[PODCAST] US Open Rundown 23rd December 2020
- Equity Indices are firmer this morning, Euro Stoxx 50 +0.7%, ES +0.3%, amid a quiet European session from a fundamental perspective as sentiment still resides on fiscal & Brexit matters
- President Trump says he won't sign the stimulus package until stimulus payments are increased to USD 2k and unnecessary components are omitted
- Sources indicate a Brexit deal is possible today; Johnson & von der Leyen reportedly to speak today or tomorrow
- DXY has been relatively contained but erring lower with the broader FX space firmer as antipodeans and GBP lead the way; debt has been slightly choppy but largely contained
- Looking ahead, highlights include US PCE, Initial/Continued Jobless Claims, University of Michigan (Final) and US 2yr FRN
Some NYSE trading floor personnel are to return to remote operations, according to CNBC. (CNBC)
US nears deal with Pfizer (PFE) for up to 100M additional doses of its Covid-19 vaccine, a source told CNBC. (CNBC)
Japanese nationwide daily COVID cases have reached a new record high of 3,212, according to Nippon TV. (Newswires)
Asia-Pac equities traded firmer across the board after a mixed Wall Street lead, where the Dow and S&P slipped but closed trade well off lows, whilst the Nasdaq ended the session in positive territory with the aid of Apple, Microsoft and Amazon. However, overnight US equity futures where dented after US President Trump warned he will not sign the COVID relief bill until Congress amends it, whilst also asking for stimulus payments to be increased to USD 2,000 from the USD 600 in the bill. Subsequently, White House Speaker Pelosi responded by stating Democrats are ready to bring USD 2,000 in direct checks to the Floor this week by unanimous consent. Furthermore, Fox's Pergram highlighted that Trump did not outright say he will veto the bill, but could prevent it from being law via a "pocket veto" to avoid Senate overriding an official veto - effectively running down the clock until Congressional adjournment before midnight on January 3rd. The President has ten days (excluding Sundays) to either sign or veto a bill, meaning Congress will have to present Trump with the bill by December 23rd to prevent a pocket veto. If Trump fails to respond in the ten-days window, then the bill would automatically become law. That being said, the size and nature of the bill would mean that it could take days to get the bill to Trump - i.e. if Trump sticks to his guns, the US government could shut down on December 29th (assuming no more stopgap bills) and COVID stimulus will be frozen. US equity futures later trimmed losses whilst European equity futures remained subdued with the region tackling the more transmittable COVID-19 variant. Back to APAC, the ASX (+0.7%) was propped up by some of the more defensive sectors, whilst gains were capped by losses in mining names. Nikkei 225 (+0.3%) waned off best levels as a firmer JPY reeled in the index. KOSPI (+1.0%) extended gains whilst South Korea halted flights to and from the UK to avoid importing the COVID variant. Elsewhere, Hang Seng (+0.9%) and Shanghai Comp. (+0.8%) conformed to the broad gains across the region, with the latter seeing upside following another PBoC liquidity injection. Finally, 10yr JGB futures trade little changed but the overall curve modestly flatter.
The Department of Homeland Security is set to issue an advisory to U.S. businesses, warning them of data security risks associated with using communications equipment and services from China-linked companies, according to Axios. (Axios)
PBoC set USD/CNY mid-point at 6.5558 vs exp. 6.5548 (prev. 6.5387). (Newswires)
PBoC injected CNY 10bln via 7-day reverse repos and CNY 100bln via 14-day for a net injection of CNY 100bln at maintained rates of 2.20% and 2.35% respectively. (Newswires)
BoJ Minutes (Oct): Most members said the BoJ's range of steps to ease corporate funding strains showing intended effects; members agreed the BoJ should not hesitate to ease further if needed. (Newswires) Note, these minutes were from two meetings ago
US President Trump asked Congress to amend the COVID-19 relief bill and stated it has unnecessary components. Trump wants stimulus payments to be raised to USD 2,000 from the bill's USD 600 and warned will not sign it until Congress amends the stimulus package. (Twitter)
US House Speaker Pelosi tweeted that Democrats are ready to bring USD 2,000 in direct checks to the Floor this week by unanimous consent. House Democrats will try to approve USD 2,000 stimulus checks via unanimous consent on House floor on Christmas Eve Day, according to Fox's Pergram. (Twitter)
Congress would have to get the President the bill by December 23 to prevent a "pocket veto" by US President Trump, according to Fox's Pergram. The President may in effect “veto” a bill by keeping it in his “pocket” and not signing it if it comes too close to the end of a Congressional adjournment. President Trump could run out the clock on the Congressional session, effectively blocking any potential override attempt. The President would have to send it back to Capitol Hill with a veto. If he failed to do so in the ten days/Sundays excluded window, then the bill would automatically become law. (Twitter)
A UK source said an agreement on a UK/EU trade deal is again possible today. Presumably because, a separate source said, there was movement late tonight on access to the 6-12 mile zone, ocean fishing and the sanctions regime, ITV's Peston tweeted, "So there will either be a deal tomorrow (Wednesday). Or the following Wednesday." (Twitter)
EU sources stressed that they do not have much room for manoeuvre on fisheries in Brexit talks, according to FT's Brundsen. (Twitter)
EU Commission President von der Leyen & UK PM Johnson expected to hold another call today/tomorrow, via EU sources. (Newswires)
There are still outstanding issues on Brexit, however, the the EU believes that if a deal on fishing is agreed, LPF and governance will automatically be resolved, according to Sky's Parsons. (Twitter)
Irish PM says the gap is still wide on fish; confirms the EU put forward a proposal of 25% reduction in catch with a 6-year transition. Annual negotiations would lead to instability. On balance there should be a deal, if there was a breakthrough tonight/tomorrow then EU officials would work on the text during Christmas day. (Newswires)
Trucks can re-enter France from UK provided truckers have negative COVID-19 tests, according to the French Transport Ministry. (Newswires)
European equities (Eurostoxx 50 +0.8%) have eked gains since the cash open as markets await any further updates on Brexit and ponder US President Trump’s intervention on the US COVID relief package. On the latter, overnight, US equity futures were weighed on after US President Trump warned he will not sign the COVID relief bill until Congress amends it, whilst also asking for stimulus payments to be increased to USD 2,000 from the USD 600 in the bill. Fox's Pergram highlighted that Trump did not outright say he will veto the bill but could prevent it from being law via a "pocket veto" to avoid Senate overriding an official veto – to prevent a pocket veto derailing the legislation, Congress would need to present Trump with the bill by today. This is clearly a potential risk for sentiment heading into year-end, however, equity markets have taken the news in its stride thus far with the e-mini S&P firmer by 0.3% with some investors potentially acknowledging that regardless of any acts of sabotage by Trump, incoming President Biden will be able to sign the bill next month. Sectoral performance in Europe sees more pronounced gains in travel & leisure names with Air France (+2.8%), easyJet (+1.7%) and IAG (+1.5%) with airliners attempting to claw back losses seen at the start of the week after the more transmissive COVID-19 strain in the UK forced countries to restrict travel to and from the nation. Closely following travel & leisure is auto names with Daimler (+2.8%) top of the DAX after reports in Handelsblatt suggested the Co. could separate its Truck unit via an IPO as early as 2021, or, more likely in 2022. To the downside, health care names lag with the likes of AstraZeneca once again lower, extending losses for the week to 3%.
Apple (AAPL) - Reportedly warned Chinese developers that a new wave of paid gaming apps are at risk of removal from their App Store, according to WSJ citing a memo. (WSJ)
USD - The Dollar has unwound relatively big recovery gains vs so called high beta, risk or pro-cyclical rivals, but the DXY retains an underlying bid having evaded several skirmishes with the 90.000 level and is currently pivoting 90.500 in rather indecisive and low-key market conditions heading into the Xmas break. However, potential impactors and sentiment drivers are still very much in play, like Brexit and the battle to contain COVID-19 that has been made all the more arduous due to new mutations with higher transmission rates. Meanwhile, ‘outgoing’ US President Trump has thrown a spanner in the fiscal relief works via a last minute request for payments to be upped more than 3-fold from Usd 600, and an amended bill is now expected before he puts pen to paper. More immediately, a raft of data has been compressed into Wednesday’s final full session ahead of the long holiday weekend.
AUD/NZD/GBP - Not quite a case of all change, but as noted above the Aussie, Kiwi and Pound have all clawed back more lost ground against their US counterpart than other G10 currencies, with Aud/Usd rebounding through 0.7550, Nzd/Usd close behind in the high 0.7000 zone and Cable reclaiming 1.3400+ status on lingering expectations rather than any real sense of confidence that outstanding Brexit deal divergences between the UK and EU will be resolved. Indeed, the Eur/Gbp cross has reversed further from well above 0.9100 and as high as 0.9200+ on Monday in the same vein or faint hope of a trade pact as PM Johnson and European Commission President von der Leyen are said to be hot-lining each other in an attempt to reach a compromise on fishing and the level playing field.
EUR/CAD/JPY/CHF - All firmer vs the Greenback, though still well below recent peaks as the Euro hovers just shy of 1.2200, Loonie above 1.2900, Yen revisits 103.50+ and Franc clings on to the 0.8800 handle. Ahead, Usd/Cad will be keeping tabs on oil prices alongside general risk sentiment, but also Canadian GDP for some additional impetus outside of the aforementioned multiple US releases, while Usd/Jpy has plenty to digest in terms of prime Japanese data on Xmas Eve and few morsels on December 25th.
SCANDI/EM - No real inclination or rationale to deviate far from familiar ranges for the Nok or Sek given the lack of Norwegian and Swedish specifics, not to mention comparatively contained crude prices. Elsewhere, most EMs are benefiting from the Usd pull-back and steady risk tone, while the Zar may be gleaning extra support/comfort from the fact that
GOLD - Found a base before Usd 1850/oz. In China, another net PBoC liquidity injection is helping to keep the Cnh and Cny afloat, and both firmer than the overnight midpoint fix, while in Turkey the Try is eyeing a back-to-back hike from the CBRT tomorrow.
Israel is to hold snap elections in March 2021 following the dissolution of Parliament in a budget dispute. (Newswires)
Core bonds have dipped to minor new intraday lows, but remain lacking in clear direction or a compelling catalyst to break out of recent ranges barring a major development or event awaiting more news on UK-EU trade negotiations beyond the monotonous gaps are still wide, but a deal is there to be had mantra that has become the norm. Bunds just reversed from posting a similarly marginal Eurex best at 178.18 to 177.93, flat on the day, with Gilts slipping to 135.42 vs 135.69 at one stage and yesterday’s 135.59 Liffe close and the 10 year T-note is hovering closer to 137-29 than 138-03 ahead of an abnormally packed US slate of data including IJC brought forward from Xmas Eve, personal income, spending and price metrics plus the often erratic durable goods before new home sales and final Michigan sentiment.
The crude complex began the session firmly on the back foot as the demand-side woes that have been weighing on performance over the past few days remain broadly unresolved; with the only marginally positive fundamental development the resumption of freight between the UK and France. However, WTI and Brent are now broadly unchanged but with a positive bias as, directionally at least, they have been following the broader equity performance although evidently to lesser effect; most recently, Brent has reclaimed the USD 50.00/bbl handle while WTI pivots the USD 47.00/bbl figure. As mentioned, focus remains on US fiscal developments but any such delay to the proceedings should, in the worst case, see a resolution in the New Year. Explicitly for crude, last nights private inventory report printed a build of 2.7mln in contrast to expectations for today’s EIA report of a 3.18mln draw; note, the weekly Baker Hughes rig count has been brought forward to today’s session on account of the Holiday period. Moving to metals, spot gold is modestly firmer but has been very much rangebound throughout the morning echoing the performance of, and benefiting from, a contained but softer dollar.
US Private Energy Inventory (bbls): Crude +2.7mln (exp. -3.2mln), Cushing +0.35mln, Gasoline -0.22mln (exp. +1.2mln), Distillate +1.03mln (exp. -0.9mln). (Newswires)
Venezuela resumed direct oil shipments to China despite US sanctions, according to vessel-tracking data and internal document from PDVSA. (Newswires)