twitter)
Libya crude production said to have reached 500k BPD (vs a reported 290k BPD on 5th October). (Newswires)
BSEE estimated 24% of offshore Gulf of Mexico crude oil production has been shut in (prev. 31%); natural gas 12% (prev. 18%). (BSEE)
Chile's Codelco said it is now producing at 100% and expects to meet its annual production targets, according to CEO. (Newswires)
U.S. military’s elite Joint Special Operations Command launched a drone strike Thursday killing two senior al-Qaeda leaders in northwest Syria, according to officials. (Twitter)
Chinese Commerce Ministry said it will impose temporary anti-dumping measures on polyphenylene sulfide imports from Japan, US, South Korea and Malaysia from Oct 17th. (Newswires)
The TPLEX was ultimately little changed after a rebound risk appetite in US trade reversed an earlier, Europe-led bull flattener. By settlement, 2s +0.2bps at 14.1bps, 10s +1.5bps at 73.7bps, 30s +1.6bps at 151.5bps; futures volumes were okay, not at the levels seen at the beginning of October, however. Treasuries had been playing catch-up to EGBs in European trade as the continuing surge of virus cases across the continent amplifies calls for new lockdown/restriction measures; London is stepping up its restrictions from Friday and Germany said it is at a tipping point. However, as US cash equity trade got underway, the overnight losses in US equity futures recovered, taking little notice of the downbeat jobless claims data, with value/cyclical names leading the rally, reversing the earlier bull-flattener in rates. Meanwhile, the Treasury announced it would be selling USD 22bln of 20-year bonds (exp. 22bln) and USD 17bln of 5-year TIPS (exp. 17bln) next week. T-note futures (Z0) settled 3 ticks lower at 139-04.
US House Speaker Pelosi told Democrats that stimulus relief will not wait until January and added House Dems will address needs if there is no deal soon. (Newswires) US President Trump reiterated that he is ready to sign and pass stimulus. (Newswires) Senate Majority Leader McConnell said if a fresh COVID-19 relief package is not passed before the election, it will be passed after it. House Republican leader McCarthy does not expect COVID relief bill before election as long as House Speaker Pelosi is involved in talks. (Newswires)
US House Speaker Pelosi spokesperson said Treasury Secretary Mnuchin stated he would accept Democrats' language for a national strategic testing plan with “minor” edits & that language would be shared tomorrow. (Twitter)
Fed's Kashkari (voter) said without fiscal stimulus, there will be a slow grinding recovery. (Newswires)
Fed's Daly (non-voter) said her outlook is more muted if there were no further fiscal support; interest rates and asset purchases are in a good place right now. (Newswires)
Fed's Barkin (non-voter) said 2% is a target for inflation, not a ceiling; unemployment is very high, and is around 11% if you factor in people who have left the labour force. (Newswires)
POLL: Emerson College/NewsNation North Carolina poll sees Biden and Trump both at 49% (Prev. Biden 50% vs. Trump 49%); conducted among likely voters between Oct 13-14. (Emerson College)
Blackstone (BX) has reached an agreement to sell BioMed Realty for USD 14.6bln to a group led by existing BioMed investors. (Newswires)