Original insights into market moving news

[PODCAST] European Open Rundown 12th November 2020

  • Asian equity markets traded mostly lower as sentiment gradually deteriorated from the mixed performance stateside
  • US President-elect Biden's current lead in Pennsylvania is reportedly larger than the margin for a recount
  • US National Security Adviser O'Brien said the US will sanction those responsible for Hong Kong freedom violations
  • In FX, DXY traded on either side of 93.00, EUR/USD and GBP/USD were lacklustre, JPY outperformed
  • OPEC+ talks are reportedly to focus on delaying oil output hikes by 3-6 months but still needs support from other producers, according to sources
  • Looking ahead, highlights include UK GDP, Swedish CPIF, EZ Industrial Production, US CPI & Initial/Continued Jobless Claims, Banxico Rate Decision & IEA Monthly Report, ECB's Lagarde, de Guindos, Mersch & Schnabel; Fed's Powell, Williams & Evans, BoE's Bailey, Supply from the UK, Italy and US
  • Earnings include Deutsche Telekom, Generali, Siemens, RWE; Disney & Cisco


US President-elect Biden's current lead in Pennsylvania is reportedly larger than the margin for a recount. (Newswires)

US President Trump tweeted that nobody wants to report that Pennsylvania and Michigan didn’t allow our poll watchers or vote observers which is responsible for hundreds of thousands of votes that should not be allowed to count, while he claimed that he easily wins both states. (Twitter)


US COVID-19 cases +134,383 (prev. +122,910) and deaths +1,859 (prev. +694), while a major newswire tally stated cases rose by at least 142,279 to a total of 10.42mln and deaths rose by at least 1,464 to a total of 241.8k. New York COVID-19 cases +4,820 (prev. +3,965) and deaths +21 (prev. +32), while New York state also implemented a 10pm curfew for bars and restaurants. (Newswires)

India's medical research body and the Serum Institute completed the enrollment for phase 3 trial of the Oxford University AstraZeneca COVID-19 vaccine, while the Serum Institute has produced 40mln doses of the vaccine and the medical research body stated that it was the most advanced vaccine in human testing in India. Furthermore, it was also reported that the Serum Institute received bulk COVID-19 vaccine from Novavax which it will soon fill and finish them in vials, while it is to test the Novavax vaccine in a phase 3 trial in India. (Newswires)


Asian equity markets traded mostly lower as sentiment gradually deteriorated from the mixed performance stateside where conditions were quieter owing to the Veterans Day quasi-holiday, although a pause in the recent growth-to-value rotation aided a tech rebound. Nonetheless, ASX 200 (-0.5%) was dragged lower by underperformance in cyclicals but with losses in the index stemmed by strength in tech and telecoms as Telstra shares were underpinned by restructuring plans and retailers kept afloat after Wesfarmers reported sales growth. Nikkei 225 (+0.5%) extended on its best levels in nearly 3 decades although the gains were briefly wiped out as risk appetite waned and amid mixed data including Machinery Orders which suffered its longest period of contraction since 2009. Elsewhere, Hang Seng (-0.2%) and Shanghai Comp. (-0.2%) were subdued after mixed lending and financing data, as well as the ongoing tensions, with the US warning of further sanctions against China for its freedom violations in Hong Kong. Finally, 10yr JGBs gained as they tracked the rebound in T-notes and as risk appetite gradually deteriorated but with upside capped by resistance at 152.00 and after mixed results at today’s 5yr auction.

PBoC injected CNY 120bln via 7-day reverse repos at a rate of 2.2% for a net daily injection of CNY 90bln. (Newswires) PBoC set USD/CNY mid-point at 6.6236 vs. Exp. 6.6225 (Prev. 6.6070)

US National Security Adviser O'Brien said the US will sanction those responsible for Hong Kong freedom violations, while other reports also noted the White House warned of more sanctions on China related to its actions in Hong Kong. (Newswires/AFP)=

Japanese Machinery Orders (Sep) M/M -4.4% vs. Exp. -0.7% (Prev. 0.2%). (Newswires) Japanese Machinery Orders (Sep) Y/Y -11.5% vs. Exp. -11.6% (Prev. -15.2%)


On Brexit negotiations, a UK government source said one of the most difficult issues was state aid. (Times) Separately, UK ministers will be holding weekly meetings with five of the largest industries to discuss Brexit preparations. (Newswires) Elsewhere, the EU is reportedly not intending to grant regulatory equivalence before the Brexit transition period end, with a source stating that the EU does not yet have the legal mechanism to provide equivalence. (City AM)

A review commissioned by UK Chancellor Sunak has determined that circa GBP 14bln could be raised by reducing exemptions and doubling the rate of capital gains tax. (BBC)

UK PM Johnson’s director of communications announced his resignation after senior No 10 advisers opposed plans to appoint him as chief of staff. His departure sparked speculation that senior advisor Cummings could also leave. However, reports noted that Cummings will stay on despite the departure of a close colleague, according to the BBC Editor. (Times/Newswires)

UK RICS Housing Survey (Oct) 68 vs. Exp. 55 (Prev. 61, Rev. 62). (Newswires)


In FX, the DXY consolidated on both sides of the 93.00 level after recent advances were capped by Fib resistance at 93.210 which also served as yesterday’s high, with price action in the Greenback contained during APAC hours amid rangebound trade in its major peers and a lack of fresh catalysts. EUR/USD was uninspired after it recently gave up the 1.1800 status, while GBP/USD was also lacklustre although support at 1.3200 has provided some reprieve from Brexit-related woes with negotiators said to likely miss the November 15th deadline to reach an accord on a new trade deal. Elsewhere, USD/JPY and JPY-crosses were eventually pressured as risk appetite deteriorated and Antipodeans conformed to the uneventful picture across currencies with comments from RBNZ Assistant Governor Hawkesby only providing brief tailwinds for NZD/USD in which he stated that less stimulus was now required than thought in August, but added negative rates could still be used and they will respond if the funding for lending programme does not deliver enough stimulus.

RBNZ Assistant Governor Hawkesby said less stimulus is now required than thought in August and that the economy was more resilient than expected although uncertainty is wide and there are still large downside risks. Hawkesby also stated that they can still use negative rates and will respond if funding for lending programme doesn't deliver enough stimulus, while he reiterated that the RBNZ has not changed its guidance on keeping OCR at 0.25% until March next year and is working to have negative OCR operationally ready by year-end if required. Furthermore, he stated that the market reaction yesterday was to economists adjusting calls on negative rates and not the monetary policy statement. (Newswires)


WTI crude futures held on to some of yesterday’s gains with prices kept afloat after reports that OPEC+ talks are to focus on delaying oil output hikes by 3-6 months. There were also comments from Algeria Energy Minister who suggested that OPEC+ could extend oil production curbs into 2021 or deepen cuts further if market conditions require, while focus for participants turns to the latest EIA inventory report which was delayed due to the quasi-holiday. Elsewhere, gold traded sideways amid an uneventful greenback and indecisive risk tone, which were also the factors that kept copper price action contained.

OPEC+ talks are reportedly to focus on delaying oil output hikes by 3-6 months. However, one delegate said the idea has not garnered widespread support so far among other producers. (Newswires)

Saudi Arabia's King Salman said the Kingdom has and is still working to guarantee the stability of oil supplies to the world in a way that equally serves producers and consumers despite market impact from COVID-19. Furthermore, he stated the kingdom supports efforts to bring peace to the Middle East through negotiations between Palestinians and Israelis to reach a fair and permanent agreement. (Newswires)


US President-elect Biden told South Korean President Moon he will closely cooperate with them to resolve North Korea nuclear issues and they agreed to hold an early summit, while Biden reaffirmed US commitment to defend South Korea. (Newswires)

Saudi-led coalition said it intercepted two explosive-laden boats south of the Red Sea that were launched by Yemen's Houthis, according to state TV. (Newswires)

Lebanon's Hezbollah Leader Nasrallah called on regional allies to be on high alert for any potential aggression by US or Israel in the remaining two months of US President Trump's term. (Newswires)


Cash bonds were closed due to Veterans Day, although the recovery of duration assets and accommodative signalling from the ECB on its asset purchases saw T-Note futures modestly bid. As cash bonds resume trade on Thursday it will be noteworthy to see whether today’s duration bias extends, especially given the record-size 30-year bond auction scheduled, coming on the back of the disappointing 3- and 10-year offerings earlier this week. Meanwhile, in STIRs, from Tuesday afternoon there has been a considerable uptick in volume/OI in front Eurodollars that has stoked concerns of funding pressures over year-end and into the new year. JPMorgan has initiated a short recommendation on December Eurodollars with funding concerns over the turn and the potential for political interference against the Fed’s backstops. There has been some commentary from GOP Senators in recent sessions expressing caution on extending the Fed’s 13(3) Emergency Facilities out of worries Democrats will use them in a more blasé manner once in office. While the facilities have been sparsely used in funding markets, it would appear that the proposed removal of the backstop is causing some market-implied stresses over the turn and into next year. This is noteworthy given that until now, the turn had been expected to be a snooze fest, especially as the market was implied to be backstopped by the Fed. T-note (Z0) futures settled 5+ ticks higher at 137-19+; t-bond (z0) settled 21 ticks higher at 170-21.

US President-elect Biden picked long-time aide Ron Klain for the position of Chief of Staff. (New York Times)