[PODCAST] US Open Rundown 18th November 2020
- European bourses are currently modestly firmer after a slightly subdued start to the session; NQ (+0.3%) initially outperformed but RTY (+0.3%) has closed the gap as the session progressed
- 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
- UK Gov’t reportedly 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; EU briefing touted for Friday
- FX features a downbeat dollar as the session progressed to the modest benefit of major peers while fixed is largely unchanged
- Looking ahead highlights include Canadian CPI, US Housing Starts, DoEs, BoE’s Haldane, Fed’s Evans, Williams, Bullard & Kaplan, supply from the US
US ELECTION UPDATE
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)
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)
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)
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 (+0.5%) 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%)
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)
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)
EU states are to receive an update on Brexit trade discussions on 0700GMT/02:00EST on Friday, according to sources. (Newswires)
UK government agreed to a 4-year funding deal for the armed forces following intense talks between PM Johnson and Chancellor Sunak. (The Times)
Slovenia PM backs Hungary & Poland in EU rule of law row, AFP. (Twitter) Link to Newsquawk analysis on the recovery fund/budget (Nov 17th)
European Commission states EZ Gov't should keep spending in 2021 to support pandemic recovery, such spedning should be temporary & targeted; cautions Belgium, France, Greece, Italy, Portugal & Spain on medium-term fiscal sustainability. (Newswires)
UK CPI MM* (Oct) 0.0% vs. Exp. -0.1% (Prev. 0.4%); YY* (Oct) 0.7% vs. Exp. 0.6% (Prev. 0.5%)
- Core CPI MM* (Oct) 0.2% (Prev. 0.6%); Core CPI YY* (Oct) 1.5% vs. Exp. 1.3% (Prev. 1.3%)
EU HICP Final YY (Oct) -0.3% vs. Exp. -0.3% (Prev. -0.3%); X-F&E Final YY (Oct) 0.4% vs. Exp. 0.4% (Prev. 0.4%)
- X-F, E, A & T Final YY (Oct) 0.2% vs. Exp. 0.2% (Prev. 0.2%)
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)
European equities trade modestly firmer after a softer start to the session (Eurostoxx 50 +0.1%) as prices continue to consolidate around recent levels in the absence of any further incremental newsflow. The picture remains the same for the region as optimism around the efficacy of COVID-19 vaccines is somewhat tempered by the nearer-term outlook which is one of mounting COVID cases, lockdown restrictions and ongoing disputes over the passage of the European recovery fund. Sectoral performance is relatively mixed with mild outperformance in the tech sector, something which recently has often been a sign of rotation in/out of growth momentum names and out/into value/cyclicals. However, the performance of the latter is relatively mixed, suggesting that this morning is not in-fitting with this theme. Additionally, the magnitude of moves thus far are relatively minor and as such there is the risk that any such discrepancies between groups could be subject to over-interpretation. The highlight of this morning’s earnings reports was Danish shipping giant Maersk (-2.1%) with the Co.’s report often viewed as a bellwether for global economic activity, on which, the Co. noted that it has recovered faster than initially anticipated as it benefits from firmer retail sales in the US. Elsewhere, RSA (+3.9%) are firmer on the session after the Co. accepted a GBP 7.2bln takeover approach from Intact and Tryg. Other deal activity has seen Deutsche Boerse (+3.4%) agree to acquire an 80% stake in Institutional Shareholder Services with an enterprise value of USD 2.3bln. To the downside, Air France-KLM (-3.3%) are lower on the session with reports noting the Co. are said to be in discussions over a EUR 6bln capital raise. Hargreaves Landsown (-1.5%) are another laggard for the session amid reports that Stephen Lansdown, the Co.’s founder has sold 6.7mln shares at a discount.
Apple (AAPL) launching, from January 1st, an App Store small business programme which reduced commission to 15% vs. 30% for such Co's with earnings up to USD 1mln/year. (Newswires)
DXY - The Dollar and index look increasingly destined to decline further as sellers continue to pounce on rebounds and the technical backdrop/momentum turns more bearish to the benefit of its major and EM counterparts. In fact, the Buck’s downfall may be due to relative strength elsewhere as much as negative US specifics, albeit the ongoing rise in COVID-19 infections and fatalities has dampened some vaccine optimism as stimulus remains gridlocked in the still uncertain Presidential Election aftermath. The DXY has faded after another tame and short-lived recovery petered out just above 92.500 and is just off 92.200 having fallen to 92.207 vs last week’s 92.129 trough ahead of housing data and another round of Fed speak.
NZD/GBP/AUD - In contrast to the Greenback, latest Kiwi and Aussie revivals appear more solid on the respective 0.6900 and 0.7300 handles following mixed NZ PPI data and appreciation in the YUAN from another higher PBoC Cny midpoint fix. Meanwhile, the Pound is inching closer to 1.3300 and back through 0.8950 against the Euro ahead of a potentially key update from EU chief Brexit negotiator Barnier on Friday and in wake of reports that France may have ‘accepted’ that there will less water to fish in post-UK transition. However, market contacts suggest there could be big offers into the next big figure in Cable and price action supports that theory, while Aud/Usd may be capped around 0.7350 in the run up to Aussie employment overnight.
JPY/CAD/EUR/CHF - The Yen has breached 104.00 again irrespective of somewhat conflicting Japanese trade impulses, as the surplus smashed consensus, but only by virtue of the fact that exports hardly fell and imports plunged much more than expected. Elsewhere, the Loonie is back above 1.3100 against the backdrop of firmer oil prices in advance of Canadian CPI again, while the Euro is still on track to test 1.1900 and in bullish mode above the 50 HMA (1.1856) given no big upside option expiry interest to hamper the pair today, unlike Usd/Cad that should be cushioned by a hefty 1.1 bn at the 1.3000 strike. In similar vein, the Franc is finding 0.9100 tough to overcome, and perhaps wary of more verbal intervention to compliment direct action via SNB’s Maechler who is scheduled to talk at some point.
SCANDI/EM - Choppy trade for the Sek and Nok due to fluctuations in risk sentiment, but the Try is bucking the overall trend of gains vs the Usd after yesterday’s brief interlude as the clock ticks down to Thursday’s eagerly anticipated CBRT policy meeting that comes with an aggressive median forecast of +475 bp in comparison to unchanged SARB expectations.
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)
Notable FX Expiry, NY Cut:
- USD/CAD: 1.3000 (1.1BLN), 1.3100 (455M), 1.3195-1.3200 (650M)
Bonds are still not strictly in lock-step with equities, but the mild rebound in EU indices as a gauge of broad risk sentiment has at least been acknowledged if not directly accredited to the pull-back in Bunds, Gilts and US Treasuries from best levels to fresh intraday lows. However, the 10-year benchmarks have regrouped after decent German and UK sales, leaving just the 20-year US offering to go after data, yet more Fed rhetoric and EIA weekly inventories. Looking at price action in more detail, the core futures are around 175.30, 134.96 and 138-10 within 175.17-46, 134.87-135.14 and 138-09+/138-16+ respective ranges.
Books for China's Euro-denominated issuance in excess of EUR 16bln; regarding 5, 10 & 15yr issuance with figures for this previously reports at MS +45bp, MS +70bp and MS +90bp respectively. (Newswires)
WTI and Brent have continued to grind higher throughout the morning aided by the gradual pick-up in equity performance as well as tail-winds from the USD’s underperformance thus far. Fundamentally, little new has occurred since yesterday’s JMMC gathering and attention has now firmly turned to the full OPEC/OPEC+ gathering at month-end for further updates prior to the next JMMC on December 17th. Currently, the benchmarks are posting gains of around 1.0% and reside in relative proximity to session highs. For reference, last night’s private inventories printed a larger than expected build of 4.2mln vs. Exp. 1.7mln and did prompt some crude downside although this was relatively short-lived. Later today the EIA will release their inventory report with the headline expected at a build of 1.65mln. Moving to metals, spot gold is overall flat this morning but has been erring slightly lower in-spite of the USD’s downside with some desks attributing the mild pressure to Fed nominee Shelton’s nomination being blocked yesterday, though this does retain the scope for a re-vote at a later date; in the context of Shelton’s previously expressed interest in hard-money regimes.
US Private Energy Inventories (bbls): Crude +4.2mln (exp. +1.7mln). (Newswires)
Iraq is to invite international energy Cos to compete for the construction of its 300k BPD refinery. (Newswires)
Saudi Energy Minister says OPEC+ has managed to bring stability to oil markets, and the group has the will and ability to bring more stability. (Newswires)