Original insights into market moving news

[PODCAST] European Open Rundown 18th November 2020

  • Asian equity markets traded mostly higher as the region attempted to pick up from the weak handover from Wall Street
  • In FX, the DXY remained below the 92.50 level, EUR/USD modestly extended gains, GBP/USD sits above 1.3250
  • France is understood to have accepted there will be reduced fishing access to UK waters post-Brexit, according to The Telegraph
  • Downing Street was said to push back on the idea of an imminent Brexit deal, according to Times Radio’s Newton Dunn
  • Fed Chair Powell noted it was not the right time to put away emergency tools
  • House Speaker Pelosi and Senate Minority Leader Schumer sent Senate Majority Leader McConnell a letter calling to start negotiations on COVID-19 relief this week
  • Looking ahead, highlights include UK, EZ (final) & Canadian CPI, US Housing Starts, DoEs, BoE’s Haldane, Fed’s Evans, Williams, Bullard & Kaplan, supply from UK, Germany & the US


US President Trump tweeted that the only thing secure about our election was that it was virtually impenetrable by foreign powers which the Trump Administration takes great credit, although Radical Left Democrats, Dominion and others were perhaps more successful. President Trump also tweeted an article that a second county in Georgia found a memory card with thousands of votes that had not been uploaded into the system used in the state, with the majority of the votes for President Trump. (Twitter)

US President Trump announced that he fired Cybersecurity and Infrastructure Security Agency Director Krebs who had vouched that the election was secure, while President Trump added the recent statement by Krebs on the security of the 2020 Election was highly inaccurate, in that there were massive improprieties and fraud including dead people voting, Poll Watchers not allowed into polling locations, “glitches” in the voting machines which changed votes from Trump to Biden, late voting, and many more. (Twitter)

US President Trump tweeted that Michigan refused to certify the election results following initial reports that Wayne County in Michigan failed to certify votes by the deadline and the deadlock was referred to the Michigan Board, although it was later reported the canvassing board backtracked and voted to unanimously certify the results after public criticism. (Newswires/Twitter/WSJ)

US President Trump's campaign filed a lawsuit contesting the results of Nevada's presidential election and alleged that identified irregularities will be enough to overturn Biden's win in the state, while other reports stated the Pennsylvania Supreme Court ruled against US President Trump on election watchers. (Newswires/Nevada Independent)

US President Trump is "seriously" considering a 2024 bid for president according to two sources, while there were also comments from Senate Majority Leader McConnell that we will have an orderly transfer from this administration to the next one. (Newswires/CBS News)


US COVID-19 cases +151,855 (prev. +138,025) and deaths +762 (prev. +660), while New York COVID-19 cases +5,088 (prev. +3,490); positivity rate 3.18% (prev. 2.8%); hospitalizations 2,124 (prev. 1,968); deaths +29 (prev. +25). (Newswires)

Ohio Governor DeWine announced plans to impose a 22:00-05:00 curfew across Ohio that will start Thursday and last for at least 21 days. Illinois Governor announced that all regions in Illinois will move to tier 3 mitigations from Friday and urged residents to stay at home when possible, while the Illinois state government ordered casinos to shut, closed indoor dining and imposed limitations on gyms. Elsewhere, Los Angeles County plans to implement a curfew from 2200-0600 beginning on Friday night and restaurants with outdoor dining, breweries and wineries will be reduced to 50% capacity. (Newswires/Fox LA)

FDA authorized the first COVID-19 self-testing kit at home with the Lucira all-in-one test kit authorized for home use with self-collected nasal swab samples. (Newswires)

US HHS's Azar expects Pfizer (PFE) and Moderna (MRNA) to submit EUAs any day now, while he stated the FDA will take as much time as it needs to review data and that hundreds of millions of doses could be produced under EUA. There were also comments from Pfizer that the safety milestone for the COVID-19 vaccine has been achieved already and it is very close to submitting US EUA, while it is also working on a new thermostable COVID-19 vaccine formulation that will be ready in the middle or H2 of next year. (Newswires)

Sinovac (SVA) vaccine CORONAVAC appeared to be safe and well tolerated at all doses according to Phase 1/2 study, while phase 3 will be crucial to determine the immune response according to researchers. Researchers also stated the vaccine is suitable for emergency use during the pandemic and noted that antibody levels induced by the vaccine were lower than those seen in people that have recovered from the virus. (Newswires)

UK COVID-19 cases +20,051 (prev. +21,363) and deaths +598 (prev. +213). (Newswires)

French President Macron is to speak on the conditions for progressive easing of French lockdown towards the middle of next week, according to sources. (BFM TV)

Tokyo is preparing to raise its coronavirus infection alert status to the highest of level 4. Elsewhere, South Australia’s Premier announced mobility restrictions amid the ongoing outbreak in the state with all schools, universities, takeaway food, pubs and cafes to be shut for 6 days. (Nikkei/Newswires)


Asian equity markets traded mostly higher as the region attempted to pick up from the weak handover from Wall Street where all major indices finished a choppy session in the red amid mixed data and as the recent vaccine euphoria wore off. ASX 200 (+0.5%) was positive with the index underpinned by outperformance in its largest weighted financials sector but with upside limited in the broader market by softness in commodity-related stocks, while Nikkei 225 (-1.1%) lagged its peers on recent currency inflows and virus concerns with Tokyo preparing to shift to the highest virus alert level. Hang Seng (+0.2%) and Shanghai Comp. (+0.2%) were kept afloat despite a slow start as participants remained cautious following another liquidity drain by the PBoC and amid further tension-related headlines after US bombers entered China's air defence identification zone on Tuesday and with US regulators drafting plans to require Chinese companies listed in the US, to use auditors overseen by US regulators or risk being removed from exchanges. Finally, 10yr JGBs eked mild gains amid recent upside in T-notes and underperformance in Tokyo stocks, but with upside capped by mixed results at the 20yr JGB auction.

PBoC injected CNY 100bln via 7-day reverse repos at a rate of 2.20% for a net daily drain of CNY 50bln. (Newswires) PBoC set USD/CNY mid-point at 6.5593 vs. Exp. 6.5594 (Prev. 6.5762)

Japanese Trade Balance (JPY)(Oct) 872.9B vs. Exp. 250.0B (Prev. 675.0B, Rev. 687.8B). (Newswires) Japanese Exports (Oct) Y/Y -0.2% vs. Exp. -4.5% (Prev. -4.9%) Japanese Imports (Oct) Y/Y -13.3% vs. Exp. -9.0% (Prev. -17.2%, Rev. -17.4%)


BoE Deputy Governor Ramsden said we stand ready to take whatever additional action is necessary to achieve the remit of meeting the 2% inflation target, while vaccine news could bolster resilience and mitigate some of the risks of long-term scarring. Ramsden also commented it is a question for the future whether the BoE would buy green gilts and that they are not about to implement negative rates. (Newswires)

UK’s Downing Street was said to push back on the idea of an imminent Brexit deal and senior sources in Brussels also don't think the politics are right yet. Furthermore, the departure of PM Johnson’s Chief Adviser Cummings is said to have made it harder for the PM to compromise with those close to PM Johnson nervous about being painted as selling out so want more time to pass with the first or second week in December now seen as most likely. However, it could even be later such as in January or February and emergency measures being quietly prepared now to keep trade flowing as long as a deal is in sight, according to Times Radio’s Tom Newton Dunn. (Twitter)

Irish PM Martin suggested that the landing zones for a trade deal were on the horizon with France understood to have accepted there will be reduced fishing access to UK waters post-Brexit. (Telegraph)

UK government agreed to a 4-year funding deal for the armed forces following intense talks between PM Johnson and Chancellor Sunak. (The Times)

German Europe Minister Roth warned that those who reject the rule of law mechanism (Hungary and Poland) need to know their citizens will pay a price for this. (Newswires)


In FX markets, the greenback’s attempt to recoup some lost ground faltered overnight and the DXY remained below the 92.50 level with upside restricted after mixed data, as well as recent central bank rhetoric including from Fed Chair Powell who noted it was not the right time to put away emergency tools and is premature to contemplate normalizing the balance sheet. In addition, Fed’s Barkin suggested that the economy faces a rough several months as widespread vaccine distribution will possibly not occur until summer, while the Senate voted 50-47 to block Judy Shelton’s Fed nomination at the procedural hurdle after Senate Majority Leader McConnell voted ‘no’ which preserves the option to bring her nomination up again as 3 Republican Senators were absent due to quarantining and a family matter. EUR/USD lacked direction as price action oscillated through the 50-hour MA level of 1.1856 and following the recent budget veto which spurred warnings from Germany that citizens of those which vetoed will pay the price, although EU Economy Commissioner Gentiloni provided a more amicable tone and was confident the situation will be resolved. GBP/USD traded above 1.3250 as it held on to yesterday’s gains due to Brexit-related optimism with negotiators said to be zeroing in on a deal for as early as next week, although other reports noted that Downing Street was pushing back on the prospects of an imminent agreement. Elsewhere, USD/JPY tested 104.00 to the downside amid the underperformance of stocks in Tokyo and mixed Japanese trade data which showed higher than expected trade balance and exports, although the latter remained at a contraction, while a steeper than anticipated decline in imports suggested weak domestic demand. Antipodeans were lacklustre after the activity currencies suffered during US trade although are off their lows as the risk appetite improved overnight and after another stronger PBoC fix.

RBA Governor Lowe said bond buying is reducing costs of government borrowing and rates across the economy, while he stated it is fully correct for the government to borrow to support the economy and suggested there is an ongoing recovery but added recovery is very uneven with some sectors booming and others are depressed. (Newswires)


WTI crude futures were choppy overnight as prices initially weakened following a bearish private inventory report which showed a larger than expected build in headline crude stockpiles, although oil prices later retraced the losses to return flat after finding support near the USD 41.00/bbl level and as the risk tone gradually improved overnight. Furthermore, the recent JMMC failed to spur prices as the committee refrained from making any formal recommendations, although there were some mixed comments from the Saudi Energy Minister who noted there is still near-term uncertainty with surging COVID cases but also sees good oil demand recovery in China and India. Gold was contained beneath the USD 1900/oz level with the effects of the lacklustre greenback offset by the improved risk tone, although there was a bout of pressure after the Senate blocked Judy Shelton’s Fed nomination for now, which some analysts attributed the downward pressure to her previously expressed interest in hard-money monetary regimes, while copper prices benefitted by the brightening mood across risk assets.

US Private Energy Inventories (bbls): Crude +4.2mln (exp. +1.7mln). (Newswires)

UAE cut oil output by 153k BPD in October, in line with the OPEC+ supply pact, according to local press. (Newswires)


US Pentagon announced withdrawal of troops in Afghanistan from 4,500 to 2,500 and a withdrawal of 500 troops in Iraq to 2,500. In relevant news, Senate Majority Leader McConnell warned against any major changes in US defense or foreign policy in the next couple of months, including major troop drawdowns in Iraq or Afghanistan. (Newswires)

Rockets reportedly landed near the Baghdad green zone and sirens were heard from the US embassy, according to local police. (Newswires)

US think tank Heritage Foundation said North Korea poses major threats to "vital interests" of the US as it continues to move forward with its missile and nuclear capabilities, while there were separate reports that US and South Korean military held combined training exercises in California. (Newswires)

Syrian air defences reportedly intercepted 'Israeli aggression' in the skies over Damascus, while a Syria military source later stated that 3 military personnel were killed and 1 injured from the Israeli aggression. (Newswires)


Treasuries were bid and the curve was flatter on Tuesday as participants pared back recent steepeners and retail sales disappoint. By settlement, 2s -0.6bps at 17.3bps, 10s -3.4bps at 87.2bps, 20s -3.4bps at 139.6bps, 30s -3.6bps at 162.3bps; Treasury futures volumes were average. Duration caught a bid overnight and extended into latter US trade. The disappointing US retail sales report accentuated the bid. There was some choppiness in the afternoon, however, with a busy supply slate (USD 8bln from Saudi Aramco and USD 3bln from Italy today) and a new record high NAHB Housing Index, the upside lost its momentum in the afternoon, with the 10-year cash yield finding resistance at the technically significant level of 87bps. While the rally plateaued, it was by no means a reversal, with the market continuing to pare back from the new cycle highs (in yields) seen at the beginning of last week. Despite a busy supply slate and the modern update from Monday, the tape action continues to exhibit a further reversal of reflationary trades - inflation breakevens narrowed as real yields fell by a smaller magnitude than nominal today. Note, Treasury market participants are now looking towards the futures roll, where open interest shifting to the March 2021 contracts from December 2020 is expected to gain traction early next week. T-note (Z0) futures settled 8+ ticks higher at 138-09+.

Fed Chair Powell said the time is not right yet to put away Fed emergency tools and that it is premature to even think about normalizing the size of the Fed's balance sheet but they will start to think about normalization issues only after a "whole lot" more progress on employment and inflation goals. Fed Chair Powell also reiterated that the recovery is slowing and remains uneven, while he is concerned that people will lose confidence and there are some signs already of people pulling back. Furthermore, he stated that vaccine news is certainly good but even the best case, widespread vaccination is months in the future. (Newswires)

Fed's Barkin (2021 voter) said the economy is facing a rough several months with wide vaccine distribution perhaps not until summer, while he added that a spike in fiscal spending is likely to have passed amid a divided government although excess savings could support the economy. (Newswires)

US Senate blocked the Fed nomination of Judy Shelton in the procedural vote by 47-50 after Senate Majority Leader McConnell voted ‘no’ which preserves the option to bring the nomination up again in the future. This follows reports that 3 Republican Senators were absent including Senator Grassley who later announced that he tested positive for coronavirus, while the White House said it is confident that Fed nominee Judy Shelton will be confirmed and Senator Thune stated there is likely to be another attempt later in the week. (Newswires)

US Senate Majority Leader McConnell said he has not had any private discussions yet with Democratic leaders or with Biden on a COVID aid bill, while he added that he is open to a USD 500bln bill but also stated he has seen no evidence that democrats are open to GOP COVID aid plan. In related news, House Speaker Pelosi and Senate Minority Leader Schumer sent Senate Majority Leader McConnell a letter calling to start negotiations on COVID-19 relief this week. (Newswires)