Original insights into market moving news

[PODCAST] European Open Rundown 13th November 2020

  • Asian equity markets weakened on spill-over selling from Wall Street; Hong Kong lagged
  • White House confirmed an executive order prohibiting US investments in firms deemed to be owned or controlled by China’s military
  • Fed Chair Powell said the recovery in the US has been faster than expected but it has slowed
  • Mexican Central Bank unexpectedly maintained rates in which only one member voted for a 25bps cut
  • EU Commission spokesperson said the Polish PM threatened to veto the EU's 2021-2027 budget
  • DXY was stuck around 93.000, EUR/USD just about retained the 1.1800, USD/JPY declined beneath 105.00
  • Looking ahead, highlights include EZ Employment & GDP (Flash), US University of Michigan, Fed's Williams & Bullard; BoE's Bailey & Tenreyro


US President Trump tweeted criticism of inaccurate and unsecure Dominion Voting System which he stated is used in States where tens of thousands of votes were stolen and given to Biden. However, there was a separate tweet from AFP that election officials said there is no evidence of lost or changed votes. (Newswires)

A judge ordered that segregated ballots in Pennsylvania should not be counted and ruled the Pennsylvania Secretary of State lacked statutory authority to override election law, according to journalist Kyle Becker. It was also separately reported that the Pennsylvania Secretary of State asked the Federal Judge to dismiss President Trump campaign's lawsuit regarding election results. (Newswires/Twitter)


US COVID-19 cases +143,408 (prev. +134,383) and deaths +1,479 (prev. +1,859), while a major newswire tally stated cases rose by at least 163,289 to a total of 10.58mln and deaths rose by at least 1,173 to a total of 243.0k. (Newswires) New York COVID-19 cases +4,797 (prev. +4,820), positivity rate 2.95% (prev. 2.93%) and deaths +29 (prev. +21), while it was also reported that New York City is preparing to shut down schools across the city if the test-positivity rate continues to increase. Elsewhere, Chicago issued a stay-at-home advisory effective November 16th for 30 days in which residents should only leave home for essentials. (Newswires/CNN)

US HHS said the Trump administration is partnering with chain and independent community pharmacies to improve access to future COVID-19 vaccines. (Newswires)

French PM Castex said that more can be done regarding making people work from home and noted that COVID-19 hospitalisations are now higher than the peak in April. However, he also stated that the COVID R rate is below 1 in France and that they could loosen COVID restrictions for Christmas holidays if the conditions permit them to do so. (Newswires)


Asian equity markets weakened on spill-over selling from Wall Street, where all major indices declined as participants continued to fade the reflation trade and with increases in virus cases denting the recent vaccine optimism, which saw the DJIA lead the downturn and briefly give up the 29k level. ASX 200 (-0.2%) was dragged lower by notable losses in the energy sector following similar underperformance stateside as rising infections and restrictions weighed on the demand outlook, while Nikkei 225 (-0.8%) was pressured as exporters felt the brunt of currency inflows and with earnings in focus as Rakuten shares slumped after its 9-month net loss widened five-fold. Conversely, Nissan shares were in top gear despite posting a H1 net loss of JPY 330bln as the Co. reduced its annual operating loss forecast by 28% and Sony was also among the notable gainers after it began PlayStation 5 sales in several major markets. KOSPI (+0.2%) rebounded from early losses with the index helped by resilience in tech stocks and with Asiana Airlines soaring on potential M&A reports after Korean Air Lines was said to be in discussions to acquire the airliner. Hang Seng (-0.5%) and Shanghai Comp. (-1.2%) conformed to the broad downbeat tone despite a firm liquidity effort by the PBoC, as sentiment remained subdued after China’s further clampdown on Hong Kong freedoms which triggered an uproar globally, with the UK said to be considering sanctions, while tensions remained a headwind after the White House confirmed an executive order prohibiting US investments in Chinese firms owned or controlled by the Chinese military. Finally, 10yr JGBs marginally extended above the 152.00 level following the bull flattening in USTs and with upside helped by the glum picture across risk assets, although the upside was capped amid the absence of the BoJ from the market today and ahead of key data beginning with Q3 GDP early next week.

PBoC injected CNY 160bln via 7-day reverse repos at rate of 2.20% for a net injection of CNY 160bln. (Newswires) PBoC set USD/CNY mid-point at 6.6285 vs. Exp. 6.6283 (Prev. 6.6236)

US President Trump’s administration was reportedly finalising an executive order to ban US purchases or sales of securities in Chinese firms with links to China's military, while the White House later confirmed an executive order prohibiting US investments in firms that Washington deems to be owned or controlled by China’s military. (Newswires)

US Commerce Department announced it will not enforce an order that would have effectively forced the TikTok video-sharing app to shut down, which follows the US Court of Appeals setting December 14th and 28th for ByteDance and the Trump administration to file motions and other documents in the case. (Newswires/WSJ)


Fed Chair Powell said the recovery in the US has been faster than expected but it has slowed and has been uneven, while he added vaccine news is good and is welcome for the medium term but it is too soon to assess implication of vaccine news for the economy. Powell also said we have not experienced downside scenarios we had worried about although the path forward will be challenging and reiterated that Congress and the Fed will likely need to do more. Furthermore, he said the crisis is accelerating a lot of pre-existing tech changes and we are not going back to the same economy, while he suggested there will be a substantial group of workers needing support even after the jobless rate goes down. (Newswires)

BoE Governor Bailey said the UK financial sector is ready for Brexit, whether there are further decisions on equivalence or not. (Newswires)

ECB President Lagarde reiterated that COVID vaccine news reduces uncertainty and stated that businesses no longer see COVID restrictions as a one off which impairs decisions. Lagarde also reiterated it is critical to maintain the financing conditions needed to keep the economy operating. (Newswires)

ECB's Villeroy reiterated that the ECB we will recalibrate monetary measures in December and needs to do more, while he added that they must maintain favourable and predictable financing conditions. (Newswires)

ECB's Muller said PEPP alone is not the best measure to provide additional stimulus and would prefer more direct tools to support the economy such as TLTROs, while he also suggested that the second wave of the virus will likely be more severe than anticipated. (Newswires)

RBNZ Governor Orr said the assumption that the economy will continue to grow is a 'big if'. Furthermore, Orr stated he is currently very comfortable with the funding for lending and QE programmes, while he added foreign asset purchases are not a preferred option. (Newswires)

Mexican Central Bank unexpectedly kept rates at 4.25% vs. Exp. 4.00% (Prev. 4.25%) in which only one member voted for a 25bps cut. The Governing Board said it will take the necessary actions on the basis of incoming information in order for the policy rate to be consistent with the orderly and sustained convergence of headline inflation to its target within the time frame in which monetary policy operates, while it noted the pause provides the necessary room to confirm that the trajectory of inflation converges to the target and noted that balance of risks for the projected trajectory of inflation is uncertain. Furthermore, it stated monetary policy implementation will depend on the evolution of the factors that have an incidence on headline and core inflation, on their foreseen trajectories within the forecast horizon and on their expectations. (Newswires)


UK Tory MPs reportedly warned that PM Johnson is on his last chance to overhaul a dysfunctional Downing Street, while the report also noted increasing rumours the PM’s Chief Adviser Cummings will leave by Christmas. (Guardian)

EU Commission spokesperson said it received a letter from the Polish PM threatening to veto the EU's 2021-2027 budget over the rule of law conditionality. (Newswires)


In FX, the DXY was rangebound with price action stuck around the 93.000 level after recent mixed data. The Greenback’s major counterparts were uneventful in which EUR/USD just about retained the 1.1800 handle following several comments from ECB officials, although these were mostly reiterations on maintaining financial conditions and support, while policymakers also continued in signalling a recalibration of measures in December. GBP/USD languished at the prior day’s lows with recent reports suggesting EU diplomats are said to be sounding pessimistic regarding UK-EU negotiations. USD/JPY declined beneath 105.00 amid the negative risk tone and the procyclical currencies such as AUD and NZD have been hampered by the uninspiring overnight sentiment, lack of pertinent data and a weaker PBoC reference rate setting.


WTI crude futures underperformed after a breakdown of support at the USD 41.00/bbl level as oil prices were pressured by several bearish factors including the surprise build in EIA headline crude inventories. Furthermore, expectations of increased Iranian supply from a more relaxed policy on Iran under a Biden administration, rising COVID-19 infections and a downgrade to 2020 global oil demand growth in the IEA monthly oil market report were also among the headwinds for oil prices. Elsewhere, gold prices remained sideways beneath the USD 1900/oz level with the precious metal reflecting the similar humdrum trade in the greenback and copper prices were unsurprisingly lacklustre due to the ongoing risk aversion.


Treasuries bull-flattened on Thursday as the reflation trades from earlier in the week lost momentum, CPI came in light and the 30-year bond auction fared better than the offerings earlier in the week. By settlement, 2s -0.8bps at 17.7bps, 10s -10.4bps at 88.5bps, 30s -11bps at 165bps; 5s, 10s, and 30s TIPS yields fell by 0.8, 5.1 and 7.4bps, respectively, seeing inflation breakevens narrow. T-Note futures volumes were lacklustre when compared to recent averages. The majority of the upside in bonds occurred as US participants returned from Veteran’s Day holiday and the duration bid extended, as did the value underperformance, from Wednesday. That bidding momentum caught tailwinds from the weaker than expected CPI print - somewhat offset by lower than expected Initial Jobless Claims – and a slew of reported real money and hedge fund type buys. The buying begot more buying as algo programmes were said to have been triggered as yields broke below resistance levels, forcing in CTA shorts. It was essentially one-way traffic up into the futures settlement too as further shakiness in stocks catalysed haven flows, and the half-decent 30-year bond auction – tailed by 0.6bps but saw stronger than average participation and an acceptable cover ratio – saw the offers lifted; note, the Treasury announced today it is to sell USD 27bln (exp. 25bln) of 20-year bonds on November 18th and USD 12bln of 10-year TIPS on November 19th. Despite the significant flattening today, long-end yields still sit above where they opened on Monday - 83bps for 10s and 161bps for 30s - which traders will use as next resistance levels if duration continues to pare back the vaccine-induced reflation trade that catalysed on Monday. T-note (Z0) futures settled 17+ ticks higher at 138-05; t-bond (z0) settled 1 point & 20 ticks higher at 172-09.

US Senate Majority Leader McConnell is setting up a vote to advance Judy Shelton's Fed nomination which could occur as soon as next Tuesday but more likely to occur on Wednesday. (Newswires)

US Republican Senator Collins suggested the way out of stimulus stalemate is to have Senate pass the GOP skinny bill and go to conference with the House's USD 2.4trln Heroes act. (Twitter)