[PODCAST] US Open Rundown 4th January 2020
- European indices are bolstered this morning following a largely firmer APAC handover, Euro Stoxx 50 +0.9%, ES +0.5%, with focus on the week's impending risk events
- US President Trump was recorded on audio tape to have pressured the Georgia Secretary of State to find enough votes to overturn the result of the Georgia presidential election
- Chinese Caixin Manufacturing PMI fell short of estimates but still printed an 8th consecutive month in expansionary territory
- UK PM Johnson has warned that tougher lockdown restrictions might have to be considered; UK has begun rolling out the AstraZeneca vaccine - Germany is to maintain restrictions until end-January
- OPEC+ meeting will commence from 08:30EST/13:30GMT after the JMMC which will begin from 07:00EST/12:00GMT; producers are to decide on production levels for February
- DXY continues to drop with pressure evidenced across the G10 space with safe-havens and the EUR in particular performing well
- Looking ahead, highlights include Final US manufacturing PMI, Fed's Bostic, Evans & Mester
US CDC reported total COVID-19 cases rose to 20.35mln from 20.06mln and total deaths rose to 349.2k from 346.9k.(Newswires)
NIH’s Dr. Fauci said it is possible that COVID-19 vaccines will become mandatory in order to travel to other countries or attend school. (New York Post)
UK COVID-19 cases +54,990 (prev. +57,725) and deaths +454 (prev. +445), France cases +12,469 (prev. +3,466) and deaths +116 (prev. +157), Italy cases +14,245 (prev. +11,831) and deaths +347 (prev. +364). (Newswires)
UK PM Johnson said we need to see if tier 4 extra restrictions work in lowering infections and that there are a range of tougher measures we may have to consider. PM Johnson also commented that stricter lockdown restrictions for England including school closures will probably be required as cases of the new COVID-19 variant continue to surge. On the subject, Health Minister Hancock says nothing is ruled out. (Newswires)
England’s chief medical officer warned that COVID-19 vaccine shortages will be a problem for months as the government faced a revolt by GPs over cancelled second jabs for elderly patients, although other reports later noted that drug manufacturers hit back at claims by ministers regarding vaccine shortages. 2mln doses of the Oxford-AstraZeneca (AZN LN) vaccine are due to be supplied each week by the middle of this month as pressure builds on the government to speed up immunisations, although reports later noted that the NHS has refrained from committing to deliver 2mln COVID-19 vaccine jabs per week. (Times/Telegraph)
German Gov't has agreed to extend lockdown measures to end-January vs prev. January 10th, via Bild; separately, the German Health Ministry are looking at whether to delay administration of a second COVID-19 vaccine dose in order to stretch supplies, according to a document. (Newswires)
Irish PM Martin said that Ireland will revert to Level 5 restrictions for a minimum of a month in an effort curb the spread. (Sky News)
Greece announced a one-week strict COVID-19 lockdown beginning on Sunday, in an effort to ease the pressure on the health system. (Politico)
Norway PM Solberg noted concern regarding infection developments and that they are seeing more signs of a new wave of the virus, while she announced that Norway will impose fresh restrictions including a nationwide ban on serving alcohol in bars and restaurants for 2 weeks and for people to not invite guests at home. (Newswires)
Shenyang in northeast China suspended schools and closed businesses in areas where 100,000 people were told to stay home, after the city reported three new COVID-19 cases. (Global Times)
Beijing is to extend its quarantine period from 14 to 21 days for new arrivals to prevent imported cases, according to The Global Times (Twitter)
The governors of Tokyo and three neighbouring prefectures called for the national government to declare a state of emergency to address surging COVID-19 infections, while there were separate comments from Economic Minister Nishimura that the government would need to hear from experts prior to deciding on an emergency declaration. Furthermore, it was later reported that Japan is to declare a state of emergency for Tokyo and 3 surrounding prefectures as soon as this week and that the government is mulling a 1-month state of emergency on January 9th. (Newswires/Nikkei)
South Korea will widen the ban on private gatherings larger than four people nationwide and will extend social distancing rules in Seoul and neighbouring areas until January 17th. (Newswires)
Several prominent health leaders and academics in South Africa are calling for President Ramaphosa to fire those responsible for the delay in procuring COVID-19 vaccines which they fear could result in thousands of deaths and further damage the economy. There were also comments from South Africa’s Health Minister that he hopes vaccines will be received as early as February and that talks have been held regarding vaccines from China and Russia. (Newswires)
Asian equity markets began 2021 mostly higher while US equity futures traded indecisively after stalling at record levels as participants returned from the New Year’s holiday and heading into this week’s key risk events including the Georgia Senate runoffs on Tuesday, FOMC Minutes on Wednesday and NFP jobs data on Friday. ASX 200 (+1.5%) was led higher by outperformance in metal stocks as gold miners were underpinned after the precious metal surged above the USD 1900/oz level and with the top-weighted financials sector also notching firm gains. Nikkei 225 (-0.7%) began positive but then faltered on reports that Japan could announce a state of emergency for Tokyo and surrounding prefectures as soon as this week after their governors requested such action to stem surging COVID-19 infections, while Japan and Tokyo are to ask restaurants to close no later than 20:00 local time as part of measures to address the virus. KOSPI (+2.5%) outperformed with index heavyweight Samsung Electronics posting fresh all-time highs and after better-than-expected trade data which showed all components topped estimates including the fastest growth in exports in more than two years. Hang Seng (+0.9%) and Shanghai Comp. (+0.9%) were positive but with early jitters seen after the recent announcement by NYSE to delist China Mobile, China Telecom and China Unicom following US President Trump’s executive order in November banning investment in companies with ties to the Chinese military, which prompted threats of countermeasures from MOFCOM and large Chinese oil names felt the pressure on speculation that they could be next in the firing line. Furthermore, participants digested the latest Chinese Caixin Manufacturing PMI which fell short of estimates but still printed an 8th consecutive month in expansionary territory and there were also reports that China’s Foreign Minister Wang Yi extended an olive branch to the incoming Biden administration and suggested that a new window of hope is opening. Finally, 10yr JGBs were rangebound with initial upside stalled by resistance near the psychological 152.00 level and with price action contained amid the absence of BoJ purchases in the market today.
PBoC injected CNY 20bln via 7-day reverse repos at a rate of 2.20% for a net daily drain of CNY 140bln. (Newswires) PBoC set USD/CNY mid-point at 6.5408 vs exp. 6.5444 (prev. 6.5249)
Chinese President Xi commented in his New Year Speech that he expects China’s 2020 GDP to exceed CNY 100tln and that China was the first among major economies to have positive growth, while he also stated that China put people and life first in fighting against the pandemic. Furthermore, he reiterated that China will further deepen reform and boost opening up. (Newswires)
China’s Foreign Minister Wang Yi reportedly extended an olive branch to the incoming Biden administration in which he stated that a new window of hope is opening and urged the Biden administration to adopt a sensible approach, as well as restart engagement with China to get bilateral ties back on track. (SCMP)
PBoC and four ministries reportedly decided to extend the maturity of direct monetary policy tools for three months to end-March following instructions by the State Council. Additionally, the PBoC has issued a notice to improve cross-border Yuan policies in order to stabilise foreign trade and investments (Twitter)
NYSE announced to delist China Mobile (941 HK), China Telecom (728 HK) and China Unicom (762 HK) following US President Trump’s executive order in November banning investment in companies with ties to Chinese military. Following the decision, China’s MOFCOM responded that it will take “necessary measures” to the recent delisting of the three Chinese telecom firms. (Newswires)
China said it would take necessary measures to safeguard its sovereignty as it warned against the British Navy deploying its latest aircraft carrier HMS Queen Elizabeth to the South China Sea. (SCMP)
- Chinese Caixin Manufacturing PMI (Dec) 53.0 vs. Exp. 54.8 (Prev. 54.9); 8th consecutive monthly expansion.
- South Korea Trade Balance (USD)(Dec) 6.94B vs exp. 6.20B (prev. 5.90B)
- South Korea Exports (Dec) Y/Y 12.6% vs exp. 6.3% (prev. 4.0%); fastest growth since October 2018.
- South Korea Imports (Dec) Y/Y 1.8% vs exp. -2.8% (prev. -2.1%)
US Senate voted 81-13 on Friday to override President Trump’s veto of the NDAA defense bill which follows similar action by the House earlier last week, while President Trump later tweeted that the Republicans should have gotten rid of Section 230 in the bill. (Newswires)
US President Trump was recorded on audio tape to have pressured the Georgia Secretary of State to find enough votes to overturn the result of the Georgia presidential election which was won by President-elect Biden. (Newswires)
A group of 11 Republican Senators and Senators-elect issued a joint statement confirming that they will raise objections during the Congressional review of the Electoral College vote on January 6th and called for an emergency 10-day audit of the results. Furthermore, Senator Ted Cruz and others said they will not certify the election results on January 6th without the investigation into voter fraud. (Newswires/Axios)
Over 3mln have already casted their votes prior to Tuesday’s Georgia runoff races, while data showed that Democrats have an advantage in early voting turnout in Georgia although Republicans generally see higher Election Day turnout. Furthermore, a FiveThirtyEight poll showed that Democrat candidate Ossoff leads Republican Senator Perdue in the regular Senate election race at 49.2% vs. 47.4% and Democrat candidate Warnock leads Republican Senator Loeffler in the special Senate election race at 49.5% vs. 47.2%. (Newswires)
US House Speaker Pelosi was re-elected as Speaker of the US House of Representatives. (Newswires)
The Brexit transition period ended and the UK-EU trade deal took effect after the negotiators from both sides of the Channel reached an agreement late last month for an unprecedented 100% tariff liberalisation on goods, although this doesn’t apply to services and the UK financial industry will no longer have blanket access to the single market. Furthermore, UK Parliament passed the trade deal which was signed into law by the Queen, while EU ambassadors approved its provisional application prior to ratification by the European Parliament by end-Feb. (Newswires)
UK government will begin urgent discussions in the week ahead to try and reach an agreement by March to give the country’s financial services firms access to EU financial markets. There were also separate reports that Italy is providing UK finance firms a grace period of six months in which they can await authorisation to conduct business in the country as non-EU companies. (Newswires/CITY A.M.)
UK PM Johnson is seen to be on track to lose his own seat and both main political parties are unlikely to achieve a majority at the next general election due in 2024, according to a new Focaldata poll. (Newswires/Sunday Times)
ECB's Knot said what helps is that interest rates are low which will remain so for the time being although the most important thing is that there is sufficient economic growth, while he suggested this will increase income and make debt more affordable. Furthermore, he added that thanks to this favourable financial position, the Dutch government can support the economy. (Newswires)
EU Markit Manufacturing Final PMI (Dec) 55.2 vs. Exp. 55.5 (Prev. 55.5)
- German Markit/BME Manufacturing PMI (Dec) 58.3 vs. Exp. 58.6 (Prev. 58.6)
- French Markit Manufacturing PMI (Dec) 51.1 vs. Exp. 51.1 (Prev. 51.1)
UK Markit/CIPS Manufacturing PMI Final (Dec) 57.5 vs. Exp. 57.3 (Prev. 57.3)
US acting Secretary of Defense Miller ordered USS Nimitz to halt its redeployment and said the aircraft carrier is no longer leaving the Middle East due to Iran's recent threats against President Trump and other government officials. (Twitter)
US President-elect Biden's incoming National Security Adviser Sullivan said the new administration would move quickly to renew the last remaining major nuclear arms treaty with Russia even as it seeks to punish the latter for hacking US government networks, while he added that Biden plans to pursue a “follow-on negotiation” with Iran regarding missile capabilities if Tehran re-enters compliance with the nuclear deal. (New York Times)
Iran’s Foreign Minister Zarif tweeted that new intelligence from Iraq indicated that Israeli agent-provocateurs are plotting attacks against Americans—putting an outgoing Trump in a bind with a fake event that used to provoke or justify war. (Newswires)
Iran informed the IAEA it is planning to enrich uranium up to 20% purity at the Fordow nuclear site. Subsequently confirmed.(Newswires)
UAE arrested Iranian nationals in Abu Dhabi and Dubai it said were planning terror attacks in the country, according to Israeli TV. (Channel 12)
European stocks kick off the new year with gains across the board, albeit to varying degrees (Euro Stoxx 50 +1.0%) after the region picked up the baton from a mostly higher APAC session, whilst US equity futures inch higher in lockstep ahead of a risk-abundant week. Looking back at 2020 performance, the top global performers mostly resided among APAC bourses, with Shenzhen, KOSPI, China A50 all among the top gainers. State-side, the NASDAQ Comp outpaced, posting 2020 gains of some 42% whilst the S&P 500 and DJIA rose around 16% and 7% respectively in the year. Europe meanwhile saw more of a downbeat year with the FTSE 100 lower by almost 15%, and over in the EZ the Euro Stoxx 50 shed around 5%, CAC declined around 7%, IBEX and FTSE MIB saw losses of around 16% and 6% respectively for the year whilst the DAX eked gains of around 4% in the 12 months. Back to today’s trade, UK’s FTSE 100 (+2.6%) outperforms as Britain undergoes the first trading day following the end of the Brexit transition period, albeit gains are seemingly led by the heavy-weigh energy and material stocks amid price action in oil and base metals (see commodities section), with those sectors the outperformers this morning alongside the travel & leisure space as vaccine rollouts gain traction, whilst some airliners including Ryanair (-1.3%) and easyJet (-0.7%) are calling for airports to cut landing charges in the recovery period from the pandemic. Overall, sectors do not portray a particular risk tone. In terms of individual movers, Entain (+26.5%) – formerly GVC – soars after the Co. rejected a takeover offer from MGM Resorts worth around GBP 8.1bln, stating the offer “significantly undervalues” the Co. Elsewhere, the CAC (+1.6%) is underpinned by Airbus (+4.5%) whose shares are lifted on the back of reports that the group was reportedly close to delivering 560 planes by 2020-end, short of the record 863 in 2019 but close to the top-end of internal forecasts.
USD - The Greenback continues to depreciate almost across the board, as the DXY slips through 89.500 after yet another fleeting and seemingly futile attempt to regain composure saw the index fade some distance from the 90.000 mark (at 89.822 to be precise). Meanwhile, oil prices are buoyant ahead of OPEC+. Gold has breached Usd 1900/oz and BTC has extended well beyond the Usd 30k mark to set new record highs, with broad risk sentiment bullish at the start of 2021 irrespective of the ongoing pandemic resurgence and several looming events that could roil markets, like the Georgia run-offs, Fed minutes, Italian coalition head-to-head and US labour data. However, the rot shows little sign of stopping for the Buck and the DXY is now hovering just above a fresh multi-year low at 89.418.
CHF/EUR/CAD - All vying for top spot in the G10 ranks, with the Franc acknowledging an acceleration in Switzerland’s manufacturing PMI plus weekly sight deposit balances suggesting no SNB intervention, while the Euro is benefiting at the expense of the Dollar and upbeat tone rather than somewhat mixed Eurozone PMIs and Loonie is getting a lift from the aforementioned bid in crude. Usd/Chf is testing 0.8800, Eur/Usd 1.2300 and Usd/Cad 1.2675 before Canada’s Markit manufacturing PMI, the final US print and a trio of Fed speakers.
JPY/NZD/AUD/NOK - The next best majors, or recipients of the Greenback’s frailty, as the Yen eyes 102.70 irrespective of reports that Tokyo may be heading for a month long state of emergency from Saturday, the Kiwi reclaims 0.7200+ status, the Aussie approaches 0.7750 and Norwegian Crown sets on 10.4250 against the Euro even though the single currency is elevated and Norway’s manufacturing PMI missed expectations.
GBP/SEK - Relative laggards, as Sterling stutters after a peak through 1.3700 in Cable terms and the Swedish Krona runs into resistance ahead of 10.0200 regardless of encouraging manufacturing PMIs to offset some of the coronavirus concerns afflicting both countries. Note also, UK mortgage lending and approvals were much stronger than forecast, but before tighter restrictions to try and quell the pandemic resurgence.
EM -Widespread gains vs the Usd, with the Cnh and rallying strongly from the PBoC fix beyond 6.5000, the Krw cheering healthy trade data and the Try boosted by stronger than anticipated inflation that should keep the CBRT in aggressive tightening mode. Elsewhere, the Zar, Mxn and Rub also all deriving impetus from strength in underlying commodities, like bullion, WTI and Brent.
CBRT Minutes stated that they decided to implement strong monetary tightening policy taking into account their end-2021 forecast target, which followed their decision to hike the one-week repo target by 200bps to 17% on Christmas Eve. (Newswires)
Turkish CPI MM (Dec) 1.25% vs. Exp. 0.9% (Prev. 2.3%); YY (Dec) 14.60% vs. Exp. 14.2% (Prev. 14.03%)
China adjusted the currency weighting in the CFETS RMB Index whereby it cut the USD weighting and increased the EUR weighting. (Newswires)
It may be partly technical, but also on reflection of the overall mood that is keeping risk assets like stocks supported, but the fact of the matter is that Bunds, Gilts and US Treasuries have all slipped from intraday peaks, of 178.37, 135.96 and 138-02 respectively, while Eurozone periphery debt, including BTPs are still on the rebound from earlier lows. In terms of chart levels, the 10 year German bond stalled ahead of the pre-Xmas high at 178.44 from December 21, while its UK equivalent pulled up just shy of the December 11 apex at 135.99 not to mention the more psychological 136.00 handle and the T-note faces near term resistance between 138-03/138-03+ that has capped advances on several occasions of late. Ahead, Markit’s final US manufacturing PMI, construction spending and 3 Fed speakers before potentially bigger market moving events this week.
WTI and Brent front-month futures see a firm session thus far in the run-up to the OPEC+ decision-making and against the backdrop of geopolitical risk and vaccine rollouts. The JMMC meeting is due to start 12:00GMT/07:OOEST followed by the OPEC+ confab slated to at 13:30GMT/08:30EST, as usual subject to delays. As things stand, consensus is split over whether the group will further ease output cuts on account of stable prices and vaccine optimism, or whether to maintain current cuts to see how the COVID-19 situation play out, namely due to lockdown and jet fuel demand risks. The JTC over the weekend did not support further easing of curbs. Russia is seemingly opting for a further ease of cuts, whilst Saudi is likely to take a more cautious approach. Unanimity is needed on deciding the February oil quota. Over the weekend, OPEC SG Barkindo voiced concern over the new COVID-variant whilst emphasising that OPEC is “standing ready to adjust these levels depending on market conditions and developments”. Analysts at ING believe that “in the current environment, where there are real concerns over the latest waves of Covid-19, the best route for OPEC+ to take is to keep output cuts unchanged at current levels. Despite the strength in the flat price and spreads, the market is still clearly vulnerable, and adding further supply risks a pullback in prices.” As a reminder, the exclusive Newsquawk OPEC Twitter dashboard is available on the website. Turning to geopolitics, eyes were on Iran over the weekend amid the anniversary of IRCG Commander Soleimani’s death stoking fears of a retaliation. Hostile Iranian rhetoric has ramped up over the past week, namely against US President Trump and other US govt officials, prompting the US to reverse a decision to bring an aircraft carrier home from the Persian Gulf. WTI and Brent front month futures have declined from best levels after reaching highs of USD 49.80/bbl and USD 53.30/bbl respectively – with focus today likely on the togetherness and sentiment of OPEC+ members over the February output decision. Elsewhere, spot gold and silver continue to grind higher amid a weaker Buck coupled with some reflationary play amid the rollout of COVID vaccines, with spot gold powering past the USD 1900/oz mark to a current high around USD 1934/oz. Shanghai copper and Dalian iron ore saw a firm start to the year amid the softer Dollar, reflationary hopes and broader gains across stocks.
Today's OPEC+ meeting will commence from 08:30EST/13:30GMT after the JMMC which will begin from 07:00EST/12:00GMT; producers are to decide on production levels for February in the meetings. On this, a Majority of OPEC+ experts at the JTC meeting did not support an oil output increase from February, according to sources. (Newswires)