Original insights into market moving news

[PODCAST] European Open Rundown 21st December 2020

  • Asia-Pac equities traded mostly lower following a similar downbeat lead from Wall St; Mainland China outperformed
  • UK PM Johnson announced a new Tier 4 level of COVID restrictions across southeast England; a string of countries have banned travellers from the UK amid the more transmittable COVID variant
  • US FDA issued EUA for Moderna's COVID-19 vaccine; UK MHRA could authorise the AstraZeneca vaccine on December 28th or 29th, according to sources
  • Brexit talks remain blocked over fishing rights; a UK source said significant differences remain; negotiations will continue today
  • Senate Majority Leader McConnell announced that an agreement has been reached on a USD 900bln COVID relief deal with votes expected today; House and Senate voted in favour of a one-day stopgap to fund the government
  • In FX, DXY tested 90.50 to the upside, Sterling remained the G10 laggard, EUR/USD dipped below 1.2200 and antipodeans faltered
  • Looking ahead, highlights include EZ Consumer Confidence (Flash)


UK PM Johnson announced a new Tier 4 level of COVID restrictions across southeast England (including London) - equivalent to a full lockdown - effective Sunday. Non-essential shops, gyms, cinemas, hairdressers and bowling alleys will close for two weeks. Furthermore, people will be restricted to meeting with only one other person from another household in an outdoor public space.Tier 4 restrictions could be toughened further and remain in place until close to Easter, Government sources have admitted. (Sky News/Telegraph)

Germany, France, Italy, the Netherlands, Belgium, Austria, Ireland, Canada, alongside a number of other countries are all halting flights and travel from the UK amid the more infectious COVID-19 variant. France also banned incoming freight by air, sea, or rail. Measures vary between the countries are generally short-term, an EU meeting will be held on Monday morning to discuss a more co-ordinated response.(BBC) UK PM Johnson is to chair a COBRA meeting on Monday morning to discuss the international travel situation. (Twitter) Italy said it has detected a coronavirus case with the new UK strain. (Newswires)

A new more "severe" coronavirus strain has been detected in South Africa with experts claiming it spreads quicker than current types of the virus. (Daily Express). This variant is similar to the one seen in the UK, but the two appear to be unrelated. (BBC) Some countries have also issued a travel ban to travellers from South Africa. (Newswires)

Senior Whitehall sources believe the MHRA will authorise the AstraZeneca (AZN LN) vaccines on December 28th or 29th, after final data is provided to the regulator. (Telegraph)

US FDA issued an emergency use authorization (EUA) for Moderna's (MRNA) COVID-19 Vaccine to be distributed in the US for use in individuals 18 years of age and older. (FDA)

US FDA is investigating five allergic reactions that happened after being administered the Pfizer (PFE)/BioNTech (BNTX) vaccine. (Newswires) Note, some allergic reactions were previously reported in the UK

Apple (AAPL) is to temporarily close stores in California as COVID cases surge (Newswires) Amazon (AMZN) has temporarily closed a facility in northern New Jersey after it detected an increase in asymptomatic positive cases, according to a notice obtained by CNBC. (CNBC)


Asia-Pac equities traded mostly lower following a similar downbeat lead from Wall St where US equities pulled back from fresh record intraday highs in what was a volatile Friday session ahead of Tesla's S&P debut today. State-side, futures opened firmer but thereafter trimmed gains upon Senate Majority Leader McConnell's announcement of a bipartisan COVID relief bill, with some participants citing "sell the news" play. Meanwhile, equity futures across Europe saw more pronounced losses as a Brexit trade deal is yet to be reached whilst the region tackles the new COVID-19 variant seemingly emanating from Britain - with DAX Mar'21 futures extending downside after falling below 13,500. Back to APAC, the ASX 200 (-0.2%) was pressured by its financial and travel & leisure sectors as COVID-related restrictions were tightened for the Greater Sydney area, whilst Nikkei 225 (-0.4%) initially traded with gains and rose to the highest since April 1991 before pulling back from best levels just shy of 27,000 as it conformed to the broader losses across the region. South Korea's KOSPI (Unch) was initially hampered by the rising COVID-cases with the country reporting over 1,000 cases for a fifth consecutive day, but the index later pared losses. Elsewhere, Shanghai Comp (+0.6%) outperformed despite the PBoC maintaining its LPR setting as expected, as China said it will continue to implement proactive fiscal policy and maintain the sustainability, stability and continuity of macro policies, whilst sources suggested China's leadership plans to set its real economic growth target at about 8% for 2021. Conversely, the Hang Seng (-0.2%) saw a lacklustre session as heavyweight oil and banking names traded with losses, with Alibaba also pressured by source reports that Jack Ma in early November offered to hand over parts of Ant Group to the Chinese government. Finally, 10yr JGB futures traded with modest gains in tandem with the broader gains across the fixed-income complex amidst the downbeat risk tone, whilst the long-end of the curve saw some pressure as the Japanese Ministry of Finance announced that 40yr JGB issuance is poised to increase by JPY 100bln per auction starting April.

US President Trump signed the bill that could prevent some Chinese companies from listing shares on US exchanges unless they adhere to US auditing standards. US blacklists China shipbuilding entities over the South China Sea. (Newswires)

Chinese leadership plans to set its real economic growth target at about 8% for 2021, according to Nikkei citing sources. (Nikkei)

PBoC LPR (Dec) 1yr 3.85% vs. Exp. 3.85% (Prev. 3.85%); 5yr 4.65% vs. Exp. 4.65% (Prev. 4.65%). (Newswires)

PBoC set USD/CNY mid-point at 6.5507 (Prev. 6.5315). (Newswires)

PBoC injected CNY 10bln via 7-day reverse repos and CNY 100bln via 14-day reverse repos at maintained rates of 2.20% and 2.35% respectively. (Newswires)

Japan's Cabinet has approved a record amount of FY21/22 general account budget spending worth JPY 106.6tln; tax revenue estimated at JPY 57.4tln vs prev. estimate of JPY 63.5tln. Japan is to increase issuance of 40yr JGB by JPY 100bln per auction from April, will keep issuance of other JGBs unchanged. (Newswires)


Brexit talks remain blocked over fishing rights as officials weighed whether another phone call between UK PM Johnson and European Commission President von der Leyen could help to break the deadlock. An official said such a call is not yet confirmed. (FT)

A UK source said Brexit discussions are still difficult and significant differences remain. Talks are set to continue on Monday. Over the weekend, UK sources said it is increasingly likely that an agreement will not be reached in time. The source added that the EU are continuing to make demands that are incompatible with UK independence. (Sky News) Sources suggested talks are unlikely to wrap up on Sunday, but should do so before Christmas. (Newswires) UK Cabinet Minister Gove suggested UK and EU can agree on a series of "mini unilateral" deals to ease any chaos if no deal can be agreed before the end of the transition period. (Telegraph)

European Parliament Spokesman said the European Parliament will not be in a position to grant consent to a Brexit agreement this year as the sides failed to reach consensus on Sunday. MEP McAllister will convene a meeting of the European Parliament‘s UK Coordination Group on Monday at 08:45GMT/03:45EST. (Twitter)

UK Lloyds Business Barometer (Dec) -4 (Prev. -21). (Newswires)


In FX, the DXY kicked the week off on a firmer footing tested 90.50 to the upside (vs Friday's 89.928 close) following Congress' agreement on a COVID relief package which is poised to be voted on Monday, whilst the index was also propped up by Sterling softness as Brexit talks remain blocked over fishing rights, with a UK source also noting that significant differences between the two sides remain as the end of the transition period looms. Furthermore, the Pound was also pressured by the imposition of Tier 4 COVID-related restrictions, equivalent to a full lockdown, imposed on Sunday across southeast England, whilst the COVID-19 variant in the UK has prompted a string of countries banning travel from Britain. GBP/USD opened the session as the G10 laggard and dipped below 1.3400 before taking out 21 DMA at 1.3389 and the 1.3350 psychological mark. EUR/USD also fell victim to the Buck but to a lesser extend, with the pair dipping below 1.2200, although a EUR/GBP cross above 0.9100 cushioned losses for the Single Currency. Antipodeans conformed to the broader Dollar strength with AUD/USD sub-0.7600 throughout most of the session and NZD/USD giving up its 0.7100 handle, with the former also hampered as New South Wales tightened restrictions for the Greater Sydney area in an attempt to contain a growing outbreak. The Yen kicked off trade on a modestly softer footing amid Nikkei source reports that Japanese PM Suga reportedly told the Japanese Finance Minister to make sure USD/JPY does not cross 100.00, but thereafter the JPY strengthened amid the overall risk-aversion across markets. Over in the EM FX space, the ZAR also experienced significant pressure as a new more "severe" coronavirus strain has been detected in South Africa, reportedly unrelated to the one seen in Britain.

Japanese PM Suga reportedly told the Japanese Finance Minister to make sure USD/JPY does not cross 100.00. "His comment, which was confirmed by multiple sources, came with an unspoken message: Be prepared to sell yen for dollars in case the Japanese currency breaches the key threshold." The comments were reportedly made in early November following the US election, Nikkei reported. (Nikkei)


WTI and Brent futures saw a soft start to the week with both front-month contracts extending on losses at the open as the demand side of the equation is impacted by UK's new COVID-related Tier 4 lockdown, alongside a string of travel bans from the EU to travellers from the UK offering a glimpse into the fallout of a more transmittable mutation. Brent Mar immediately fell at the open from its USD 52.34/bbl high through USD 51/bbl before finding an overnight base under USD 50.50/bbl. In a similar vein, WTI Feb declined from a high of USD 49.30/bbl through the USD 49 and USD 48 marks before testing USD 47.50/bbl to the downside. Elsewhere, precious metals were bolstered despite a firmer Buck as fears of a more transmittable COVID variant prompted investors to flock into the safe-havens, with spot gold prices testing USD 1900/oz to the upside whilst spot silver extended above USD 26/oz to test USD 27/oz to the upside. Turning to base metals, Dalian iron ore prices were boosted as a landslide at one of Vale's mines fed into supply woes, whilst a Chinese government research body said it sees Chinese iron ore demand +9.2% in 2020 with steel production demand seen rising 9.6% this year and +1% next year. Finally, copper prices overnight saw a session of losses amid the firmer Dollar and overall risk aversion.

Baker Hughes US Rig Count (w/e Dec. 18th): Oil +5 at 263, Natgas +2 to 81, Total +8 at 346. (Newswires)

Saudi Energy Minister Abdulaziz stated that oil market speculators will "remain on their toes" and Saudi and Russia are on the same page when it comes to oil market management, according to EnergyIntel. (Twitter)

China's steel product demand seen rising 9.6% in 2020 and +1% in 2021, according to a government research body. Chinese iron ore demand seen +9.2% in 2020, -1.2% in 2021; imports seen +9.% in 2020 and -2.7% in 2021. (Newswires)


China’s military has accused the United States of jeopardising peace and stability in the Taiwan Strait by sending a guided missile destroyer through the waterway on Saturday. (SCMP) Chinese Navy spokesperson said China's Shandong carrier sailed through the Taiwan Strait to the South China Sea on Sunday for military drills

The US Embassy in Baghdad confirmed rockets targeting the International Zone resulted in the engagement of Embassy defensive systems. There was some minor damage on the Embassy compound but no injuries or casualties. (Twitter) US Secretary of State Pompeo tweeted "Iran-backed militias once again flagrantly and recklessly attacked in Baghdad, wounding Iraqi civilians." (Twitter)

A small number of UK organisations are known to have been affected by a suspected Russian hacking campaign. Sources stated no public sector bodies are yet known to be among the UK-based victims. (Newswires)

US President Trump tweeted that the recent cyberattack suspected to be Russia is "far greater in the Fake News Media than it actually is" and floated the possibility it may be China. (Twitter)


Treasuries were choppy but lower on Friday amid thinning liquidity into the holidays and concession for next week's bond auction. By settlement, 2s -0.4bps at 12.3bps, 10s +1.6bps at 94.6bps, 30s +2.2bps at 169.7bps; futures volumes were lacklustre; real yields were little changed. It was hard to gauge too much from the tape action today amid declining cross-asset correlations. However, desks cited Treasury support to stimulus/Brexit concerns. There was also some knock-on bidding from the UK's Gilt market after BoE's Vlieghe spoke to the merits of negative rates. However, later in US trade, USTs pared their gains to flip steeper on the session. Monday's USD 24bln 20-year bond auction from the Treasury is looming with concession needed, especially given that dealers will likely have to pick up the tab given many players have already dashed away for Christmas; the 20yr butterfly has been getting cheap, and for any tactical players willing to hang around, desks are noting there could be some value available before the crowds return in January. T-NOTE (H1) FUTURES SETTLED 3+ TICKS LOWER AT 137-24.

Senate Majority Leader McConnell announced that an agreement has been reached on a USD 900bln COVID relief deal, “The four leaders of the Senate and the House finalized an agreement.”. (Newswires) Republicans and Democrats came to an agreement on Sen. Toomey's language to limit the Fed’s emergency lending programs. Sen. Toomey has agreed to drop the broad language in his proposal that would have prevented the Fed chair from establishing similar facilities in the future. (Politico) The bill proposed by Congress includes USD 600 of direct payments, USD 300 more per week in unemployment payments, USD 15bln for US airlines payroll assistance and USD 25bln rental assistance. (CNBC) Click here for the full details.

US House is likely to vote on the COVID bill today as time is needed to finish the bill. (Twitter) Senate Minority Leader Schumer says the COVID-relief bill "should" have votes to pass Congress

US House and Senate have voted in favour of a one-day stopgap bill to avert a government shutdown as expected in order to give Congress more time to finish writing the omnibus and COVID relief bill. US President Trump later signed the bill into law. (Newswires/Twitter)

Fed's Clarida (voter) echoed the FOMC statement regarding new forward guidance to asset purchases. When asked about WAM, he said current policies are providing substantial accommodation; policy is where it needs to be. (CNBC)

Fed's Kaplan (departing voter) said asset purchases should fall when it is clear the economy is recovering strongly but he won't give a timeline on that. (WSJ)

Fed Stress Tests stated banks will be permitted to pay out dividends and buy back stock on a limited basis in Q1. Furthermore, banks have enough capital to withstand over USD 600bln in losses from a short sharp economic slump, as well as a moderate longer-lasting downturn. Fed said dividends/buybacks are not allowed to exceed net income from the last year. Fed suggested it will not use the new results to tweak how much it ordered each bank to hold as a "stress capital buffer" following the previous test results. (Newswires)

Apple's (AAPL) contractors in India and China have protested over unpaid wages and bonuses. (FT)

US Senate Commerce Committee concluded that Boeing (BA) and the FAA worked together to manipulate 737 Max recertification tests. Senate investigators also said that Boeing officials "inappropriately coached" test pilots during efforts to recertify the company's 737 Max aircraft. (Senate Commerce Committee/BBC) Click here for the full release.

DOJ case against Google (GOOG) likely will not go to trial until late 2023, according to CNBC citing a judge. (CNBC)

Microsoft (MSFT) is designing its own chips for servers and surface PCs in a threat towards Intel's (INTC) server chip business. (Newswires)

Nike (NKE) reported Q2 2021 (USD) EPS 0.78 (exp. 0.62); revenue 11.2bln (exp. 10.56bln). Gross profit margin: 43.1% (exp. 42.8%). Total liquidity: 15.8bln (prev. 13.4bln). (Newswires) N.B Co. has a 0.6% weighting in the SPX and 3.0% weighting in the DJIA. Co. shares rose 5.6% after-market.