[PODCAST] US Open Rundown 16th October 2020
- European bourses are firmer this morning, Stoxx 50 +1.0%, seemingly in a pick-up from yesterday’s performance as newsflow remains light; ES +0.1%
- 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
- Pfizer (PFE) could be ready to apply for emergency use authorisation for its COVID-19 vaccine by late-November, WSJ
- The EU is reportedly considering making a more explicit link between energy & fish in Brexit negotiations; PM Johnson reportedly speaking on negotiations this morning
- EU Aviation Safety Agency says the Boeing 737 Max is safe to fly before year-end given the changes the Co. has made
- FX features a lacklustre and rangebound USD with GBP supported ahead of Council/Johnson updates but G10 FX performance overall fairly tentative
- Looking ahead, highlights include 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.
Previous smaller trials of Gilead's (GILD) Remdesivir were subject to chance, trials with a larger number of patients are required, according to a WHO Solidarity Trial independent statistician. Notes there could be a small benefit of Remdesivir in low-risk COVID-19 patients, but not a big on; expect to issue recommendations for drugs studied in the trial in the next 2-3 weeks. (Newswires)
Pfizer (PFE) could be ready to apply for emergency use authorisation for its COVID-19 vaccine by late-November, assuming it received positive efficacy and safety data, WSJ. (WSJ)
Germany reports 7,334 (Prev. 6,638) new COVID-19 cases and 24 (Prev. 33), according to RKI. (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 (-0.4%) 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 (-0.8%) remained in negative territory with participants pinning the losses on virus woes. Shanghai Comp. (+0.1%) 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)
US President Trump reiterated that he is ready to sign and pass stimulus. (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)
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)
The EU is reportedly considering making a more explicit link between energy & fish in Brexit negotiations, RTE's Connelly; Barnier will look to leverage the EU's energy market as a way of unblocking UK resistance on EU access to UK fishing waters. Diplomats state such a link would be valuable to the UK. However, Officials caution that the EU will *not* use energy as a “hostage” in order to secure concessions on fisheries, but that holding out on closing the energy chapter would strengthen the EU’s hand. (Twitter)
UK Foreign Secretary Raab, on Brexit, says we are close to a deal; with goodwill on both sides we can get there. (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. Subsequently, French Finance Minister Le Maire says is favourable to Europe imposing tax sanctions on the US re. Airbus (AIR FP)/Boeing (BA) issue. (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)
European equities (Eurostoxx 50 +1.0%) trade on a firmer footing in what appears to be more a trimming of yesterday’s heavy losses rather than an outright pick-up in sentiment across the region as incremental macro newsflow remains light. The CAC 40 (+1.3%) has outperformed from the get-go following LVMH’s (+6.4%) Q3 update which saw the Co. exceed revenue expectations citing strong performance in the US and China; Kering (+3.8%), Burberry (+3.0%) and Christian Dior (+7.3%) trade higher in sympathy with the consumer discretionary sector the clear outperformer. Elsewhere, it’s been a session of solid gains thus far for the auto sector with Daimler (+3.4%) leading the charge after its prelim Q3 EBIT exceeded market expectations and the Co. stating that it has seen a faster than expected market recovery and a particularly strong September performance. Furthermore, Renault (+3.8%) have also been supported amid reports the Co. is intending to launch a range of electric vehicles targeting ‘middle class’ consumers, whilst its CEO said the Co. does not have a liquidity problem. Additionally, for the sector, some positivity was garnered from the latest EU27 car registrations which rose 3.1% in September (prev. -18.1%). In terms of stocks specifics, Thyssenkrupp (+15.0%) are a clear standout performer today after Liberty House announced a bid for the Co’s steel operations. Subsequently, the IG Metall Union in the German NRW state rejected Liberty Steel's bid, suggesting that such a takeover could lead to job losses, however, it is yet to be seen if their objections will be enough to derail the acquisition. To the downside, BT (-1.8%) have hampered the performance of the telecom sector today amid ongoing scepticism suggesting that PM Johnson’s pledge to connect the country to fast broadband by 2025 is considered to be unrealistic.
Boeing (BA) EU Aviation Safety Agency says the 737 Max is safe to fly before year-end given the changes the Co. has made; draft airworthiness document is expect to be issued next month. (Newswires)
GBP – Positive vibes from both sides of the UK-EU divide ahead of the final day of the Summit have given Sterling a lift as chances of clinching a trade deal are kept alive, with Cable back on the 1.2900 handle and Eur/Gbp backing off from the high 0.9000s after Foreign Minister Raab claimed that negotiators are close to agreement and the Irish PM said Barnier has been granted the flexibility to continue discussions. However, PM Johnson still has the final say and there is little sign of compromise on the well documented key issues that stand in the way of an accord so the bar remains high and Pound prone to further disappointment, while Moody’s ratings review after hours also poses a threat to sentiment.
USD – Brexit aside, the broad risk tone has settled down to dampen some demand for the Dollar and major pairs have reverted to more restrained ranges as a result, as the DXY retreats from highs just shy of Thursday’s 93.910 peak within a 93.883-665 range. The pullback may also be partly psychological and consolidative ahead of primary US data in the form of retail sales and ip before 2 Fed speakers (Williams and Bullard) and preliminary Michigan sentiment, while a firm rebound in the YUAN is also likely to be weighing on the Greenback more generally given the Cny and Cnh both reclaiming 6.7000+ status.
JPY/NZD – The Yen and Kiwi are benefiting from the waning Buck, with the former back above 105.50 and flanked by decent option expiry interest (3 bn between 105.00-05 and 1.2 bn from 105.35 to 105.40), and the latter pivoting 0.6600 in the run up to NZ elections and getting regional support from favourable Aud/Nzd crosswinds.
EUR/CAD/CHF/AUD – All narrowly mixed vs their US counterpart as the Euro keeps tabs on 1.1700, just, Loonie paring losses from sub-1.3260 towards 1.3200 in advance of Canadian manufacturing sales and less of a drag via crude prices. Elsewhere, the Franc is straddling 0.9150 again and Aussie underperforming below 0.7100 and the 100 DMA (0.7096) in wake of more worrying reports on the Chinese trade front as cotton exports are said to be added to the embargo list and could be subject to tariffs as big as 40%.
SCANDI/EM – Further divergence between the Sek and underperforming Nok even though oil is attempting to stabilise and Riksbank’s Ingves may cover exchange rate moves during a speech at the IMF, but the Zar appears content with Gold’s recovery to trade above Usd 1900/oz, albeit by only a few bucks. Conversely, the Brl could be vulnerable following the latest political antics and the resignation of Brazilian President Bolsonaro’s Deputy Senate leader who was caught by police concealing COVID aid funds in his underwear.
Notable FX Expiries, NY Cut:
- EUR/USD: 1.1650 (250M), 1.1690 (209M), 1.1700 (680M), 1.1715-20 (600M), 1.1750 (524M), 1.1800 (1.9BLN)
- USD/JPY: 104.50 (1.8BLN), 104.75 (430M), 105.00-05 (3BLN), 105.35-40 (1.2BLN), 105.50 (268M), 105.60 (270M), 105.70 (360M)
Bunds alongside Eurozone bond peers continue to recoup losses even though equities are staying afloat and inverse correlations between the 2 asset classes have regained a more traditional pattern over the course of this week. The core Eurozone debt future has been up to 176.16 vs 175.77 at the other Eurex extreme, while Gilts continue to lag, albeit also rebounding further from their 136.47 Liffe low to 136.76, thus far. Brexit headlines are still emerging at a clip, while dovish ECB and global counterpart commentary is lurking if not gathering pace to the point of near term policy action, but the resurgence of COVID-19 seems to be the overriding factor keeping fixed underpinned. Ahead, a raft of top tier US releases for relatively subdued Treasuries to digest, a couple of Fed speakers, plus Riksbank and ECB heads at the IMF.
WTI and Brent front month futures are modestly subdued this morning diverging somewhat from the modestly firmer performance seen in European bourses, with US futures relatively flat; focus for the complex has returned to the supply-side given updates in Libya. Crude production for the country is now said to have hit 500k BPD displaying a significant rise from the October 5th figure of 290k BPD; the increase comes alongside the El Sharara field getting back to around 110k BPD capacity but still someway from the 300k BPD capacity the field is targeting in the near-term. The production increase will likely draw the focus of OPEC’s JMMC gathering on October 19th, among other factors including compliance and plans for the OPEC+ demand schedule, particularly as while the Libyan supply has substantially increased it is still someway off Q4-2019’s figure of circa 1.2mln BPD. Elsewhere, the schedule for crude explicitly is light aside from the usual Baker Hughes rig count. Moving to metals, spot gold is essentially flat on the day residing within comparatively tight ranges of USD 10/oz; given the lack of fundamental newsflow the driver for the metal is once again the USD which is similarly exhibiting lacklustre and range-bound action. Regarding copper, ING highlight that discussions at the Candelaria mine in Chile are still unresolved, regarded as one of the largest copper reserves in the world, and the most recent updates indicate that strike action could still occur next week.
OPEC-10 September compliance 105% and non-OPEC at 97% (100% incl. Mexico), according to delegates cited by Energy Intel’s Bakr. (Twitter)