[PODCAST] US Open Rundown 22nd December 2020
- European equities are firmer this morning, Stoxx 50 +1.0%, as newsflow has slowed following the US House/Senate votes with attention on Brexit developments; ES +0.2%
- US House (359-53) and Senate (92-6) approved the COVID relief package tied together with the spending bill to keep the government open through September 2021
- The EU is reportedly willing to accept up to 25% reduction in UK waters catch, sources say; Johnson & von der Leyen have been speaking on fisheries since yesterday's call
- EU Chief Negotiator Barnier to brief MEP's 17:00GMT/12:00EST today, following his briefing to ambassadors at 15:00GMT/10:00EST
- FX features a firmer DXY but within relatively contained ranges while GBP has been at the whim of Brexit updates but is currently subdued though above 1.3400
- Gilts have been leading the debt space with losses of circa 30 ticks while USTs are little changed but the curve is exhibiting modest flattening action
- Looking ahead, highlights include US GDP (Final) & Existing Home Sales
Germany reports 19,528 (vs prev. +16,643) new COVID-19 cases and 731 new deaths (vs prev. 226), according to RKI. Separately, Germany has extended its ban on travellers from Britain and South Africa until January 6th. (Newswires)
Taiwan reported its first locally transmitted COVID-19 case since April. (Newswires)
UK may not have enough COVID-19 tests to meet surging demand in the coming weeks, according to an internal government document. (FT)
Pfizer (PFE) & Moderna (MRNA) are testing their COVID-19 candidates against the UK variant. (CNN)
BioNTech (BNTX) CEO says UK COVID-19 variant has nine mutations and does not know at the moment if a vaccine could protect against a new variant; Could provide a new vaccine that would mimic significant virus mutations within 6 weeks but also must deal with questions on how regulators would view such a vaccine - will need two weeks to gather further data on the mutation. Confident that the Co. could come up with more relaxed storage conditions and stability but are waiting for data. Looking to update at the end of January. (Newswires)
WHO to convene a meeting of members on the response to the new COVID-19 variant, referring to the one identified primarily in the UK. (Newswires)
APAC equities saw a subdued session following a somewhat mixed Wall Street handover, after the S&P 500 and Nasdaq ended the session well off lows and the Dow eked mild gains. Meanwhile, Tesla shed 6.5% on its S&P debut, with some of the losses emanating from source reports that Apple is looking at electric vehicle production as early as 2024 which could also have its own novel "monocell" battery tech. US equity futures meanwhile drifted lower as markets awaited the State-side COVID relief and government funding package to make its way through Congress. Back to APAC, the overall sentiment was lacklustre, with losses in the ASX 200 (-1.1%) led by the basic resources and energy sectors, whilst upside for the Nikkei 225 (-0.6%) was hampered by recent JPY-dynamics. South Korea's KOSPI (-0.5%) held onto losses as the rising COVID case count in the country surfaced reports of tourist location closures in a bid to stem the spread. Elsewhere, Hang Seng (-0.3%) and Shanghai Comp. (-0.2%) conformed to the losses across the region and as tensions with Washington brew in the background, with the Trump admin poised to publish a list of 103 Chinese and Russian companies with alleged military ties, whilst Secretary of State Pompeo announced additional restrictions on visas for officials of the Chinese Communist Party linked to human rights violations. Finally, 10yr JGB futures are flat as it tracks similar price action in UST futures.
China and the EU are likely to wrap up their investment deal “soon”, according to Chinese Foreign Minister Wang Yi. (SCMP)
PBoC sets USD/CNY mid-point at 6.5387 vs exp. 6.5397 (Prev. 6.5507)
PBoC injected CNY 10bln via 7-day reverse repos and CNY 120bln via 14-day reverse repos for a net daily injection of CNY 120bln. PBoC maintained 7- and 14-day reverse repo rates at 2.20% and 2.35% respectively. (Newswires)
US House (359-53) and Senate (92-6) approved the COVID relief package tied together with the spending bill to keep the government open through September 2021. (Newswires/Twitter)
US House and Senate approved the week-long stopgap to avert a government shutdown. (Newswires/Twitter)
US President-elect Biden welcomes the COVID relief package but adds "but our work is far from over. Starting in the new year, Congress will need to immediately get to work on support for our COVID-19 plan."(Twitter) US House Speaker Pelosi wrote to her colleagues that more needs to be done regarding stimulus. (Twitter)
Senate Majority Leader Mitch McConnell has announced that the Senate would meet on December 29th in the event that President Trump vetoed the Defense Bill. (Newswires)
Some of Trump’s Hill allies met with Trump and discussed challenging the election results when Congress certifies them on Jan. 6, according to sources cited by Politico's Zanona (Twitter)
Australia's ACCC has rejected Google's (GOOG) undertakings for Fitbit (FIT) acquisition, will continue investigation and set a new date of 25th March 2021. (Newswires)
Facebook (FB) and Google (GOOG) have agreed to team up against potential antitrust action, according to WSJ. (WSJ)
The EU is reportedly willing to accept up to 25% reduction in UK waters catch, sources say. The length of this reduction and associated enforcement measures are reportedly still sticking points. (Newswires) Note, it is currently unclear as to what time period would be attached to this reduction - as a reminder yesterday's reports were for a 35% reduction over 5-years.
Prior to this: EU officials note that the latest offer from the UK on fisheries is unacceptable, according to reports. Note, prior to this there were reports via an EU official speaking about the UK's latest offer informing The Telegraph: "It's still a no from us." (Newswires/Telegraph) On the matter, UK PM Johnson and EU Commission President von der Leyen held a secret phone call on Monday over a potential Brexit compromise on fish, Politico says; a UK government official said “the EU position is still miles off what would be acceptable to us.”. Furthermore, the two leaders are said to have spoke on the matter again since the Monday night call. (Twitter/Telegraph)
UK ministers reportedly have drawn up plans for a potential Brexit legislation to clear both Houses of Parliament and gain Royal Assent in a single day next week. (Telegraph)
EU Chief Negotiator Barnier to brief MEP's 17:00GMT/12:00EST today, following his briefing to ambassadors at 15:00GMT/10:00EST, FT's Brunsden. (Twitter)
UK PM Johnson and French President Macron have agreed on measures to restart freight, measures will be announced later and will come into effect Wednesday (BBC). UK PM Johnson is reportedly drawing up contingency plans to test all lorry drivers taking goods across the Channel in order to bring an end to the disruption at Britain's ports. (Telegraph)
German GfK Consumer Sentiment (Jan) -7.3 vs. Exp. -8.8 (Prev. -6.7, Rev. -6.8)
UK GDP QQ * (Q3) 16.0% vs. Exp. 15.5% (Prev. 15.5%); YY * (Q3) -8.6% vs. Exp. -9.6% (Prev. -9.6%)
Suspected Russian hackers compromised dozens of Treasury Department email accounts and breached the office that houses its top officials, a senior senator said Monday. The Treasury Department still doesn’t know all of the activity the hackers engaged in or precisely what information was stolen. (WSJ)
Russian Foreign Minister Lavrov is expanding the list of representatives from EU countries banned from entering Russia is response to the imposition of sanctions on Russia due to the Navalny poisoning, AJA. Elsewhere, the Kremlin says that the latest US sanctions will further harm already poor US-Russia relations. (Newswires/Twitter)
European equities (Eurostoxx 50 +1.0%) have extended on opening gains in a retracement of some of yesterday’s heavy losses. From a European perspective, markets await updates from the EU negotiator on Brexit discussions after talks of a compromise on fisheries last night were rebuffed by the EU side and further sources on the matter this morning seemingly keeping the prospect of an agreement alive. Across the pond in the US, futures are relatively unchanged, with a slight positive bias, as the widely-expected news that Congress has approved the spending bill and COVID relief package has been unable to bolster sentiment. All major sectors in Europe trade higher with outperformance seen in banks, retail and tech names, whilst telecoms and basic resources post more modest gains. The underperformance of the latter has acted as a headwind for the FTSE 100 (+0.1%) which lags peers after yesterday’s relatively outperformance. Additionally, index-heavyweight AstraZeneca (-1.3%) are softer on the session after its 48-week Phase III trial of Tezepelumab did not meet its primary endpoint. Airline names such as Air France (+4.3%), easyJet (+3.7%) and IAG (+4.1%) have been granted some reprieve, albeit concerns continue to linger around the sector after Germany announced today that it has extended its ban for travellers from Britain until January 6th in an attempt to stop the spread of the new COVID-19 strain. Asides from the above, corporate updates in Europe have been on the light side as markets wind down for Christmas. Stateside, the WSJ reports that Facebook and Google have agreed to team up against potential antitrust action.
AUD/NZD- Not much retail therapy for the Aussie, even though the lifting of restrictions and lockdown in the state of Victoria boosted consumption last month, as Aud/Usd topped out ahead of 0.7600 and is now hovering around 0.7550. However, favourable crosswinds are keeping Aud/Nzd underpinned around 1.0700 as the Kiwi fades from just above 0.7100 vs its US counterpart towards 0.7050.
USD - Antipodean peers aside, the Buck is flat to firmer across the G10 board after unwinding the bulk of its safe-haven gains over the course of Monday’s whipsaw session and the DXY finding underlying bids into 90.000, but trading conditions are getting increasingly thin and rangy beyond the few major exceptions like Sterling on Brexit and new virus strain dynamics. Nevertheless, the index is holding within a narrow 90.366-079 band for now and awaiting several US data points including final Q3 GDP, existing home sales and the more forward-looking Richmond Fed survey.
EUR/CAD/GBP/CHF/JPY - The Euro is attempting to consolidate on the 1.2200 handle vs the Greenback after yesterday’s swoon below the round number and through technical support, with decent option expiry interest adding more layers of support given 2.3 bn at the strike and a further 1.1 bn at 1.2150. Meanwhile, the Loonie is still keeping an eye on crude prices before more Canadian data, albeit rather stale today and tomorrow compared to Xmas Eve (October average earnings, monthly GDP and November building permits respectively). Elsewhere, the Pound has regained a bit more composure following its extremely volatile start to the week, with Cable back above 1.3400 and Eur/Gbp pivoting 0.9100 after UK PM Johnson’s fishing concession and talks between himself and French President Macron aimed at unblocking the cargo route between Britain and France. However, reports that the latest offer on fisheries will be rejected by the EU did spark another bout of selling in Sterling - albeit, this was somewhat short-lived given further sources from the EU on an acceptable quota reduction; in contrast to the Franc that is sitting tight just under 0.8850 and 1.0800 vs the Euro, in similar vein to the Yen keeping its head above 103.50, but likely to meet resistance at 103.00 in the form of 1.2 bn expiries.
SCANDI/EM - The Sek is still testing 10.1000 against the Eur irrespective of mixed Swedish retail sales data and sentiment surveys, while the Nok lags near 10.6000 alongside softer oil after an in line Norwegian LFS jobless rate, but the Rub continues to underperform on geopolitical factors as Russia retaliates to EU sanctions and warns that those imposed by the US will harm already strained relations between the 2 nations.
Major FX Expiries, NY Cut:
- EUR/USD: 1.2100 (1.1BN), 1.2125 (588M), 1.2150 (1.1BN), 1.2200 (2.3BN), 1.2300 (741M)
- USD/JPY: 103.00 (1.2BN), 103.50 (651M), 103.75 (450M), 104.00 (550M)
Australian Retail Sales Prelim (Nov) MM +7% (Prev. +1.4%). (Newswires)
South Africa’s Eskom CEO says they will need to increase electricity prices in order to reduce debts and prevent bankruptcies; in-spite of the frequent blackouts. (FT)
Hard to say if Gilts are flagging on Brexit and heightened pandemic factors or the fact that latest updates on public sector finances were worse than anticipated, but suffice to say that the 10 year benchmark is lagging behind core debt counterparts having retreated further below parity to 135.05 (-28 ticks on the day), as Bunds have dipped below yesterday’s 177.86 Eurex close to a trough of 177.68 and US Treasuries remain mildly firmer and flatter. Ahead, the main focus for UK markets will likely rest on briefings by chief EU negotiator Barnier to ambassadors and then MEPs following a batch of US data, with sentiment driven by the reaction to proposals from PM Johnson designed to resolve divergences on fishing in the main. On that note, the gap between the 2 sides has reportedly narrowed to 10% so perhaps there are enough grounds to continue discussions.
WTI and Brent are hampered this morning with concern remaining on the demand-side implications of enhanced lockdown restrictions and the halting of flights to/from the UK and South Africa. Currently, the benchmarks are exhibiting losses in excess of 1.0% but are around USD 1.00/bbl from their session lows seen around the entrance of European participants this morning. Fundamentally, news explicitly for the complex has been very sparse and nothing has occurred which significantly changes the narrative thus far. In the session ahead the weekly private inventories will be published as normal, unaffected by the holiday period, and for reference last week the report showed a build of 1.97M in comparison to the week’s EIA equivalent which printed a draw of 3.135M. Moving to metals, spot gold and silver are currently in proximity to the U/C mark, in contrast to the sessions fairly broad range of USD 20/oz for gold, but still retains a slight negative bias given the USD’s continued modest strength.