Original insights into market moving news

[PODCAST] European Open Rundown 16th November 2020

  • Asian bourses kickstarted the week on the front foot and US equity futures extended on last Friday’s gains; ASX encountered technical problems
  • US President-elect Biden is poised to speak today on plans for a post-COVID economic recovery and longer-term growth, tentatively scheduled for 13:45EST/18:45GMT
  • US Operation Warp Speed Chief reiterated that they are hopeful for another positive vaccine update from Moderna (MRNA) this week
  • US President Trump reportedly plans a last-minute crackdown on China and will enact a series of hard-line policies in his final weeks, according to senior administration officials
  • UK Government officials noted that there will be no change on Brexit policy following the resignation of senior advisor Cummings
  • EU sources noted there was less progress in recent days on outstanding Brexit sticking points than they had hoped for
  • In FX, DXY was softer, EUR/USD briefly topped 1.1850, GBP/USD rose above 1.3200, USD/JPY tested 104.50 to the downside
  • Looking ahead, highlights include US NY Fed Manufacturing; RBA’s Lowe, Fed’s Clarida & Daly, ECB’s Lagarde, de Guindos & Mersch


US President-elect Biden and VP-elect Harris are poised to speak today on their plans for a post-COVID economic recovery and longer-term growth. The remarks are tentatively scheduled for 13:45EST/18:45GMT. (Newswires)

US President Trump tweeted in which he suggested that Biden only won in the eyes of the fake news media and that he concedes nothing, while he added we have a long way to go and that it was a rigged election. President Trump also noted that many cases being filed across the country are not ours but rather those of people that have seen horrible abuses and our big cases that show the unconstitutionality of the election and outrage of actions to change the outcome, will soon be filed. Furthermore, he questioned why does the fake news media continuously assume Biden will ascend to the Presidency and not even allowing our side to show which we are just getting ready to do, while he suggested the Constitution was badly shattered and violated from the election. (Twitter)

A legal adviser to the Biden campaign said Georgia counties that counted votes have shifted totals ‘almost imperceptibly’ in favour of Biden and that there is no reason to believe widespread irregularities were found in Georgia. (Newswires)


US COVID-19 cases +155,708 (prev. +181,801) and deaths +1,252 (prev. +1,364). (Newswires) New York Governor Cuomo announced an emergency summit meeting on Friday between the Governors of six north-eastern states amid COVID-19 case spikes, while he sees the situation getting worse over the coming weeks and stated we believe we’re going to have to be taking additional steps. California, Oregon, and Washington issued an advisory on Friday urging the public to avoid all non-essential out-of-state travel amid rising COVID-19. It was also reported that Oregon Governor Brown ordered a two-week 'freeze' for the entire state starting November 18 in which restaurants and bars will be limited to take-out only and recreational facilities and venues that host indoor or outdoor events will be closed. Furthermore, New Mexico Governor announced that citizens will have to "shelter-in-place" from November 16th-30th in which all non-essential businesses and non-profits must stop in-person activities, while Washington state Governor Inslee announced new restrictions for residents and businesses to address the infection rates. (Newswires/ABC News/KGW Sunrise)

US President Trump said the vaccine will be available for the entire population as soon as April and the US will not deliver vaccine to New York state until the administration has approved to do so, while he expects Pfizer (PFE) EUA very soon and stated that the administration will not go into a lockdown under any circumstances. (Newswires)

US President-elect Biden’s incoming Chief of Staff said the Biden transition team has not yet been authorized to work with the current administration on COVID-19 efforts and that Biden spoke with Democrat congressional leaders Pelosi and Schumer about the urgent need for COVID-19 relief. (Newswires)

America’s top infectious disease experts have ruled out a national lockdown, whilst NIH’s Fauci said it would fall to local and regional leaders to instigation mitigation measures, even under a Biden administration. (Times)

US Operation Warp Speed Chief Slaoui reiterated that they are hopeful for another positive vaccine update from Moderna (MRNA) this week given the similar technology to Pfizer (PFE) and noted that if front running vaccines are approved via EUA, the vaccine could be available to those who need it in December. Furthermore, the Operation Warp Speed Chief also called on the White House to allow contact with Biden's transition team and warned interrupting its work would endanger lives. (Newswires)

Johnson & Johnson (JNJ) initiated the second global Phase 3 clinical trial of the Janssen COVID-19 vaccine candidate in UK in which it will recruit 6,000 people for a 12-month trial. There were separate reports that HHS and Johnson & Johnson are to expand agreement to support next phase of COVID-19 vaccine research and development. (Newswires)

UK COVID-19 cases +24,962 (prev. +26,860) and deaths +168 (prev.+462), while France cases +27,228 (prev. +32,095) and deaths +302 (prev. +359). (Newswires)

UK PM Johnson was notified by NHS Track and Trace that he is required to self-isolate after contact with a person that tested positive for COVID-19, while Downing Street stated that the PM is well and does not have any symptoms. (Newswires)

French PM Castex stated that they are working on a COVID-19 strategy which will be in place until next summer, as the nation needs to adopt long-term rules to live with the virus until a vaccine is found. (Le Monde)

Austria announced a lockdown from Tuesday through to December 5th which will include closing of non-essential shops and will require the public to stay-at-home with specific exceptions. (Newswires)

German Chancellor Merkel is to meet with the heads of the country’s states today and are considering stricter measures to tackle the rising COVID-19 infection including reducing the number of allowed in household gatherings and compulsory wearing masks for students. (Newswires)

Japan's Miyagi prefecture may declare its own state of emergency regarding the virus, while reports also noted that Hokkaido and Sapporo chiefs are to hold emergency talks regarding the virus. (Newswires)


Asian bourses kickstarted the week on the front foot and US equity futures extended on last Friday’s gains on Wall St, where all major US bourses notched respectable gains and the S&P 500 posted a fresh record close with the upside led by the resurgence in cyclicals. ASX 200 (+1.2%) and Nikkei 225 (+2.0%) were positive as energy and financials in Australia mirrored the recent outperformance of the sectors stateside but with markets halted in the ASX within the first hour of trade due to a data-related issue, while the Japanese benchmark extended on its best levels in nearly 3 decades after stronger than expected GDP data for Q3 which showed the widest expansion in the economy since comparable data was available in 1980. Furthermore, the region was also boosted by the recent signing of the Regional Comprehensive Economic Partnership (RCEP) trade pact involving 15 countries for the world’s largest trade bloc with members accounting for nearly a third of the global population and around 30% of global GDP, while the latest Chinese activity data added to the tailwinds after Industrial Production topped estimates and although Retail Sales missed, it still showed an improvement in growth from the prior month. Hang Seng (+0.6%) and Shanghai Comp. (+0.9%) were supported by the data and PBoC announcement of a CNY 800bln 1-year Medium-term Lending Facility operation, but with gains capped on uncertainty as reports suggested US President Trump plans a last-minute crackdown on China and will enact a series of hard-line policies in his final weeks. The announcement of a rejig to the Hang Seng Index also provided a catalyst for price action with the index to be increased to 52 constituents from the current 50 which saw Anta Sports, Budweiser APAC and Meituan Dianping benefit from their inclusion to the index and Swire Pacific shares suffered on their expulsion, effective December 7th. Finally, 10yr JGBs were flat amid similar uneventful trade in T-notes and with prices hampered by the broad appetite for riskier assets, as well as weaker demand at the enhanced liquidity auction for longer-dated JGBs.

PBoC skipped reverse repos but conducted CNY 800bln 1yr MLF operation with rate maintained at 2.95%. (Newswires) PBoC set USD/CNY mid-point at 6.6048 vs. Exp. 6.6058 (Prev. 6.6285)

China and 14 other countries agreed to set up the world’s largest trading bloc in which they virtually signed Regional Comprehensive Economic Partnership on Sunday. (Newswires)

US President Trump reportedly plans a last-minute crackdown on China and will enact a series of hard-line policies in his final weeks, according to senior administration officials. Trump officials plan to sanction or restrict trade with more Chinese companies, government entities and officials for alleged complicity in human rights violations, or threatening U.S. national security. US officials added not to expect substantial new moves on Taiwan or the closure of Chinese consulates. (Axios)

China said it firmly opposes US actions regarding restricting investments in firms linked to the Chinese military and stated the US should stop unreasonable suppression of Chinese firms. (Newswires)

Central Military Commission in China released an outline on improving joint combat capabilities of the People's Liberation Army, which is aimed at war preparedness amid increased risk of military conflicts in certain regions including South China Sea, Taiwan Strait and China-India border. (Global Times)

US government provided Qualcomm a license to permit sales of 4G mobile phone chips to Huawei Technologies, while it was separately reported that CFIUS granted TikTok a 15-day extension of the divestiture order, according to a court filing. (Newswires)

Chinese Industrial Production (Oct) Y/Y 6.9% vs. Exp. 6.5% (Prev. 6.9%). (Newswires) Chinese Retail Sales (Oct) Y/Y 4.3% vs. Exp. 4.9% (Prev. 3.3%) Chinese House Prices (Oct) Y/Y 4.3% (Prev. 4.6%)

Japanese GDP (Q3) Q/Q 5.0% vs. Exp. 4.4% (Prev. -7.9%, Rev. -8.2%). (Newswires) Japanese GDP Annualised (Q3) 21.4% vs. Exp. 18.9% (Prev. -28.1%, Rev. -28.8%)


UK PM Johnson’s Chief Adviser Cummings has reportedly left the government for good after not deciding to stay until Christmas. Government officials noted that there will be no change on Brexit policy following the resignation, while reports also stated that Cummings and director of communications Cain will work the notice period from home. (Newswires)

UK PM Johnson is expected to announce in the upcoming week the implementation requiring all new cars sold must be electric in 2030 (which was brought forward to 2035 from 2040 in February). There were also separate reports that Chancellor Sunak is mulling plans to charge motorists for using roads amid concerns of a GBP 40bln tax shortfall related to switch to electric cars. (Newswires/Times)

UK government reportedly launched a crackdown on tax avoidance by multinationals that lower their tax bills by shifting moving profits to other countries, in which the HMRC warned it could conduct investigations and impose substantial fines. (FT)

UK Brexit Negotiator Frost stated that there has been progress in a positive direction in recent days and we now largely have a common draft treaty text although significant elements have not yet been agreed, while he added we will build on these and get an overall agreement if we can, but may not succeed. (Newswires)

UK Environment Secretary Eustice said the government will be bringing the Internal Market Bill back and that both sides must focus on getting a free trade deal so measures for Northern Ireland will not be necessary, while he added that there is still “some way” between UK and EU on fishing and the “time is very, very short” to reach an agreement. Furthermore, he stated they can always squeeze out additional time if nearly there, but things must move this week. (Newswires)

EU sources noted there was less progress in recent days on outstanding Brexit sticking points than they had hoped for and that the moment of truth was approaching, while UK sources said that big gaps remained between the sides. Furthermore, both sides were doubtful that a draft agreement could be reached in the coming days. (BBC/Twitter)

Irish Foreign Minister Coveney stated that a deal is very difficult but very doable and that we won’t get a deal if the UK imposes the Internal Market Bill, while he added the sides are very far apart on fishing and that time is running out and talks must be resolved in principle this week. (Newswires)

A senior MEP said a Brexit deal could be agreed in as little as 10 days but noted differences still remain, while reports also noted that the European Parliament told EU’s Chief Brexit Negotiator Barnier the latest they could get the negotiated deal was December 10th. (Telegraph)

EU regulators are reportedly seeking a solution regarding post-Brexit derivative trades as overlapping regulations risk EU banks' branches in London having to route derivatives trades to NYC, while reports added that officials are working on adjustments to rules in the event the UK and EU block full access to each other’s financial services. (FT)

French Finance Minister Le Maire believes a compromise can be reached in coming weeks on the Boeing-Airbus sanctions dispute. (Newswires)

Fitch affirmed France at 'AA'; Outlook Negative and affirmed Austria at AA+; Outlook Stable. S&P affirmed Israel at AA; Outlook Stable and affirmed Iceland at A; Outlook Stable, while DBRS cut UK to AA; outlook stable. (Newswires

UK Rightmove House Price Index (Oct) M/M -0.5% (Prev. 1.1%). (Newswires) UK Rightmove House Price Index (Oct) Y/Y 6.5% (Prev. 5.5%)


In FX, the DXY was softer amid the lack of haven appeal due to the positive risk tone and as the greenback’s major counterparts mildly built upon Friday’s gains whereby EUR/USD advanced to the 1.1850 level, while GBP/USD reclaimed the 1.3200 handle after the recent announcement that UK PM Johnson’s Chief Adviser and Brexit campaign architect Dominic Cummings resigned, although officials have stated that there will be no change on Brexit policy following the resignation. In addition, focus remains on discussions as UK Brexit Negotiator Frost noted progress in a positive direction in recent days but significant elements have not yet been agreed upon, while EU sources stated progress was less than they hoped for and both sides have suggested they need to make headway this week, which could be complicated by PM Johnson’s requirement to self-isolate after a contact of his tested positive for COVID-19. Elsewhere, USD/JPY was subdued around 104.50 amid the softness in the greenback and rebound in the Japanese economy, while Antipodeans benefitted from the risk appetite and firmer PBoC reference rate setting.


WTI crude futures extended above the USD 40/bbl level amid the broad heightened risk appetite, although gains were capped amid recent supply related headlines including the rise in Libya output to more than 1.2mln bbls, increased in the latest Baker Hughes rig count and with China also planning to begin a large oil and gas project in the South China Sea, while increased COVID-19 infections and further restrictions in several US states does not do any favours on the demand front. Elsewhere, gold eked mild gains amid the softer greenback although remains beneath the USD 1900/oz level amid the lack of haven demand and copper outperformed with prices getting a boost by the stronger than expected Chinese Industrial Production data.

Baker Hughes US rig count: Oil +10 at 236, NatGas +2 at 73, Total +12 to 312. (Newswires)

US President Trump reportedly plans to rush drilling leases in the Arctic before President-elect Biden takes over. (Newswires)

China is reportedly to begin a large oil and gas project in the South China Sea after recently building the world’s largest oil and gas storage platform. (Asia Times Financial)


Turkish President Erdogan said Turkey and Northern Cyprus will no longer tolerate diplomatic ‘games’ regarding the rights to offshore resources in the eastern Mediterranean and he called for a two-state solution in Cyprus, while Cyprus stated that President Erdogan’s visit was provocative and illegal. (Newswires)


Treasuries lacked conviction in either direction on Friday, with futures closing towards the bottom of their tight ranges. Futures volumes were lacklustre. Stocks were bid with a modest bias towards cyclicals emerging in latter trade, seeing rates come off their earlier highs somewhat. However, with no tier 1 data today (disappointing consumer sentiment survey and slightly below expected PPI did not catalyse any market moves) and little macro developments, the Treasury market was free to close up for the week and make any preparations for next week's refunding (USD 27bln of 20-year bonds on Wednesday and USD 12bln of 10-year TIPS on Thursday). On the week, following the pronounced curve steepening on Monday, yields have now pared back a fair amount of the move (Weekly open/high levels, 5s: 36.4/46.5bps, 10s: 83/97.5bps, 30s: 161.2/176.7bps). The combination of surging US virus cases amid an opaque interregnum, and the associated fiscal policy/stimulus, not to mention potential Fed intervention, will serve as headwinds to further steepening. However, tailwinds will sustain if the economic data continues to prove resilient in light of new mobility restrictions and if more vaccine/treatment progress is made, with next support levels to cross for the 10- and 30-year yields being the big 1 and 2% round figures, respectively.  T-note (Z0) futures settled 1+ ticks lower at 138-03+; t-bond (z0) settled 3 ticks lower at 172-06.

Saudi Aramco has reportedly hired banks for a potential Dollar bond offering. (Newswires)