[PODCAST] US Open Rundown 24th December 2020
- Equity price action is contained and somewhat directionless amid the lack of newsflow as we await Brexit/fiscal updates; ES +0.2%, FTSE 100 -0.1%
- UK PM Johnson and European Commission President von der Leyen expected to hold a call today followed by a press-conference
- GBP continues to grind higher ahead of this call and press-conference as negotiators discuss the final aspects of the deal; GBP/USD has eclipsed 1.3600 while DXY remains in proximity to lows of 91.151
- 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%
- NOTE: Desk will operate as usual until 18:45GMT/13:45EST
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 (-0.6%) 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 (+0.2%) 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
China's Foreign Ministry on the China-EU investment agreement says discussions are progressing smoothly. (Newswires)
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)
Google (GOOG) will open a “cloud region” where it can provide its cloud services in Saudi Arabia in a JV with Saudi Aramco. (CNBC)
UK PM Johnson and European Commission President von der Leyen are expected to hold a call today followed by a press-conference; timing for the call has been delayed somewhat with negotiators still discussing the final aspects of the fisheries agreement. (Newswires)
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)
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)
Senior UK parliamentary sources suggest 30th Dec (next Weds) remains most likely day for UK Parliament to meet and approve any Brexit deal, Sky's Pike. (Twitter)
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)
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)
With several markets closed across the region ahead of the festive break, price action in the equity space has been relatively contained thus far. Of the indices open, the FTSE 100 (+0.1%) has trimmed its modest opening gains with investor sentiment in the UK solely focused on the expected pending announcement of a Brexit deal. Despite some minor details on fishing that are still to be resolved and a delay in the announcement of the deal, it appears that the prospect of a no deal has now been avoided. Accordingly, most of the FTSE 100’s gainers are comprised of the typical Brexit-sensitive names with banking stocks such as Lloyds (+5.4%), Barclays (+2.7%) and Natwest Group (+1.9%) firmer on the session. Additionally, homebuilders are also cheering the news with Berkeley Group (+3.7%), Persimmon (+2.5%) and Barratt Developments (+2.8%) trading higher. Note, the more domestically focused FSTE 250 trades higher to the tune of 0.5%. Elsewhere, there’s not much worth highlighting in Europe with the CAC 40, FSTE MIB and IBEX all near the unchanged mark on the session. Stateside, ahead of the early close, US futures are modestly firmer (e-mini S&P +0.2%) with the only notable incremental news over the past 24 hours being events on Capitol Hill as President Trump’s intervention on the COVID relief/stimulus bill poses a headwind to progress. In terms of the latest updates, 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. Unsurprisingly, reports suggest that GOP Leader McCarthy will object to this. Additionally, in a move that will be opposed by Democrats, McCarthy plans to offer a new CR (Continuing Resolution) separating State and foreign aid from the omnibus.
GBP - Notwithstanding, all the missed deadlines, dashed hopes and disappointments, the Pound remains elevated if not effused with Brexit deal optimism in line with overwhelming odds via bookmakers that negotiators from London and Brussels will get over the line this time. Indeed, Cable has probed above 1.3600 and to within striking distance of the 1.3625 ytd high, while Eur/Gbp is back below 0.9000 awaiting confirmation of a post-transition agreement via UK PM Johnson and European Commission President von der Leyen, assuming no leaks and tweets before their official joint news conference, which is expected at some unspecified time. It goes without saying that Sterling could be prone to a buy rumour and sell fact set-back even if a pact is forthcoming, while the reaction to yet another false dawn will doubtless be pronounced to the point of immeasurable given seasonally sparse liquidity.
USD - In stark contrast to the Pound, albeit partly as a result, the Dollar continues to limp towards Xmas and the New Year, with the DXY fending off numerous assaults on the 90.000 mark and only just keeping afloat of the 2020 low at 89.723 between 90.151-313 parameters. Aside from Cable’s exertions, the Greenback has lost safe-haven appeal broadly and barring any last minute shocks on the election front, looks set for life under a Democratic President that promises to be more fiscally expansive. Meanwhile, after benefiting from heightened demand when the first wave of COVID-19 sparked a FTQ and liquidity squeeze, the Buck has been in a virtual and almost constant downward spiral from a 102.99 peak in index terms at the end of Q1. Moreover, any month end selling for portfolio rebalancing could be compounded by quarter and year end positioning, while the Fed is sticking to an accommodative and it remains to be seen how forcefully the incoming Biden administration (assuming he is formally sworn in of course) bangs the strong Dollar drum.
AUD/NZD - The next best G10 currencies, as the Aussie and Kiwi revisit round numbers at 0.7600 and 0.7100 respectively amidst the aforementioned Greenback travails, but with the former also drawing some encouragement from China looking at lowering an array of import tariffs to compensate for other goods, like beef, barely, beer and wine that have been embargoed, suspended of subject to high tariffs.
EUR/CAD/CHF/JPY - All narrowly mixed vs their US counterpart, with the Euro straddling 1.2200 against the backdrop of heightened Brexit accord expectations that are providing tailwinds for the headline pair to offset some of the Eur/Gbp headwinds, while the Loonie is holding within a 1.2852-31 range ahead of Canadian building permits that might provide some independent impetus given no scheduled US data. Elsewhere, the Franc is hovering just over 0.8900 and Yen under 103.50 following more jawboning from Japan about 100.00 forming a line in the sand (per former currency official Watanabe in wake of current PM Suga last weekend).
EM - Initially, relatively rangy and quiet trade given the start of the festive holidays in many centres, but the TRY strengthened going into, and following, the CBRT announcement which saw a larger than expected 200bp hike.
Turkish CBT Weekly Repo Rate (Dec) 17% vs. Exp. 16.5% (Prev. 15.0%); Implemented strong monetary tightening & inflation expectations continue to affect pricing behaviour and inflation adversely. (Newswires)
Japan may intervene in the FX market to prevent USD/JPY from crossing 100.00 according to former official Watanabe; such an intervention would be a one-off given the difficulty of keeping rates to a set level. (Newswires)
Gilts continue to plough a lone furrow in absence of Eurozone counterparts due to the Xmas Eve Eurex platform closure, and with little or no direction from US Treasuries that appear content to follow rather than lead. However, the 10 year debt future has gradually extended gains to 1/2 point at 134.74 from -23 ticks at the low to breach Tuesday’s best and seems to have dragged Short Sterling back above parity vs -0.5 to -1.5 tick troughs even though Brexit deal hype is high and keeping the Pound on an upward trajectory amidst reports that the eagerly awaited call between PM Johnson and von der Leyen is about to start.
WTI and Brent have, unsurprisingly in the holiday conditions, lacked clear direction or impetus and as such are in relative proximity to the unchanged mark. Fundamentally, updates explicitly for the complex have been incredibly sparse with attention focused more on the macro themes of Brexit and the progression of fiscal aid stateside following the veto 'threat' by the POTUS; focus points that are likely to capture attention for the remainder of the session given the light calendar. In terms of precious metals action has been relatively contained with spot gold and silver are only modestly supported by the softer USD; perhaps hindered somewhat by the imminent Brexit deal. Currently, the yellow metal is firmer by ~USD 3/oz and is towards the top-end of a USD 10/oz range in a continuation of the similarly lacklustre APAC performance.