Original insights into market moving news

[PODCAST] European Open Rundown 5th January 2021

  • Asian equity markets traded cautiously following on from the uninspiring performance on Wall St where major indices declined from record levels
  • NYSE announced that it is no longer planning to delist Chinese telecom firms
  • UK PM Johnson announced a national lockdown in England, as expected from Tuesday until mid-February
  • The DXY consolidated beneath 90.00 after yesterday’s fluctuations, EUR/USD sits above 1.2250 and GBP/USD remained subdued below 1.3600
  • OPEC+ delegates confirmed that its meeting has been adjourned until Tuesday amid a lack of consensus for a decision
  • Looking ahead, highlights include German unemployment, US ISM manufacturing, Fed's Williams, German Schatz auction


US COVID-19 cases +212,117 (prev. +284,554) and deaths +1,418 (prev. +2,321). New York COVID-19 cases +11,209 (prev. +11,368), hospitalisations 8,251 (prev. 7,963), positivity rate 8.34% (prev. 7.98%) and deaths +170 (prev. +138). NY Governor Cuomo stated that the more contagious UK strain has been found in the state and that the man infected had not travelled. (Newswires)

US FDA warned that curative COVID-19 tests could have risks of false results, particularly false negatives. The FDA also issued a statement following dosing schedules for COVID-19 vaccine in which it stated that two different MRNA vaccines have shown remarkable effectiveness of about 95% in preventing infections among adults and that suggesting changes to the dosing or schedule is premature. FDA stated that available data continues to support the use of 2 specified doses of each vaccine at specified intervals which are 21 days for the Pfizer-BioNTech vaccine and 28 days for the Moderna vaccine, while it added that until vaccine makers have data supporting a change, it continues to strongly recommend health care providers follow the FDA dosing schedule. (Newswires)

BioNTech (BNTX) and Pfizer (PFE) said there is no data to demonstrate that protections against COVID-19 from their vaccine is sustained beyond 21 days after the first dose, while reports noted that BioNTech warned there is no data to support a UK plan to space COVID-19 vaccine doses and that the vaccine was only tested on doses being 21 days apart. (Newswires/FT)

European Medicines Agency approval for Moderna's COVID-19 vaccine could come on January 6th, according to the Dutch Medicines Authority. (Newswires)

UK PM Johnson announced a national lockdown in England, as expected from Tuesday until mid-February and stated that if things go well, he expects to have offered the first vaccine to top four groups of priority in vaccination programme by the middle of February. In related news, PM Johnson reportedly faces calls to increase support for businesses following the announcement of a fresh nationwide lockdown. (Newswires/FT) UK mass COVID-19 vaccination program rollout is said to be hampered by red tape and lack of back up supplies, according to reports citing sources, while it was also reported that UK ministers are finalising proposals to toughen entry by foreign travellers into England by introducing PCR tests for those entering the country. (FT)

Japanese PM Suga told LDP meeting that the state of emergency declaration will be decided on Thursday. There were also reports the Japan government is mulling a halt of all foreign arrivals and will pause the business travel agreement with China and South Korea. (Newswires/Nikkei)


Asian equity markets traded cautiously following on from the uninspiring performance on Wall St where the major indices declined from record levels and the DJIA briefly slipped beneath 30k as sentiment was hampered by surging COVID-19 infections and upcoming risk events. ASX 200 (Unch.) and Nikkei 225 (-0.5%) were pressured in which cyclicals underperformed in Australia but with losses in the index stemmed by continued strength in the mining sectors, while Tokyo sentiment remained hampered by the prospects of a state of emergency declaration which PM Suga will make a decision on this Thursday. Hang Seng (-0.1%) and Shanghai Comp. (+0.3%) were indecisive after another liquidity drain by the PBoC and with FTSE Russell announcing to delete China United Network Communications, SMIC and Nanjing Panda Electronics from the Global Equity Series due to President Trump's executive order. Furthermore, the China State Council passed the draft stamp tax law to bring stamp duty on securities trading into its legal framework and Hong Kong extended the work from home policy for civil servants through to January 20th with social distancing restrictions likely to remain in place until the Lunar New Year. However, losses were eventually pared after NYSE backtracked on plans to delist the Chinese telecom giants which boosted China Mobile, China Telecom and China Unicom shares. Finally, 10yr JGBs were higher with prices lifted amid the cautious mood in stocks but with further upside capped by resistance at the psychological 152.00 level and after the BoJ’s Rinban announcement to purchase a total of nearly JPY 1.3tln of 1yr-10yr JGBs but lowered the purchase amounts in 1yr-3yr maturities from prior.

PBoC injected CNY 10bln via 7-day reverse repos at a rate of 2.20% for a net daily drain of CNY 130bln. (Newswires) PBoC set USD/CNY mid-point at 6.4760 vs exp. 6.4978 (prev. 6.5408); strongest fix since June 2018.

NYSE announced that it is no longer planning to delist Chinese telecom firms. The decision follows further consultation with relevant regulatory authorities in connection with a recent update of guidance from the US Treasury Department regarding Executive Order on companies with military ties to China, while the update had also stated that the E.O. does not require US persons to divest holdings in such companies. (Newswires)

China could reportedly ask US companies seeking access to the Chinese market to reveal their own US military dealings and links, according to Global Times citing an analyst. (Global Times)


In FX markets, the DXY consolidated beneath 90.00 after yesterday’s fluctuations whereby initial weakness in the USD was reversed as risk appetite soured during Wall St trade, while focus is centred on the upcoming risk events with the Georgia Senate run-off later today in which polls by Real Clear Politics and FiveThirtyEight lean marginally in favour of both Democrat candidates. Furthermore, FOMC Minutes and the latest NFP data remain on the horizon. Elsewhere, the recent price action in EUR/USD has been at the whim of the swings in the greenback with the single currency reverting to Monday’s Asia-Pac range above the 1.2250 level and GBP/USD remained subdued below the 1.3600 handle after UK PM Johnson confirmed another nationwide lockdown which will last until mid-February. Elsewhere, USD/JPY traded sideways and JPY-crosses were driven by base currency advances, while antipodeans were underpinned by upside in Chinese iron ore prices and continued CNH appreciation after the PBoC strengthened the reference rate by 1% which was the largest percentage increase since 2005.


WTI crude futures were little changed overnight beneath USD 48.00/bbl after yesterday's declines amid the soured risk tone, COVID-19 infections and lockdown concerns, as well as participants awaiting the decision regarding OPEC+ output for February. The meeting was adjourned till later today amid a lack of consensus with most producers favouring to rollover current output level although both Russia and Kazakhstan are advocating for a 500k bpd increase to quotas. Elsewhere, gold prices plateaued near yesterday's best levels and copper shrugged off the cautious risk tone and took its cue from early strength in Chinese iron ore futures which surged around 3% at the open of Shanghai metals trade.

OPEC+ reportedly discussed extending the meeting into Tuesday where the meeting will be held at 15:00GMT/10:00EST and delegates then confirmed that the meeting has been adjourned until Tuesday. (Newswires)


Saudi Arabia is to open the land border and air space to Qatar, according to a Kuwaiti official. Furthermore, a senior Trump administration official also noted that Saudi Arabia, UAE, Bahrain and Egypt will lift blockade on Qatar and Doha will drop related lawsuits. (Newswires)

South Korea Foreign Minister said it is taking steps to release tanker seized by Iran. Furthermore, US called for Iran to immediately release the South Korean-flagged tanker and stated that Iran threatens Gulf freedom of navigation, while it alleged Iran is seeking to extort sanctions relief and that Iran enriching uranium to 20% is a clear attempt to increase its campaign of nuclear extortion. (Newswires/Yonhap)


The TPLEX was little changed on Monday as a spike in volatility across markets saw an earlier bear-steepener reverse. By settlement 2s -0.6bps at 11.5bps, 10s +0.3bps at 91.5bps, and 30s +1.4bps at 165.6bps; 5- and 10-year TIPS yields both made fresh all-time-lows; UST futures volumes were average. Treasuries had been sold heading into US trade, coinciding with a firmer risk tone out of APAC/Europe, in addition to a slew of US corporate deals adding supply pressure (including USD 10bln from Broadcom). Yields in 10s and 30s cash hit peaks of 95.3bps and 169.1bps, respectively. However, stocks had a shaky start at the NY open, which saw a broader reversal of the earlier risk-off, seeing the DXY and USTs go bid. Reports noted a combination of both chunky hedge fund buys, in addition to algo buy programmes supporting the reversal. The causation of the risk aversion wasn't so black and white, rather, it was seemingly a cocktail of factors. Commentators were quick to ascribe fears over a Dem sweep and its implications for taxes and regulation to the stock sell-off, although the effect from the GA race going to the Dems would be the accompanied ramp-up in fiscal spending/supply to fund a greater budget deficit, but bonds in fact went bid amid the stock rout today. Meanwhile, other potential catalysts included the continued ramp-up in COVID cases, with new lockdowns being introduced in Europe, as well as potential book squaring as many return for the new year. Looking ahead for the week, the key catalysts for the rates market, and the broader markets, include the GA Senate runoffs on Tuesday, the potential for Johnson & Johnson's (JNJ) vaccine results (which could greatly ramp-up vaccine availability), any "upsets" at the Electoral College vote confirmations on Wednesday, the FOMC minutes also on Wednesday, with December NFP on Friday. T-note (H1) futures settled 1+ tick higher at 138-04.

US President-elect Biden said electing Democrats in Georgia will put an end to the block on the USD 2,000 stimulus checks and money will go out the door immediately, while he added the entire nation is looking to Georgia. In relevant news, US Republican Senator Loeffler who's seat is up for contention in the Georgia Senate run-off is to object to the certification of the Presidential results. (Newswires/Fox News)

Fed's Bostic (Voter, Dove) said recalibration of Fed asset purchases could come in short order if COVID-19 vaccines and economic recovery take hold, while he added that the baseline is for a somewhat difficult start for the year with stronger recovery beginning perhaps in Q2. Furthermore, he stated the new US fiscal package will help avert some of the worst outcomes but is still watching for vulnerabilities. (Newswires)

Fed's Evans (Voter, Dove) said he doesn't expect to raise rates until inflation reaches 2% and looks set to rise above it. Evans also commented that US monetary policy is well positioned now and that vaccines make him more confident in his forecast for 4% growth this year, while he added that if the economy grows substantially faster than he expects, it could mean that fewer asset purchases would be needed. (Newswires)

Fed's Mester (Non-voter, Hawk) said monetary policy will need to stay accommodative for quite some time and that dynamics suggest inflation is not going to move up quickly above 2%, while she expects a strong pick up in economic activity in H2 assuming most people are vaccinated by Q3 but added the near-term outlook remains weak as the virus surges. Mester also suggested that stronger growth this year will not warrant a shift in policy because she anticipates the economy will remain far apart from the Fed's employment and inflation targets. (Newswires)