[PODCAST] US Open Rundown 9th November 2020
- AP, NBC, CNN, Fox and Edison Research have all called the election for Democrat Presidential candidate Biden
- European bourses exhibit a strong start to the week following a similar APAC handover with US futures firmer by similar magnitudes; ES +1.6%, NQ +1.9%, YM +1.5%
- Saudi Energy Minister says that with consensus they can tweak the OPEC+ agreement; could be a tweak beyond what analysts have raised
- Turkish President Erdogan removed central bank Governor Uysal and appointed former Finance Minister Naci Agbal as the new Governor; Finance Minister has stepped-down
- FX features a firmer USD but off highs with peers mixed and NZD outperforming, aided by AUD cross, while TRY strengthens post-CBRT shakeup
- Looking ahead highlights include ECB’s Mersch, BoE’s Haldane, Fed’s Mester, Harker and US 3yr note auction
US ELECTION UPDATE
AP, NBC, CNN, Fox and Edison Research have all called the election for Democrat Presidential candidate Biden who became President-elect after winning 290 electoral votes so far vs. President Trump at 214 electoral votes. Note, the General Services Administration has yet to formally acknowledge Biden as president-elect which is required under the Presidential Transition Act to allow access to funding and other areas. (Newswires)
US President-elect Biden declared victory in the election and stated that the people delivered a convincing victory, while he pledged to be a president that seeks to unify and understands the disappointment of those who voted for Trump. Furthermore, he stated that their mandate is to marshal forces of decency in battle against the virus and to build prosperity, while he is to unveil a task force to address the US coronavirus outbreak this Monday. (Newswires)
US President Trump has not yet conceded and tweeted that we should look at the votes and the allegations, while he added we’re seeing a number of affidavits that there was voter fraud and reiterated that this was a stolen election. (Twitter)
Republican National Committee were reported on Friday to be seeking to raise at least USD 60mln to fund Trump legal challenges to the Presidential election, according to sources. (Newswires)
US COVID-19 cases rose to a total 9.81mln from 9.71mln the day before and deaths rose to a total 236.5k from a prior total of 235.5k, while a major newswire tally stated that US cases rose by at least 103,314 to a total of 10.01mln and deaths rose by at least 473 to a total of 237.8k. (Newswires) Former FDA Commissioner Dr. Scott Gottlieb suggested the US has probably more than 500K new coronavirus infections per day and that probably at best, only 1 in 5 cases are being diagnosed right now, while he thinks it is going to explode in several weeks. (Newswires)
UK COVID-19 cases +20,572 (prev. +24,957) and deaths +156 (prev. +413). (Newswires)
France COVID-19 cases +38,619 (prev. +86,852 record increase) and deaths +271 (prev. +306). (Newswires)
Italy COVID-19 cases +32,616 (prev. +39,811) and deaths +331 (prev. +425). It was also reported that Italy’s cabinet drew up a plan to provide EUR 2.5bln in further pandemic aid. (Newswires)
Portugal PM Costa stated that a night-time curfew between 2300-0600 will be imposed from Monday across 121 municipalities to contain COVID-19 as part of a 15-day state of emergency. (Newswires)
Shanghai Government reports one confirmed COVID-19 case, according to the Shanghai Health Commission. (Newswires)
Asian bourses traded higher across the board and US equity futures were also lifted with risk appetite spurred after Democrat candidate Biden was declared the winner of the US election, although the defeated incumbent has so far refused to concede and repeated allegations of voter fraud. The gains were also a continuation of last week’s post-election rally on Wall Street where despite the indecisive finish last Friday, stocks still notched their best weekly performance since April. ASX 200 (+1.8%) was higher with all sectors lifted on broad optimism following the election news and with outperformance in the tech sector front-running the advances in the index, while Nikkei 225 (+2.1%) surged over 500 points and extended on its best levels in nearly 3 decades with participants also digesting earnings results although Japan Airlines shares lost altitude fast after the announcement of a JPY 168bln share sale. Hang Seng (+1.2%) and Shanghai Comp. (+1.9%) conformed to the broad upbeat mood as the Biden victory raised hopes for improved US-China ties, which saw Chinese markets shrug-off a relatively slow start after the PBoC continued to drain liquidity and following mixed trade data over the weekend in which Trade Balance and Exports topped estimates although Imports disappointed to suggest a weak domestic consumer profile, while Indian markets joined in on the spoils in which both the Nifty (+1.6%) and Sensex (+1.7%) surged to all-time highs shortly after the open. 10yr JGBs were subdued after recent declines in T-notes and amid the strength in stocks but with downside stemmed following a recent rebound from nearby support at 152.00 and with the BoJ also present in the market for JGBs predominantly concentrated in 5yr-10yr maturities.
PBoC skipped reverse repo operations for a net daily drain of CNY 50bln. (Newswires) PBoC set USD/CNY mid-point at 6.6123 vs. Exp. 6.6117 (Prev. 6.6290); strongest fix since June 2018.
Chinese Trade Balance (USD)(Oct) 58.44B vs. Exp. 46.0B (Prev. 37.0B) Chinese Exports (USD)(Oct) Y/Y 11.4% vs. Exp. 9.3% (Prev. 9.9%) Chinese Imports (USD)(Oct) Y/Y 4.7% vs. Exp. 9.5% (Prev. 13.2%)
Chinese Trade Balance (CNY)(Oct) 401.8B vs. Exp. 332.7B (Prev. 257.7B) Chinese Exports (CNY)(Oct) Y/Y 7.6% vs. Exp. 6.5% (Prev. 8.7%) Chinese Imports (CNY)(Oct) Y/Y 0.9% vs. Exp. 6.3% (Prev. 11.6%)
US Embassy in China took a softer tone on China in which the acting top diplomat noted that Washington will seek a “results-oriented relationship” with Beijing after the US presidential election. (SCMP)
Chinese state media Op-Ed stated the Biden presidential election win opens the door for improved US-China relationship, while there were separate reports a national adviser stated that China will seek to renegotiate a trade deal with US President-elect Biden. Furthermore, Global Times cited comments from analysts that President-elect Biden could ease the tit-for-tat war with China but will be pressured to appear tough. (Newswires/Global Times/SCMP)
China will move to actively negotiate and sign more high-standard free trade agreements and regional free trade agreements, Global Times citing State Council guidelines. (Newswires)
Japanese PM Suga wants to come up with steps to revive the Japanese economy and will deploy all means available in a timely fashion, will instruct Cabinet to compile a 3rd extra budget at tomorrow's meeting. (Newswires)
BoJ Summary of Opinions stated that it is appropriate to continue monitoring impact of current policy and must avoid premature withdrawal of easy policy with an eye on the chance that the battle with the pandemic could be prolonged. BoJ also stated that it must respond swiftly and appropriately as needed while in close cooperation with the government and major central banks, while it must seek ways to enhance sustainability of its ETF and J-REIT purchase programs. Furthermore, it stated that monetary easing measures conducted since March had positive effects and it is important to continue to support financing, mainly of firms, as well as maintain stability in financial markets. (Newswires)
UK PM Johnson and Chancellor Sunak reportedly agreed in principle to extend a GBP 20/week increase in universal credit for 6mln people which would cost GBP 6bln. (The Times)
UK Chancellor Sunak is said to be preparing to announce a review of the UK's public company listings regulations to help the City compete more robustly with New York and attract more technology "unicorns" to London. Furthermore, reports noted among the proposals the leading review is likely to consider include lowering the minimum "free float" requirement for a premium main market listing which would allow tech entrepreneurs to retain greater ownership of their businesses when they take them public, while a banker suggested the plan could be announced as early the week head. (Sky News)
UK PM Johnson stated that the US is the UK’s most closest and important ally and he thinks there is far more which unites the two governments than divides them, while he noted there is a good chance to do something with the US but noted that US are tough trade negotiators. Furthermore, PM Johnson stated that he has been a great enthusiast for a trade deal with the EU and that we need to get on and do a trade deal if we can. (Newswires)
UK PM Johnson is reportedly risking opening a rift with US President-elect Biden by insisting the internal markets bill which reneges on part of the EU withdrawal agreement would go ahead as planned and stated that the bill would protect and uphold the Good Friday Agreement. (Guardian)
US President-elect Biden will not prioritise UK-US trade deal talks in the first 100 days of his presidency, according to a figure advising his campaign regarding foreign policy. (The Telegraph)
UK Foreign Minister Raab said the UK government is very clear that it will never do anything to jeopardise the Good Friday Agreement and suggested there is a good chance for a trade deal with EU if we see flexibility. (Newswires)
European Commission President Von der Leyen stated that they took stock of the negotiations with UK PM Johnson and that some progress has been made, but large differences remain especially on level playing field and fisheries. Furthermore, she added teams will continue working hard next week and will remain in close contact in the next days. (Twitter) EU Chief Brexit Negotiator Barnier stated he is very happy to be back in London and that work continues. (Newswires)
EU seeks to reset trade relationship with the US in post-Trump era with the bloc's trade ministers to meet today to discuss rebooting relations despite preparing to set retaliatory tariffs to target USD 4bln worth of US goods. (FT) The EU says it is proceeding with up to USD 4 bln in tariffs against the US amid illegal state aid to Boeing, according to AFP. (Twitter)
German Economic Minister Altmaier responded that he thinks there will be a return to multilateralism, when asked if trade wars will end following the Biden victory, while he added we need a broad US-EU customs union. (Newswires) German Chancellor Merkel says EU and US should develop a common plan until 2030 and must not only look at the next four years in transatlantic relations. (Newswires)
Fitch affirmed Germany at AAA; Outlook Stable and Fitch affirmed Slovakia at A; Outlook revised to Negative from Stable, while Moody’s raised Greece sovereign rating one notch from B1 to Ba3; Outlook Stable. (Newswires) (Newswires)
Iran President Rouhani stated that the next US government should compensate for the President Trump’s mistakes and that Iran has always favoured constructive interaction with the world. (Newswires) Iran Foreign Minister Zarif stated that US President Trump is gone while Iran and its neighbours will stay, while he added that betting on foreigners does not bring security. Furthermore, he added that Iran extends its hands to its neighbours to cooperate in achieving common interests and called on all to embrace dialogue as the only way to end differences and tensions. (Twitter)
Turkish warplanes reportedly bombarded a PKK target in northern Iraq’s Sinjar District. (Twitter) Baku may resort to aid from the Turkish military if the country faces a threat, according to Sputnik citing the Azerbaijani President. (Sputnik)
French government will propose to the European Council to abolish the customs union with Turkey, according to Europe1. (Europe1)
Saudi-led coalition has destroyed a drone launched by Yemen's Houthis to Saudi Arabia. (Newswires)
Global equities (Eurostoxx 50 +1.7%) have kicked the week off on the front-foot as markets digest the fallout from Democratic Candidate Biden being declared the winner of the 2020 Presidential election. Price action has seen a continuation of some of the moves observed last week with the e-mini S&P (+1.5%) now eyeing its ATH of 3587 and outperformance once again in the e-mini Nasdaq (+1.8%) as growth/momentum names continue to surge. Value names are higher on the session but to a lesser extent, that said, JP Morgan have upgraded the group vs. growth on the basis that “when the dust settles” on the election, the result will be supportive of stronger performance of the broader market and prompt a style rotation. The Congressional calculus will be a key factor in determining the outlook, as although some of the expectations of tax hikes and regulatory oversight may have been tempered by an expected retention of the Senate for the GOP, the Republicans will also likely reduce the magnitude of any COVID-19 stimulus package, particularly now that Senate Majority Leader McConnell is in charge of negotiations with Treasury Secretary Mnuchin to step back from talks. It is also worth noting how the Biden administration could tackle COVID given that infections in the US are continuing to climb. Throughout the campaign, Biden has continued to talk up the efficacy of lockdowns, however, a lot of the power to impose further restrictions is held at a state level. On the trade front, Biden is viewed to take a potentially less erratic approach to Chinese relations, however, it remains to be seen how much/if any ground Biden will give the Chinese in the ongoing trade war. Instead, Biden will likely prefer to ease relations with the EU instead, with reports in the FT suggesting that the EU are seeking a reset of relations with the EU in the post-Trump era with the bloc's trade ministers to meet today to discuss rebooting relations despite preparing to set retaliatory tariffs to target USD 4bln worth of US goods. That said, Airbus (+3.5%) are a top performer in Europe this morning on overall hopes a de-escalation in tensions between the two economic powerhouses. All sectors in Europe are firmer on the session with outperformance in travel & leisure names such as Ryanair (+5.0%), Air France (+5.7%) and Deutsche Lufthansa (+4.7%) with the latter also benefitting from reports suggesting the Co. is in agreement with unions on austerity measures until 2023. Tech names have seen support (beyond the aforementioned trends observed in growth names discussed above) via earnings from Infineon (+3.1%) with the Co.’s forecasts for FY 2021 revenues exceeding expectations. UK housing names are firmer on the session in the wake of earnings from Taylor Wimpey (+11.4%) who delivered a particularly bullish 2021 outlook. Finally, SocGen (+3.5%) are the best performing bank in the region following reports is to reportedly announce around 650 job cuts in France, namely in its investment bank division.
DXY - The broader Dollar and Index have recouped mild losses seen at the open in the aftermath of a projected Biden win after finding an overnight base around 92.150 vs. Friday’s 92.310 close, with early European hours seeing a move higher above Friday’s last to 92.372 – with price action relatively contained thus far. The Biden win has reinstated some bearish views among banks, with Goldman Sachs noting that the result removes some near-term downside risk but still sees a 6% depreciations in the nominal trade-weighted Dollar over the next year, and thus GS sticks to shorts into 2021 as a Blue Senate looks unlikely and hence a hurdle remains with regards to fresh COVID-19 related stimulus.
NZD, CAD, AUD, SEK, NOK - The non-US Dollar all benefit from the risk appetite across the market with the Kiwi outpacing its high-beta counterparts, namely against the Aussie as the AUD/NZD cross dips below 1.07 (vs. high 1.0727), and with the looming RBNZ rate decision where its OCR and LSAP are expected to be maintained. NZD/USD has reclaimed 0.68+ status from an overnight base at 0.6780, whilst AUD/USD pulled back after testing overnight resistance at 0.7300 (vs. low 0.7256). The Loonie coattails on the firmer crude prices as USD/CAD heads towards 1.3000 to the downside from an overnight peak at 1.3067, with the 1st Sept low in sight at 1.2990. The constructive risk tone has also translated into modest gains for the Scandi FX, with EUR/SEK and EUR/NOK both posting mild intraday losses, with the former now under 10.2500 and the latter below its 50 and 200 DMAs at 10.8665 and 10.8447 respectively.
GBP, EUR - The core European currencies are relatively flat and largely dictated by Dollar action in early European trade. GBP/USD has somewhat stabilised after an overnight test of 1.3200 to the upside (vs. low 1.3140), with early gains potentially on hopes a change in US administration could restrict the UK from pursuing harmful Brexiteer policies ahead of further negotiations with the EU today, whilst the phone call between PM Johnson and European Commission President highlighted large differences remain between the two sides on level playing field and fisheries. EUR/USD meanwhile meanders around session lows, but sees flat intraday price action ahead of Brexit talks and with the EU also poised to impose tariffs on some USD 4bln worth of US goods with regards to the Airbus/Boeing dispute, although sources suggested that Germany is mulling a delay of such measures. EUR/USD hovers around 1.1875 after an earlier test of 1.1900 where a hefty EUR 3.1bln of opex resides ahead of the Sept 10th high of 1.1917 – with the Sintra conference this week also providing a platform for ECB members to address the firmer EUR.
JPY - The Yen stands as the G10 laggard in early trade, on account of a firming Dollar alongside safe-haven outflows. USD/JPY continues to edge higher towards Friday’s 103.76 high vs. the overnight base at 103.18, whilst commentary from PM Suga suggested a 3rd extra budget could be in the pipeline to tackle complications from COVID-19.
Yuan, TRY - The Chinese Yuan and Turkish Lira stand as the notable EM FX gainers, with the former benefitting from the short-term implications of a Biden administration, which could see a less “trigger happy” policy towards China. That being said, back in August, Biden’s Foreign Policy Adviser Ratner suggested that the US needs to forge closer ties with allies to counter challenges from China – which could in the longer-term provide Beijing with an uphill battle. Nonetheless, USD/CNH continues to decline as it inches towards 6.5000 to the downside (vs high 6.5872), with the spot onshore also closing at the firmest level against the Buck since June 2018. Elsewhere, the Turkish Lira stands as the marked gainer after Turkish President Erdogan replaced the CBRT governor amid a failure to stem the Lira’s decline, with some suggesting the newly appointed Agbal could tackle the issue with more stringent measures including an aggressive increase in interest rates, albeit Central Bank credibility further deteriorates. Finance Minister Albayrak has also resigned but amid health issues. USD/TRY was propelled lower at the open from Friday’s 8.5200 close to a current low of 8.0420.
Turkish President Erdogan removed central bank Governor Uysal and appointed former Finance Minister Naci Agbal as the new central bank Governor, while current Finance Minister and President Erdogan’s son-in-law Berat Albayrak has resigned due to health issues. (Newswires)
NZIER Shadow Board sees less of a need for a negative OCR and boost to QE by the RBNZ over the coming year, while some members noted that the expected implementation of a Funding for Lending programme was an influence regarding their view on the need for further stimulus. (NZIER)
EUR/USD: 1.1780 (300M), 1.1800 (782M), 1.1900 (3.1BLN)
A modestly firmer start to the week in the wake of Biden now being considered the President Elect, albeit not confirmed until the electoral college votes, and pending any legal challenged/recounts enacted by the Republican campaign. The slightly stronger start to the session arises largely as an unwinding of some of the selling pressure seen at the tail-end of last week and with action from a US perspective relatively contained and the curve exhibiting modest flattening action. For USTs explicitly JPM believe yields are likely to be rangebound as the current election state-of-play indicates a split congress and as such the prospects for ‘significant’ fiscal packages are somewhat lower; as such, they look to stay neutral on both the curve and duration. Focus for the session ahead and perhaps influencing price action somewhat this morning is the US issuance due this week commencing with a 3-yr note offering today (newsquawk preview) with ~USD 122bln due in supply from the US alone. Turning to Europe performance is in-fitting with their US peer with Bunds some 30+ ticks firmer but off highs as newsflow has been particularly quiet this morning and the central bank schedule thus far has yet to unearth anything notable. For German debt, little lies in the immediacy from a technical perspective before 177.00 itself aside from last Wednesday’s high of 176.83. Later in the week attention turns, particularly for periphery watchers, to the ECB’s Sintra gathering (schedule highlights) for any clues into possible December action; aside from a guide into the magnitude of such support BTPs et al may well prove reactive to any commentary around PEPP/APP given the capital key dynamics – which, particularly at the start of the pandemic, favoured periphery nations more than the capital key would suggest, regarding the APP programme. Finally, Gilts have been tracking the performance of their main European counterpart but as focus moves away from the US election participants will be watching for Brexit updates with Barnier back in London for talks but progress seemingly still insufficient overall at this stage; technically, Gilts face clean-air until the psychological 136.00 before Friday’s 136.24 high.
WTI and Brent front-month futures kicked off the week on a firmer footing as prices gain impetus from the constructive tone across the markets in the aftermath of Biden being announced president-elect by a number of outlets, whilst markets look forward to this week’s trio of monthly oil market reports, kicking off with EIA STEO tomorrow and the OPEC and IEA reports in the days after – with eyes on the latest global demand forecasts since European lockdowns came into force. The morning has also seen comments from the Saudi and UAE energy ministers who suggested the OPEC+ deal could be tweaked, albeit contingent on unanimous backing, whilst the former also stated that the pact could be extended for the rest of 2022. This comes in the context of reports that Saudi Arabia and other OPEC members are considering deepening oil production cuts amid rising COVID-19 cases in the West and fresh economic lockdowns in Europe that could curb oil demand further, according to WSJ citing oil officials. Note, OPEC+ are due to taper cuts to 5.7mln BPD in Jan from the current 7.7mln BPD. In terms of key dates, the JMMC meets on 17th November – but, the body does makes recommendations and not decisions; OPEC and OPEC+ confabs will then take place on 30th November and 1st December respectively. Sticking with OPEC, sources over the weekend suggested that a potential return of Iranian oil under a Biden administration could put the OPEC+ deal at risk. Although, such a change is not expected in the near-term. Elsewhere, reports suggest that Libyan oil output has also been ramped up to 1mnl BPD vs ~800k BPD last week – posing another headache for OPEC+ as the country is currently exempt from production quotas. Prices were initially unmoved by comments from OPEC’s largest producer, but have since found impetus - with WTI Dec gaining ground above USD 38/bbl and Brent Jan rising above USD 40/bbl. Elsewhere, spot gold and spot silver eke mild gains as prices move in tandem with the Buck – with the yellow metal just north of USD 1950/oz and spot silver just under USD 26/oz. Finally, LME copper also sees modest gains as stock market gains keep the sentiment proxy supported.
Saudi Energy Minister says that with consensus they can tweak the OPEC+ agreement; could be a tweak beyond what analysts have raised. With the return of Libyan output and new lockdowns, the market is still stable. OPEC+ could extend the output deal for the rest of 2022. UAE Energy Minister says the OPEC+ deal can be tweaked contingent on unanimous backing. (Newswires)
Saudi Energy Minister says future oil demand may not be able to keep up with economic growth, see potential for supply capacity crunch and bottlenecks in the mid-stream sector. (Newswires)
OPEC source reportedly fears a return of supply from Iran could put the OPEC+ deal at risk. (Newswires)
Libya’s NOC stated that the country’s production surpassed 1mln bpd. (Sputnik/Twitter)
Russian PM proposes appointing Energy Minister Novak as the Deputy PM, Ifax; proposes Nikolay Shulginov the RusHydro CEO as Energy Minister. Russian Deputy Energy Minister Sorokin says there is a risk of a supply crunch given the decline in investments. (Newswires)