Original insights into market moving news

[PODCAST] US Open Rundown 10th November 2020

  • Value-growth rotation remains in force with European banks outperforming as is the Russell 2000 future +1.90% while NQ -1.9%
  • NIH's Fauci that the Pfizer vaccine is a big deal and there are still questions about its durability, while he added Moderna's results are expected soon
  • US Senate Majority Leader McConnell said Congress should pass a limited stimulus bill before year-end, following encouraging vaccine data & Trump is 100% within his rights to look into possible election irregularities
  • European Competition Commission is reportedly to announce antitrust charges against Amazon today could see fines up to 10% of global revenue (USD 28bln)
  • FX features a modest USD resurgence with upside capped on GBP strength while fixed is largely U/C and in proximity to yesterday’s lows
  • Looking ahead highlights include Fed's Rosengren, Quarles, Kaplan, ECB's Knot and US 10yr supply


US President Trump is seeking to block Pennsylvania from certifying results and the Trump campaign filed a lawsuit alleging Pennsylvania mail-in voting lacks hallmarks of transparency and verifiability which were present for in-person voting. (Newswires)

US Attorney General Barr authorized the Department of Justice to probe "substantial allegations" regarding vote counting irregularities, although it was also reported DoJ Election Crimes Branch Director Pilger resigned in response to Attorney General Barr's memo authorizing an election fraud investigation. (Newswires/NYT)

US Senate Majority Leader McConnell said President Trump is 100% within his rights to look into possible election irregularities. (Newswires)

A Biden transition official said the General Services Administration must recognize Biden's election win so the transition can begin and warned that legal action is possible if the General Services Administration does not recognize the election victory. (Newswires)


US COVID-19 cases +105,142 (prev. +93,811) and deaths +490 (prev. +1,072), while US COVID-19 hospitalizations rose to a record of almost 59k patients, according to a major newswire. California COVID-19 positivity rate at 3.7% (vs 2.5% three weeks ago); Governor Newsom expects some areas to become more restricted. (Newswires)

NIH's Fauci that the Pfizer vaccine is a big deal and there are still questions about its durability, while he added Moderna's vaccine is similar to Pfizer's and he expects the results soon. (Newswires)

Eli Lilly (LLY) BAMLANIVIMAB drug for COVID-19 received emergency use authorization from the FDA, while the Co. stated that the US government will allocate 300k doses to high-risk patients and it will begin shipping immediately to AmerisourceBergen which will distribute it directly as directed by the government program. (Newswires)

BioNTech (BNTX)/Pfizer (PFE) - BioNTech Chief Strategy Officer says the group plans to price the COVID-19 vaccine well below typical market rates, with different prices for different locations. Italy will get 13.6% of the first 200mln doses of the Pfizer (PFE)/BioNTech (BNTX) COVID-19 vaccine made available to Europe, possible by January, according to sources; Germany looks to sign a final agreement shortly for up to 100mn doses. (Newswires)

China COVID-19 vaccine trial was halted in Brazil following a serious adverse event which occurred in October 29th, while the Butantan Institute head later noted that the Sinovac Biotech's trial of Coronavac in Brazil was halted due to a death but added it was unrelated to the vaccine. Subsequently, Sinovac Biotech says they are confident in the safety of their vaccine. (Newswires)

UK Health Minister Hancock says it will take some time for a vaccine to be rolled out; central expectation for the bulk of the deployment of a vaccine is H1-2021; does not know when we will hear on the Oxford University/AstraZeneca (AZN LN) COVID-19 vaccine as the timing is determined by the science; working to ensure deployment should the trial be successful. (Newswires)

Russian President Putin says all Russian COVID-19 vaccines are effective, RIA; soon to register their 3rd COVID-19 vaccine. (Ria/Newswires)


Asian equity markets were mostly higher as the region took its cue from the predominantly strong performance stateside where the S&P 500 and DJIA rallied to fresh record highs, although the Nasdaq bucked the trend as tech and stay-at-home stocks were heavily pressured following an encouraging update regarding the Pfizer and BioNTech vaccine which was reported to be more than 90% effective in combatting COVID-19. This triggered a rotation out of growth and into value stocks although the broader market retraced some of the gains heading into the close on several bearish factors including a large sell-side imbalance, expectations of further restrictions in California and comments from Senate Majority Leader McConnell that he does not acknowledge Biden or Harris as President-elect or VP-elect. Additionally, despite the positivity surrounding the update from Pfizer and BioNTech yesterday, some desks have highlighted that questions on the drug’s durability and efficacy for various subsets of the population and the severity of cases it will be effective for, still remain. ASX 200 (+0.7%) was boosted at the open with gains led by energy after a rally in oil prices and with the largest-weighted financials also cheering the vaccine news, while Nikkei 225 (+0.5%) briefly surged above the 25k level with notable strength seen in the travel sector including rail and airline stocks but with the index finishing well off its best levels amid weakness in tech which saw Tokyo Stock Exchange’s Mothers Index Futures, which consists of start-ups, trigger a circuit breaker after hitting limit down. Hang Seng (+0.8%) and Shanghai Comp. (-0.2%) were varied as the mainland lagged after a neutral PBoC liquidity operation and ongoing tensions with the US which are to sanction four more people in response to China's crackdown on dissent in Hong Kong, while there were also recent reports that China’s COVID-19 vaccine trial was halted in Brazil following a serious adverse event. Finally, 10yr JGBs were pressured and slipped below the 152.00 level amid spillover selling from T-notes and gains across stocks, with demand also subdued by mixed results at the 30yr JGB auction.

PBoC injected CNY 120bln via 7-day reverse repos at rate of 2.20% for a net neutral daily position. (Newswires) PBoC set USD/CNY mid-point at 6.5897 vs. Exp. 6.5885 (Prev. 6.6123); which was the strongest fix since June 2018.

Chinese CPI (Oct) Y/Y 0.5% vs. Exp. 0.8% (Prev. 1.7%); slowest pace of increase since October 2009

Chinese PPI (Oct) Y/Y -2.1% vs. Exp. -2.0% (Prev. -2.1%)

BoJ is introducing a special deposit facility which will enhance the resilience of the regional financial system; facility is for system stability and is different from special operation for COVID-19. (Newswires)


Fed released Financial Stability Report in which it stated that business debt has increased sharply and reduced economic activity has weakened ability to service debt, while it noted that household loan defaults may increase and banks remain well capitalized but challenging conditions persist. Fed also stated that most banks CET1 ratio recovered to pre-pandemic levels in Q2 and money markets have stabilized but would be vulnerable in the absence of emergency facilities. Furthermore, it added that some accounts in loss mitigation could increase bank delinquency later this year and early-2021 followed by increase charge-off rates and losses, as programs expire. (Newswires)

Fed's Kaplan (voter) stated the US economy is in the midst of a rebound from deep contraction but added that trends are in the wrong direction on COVID-19, while he added the base case is for a 2.5% contraction in 2020 with downside risks from virus and that the base case is for 3.5% growth in 2021. Kaplan also suggested the Fed may well need to keep rates at zero for another couple of years although he does not want to make a commitment on what the Fed will do after the pandemic. (Newswires)

Fed's Mester (voter) said there is more the Fed can do in terms of asset purchases and other programs to provide accommodation, while she added that she doesn't think the Fed is out of ammo and she would extend all of the Fed's emergency lending facilities if it were up to her as they are still needed. Furthermore, Mester also commented the recovery has been stronger than expected but there are a lot of variation across sectors and that the recovery is likely to be slower from here on out. (Newswires)

Fed’s Quarles (voter) said the Fed remains committed to using full range of tools to support the economy as long as needed and is confident they will support the hardest impacted, as well as ensure economic wounds will not become scars. Fed’s Quarles also suggested that banks are well-positioned as a bulwark against financial and economic pressure. (Newswires)

US Senate Majority Leader McConnell said Congress should pass a limited stimulus bill before year-end, following encouraging vaccine data according to a reporter. (Twitter)

US President Trump fired Defense Secretary Esper, while Washington Post reported that Defense Department officials privately expressed concerns that the removal of Esper could be a sign that President Trump may initiate operations against Iran or others in last days of office. (Newswires/Washington Post)


UK House of Lords voted against UK government on Internal Market Bill to remove clauses that would allow ministers to scrap parts of the Withdrawal Agreement; as expected. The defeat prompted a statement from UK PM Johnson’s office that the clauses are a legal safety net to protect the integrity of the UK’s internal market and will be reinstated when the draft law returns to the House of Commons. (Newswires)

EU leaders are confident they will come to agreement on the size of the bloc's next 7-year spending plan and recovery fund of ~EUR 1.1trl & EUR 750bln respectively, via FT; talks resume at 13:00GMT today. (FT)

-        EU leaders are confident they will come to agreement on the size of the bloc's next 7-year spending plan and recovery fund of ~EUR 1.1trl & EUR 750bln respectively, via FT; talks resume at 13:00GMT today

UK ILO Unemployment Rate* (Sep) 4.8% vs. Exp. 4.8% (Prev. 4.5%); Claimant Count Unemployment Change* (Oct) -29.8k vs. Exp. 50.0k (Prev. 28.0k, Rev. -40.2k)

-        Average Earnings (Ex-Bonus)* (Sep) 1.9% vs. Exp. 1.5% (Prev. 0.8%. Rev. 0.9%)

-        Average Week Earnings 3M YY* (Sep) 1.3% vs. Exp. 1.0% (Rev. 0.1%)

-        Employment Change (Sep) -164k vs. Exp. -148k (Prev. -153k)

-        October flash employment estimate -2.6% YY

UK BRC Retail Sales YY (Oct) 5.2% (Prev. 6.1%). In related news, Barclaycard stated UK consumer spending fell 0.1% Y/Y in October and its survey found a third of Britons reported stockpiling for lockdowns in October. (Newswires)

German ZEW Economic Sentiment (Nov) 39.0 vs. Exp. 41.7 (Prev. 56.1)

-        German ZEW Current Conditions (Nov) -64.3 vs. Exp. -65.0 (Prev. -59.5)

-        EU ZEW Survey Expectations (Nov) 32.8 (Prev. 52.3)


Armenia PM said he has signed an agreement with leaders of Russia and Azerbaijan to end the war today, while the Russian Defense Ministry later announced it began deploying nearly 2000 troops to Nagorno-Karabakh. Subsequently, 

Azeri and Turkish presidents discussed creation of joint Russia-Turkish peacekeeping centre to monitor Karabakh ceasefire, Sputnik reports. However, the Kremlin says there is no agreement on the deployment of the Russian-Turkish peace keepers in the Nagorno-Karabh regions (Newswires)


Ahead of the cash product open, European index futures picked up from overnight lows with the DAX Dec’20 moving back into modest positive territory. A scaling back of these losses has led to a relatively mixed picture across the region thus far with the Eurostoxx 50 (+0.5%) eking mild gains, whilst the DAX cash (-0.2%) is softer once again with the index hampered by corporate updates from Deutsche Post (-6.0%) and Adidas (-5.6%). Additionally for the index, the fallout from yesterday’s Pfizer/BioNTech continues to reverberate across the market with Infineon (-3.7%) lower on the session as tech names remain out of favour (Stoxx Europe 600 Tech Index -1.5%; the laggard in the region), whilst Delivery Hero (-8.7%) are also underperforming with the Co. viewed as a loser from any potential reopening efforts. As the dust begins to settle on the US election, the current market narrative has shifted somewhat over the past 24 hours to the impact of a prospective vaccine on the economic outlook. Yesterday’s market reaction was particularly pronounced with the S&P 500 and DJIA printing all-time highs, whilst desks also continue to weigh the prospects of a more prolonged shift away from growth/momentum names towards value/cyclicals. One of the key determinants of this will hinge upon how quickly the vaccine can be distributed and nations can reopen their economies. Yesterday’s news was clearly a positive for this narrative, however, the timeline for a “return to normal” remains unclear. Additionally, markets will likely need further details from the study on its efficacy on specific subsets on the population and whether or not the vaccine will protect the most vulnerable in society; failure to do so could temper the hopes from a more extensive reopening of the economy. Nonetheless, for now, markets are continuing to add to some of the bets placed yesterday with financials and oil & gas names outperforming peers. For the former, strength can predominantly be observed in the periphery with Italian and Spanish banks some of those hit hardest in the wake of the pandemic, accordingly, the IBEX 35 and FTSE MIB trade higher by 2.6% and 0.1% respectively. On a more granular level, substantial gains have been observed in some of the more specific beneficiaries of an easing in lockdown restrictions with Unibail-Rodamco (+24%), Cineworld (+60%) and Rolls Royce (+20%) the best performers in the Stoxx 600. To the downside, besides tech names, the recent rally continues to hamper performance of the defensively positioned health care sector. For the FTSE 100, AstraZeneca (largest weighted stock in the index) remains a key focus as it continues work on its COVID-19 vaccine, results of which are expected towards the end of the year or early 2021 (according to ITV’s Peston)

Amazon (AMZN) - European Competition Commissioner is to announce antitrust charges against the Co. today in relation to the usage of data about merchants on its platform, according to FT sources. EU Competition Commission could force Amazon (AMZN) to change their business practices and see fines of as much as 10% of annual global revenue (USD 28bln), via WSJ (FT/WSJ)

Boeing (BA) – US FAA in final stages of reviewing changes to the 737 MAX with the review to be finished in the coming days; sources state approval could arrive as soon as November 18th. (Newswires)

Micron (MU) has begun volume shipments of world's first 176-layer 3D NAND flash memory. (Newswires)


DXY - The index has picked up steam in recent trade after a relatively contained start to the session, with the index eyeing yesterday’s 92.976 high ahead of 93.000, with upside levels including the 21 DMA (93.231) followed by the 50 DMA (93.366). The mild pullback overnight coincided with reports that US AG Barr has authorised a DoJ probe of "substantial allegations" regarding vote counting irregularities, whilst a Biden transition official threatened legal action and called for the General Services Administration to recognize Biden’s election victory so the transition can begin. Meanwhile, today’s data slate remains on the lighter side but Fed speak includes the likes of Fed’s Rosengren, Quarles, Kaplan and Brainard, with fresh/pertinent comments on monetary policy unlikely as the topics seem to be more from a regulatory standpoint.

GBP, EUR, JPY, NZD, AUD - All narrowly mixed against the Buck to various degrees. Sterling stands as the best performer this far after it gleaned some support from technical play as Cable managed to top 1.3200 (vs. low 1.3158) after testing the level to the upside on multiple occasions during APAC hours – with little follow through seen from the clouded September jobs data. The pair topped yesterday’s 1.3207 high to a current intraday peak at 1.3259. This bout of Sterling strength subsequently pressured EUR/GBP below 0.8950 and its 200 DMA at 0.8922 – with the only notable Brexit development since the European close being the UK House of Lords voting against UK government on Internal Market Bill which would have given ministers power to override EU exit treaty, whilst EU/UK talks are set to continue throughout the week. EUR/GBP flows eventually pressured the Single currency after largely moving in tandem with the Dollar in APAC trade, with eyes also set on the EU budget/recovery fund negotiations as discussions poised to resume at 1300GMT, whilst the EU Parliament spokesman yesterday expressed pessimism over the state of talks in a contrast to the rhetoric out of EU leaders. EUR/USD breached 1.1800 to the downside alongside yesterday’s 1.1795 low ahead of the 50 and 21 DMAs at 1.1772 and 1.1766 respectively. Meanwhile, Yen recently gave up its earlier mild gains on account of the firming Buck, whilst the constructive risk tone also aided USD/JPY to trim a bulk of earlier losses after the pair tested its 21 DMA (104.78) to the downside in overnight trade. Antipodeans are now mixed after initially edging higher on the constructive risk tone, but the Dollar’s recent strength has weighed on the Aussie whilst the Kiwi remains somewhat cushioned by downside in the AUD/NZD cross.

EM - The Turkish Lira has given up some of yesterday’s gains against the backdrop central bank independence in question and geopolitical developments in the Nagorno-Karabakh region, with the recently announced ceasefire in the region reportedly observed but scepticism remains given the fragile nature of said ceasefires. On the domestic front, Turkish President Erdogan spoke again and noted that the country is battling against those trying to trap the country with regards to inflation, interest rates and FX as the leader reiterated his stance, but with no follow-through to the Lira as USD/TRY stabilises around 8.2143 vs. its 8.3738 intraday high.

Australian NAB Business Confidence (Oct) 5 (Prev. -4.0). (Newswires) Australian NAB Business Conditions (Oct) 1 (Prev. 0)


A comparatively range-bound session so far for the debt space following yesterday’s vaccine induced sell-off; albeit, the selling pressure attempted to resume as the European session commenced in full. At present, core counterparts are in proximity to the unchanged mark with Bunds now back to yesterday’s low of 174.26 after a short-lived foray below the mark to a session trough of 174.08 – technically, the 174.00 mark itself offers psychological support and lies in proximity to a fib level but attention has been on the -0.50bp yield which has been more substantially crossed this morning after briefly surpassing the mark yesterday. Continuing with the German 10yr but also looking to the periphery where the BTP-Bund spread has continued to tighten this morning to around 120bp with focus for the periphery also on today’s recovery fund/budget discussion in the EZ which are expected to recommence around 13:00GMT with leaders reportedly confident a deal can be reached on a budgetary perspective. Technically, BTP-Bund yield spread could encounter resistance at 112.5bp which is a continuation low from mid-April before the obvious 100bp mark itself. Leaving the EZ but remaining with Europe where Gilts are essentially flat on the session with little price action derived from the morning’s unemployment data as it tracks broader performance and themes; however, as the current November 15th Brexit deadline looms updates on the subject may begin to influence price action once more. Finally, USTs are also broadly unchanged after yesterday’s pronounced price action but remain above the post-Pfizer/BioNTech low of 137.13. Fundamentally further US issuance and Fed speak will draw attention throughout the session but broader themes may well continue to dictate price action, in the immediacy at least, as the 10yr eyes yesterday’s 97.50bp high before the 100bp figure.

EU has received EUR 140bln demand for the second SURE bond sales; to raise EUR 14bln from 5yr and 30yr bonds, according to lead managers (Newswires)

Link to US 10-year issuance preview


WTI and Brent front-month futures remain elevated as risk sentiment in Europe somewhat improved from APAC hours, with WTI Dec just off session highs after testing USD 41/bbl (vs. low USD 39.41/bbl) and Brent Jan sees itself around USD 43/bbl (vs. low 41.71/bbl). News flow for the complex has remained light during early hours, but impetus is derived from the prospect that an effective vaccine could paint a rosier (or less pessimistic) outlook for the market, with jet fuel demand a top beneficiary. That being said, it remains to be seen what yesterday’s vaccine news flow could mean for OPEC+ as the producers were expected to hold current cuts through Q1 2021 vs. the pact to ease output cuts. Looking ahead, the weekly Private Inventory data is to be released today, but ahead of that the EIA will release its monthly STEO where the much-watched global demand growth forecasts are likely to be stale given yesterday’s vaccine news. Elsewhere, spot gold and silver have drifted off intraday highs of USD 1890/oz and USD 24.40/oz respectively, whilst LME copper also lost ground on account of a firmer Dollar.

Iraq set December Basra light crude OSP to Asia at Oman/Dubai + USD 0.45/bbl which is higher by USD 0.15/bbl from the prior month. (Newswires)

Shanghai Exchange stated it will launch an international copper contract on November 19th and will temporarily waive the delivery fee on the contract for the first 7 weeks of trading. (Newswires)