Original insights into market moving news

[PODCAST] European Open Rundown 24th December 2020

  • APAC stocks traded mostly higher following a similar lead from Wall Street; Mainland China lagged
  • UK PM Johnson is expected to make the Brexit deal announcement at around 08:00GMT/03:00EST
  • US GOP Leader McCarthy will object to measure on USD 2,000 checks; House may try to advance an interim spending bill on Monday
  • China is to probe the Alibaba over suspected monopoly; shares fell almost 10%
  • In FX, DXY was softer, GBP/USD topped 1.3550, EUR/USD reclaimed 1.2200 and USD/JPY meandered around 103.50
  • Looking ahead, highlights include the CBRT Rate Decision and early closures for Christmas Eve
  • NOTE: Desk will operate as usual until 18:45GMT/13:45EST


US COVID stats: Cases +195,759 (prev. +183,927); deaths +3,165 (prev. +1,725). New York COVID stats: Hospitalisations 6,864 (prev. 6,661), cases +11,937 (prev. +9,716), positivity rate 5.84% (prev. 5.89%), deaths +164 (prev. +139). (Newswires)

Germany reported 32,195(vs prev. +24,740) new COVID-19 cases and 802 new deaths (vs prev. 962), according to RKI. (Newswires)

Moderna (MRNA) said range of potentially neutralising antibodies give confidence its vaccine will be effective against any COVID strain. (Newswires) UK COVID-19 variant detected in Malaysia and Singapore, according to officials there cited by VOA's Herman. (Twitter)

US Health Official stated Johnson & Johnson's (JNJ) COVID-19 vaccine authorisation could come by late January and distribution could start as soon as February. (Newswires)


APAC equities traded mostly higher following a similar lead from Wall Street, whereby the S&P and Dow closed in the green but off best levels amid year-end profit taking coupled with holiday-thinned trading conditions. US equity futures overnight remained stable and Eurex is today closed for trading in all derivatives. Over in Asia-Pac, the ASX 200 (+0.3%) was led higher by gains across some of the cyclical names, with its heavyweight financial sector also underpinning the index throughout the session. Nikkei 225 (+0.5%) was also supported by cyclical stocks but with upside somewhat hindered by a pullback in Softbank shares, whilst South Korea's KOSPI (+1.7%) extended on opening gains after the country reported less than 1,000 COVID-19 cases. Elsewhere, the Shanghai Composite (-0.2%) moved between gains as losses following a tepid liquidity injection by the PBoC and against the backdrop of heightened tensions with Washington, whilst the Hang Seng (+0.3%) was initially dragged lower by losses in heavyweight Alibaba, whose shares fell over 5% at the open and extended on losses, after China announced a probe into the Co. over suspected monopoly, although the index then conformed to the broader gains across stocks. Finally, 10yr JGB futures were mostly softer amid the gains across equities, with the Japanese curve broadly steeper.

China is to probe the Alibaba (9988 HK/BABA) over suspected monopoly; China financial institutions, including PBOC, Banking, and Insurance Regulatory Commission, and Securities Regulatory, will interview Ant Group in the coming days. (Newswires)

PBoC set USD/CNY mid-point at 6.5361 vs exp. 6.5354 (Prev. 6.5558). (Newswires) PBoC injected CNY 10bln via 7-day reverse repos and CNY 30bln via 14-day reverse repos (at maintained rates) for a net daily injection of CNY 30bln. (Newswires)

BoJ Governor Kuroda he does not see a need to change YCC at the upcoming meeting. Kuroda said Japan's economy is likely to improve moderately as a tend; does not expect Japan to return to deflation but watching price moves carefully. Kuroda said the BoJ must take steps to make YCC sustainable, and must be ready to act flexibly and take effective steps as needed. Kuroda added that continued ultra-low rates has had negative impacts on financial institutions' profits. (Newswires) Next policy announcement is scheduled for Jan 21st 2021


Daily Mail suggested a Brexit deal is done; Chief Negotiators Frost and Barnier are still finalising text, so a last-minute hiccup is possible, but UK sources said it is 'highly unlikely' it will collapse now, (Daily Mail) UK PM Johnson is set to talk to EU's von der Leyen at around 0700GMT with a press conference to follow at 0800GMT, according to BBC's Kuenssberg (BBC)

A French official said UK made huge concessions in Brexit trade talks in the last 48 hours, mostly on fishing. (Newswires) A senior European official said UK PM Johnson is willing to accept that the EU hands back just 25% of the value of fish it catches in British waters, over a 5.5-year transition period, according to Daily Express' Barnes. After the transition, the UK Gov will be free to decide access. It appears EU has given way on its 'punishment clause' demand that would see Britain slapped with tariffs if EU boats lose access in future. (Twitter)

EU capitals will get until early next week to make a decision on the Brexit deal, according to WSJ citing sources. (WSJ) EU briefings on Brexit contingency measures have been cancelled, according to Business Insider, adding this points to a UK-EU trade deal is very close; Business Insider's Payne. (Twitter)


In FX, the DXY was softer and sub-90.500 after waning from the prior day's 90.671 high, but the index overnight matched yesterday's 90.151 low as participants focus on the US stimulus amendments and remain on standby for potential influence from Brexit-related Sterling action. On that note, GBP/USD extended on yesterday's gains and topped 1.3550 (vs. low 1.3490) as the EU and UK are set to announce a post-Brexit trade deal today after PM Johnson offered major concessions on fisheries in a bid to break the impasse. That being said, the devil is in the detail as there will now be a rush to approve the agreement in both the UK and European Parliaments - with hard-line Tory MPs suggesting they will scrutinise any deal in great detail. Meanwhile, the European Parliament said earlier this week that it will not vote before the end of the year, albeit Brussels could exercise the option to provisionally apply the deal until then. UK PM Johnson is expected to make the announcement at 11:00GMT, but a statement from the EU could be released sooner. EUR/USD meanwhile traded on either side of 1.2200 for most of the session as the pair moved with the Greenback - whilst just over EUR 800mln of OpEx resides at the round figure. Elsewhere, USD/JPY saw side-ways trade above 103.50 throughout the session and Antipodean benefitted from the softer Dollar, with AUD/USD eyeing 0.7600 to the upside throughout the session whilst its Kiwi counterpart attempted to sustain a breach above 0.7100.


US President Trump blames Iran for the Sunday attacks on the US Embassy in Baghdad; "Now we hear chatter of additional attacks against Americans in Iraq...If one American is killed, I will hold Iran responsible." (Twitter) Options were discussed but no military strikes were approved regarding Iran at this time, according to an official cited by CNN. (Twitter) Top US national security officials met at the White House to discuss a range of options to deter Iran and its proxies from attacking US military and diplomatic personnel in Iraq in light of the December 20th strike, according to a senior official. (Newswires)

US President Trump administration is reportedly planning a new package of congressionally mandated sanctions on Russia's Nord Stream 2 gas pipeline in the very new future, according to US officials. (Newswires)

US President Trump vetoes bipartisan defense bill, as expected. US House Speaker Pelosi said the Chamber will vote on Dec 28th on whether to override the veto of the National Defence Authorisation act. (Newswires)


WTI and Brent front month futures were initially uneventful before eking mild gains ahead of the European open. Prices overnight largely moved in lockstep with the Dollar, with WTI Feb and Brent Mar both contained near yesterday's highs. Meanwhile, an early release of the Baker Hughes rig count failed to spur price action. Elsewhere, precious metals eked mild gains as the complex tracked the Dollar throughout the night, with spot gold encountering a barrier at USD1880/oz and spot silver stopping short of USD 26/oz. In terms of base metals, Dalian iron ore futures rose following two consecutive days of losses despite BHP announcing that it had met licensing requirements to restart operations and had begun iron ore pellet production at its Samarco JV with Vale five years after a dam disaster. Shanghai copper also traded on a firmer footing amid the gains across stocks coupled with a softer Dollar.

Baker Hughes US Rig Count (w/e Dec. 23rd): Oil +1 at 264 (prev. +5), Natgas +2 to 83 (prev. +2), Total +2 at 348 (prev. +8). (Newswires)


Treasuries were dancing to the tune of Brexit on Wednesday; after reports hinted that a UK/EU trade deal was close to being announced, Gilt yields surged, taking Bund yields and Treasuries with it. That resulted in 2s10s steepening to wides last seen in February 2018. It was also interesting that Treasury price action respected the top-end of the recent range, leaving the cyclical high for 10s yields unbreached at 98.6bps. Some desks noted that the price action came amid thin trading conditions, and accordingly, were asking questions about how sustainable the Treasury move is particularly since the US narrative doesn't rely on a Brexit deal, although the easing in one major macro risk which has been dogging markets for eight years was being framed as an incremental positive. T-NOTE (H1) SETTLED 7 TICKS LOWER AT 137-24+

House Democrats plan to try to plan to pass USD 2,000 stimulus payment via unanimous consent today. If that does not work, they will push a bill on Monday to increase the USD 600 payment in the existing relief package to USD 2,000, according to WaPo's Stein.

GOP Leader McCarthy will object to measure on USD 2,000 checks. He also plans to offer a new CR (Continuing Resolution) separating State + foreign aid from the omnibus. That will likely see objection from Dems, according to CNBC's Tausche. (Twitter)

Fox was told to expect the House to try to advance the interim spending bill Dec 28 to run into new year, according to Fox's Pergram. (Twitter)

Maryland Judge rejected Trump admin rule that aimed to lower drug prices. (Newswires)

Google (GOOG) will open a “cloud region” where it can provide its cloud services in Saudi Arabia in a JV with Saudi Aramco. (CNBC)