Original insights into market moving news

[PODCAST] European Open Rundown 19th November 2020

  • Asian bourses were mixed as the region partially shrugged-off the risk-averse mood that rolled over from US where early vaccine optimism faded amid COVID-19 concerns
  • Selling in the US exacerbated heading into the close after New York City Mayor De Blasio announced the closure of all public schools from today
  • In FX, the DXY has slipped back below 92.50, EUR/USD hovers around 1.1850 and GBP/USD has trimmed gains
  • European leaders will reportedly demand today that the European Commission publishes no-deal Brexit plans amid worries negotiations are dragging on
  • Looking ahead, highlights include CBRT and SARB Rate Decisions, Philadelphia Fed Business Index, US Existing Home Sales, Fed’s Mester, ECB’s Lagarde, Schnabel, supply from Spain and France


US COVID-19 cases +164,382 (prev. +151,855) and deaths +1,602 (prev. +762), while reports also noted that the total death toll in the US from the pandemic has surpassed 250k. New York COVID-19 cases +5,294 (prev. +5,088) and deaths +35 (prev. +29). New York City Mayor De Blasio later confirmed that New York City reached the 3% testing positivity 7-day average threshold and that public school buildings will be closed from Thursday, while Minnesota Governor Walz ordered restaurants and bars to stop in-person dining, as well as the closure of fitness centers for 4 weeks. (Newswires)

US President-elect Biden said he will be using the Defense Authorization act on the pandemic. (Newswires)

US HHS' Azar said two COVID-19 vaccines could be ready for US authorization and distribution within weeks, while US government officials suggested there could be a 7-10 day lag between US authorization of Moderna and Pfizer vaccine candidates, while there could also be a gap of two or three months between EUA and full approval. (Newswires)

BioNTech (BNTX) CEO said if dialogue with regulators goes well and all conditions are met, the group could have EU conditional approval in H2 of December and US EUA in mid-late December. (Newswires)

Tokyo raised its virus alert to highest level as expected and the city had a new record of 534 new COVID-19 infections today, which was the first time that daily cases surpassed 500. Furthermore, Japan Chief Cabinet Secretary Kato said they will monitor infection rates and capacity of medical facilities before declaring and emergency, while the Japanese and Tokyo governments held a meeting regarding the virus and will conduct a briefing at 1715 local time (0815GMT). (Newswires/NHK)


Asian bourses were mixed as the region partially shrugged-off the risk-averse mood that rolled over from US where early vaccine optimism faded amid COVID-19 concerns and with selling exacerbated heading into the closing bell on Wall Street after New York City Mayor De Blasio announced to close all public schools from today after the 7-day average positive testing rate reached the 3% threshold. Furthermore, there was also recent commentary from Goldman Sachs that month-end pension rebalancing estimates were at a net USD 36bln of equities to sell and was the fourth-largest sell estimate going back 20yrs. ASX 200 (+0.3%) declined at the open in which notable weakness in healthcare and the commodity-related stocks briefly dragged the index beneath the 6500 level where it then found support to recoup its losses, while the largest-weighted financials sector kept afloat despite the mixed fortunes of its constituents with insurers IAG, Suncorp and QBE among the worst performers after the NSW Supreme Court ruled in favour of policyholders on a test case regarding business interruption policies, whereby it decided that pandemic exclusions were not valid. Nikkei 225 (-0.5%) declined as Japan’s exporters remained at the mercy of a stronger currency and with the mood clouded by the ongoing spike in COVID-19 infections, although there were some bright spots including Sharp which rallied on news it will return to the blue-chip index from December 2nd. Hang Seng (-0.5%) and Shanghai Comp. (+0.5%) conformed to the indecisive picture which was not helped by another PBoC liquidity drain and recent comments from a PBoC researcher who sees little room for a rate reduction and suggested that current rates in the market are already lower than the natural equilibrium level, while shares in one of China’s largest securities companies Haitong Securities were heavily pressured after China alleged manipulation by the Co. in an expanding probe into the recent default by a state-owned coal miner. Finally, 10yr JGBs were steady despite the negative picture in Japanese stocks with demand hampered after recent indecision in T-notes following a weak 20yr auction and the lack of BoJ purchases in the market today.

PBoC injected CNY 70bln 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 6.5484 vs. Exp. 6.5506 (Prev. 6.5593)

Chinese President Xi said international communities should strengthen policy coordination and that China has confidence and ability to maintain stable economic operations. President Xi also stated that China will continue to deepen reforms and must rely on innovation-driven growth model, while he added China will strengthen protection of intellectual property rights, will not engage in decoupling and will further reduce tariffs. (Newswires)

US, UK and Australia released a joint statement which called on China to stop undermining rights of people in Hong Kong and that they expect China to adhere to its international commitments. (Newswires)


UK PM Johnson is to unveil an additional GBP 16.5bln in defence spending, while reports stated the UK will create a new space command and artificial intelligence agency. (Sky/Twitter)

Senior EU diplomats warned that EU governments would demand the European Commission launch emergency Brexit no-deal plans if a trade accord was not struck by Friday and an EU source believes that preparing no-deal plans will concentrate minds in the UK government. However, later reports noted that European leaders will demand today that European Commission publish their no-deal Brexit plans amid worries negotiations are dragging on with businesses unaware what to prepare for in the worst scenario. (Newswires/Telegraph/The Times)

The UK and Canada are on the cusp of securing a new trade agreement that will replace the existing deal Britain holds via the EU. (Newswires)

European Court of Auditors report stated EU has failed to tame big tech because it has moved too slowly and lacks legal powers to stop the likes of Google (GOOG) and Facebook (FB) from wiping out rivals, while it added that antitrust probes are too lengthy and enforcement only occurs after smaller competitors have been wiped out. (FT)


In FX markets, the DXY briefly rose back above the 92.50 level as the initial risk-aversion spurred haven appeal although the greenback has since retreated from its best levels amid ongoing virus concerns and tighter restrictions including the temporary closure of NYC schools and with the Minnesota Governor ordering restaurants and bars to stop in-person dining, as well as the closure of fitness centres for 4 weeks. There were also recent comments from Fed officials which didn’t deviate much from the usual rhetoric as Fed’s Williams stated the loss of fiscal support could slow the economy in the coming months and Fed's Barkin noted that spending is coming back faster than employment but suggested there is still far to go amid the recent escalation in virus cases. EUR/USD was pressured following a breakdown of support at the 1.1850 level but then rebounded as the USD-momentum lost steam and GBP/USD remained subdued after reports that European leaders will demand today that European Commission publish no-deal Brexit plans amid worries negotiations are dragging on with businesses unaware what to prepare for in the worst scenario. USD/JPY languished beneath 104.00 amid the uninspiring risk appetite which was also the main catalyst for losses in cyclical currencies AUD/USD and NZD/USD, although AUD/USD has since recouped its losses and eyes a reclaim of the 0.7300 status after a stellar jobs report in which Employment Change showed a surprise expansion of 178.8k jobs and the Unemployment Rate printed lower than expected but was still an uptick from the prior month’s jobless rate.

Australian Employment (Oct) 178.8k vs. Exp. -30.0k (Prev. -29.5k). (Newswires) Australian Unemployment Rate (Oct) 7.0% vs. Exp. 7.2% (Prev. 6.9%)

South Korean Finance Minister Hong said recent gains in KRW outpace the major currencies and excessive FX moves are undesirable, while they are closely watching FX market and will firmly act to stabilize markets. Furthermore, it was later reported that the BoK was suspected to be purchasing USD to curb KRW appreciation, according to multiple FX dealers. (Newswires)


Commodities were softer overnight amid the mixed risk tone which dragged WTI crude futures below USD 41.50/bbl level and with recent OPEC commentary also providing mild headwinds with Saudi’s Energy Minister suggesting the jury is still out regarding extension of oil cuts. However, the downside in oil prices were marginal with the slight improvement in risk tone providing some support for prices. Gold was mildly pressured and retreated further away from the USD 1900/oz level with the precious metal subdued by the early strength in the greenback and copper remained lacklustre which saw prices extend on yesterday’s lows.


Iranian Foreign Minister Zarif said if the US looks to re-join the Iranian nuclear agreement, Iran is ready to negotiate terms for it to regain its JCPOA participant status, while AFP later tweeted that Iran said it would "automatically" return to its nuclear commitments if US President-elect Joe Biden lifts sanctions. (Newswires/Twitter)


Treasuries were marginally offered by futures settlement on Wednesday, with choppiness in US stocks and supply pushing yields off their earlier lows. By settlement, 2s unch. at 17.5bps, 10s +0.8bps at 88bps, 20s +0.2bps at 139.9bps, 30s -1bps at 161.5bps; real yields were flat; Treasury futures volumes were slightly soft compared to recent averages. It was hard to read too much from the moves in Treasuries today, with ranges tight again and a lack of meaningful direction. It appeared that the modest move lower in bonds was in part a result of concession for the 20-year bond auction, especially given duration-sensitive stocks were actually recovering losses at the same time. That concession was ultimately warranted after the record size, USD 27bln 20-year offering tailed by 0.9bps, with the internals fairly weak. There were reported block sales of USZ0 and TYZ0 contracts on the back of that, seeing bonds print session lows in the outset, although desks noted a strong offsetting bid from CTA-type players bringing the complex back off those lows. Following last week's duration Treasury slate, with a weak 10-year auction and an average 30-year, the weak 20-year adds to concerns of a Treasury market struggling to digest record size auctions. Those supply concerns will likely be on the Fed's mind as it considers extending the average maturity its asset purchases. Furthermore, Thursday will see a Treasury auction of USD 12bln 10-year TIPS. T-note (Z0) futures settled 3+ ticks lower at 138-06.

Fed's Williams (Voter) said loss of fiscal support could slow the economy in the coming months, while he is optimistic on vaccine news and sees aid as a bridge. Furthermore, Williams added that Fed is fully aware it only reached its inflation goal briefly which is why it introduced new framework and that pressures creating low inflation have become dominant in the global economy. (Newswires)

Fed's Barkin (2021 voter) said spending is coming back faster than employment and recent escalation in cases makes him believe we still have a way to go, but also suggested that he would expect a great majority to be vaccinated by the time we get through the summer. Barkin also commented that monetary policy will stay accommodative until we see the economy recover and that there is still a lot of money in people's pockets which will cushion decline in fiscal aid, while he suggested the impact of the shelving 13 (3) Emergency Facilities on financial markets is unclear and that it may not have a big impact if you take them away, but there is an increased risk. (Newswires)

White House Chief of Staff Mark Meadows visited the Capitol to meet with Senate Majority Leader McConnell and talk about efforts to avoid a December government shutdown. Meadows later commented he cannot guarantee lawmakers will be able to reach a deal to avert a mid-December shutdown of the federal government but is hopeful an agreement would be reached. (Fox/Washington Post)

US Senate reportedly prepares to leave for recess without voting on Shelton's Fed nomination. (Newswires)

US official said travel restrictions at US borders with Canada and Mexico are expected to be extended until December 21st. (Newswires)

FHFA Director Calabria said Fannie Mae and Freddie Mac will have to hold USD 280bln dollars of capital to absorb possible losses amid an effort to end conservatorship. (WSJ)


Diplomatic sources stated that President Trump does not have plans to host the G7 Summit which he postponed earlier this year until after the election. (Twitter/Newswires)

Georgia state election official said that US President Trump has been misinformed about claims of fraudulent votes in the state and that the state fully anticipates certifying election results on Friday. There were also comments from the Georgia Secretary of State that he doesn't believe vote recount will alter the result that Biden won in the state. (Newswires/CNN)