[PODCAST] US Open Rundown 18th December 2020
- European indices are modestly firmer in a session devoid of fresh macro newsflow with all eyes on the fiscal front as we approach year-end
- FDA advisory committee voted (20 yes, 0 no and 1 abstain) that benefits of taking Moderna (MRNA) vaccine outweigh the risks in people aged 18 years and older
- BoJ kept policy settings unchanged as expected with rates held at -0.10% and QQE with Yield Curve Control maintained; extended funding measures
- House Speaker Pelosi commented that we'll see if the House will pass the COVID-19 and funding bill on Friday
- FX features a DXY which briefly reclaimed the 90.00 mark with G10 peers subdued as such and GBP the laggard on approach to Sunday's 'deadline'
- Looking ahead, highlights include Canadian retail sales, quadruple witching & bank stress tests
US COVID-19 cases +236,913 (prev. +201,776) and deaths +3,435 (prev. +2,960), while a major newswire tally stated US cases rose by a record of at least 239,903 to a total of 17.16mln and deaths rose by at least 3,335 to a total of 311.1k. (Newswires)
US FDA advisory committee voted (20 yes, 0 no and 1 abstain) that benefits of taking Moderna (MRNA) vaccine outweigh the risks in people aged 18 years and older. Following this, the FDA informed Moderna it will rapidly work towards finalization and issuance of emergency use authorization for its COVID-19 vaccine, while FT later reported that sources close to the process stated the FDA decided to approve Moderna's COVID-19 vaccine on an emergency basis following the panel recommendation. (Newswires/FT)
New England Journal of Medicine published positive initial Regeneron (REGN) antibody cocktail results in non-hospitalized patients with COVID-19 which stated a smaller proportion of patients treated with the antibody cocktail required medically-attended visits due to COVID-19 through Day 29 compared with a placebo and there was even greater benefit on endpoint among sero-antibody-negative patients in additional prospective results. (Newswires)
Mesoblast (MSB AT) updated on its Remestemcel-L trial for treatment of acute respiratory distress syndrome related to COVID-19 infection, in which it stated the Data and Safety Monitoring Board noted the trial is not likely to meet its 30-day mortality reduction endpoint at planned 300 patient enrollment. (Newswires)
Australia's New South Wales Premier said everyone in Greater Sydney is to be on high alert as Sydney infection cluster rose to 28 cases, while states in Australia have imposed border restrictions amid the virus cluster in Sydney with Victoria state to issue permit system for entering the state from New South Wales. (Newswires)
Asian equity markets traded cautiously as momentum from the fresh record levels on Wall Street where sentiment was underpinned by stimulus hopes, failed to resonate in the region heading into the weekend and amid unresolved US stimulus and Brexit talks. ASX 200 (-1.2%) was pressured as tech and financials led the descent and with a cluster of infections in Sydney prompting states to impose border curbs, while investor appetite was also bruised by heavy losses in Mesoblast which slumped 35% after poor results in its Remestemcel-L trial for the treatment of acute respiratory distress syndrome related to COVID-19 and with QBE Insurance suffering after it flagged an FY loss of around AUD 1.5bln. Nikkei 225 (-0.2%) was also lacklustre but with downside stemmed by a mixed currency and tentativeness amid the BoJ policy decision in which the central bank maintained its main policy settings and but extended corporate funding measures for COVID-stricken firms as expected. Hang Seng (-0.7%) and Shanghai Comp. (-0.3%) were uninspired after another tepid PBoC operation and mixed newsflow with EU said to have agreed in principle for an investment treaty with China, although there were also reports the US issued a new ban to prohibit electric utilities that supply critical defense facilities, from importing certain power system items from China and that the Trump administration is set to add dozens of Chinese companies including SMIC (981 HK) to the Commerce Department's entity list today. Finally, 10yr JGBs were lacklustre with prices remaining near support at the psychological 152.00 level and after the BoJ provided very few surprises.
PBoC injected CNY 10bln via 7-day reverse repos with rate maintained at 2.20%. (Newswires) PBoC set USD/CNY mid-point at 6.5315 vs exp. 6.5301 (prev. 6.5362)
US President Trump's administration is reportedly set to add dozens of Chinese companies including SMIC (981 HK) to the Commerce Department's entity list today, according to sources. (Newswires)
US Treasury Department is reportedly seeking to weaken President Trump's Chinese securities ban, while the Pentagon and State Department are said to be angered by the attempt to ease the impact of the Executive Order. (FT)
US issued a new ban on Thursday to prohibit electric utilities that supply critical defense facilities from importing certain power system items from China. (SCMP)
China will continue to implement proactive fiscal policy and maintain the sustainability, stability and continuity of macro policies. (Newswires)
BoJ kept policy settings unchanged as expected with rates held at -0.10% and QQE with Yield Curve Control maintained to flexibly target 10yr JGBs at around 0%, while the central bank also extended the March deadline for the package of measures to ease corporate funding strains by 6 months as was widely anticipated and it announced it is to remove the JPY 100bln upper limit on funds provided to each eligible counterparty against loans made by financial institutions to cash-strapped firms. Furthermore, BoJ stated it will conduct an examination of more effective and sustainable monetary easing framework to achieve the price goal and will release outcome of the examination at the March meeting but noted there is no need to change the YCC framework, while it maintain its assessment of the economy being in a severe state but picking up and which is likely to recover moderately as a trend. (Newswires)
- Japanese National CPI (Nov) Y/Y -0.9% vs. Exp. -0.8% (Prev. -0.4%)
- Japanese National CPI Ex. Fresh Food (Nov) Y/Y -0.9% vs. Exp. -0.9% (Prev. -0.7%)
- Japanese National CPI Ex. Fresh Food & Energy (Nov) Y/Y -0.3% vs. Exp. -0.3% (Prev. -0.2%)
White House aides reportedly intervened to prevent US President Trump from a last-minute demand for stimulus checks of as much as USD 2,000/person with aides telling President Trump his demands could blow up talks. (Washington Post)
US House Speaker Pelosi commented that we'll see if the House will pass COVID-19 and funding bill on Friday. In related news, GOP Senator Cornyn said he expects another stop gap bill instead of a shutdown. (Newswires)
Work is continuing behind the scenes on the COVID-19 bill but there is still no text. Government funding expires tonight at 11:59:59ET. An interim bill will likely avert a shutdown tonight, according to Fox's Pergram. (Twitter)
EU Chief Brexit Negotiator Barnier says the possibility of a deal is there but the path for this is very narrow; makes clear that time is now very short. Personally, does not think it would be fair/acceptable for there not to be a transitory access period for EU fisherman in UK waters; Brussels must have the sovereign right to react. Everyone needs to move to find a fisheries compromise, the last hours to find an acceptable compromise on this Cannot say if there will be a deal, must be ready for all scenarios. (Newswires)
Irish Deputy PM Varadkar said he is still on the optimistic side regarding Brexit talks and a deal is in sight on the level playing field but noted fisheries is the real difficulty. (Newswires)
Brexit talks have found a new impasse regarding state aid over Brussel's EUR 750bln Recovery Fund with the UK stating that EU-level spending including the RF cannot be exempt from enforceable principles on state aid in a Brexit trade deal, according to FT. (Huffington Post/FT)
German Ifo Business Climate New (Dec) 92.1 vs. Exp. 90.0 (Prev. 90.7, Rev. 90.9)
- Current Conditions New (Dec) 91.3 vs. Exp. 89.0 (Prev. 90.0)
- Expectations New (Dec) 92.8 vs. Exp. 92.5 (Prev. 91.5, Rev. 91.8)
- 80% of the responses to the survey came in prior to the recent announcement of stricter lockdown measures in Germany.
UK Retail Sales MM* (Nov) -3.8% vs. Exp. -4.2% (Prev. 1.2%, Rev. 1.3%); YY* (Nov) 2.4% vs. Exp. 2.8% (Prev. 5.8%)
- Ex-Fuel MM* (Nov) -2.6% vs. Exp. -3.3% (Prev. 1.3%, Rev. 1.4%); YY* (Nov) 5.6% vs. Exp. 4.1% (Prev. 7.8%)
UK GfK Consumer Confidence (Dec) -26 vs exp. -31.0 (prev. -33.0). (Newswires)
Microsoft (MSFT) was breached in the suspected Russian hack which took advantage of SolarWinds software and Microsoft products which were used to infect others, according to sources. Furthermore, Microsoft later stated it found SolarWinds intrusion in company systems but no evidence that hackers accessed customer data, while it stated the latest cyber assault is effectively an attack on the US and its government, as well as other critical institutions. (Newswires)
After opening on a softer footing, European equities (Eurostoxx 50 +0.3%) trade with modest gains in what has been a session void of incremental macro newsflow. Many of the same themes remain at the forefront of investor sentiment as markets await updates on Brexit, the passage of COVID relief in the US and the progress of vaccination efforts. It’s worth highlighting that today is quadruple witching day (full schedule available on the newsquawk calendar/headline feed) and as such this could stoke some volatility throughout the session. Additionally, today marks the last trading day before Tesla is added into the S&P 500 on December 21st and as such, funds that track the S&P 500 will need to purchase the stock at today’s closing price in order to track the index. In an interview with CNBC, Bleakley Advisory Group’s Boockvar stated “it’s probably going to be one of the biggest market on close buy orders of all time”. Back to Europe, most sectors trade firmer, albeit modestly so with telecoms and chemicals leading, whilst travel & leisure, retail & banks lag in what has been a morning lacking in noteworthy stock-specific updates. Looking further ahead to 2021, Deutsche Bank strategists expect that European equities will catch up to US peers and have set an end-2021 target of 450 which would imply upside of 14%, compared to its 7% gain pencilled in for the S&P 500.
Disney (DIS) - Disney+ is reportedly experiencing user issues. (Newswires)
JPY/GBP - No obvious reaction to the BoJ that was bang in line with expectations on all counts, but the Yen has treated further from pre-policy meeting peaks vs the Dollar and other G10 peers perhaps taking some note of Governor Kuroda’s reminder that currency moves are being closely observed rather than his contention that Jpy strength is not having a serious (adverse) effect on the Japanese economy. However, the sharp turnaround in Usd/Jpy to circa 103.60 from around 102.88 only yesterday also looks technical as tend-line support held at 102.75 on some charts. Meanwhile, Sterling has suffered a similar if not worse fall from grace as Brexit vibes turn decidedly more downbeat with the clock ticking down fast to the next EU deadline to strike a trade deal and big gaps still apparent on fishing rights mainly, but not solely. Hence, Cable has recoiled from 1.3600+ to probe bids/support at 1.3500 and Thursday’s base near 1.3490, while Eur/Gbp is almost 100 pips higher and eyeing 0.9100.
NZD/AUD/CAD/DXY - The Kiwi is paring advances on the 0.7100 handle vs its US counterpart with no additional independent impetus via NZ trade data or lasting momentum from improvements in ANZ business sentiment and activity outlook, while the Aussie has lost 0.7600+ status amidst renewed coronavirus jitters after reports of a cluster of cases in Sydney, NSW. Elsewhere, the Loonie looks drawn to hefty option expiries at 1.2750 (1.1 bn) awaiting Canadian retail sales having reversed from yet another foray above 1.2700, and contributing to the broader Greenback recovery that has nudged the index back up to 90.000, albeit marginally and tentatively between 90.033-89.822 parameters.
CHF/EUR - Holding up somewhat better than their major rivals, with the Franc clawing back some post-SNB losses across the board as Usd/Chf straddles and Eur/Chf slips back below 1.0850 even though the Euro remains elevated elsewhere in wake of a decent Ifo survey, though again mitigated by the timing of responses not to mention the fact that the COVID-19 situation in Germany appears increasingly bleak. Nevertheless, Eur/Usd is relatively resilient either side of 1.2250 where mega expiry interest lies (2.2 bn) after another approach towards 1.2275.
SCANDI/EM - The Nok has not gleaned more traction from a lower than forecast Norwegian jobless rate and is back under 10.5000 vs the Eur after relatively hawkish Norges Bank rate projections pushed the cross down to almost 10.4900 yesterday, while the Rub has resumed its downward trajectory after no change in rates from the CBR and Mxn is also weaker after Banxico stood pat, both as expected. Conversely, the Try continues to recover on the back of CBRT reassurance about getting inflation back on track and ahead of December’s year end CPI survey estimate (12.47% previously).
Notable FX Expiries, NY Cut:
- USD/CAD: 1.2675 (520M), 1.2725 (300M), 1.2750 (1.1BLN), 1.2800 (380M), 1.2825 (605M)
- EUR/USD: 1.2150 (1.6BLN), 1.2200 (875M), 1.2250 (2.2BLN), 1.2300 (500M)
New Zealand ANZ Business Confidence (Dec) 9.4 (prev. -6.9)
New Zealand ANZ Activity Outlook (Dec) 21.7 (prev. 9.1)
New Zealand Imports (NZD)(Nov) 4.95B vs exp. 4.95B (prev. 5.29B, rev. 5.27B)
New Zealand Exports (NZD)(Nov) 5.20B vs exp. 5.21B (prev. 4.78B, rev. 4.80B)
New Zealand Trade Balance (NZD)(Nov) 252M vs exp. 250M (prev. -0.5M, rev. -472M). (Newswires)
While equities may be experiencing extraordinary volatility due to quad-witching, debt markets have also been somewhat spellbound or beguiled by the early rebound in Gilts on latest far less optimistic Brexit developments. However, Bunds had already turned tail after fading some way below yesterday’s Eurex best and it begs the question whether much of the month/Q4/2020 end buying for portfolio balancing has now been done as the 10 year benchmarks subsequently retreated to 134.53 and 177.28 before finding underlying bids. Meanwhile, USTs remain flaky in outright and curve terms awaiting US fiscal relief and Government funding news before deadlines, with only minor passing interest afforded to the Q3 current account balance, November’s leading index and Fed’s Brainard given this week’s FOMC.
Throughout the European morning, WTI and Brent have experienced some modest choppy price action given the movements associated with the approach to month/quarter/year end. Thus far, the session has been devoid of macro newsflow either generally or pertinent explicitly to the complex; as such, the benchmarks are currently in proximity to the unchanged mark on the session; posting ranges of around USD 0.40/bbl thus far. For the session ahead the only crude highlight is the weekly Baker Hughes rig count but more pertinently markets will be focused on the US fiscal narrative ahead of tonight’s shutdown narrative and as the near-term COVID-19 narrative remains downbeat going into the Christmas period. Turning away from oil and to metals where spot gold isn’t too differed on the session but has lost some allure as the DXY has marginally reclaimed 90.00, with the precious metal capped at USD 1886.84/oz at present; but, well within yesterday’s range of USD 1895/oz and USD 1861/oz.