[PODCAST] US Open Rundown 5th January 2020
- Equity performance has been choppy but contained, Euro Stoxx 50 -0.1%, ES +0.2%, as participants weigh further COVID developments ahead of key risk events this week
- NYSE announced that it is no longer planning to delist Chinese telecom firms
- OPEC document shows that one scenario developed by OPEC+ include an output reduction of 500k BPD in Feb; meeting to continue today from ~09:30EST/14:30GMT
- DXY remains pressured with the broader FX space supported in turn with antipodeans outperforming amid China developments
- Looking ahead, highlights include US ISM manufacturing, Fed's Williams, OPEC+ meeting resumption & Georgia Senate Runoffs
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 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. (FT)
Additionally, the UK's 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 (-0.4%) 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 (+0.6%) and Shanghai Comp. (+0.7%) 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)
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 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)
Italian PM Conte could agree to Government changes in order to end the crisis, via Corrriere. (Newswires)
UK PM Johnson to hold a press conference at 10:00EST/17:00GMT today. Earlier, Chancellor Sunak announces a one-off top up of grants for retail, hospitality and leisure business worth up to GBP 9k per property, GBP 594mln discretionary fund will be made available to provide additional support for other businesses impacted by COVID-19. Link to release
German Unemployment Rate SA (Dec) 6.1% vs. Exp. 6.1% (Prev. 6.1%); Change SA (Dec) -37k vs. Exp. 10.0k (Prev. -39.0k, Rev. -40k)
- Unemployment Total SA (Dec) 2.776M (Prev. 2.817M, Rev. 2.813M)
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) On the matter, Iran's Revolutionary Guard breaks into South Korean tanker and forces it to go to Iran - Al Jazeera. (Twitter)
European cash bourses see more of a mixed picture in choppy morning trade after a broadly lower open (Euro Stoxx 50 Unch) and following a similarly varied APAC performance, as investors remain cautious over the implications of the more transmittable COVID-19 variant ahead of key risk events including the Georgia Senate run-offs, FOMC minutes and the US labour market report – with US equity futures treading water in early European hours. In terms of the more immediate Senate run-off races, if Democrats manage to clench both seats (not expected), some desks believe that stocks might see a knee-jerk move lower as markets begin pricing in the prospects of higher corporation tax, and a potentially more activist regulatory approach - particularly against some of the concentrated large-cap names in tech (full primer available in the Research Suite and on the headline feed). Back to Europe, UK’s FTSE 100 (+0.4%) outperforms despite UK PM Johnson yesterday announcing a full lockdown for England, as heavyweights Shell (+3%) and BP (+2%) keep the index propped up amid firmer oil prices heading into the extended OPEC+ meeting, whilst the former is also to sell its Queensland Curtis LNG stake for USD 2.5bln to Global Infrastructure Partner. Sectors are also mixed with no risk profile to be derived. Oil & gas are among the top performers alongside Retail outpacing as Next (+9%) shares jump on a positive trading update. The IT sector also mildly benefits from a revenue guidance upgrade by Dialog Semiconductor (+3.5%) amid firmer-than-expected 5G phone and tablet demand, with this positive momentum is expected to continue into Q1 2021 – in turn, providing some impetus to the likes of Infineon (+0.8%) and STMicroelectronics (+1.7%). In terms of individual movers, Tui (+2%) is supported after Co. said Germany's BaFin has exempted a consortium backed by Russian billionaire Alexey Mordashov from making a compulsory takeover offer for the Co. Meanwhile, easyJet (-1.1%) and Ryanair (-0.9%) bear the brunt of more stringent lockdown measures and higher fuel prices.
AUD/NZD - Although the Greenback has regained some poise and safe-haven premium, its Antipodean rivals are outperforming and both are back on, or near round number levels that proved too tough to maintain on Monday. Aud/Usd has been boosted by a combination of factors including ongoing appreciation in the YUAN, a rise in iron ore prices, another jump in ANZ job vacancies and PM Morrison expressing hope that border restrictions between Victoria and NSW may be relaxed in the not too distant future. However, gains above 0.7700 are still relatively light and 1.0700 is capping the Aud/Nzd cross to keep Nzd/Usd afloat above 0.7200. Back to China, the PBoC gave the Cny and Cnh a further lift via a sub-6.5000 midpoint fix for the strongest onshore setting since June 2018, but additional strength towards 6.4300 and 6.4100 for the offshore unit stalled amidst reports of major state banks buying Usd/Cnh in pm trade.
USD - Off recovery highs, but back in a degree of demand as risk sentiment stalls and the DXY holds above 89.500 within a 89.917-637 range ahead of the US manufacturing ISM, more from Fed’s Evans and the eagerly-awaited Georgia state run-off results. However, Dollar/major and a few EM pairings remain skewed to the downside (or upside if quoted inversely of course), with ongoing pressure from commodities, like precious metals and crude to a lesser pre-OPEC+ extent.
EUR/CAD/JPY/CHF/GBP - The Euro is hovering below 1.2300 with external support from the aforementioned Yuan rally and strength in German data to compensate for the pandemic resurgence, while the Loonie has recovered some losses alongside oil in advance of Canadian PPI to trade back above 1.2750 compared to almost 1.2800 and Yen has rebounded through 103.00 in the run up to Japan’s services PMI and consumer confidence tomorrow. Elsewhere, the Franc is retesting 0.8800 in wake of slightly softer than expected Swiss CPI and the Pound is trying to keep sight of 1.3600 after confirmation that the UK will enter its 3rd lockdown and more business support measures from Chancellor Sunak.
SCANDI/EM - A change of fortunes for the Sek and Nok as the former derives technical/psychological support following a bounce from under 10.1000 vs the Eur, but the latter loses oil-induced impetus after failing to breach 10.4000 yesterday. Meanwhile, the Zar is underperforming amidst the fight to contain SA’s COVID-19 variant, but the Rub is also lagging on diplomatic strains in contrast to the Try that has sustained frothy Turkish inflation momentum with extra assistance from an increase in exports according to the Trade Ministry.
A somewhat lacklustre 2 year German debt sale, but in truth bonds were already backing off a bit further from best levels prior to the later than usual posting of results, with Bunds touching 178.00 vs 178.27 at the Eurex high, Gilts down to a minor new 135.50 Liffe low from 135.73 and the 10 year T-note probing 138-00 compared to 138-05. No obvious catalyst behind the latest downturn, though equally there was little incentive for bonds to break above earlier intraday peaks or out of recent moderately loftier range pinnacles. Rather, more consolidation, making room for syndications and corporate issuance before this week’s major events that kick off with the Georgia results post-US manufacturing ISM and more Fed speak.
WTI and Brent front-month futures trade with mild gains as participants prepare to monitor the extended OPEC+ meeting after producers failed to reach an accord during yesterday's session. The meeting is slated to commence around 14:30-15:00GMT with some speculation doing the rounds that the alliance will attempt a compromise of around 250k BPD output hike given the varying positions on February output. Headlines early in the session highlighted one scenario proposed by the JMMC which includes an output reduction of 500k BPD, although it is hard to see this gaining traction as both Russia and Kazakhstan are advocating for a 500k bpd increase to quotas - with unanimous consent needed on the decision. Reminder: the exclusive Newsquawk OPEC Twitter dashboard is available on the website. On that note, the backdrop of the spreading COVID-variants remain, with England announcing a full lockdown yesterday and other European countries tightening measures - while scientists have also warned the South African COVID-19 variant may evade vaccines and testing, according to the Telegraph. WTI trades on either side of USD 48/bbl (vs low 47.27/bbl) while its Brent counterpart trades just north of USD 51/bbl (vs. low 50.60/bbl). Elsewhere, precious metals eke mild gains amid the modestly softer Buck, with spot gold eyeing 1950/oz to the upside (vs. low ~1935/oz) and spot silver just shy of 27.50/oz (vs. low 27/oz). Over to base metals, LME copper prices creeps towards the USD 8,000/t psychological mark amid a recovery in stocks coupled with a softer Dollar. Dalian iron ore futures meanwhile advanced for a third consecutive session amid tight supply concerns after iron ore volumes dispatched from 19 ports and 16 mining companies in Australia and Brazil fell by 4.3% WW over Dec 28th to Jan 3rd, Mysteel consultancy reported.
OPEC document shows that one scenario developed by OPEC+ include an output reduction of 500k BPD in Feb. Elsewhere, OPEC+ technical and monitoring ministerial meetings are scheduled for February 2nd and 3rd, according to a document; OPEC+ overproducing nations are to submit plans for compensation by January 15th to the OPEC Secretariat. (Newswires)