Original insights into market moving news

[PODCAST] European Open Rundown 8th January 2021

  • Asian equity markets traded mostly positive on momentum from the fresh all-time highs on Wall St where the Nasdaq led the advances
  • In FX markets, the DXY briefly tested 90.00 to the upside, weighing on EUR/USD and GBP/USD
  • President Trump condemned the riots and stated that his focus was on a smooth and orderly transition
  • Reports suggest that VP Pence is against invoking the 25th Amendment to remove President Trump
  • US President-elect Biden is reportedly mulling a 'one-two' stimulus jab involving the balance of the USD 2,000 coronavirus checks and USD 3tln tax and infrastructure package (Axios)
  • Looking ahead, highlights include German trade balance, EZ unemployment, US and Canadian labour market reports, Fed's Clarida


US COVID-19 cases + 299,904 (prev. +227,692), deaths +3,844 (prev. +3,541), while a major newswire tally stated US cases increased by a record of at least 272,563 to 21.49mln and deaths rose by at least 4,002 to 365.1k. New York reported cases +17,636 (prev. +16,648), positivity rate 7.39% (prev. +8.41%), hospitalisations 8,548 (prev. +8,665), deaths +197 (prev. +161). (Newswires)

Pfizer (PFE) said its COVID-19 vaccine appears to be effective against UK mutation and South Africa variants of the virus in lab tests. However, other reports noted that study was conducted on blood taken from people who had been given the vaccine and that its findings are limited because it does not look at the full set of mutations found in either of the new variants of the rapidly spreading virus. (Newswires/Telegraph)

UK extended travel restrictions to south African countries to protect against the spread of the COVID-19 variant detected. (Newswires)

French PM Castex said restrictions will remain in place regarding travel to the UK and the situation is worsening in some parts of France compared to other parts of the country, such as Eastern France, while he added that they must keep up pressures to curb COVID-19 and we may need to tighten restriction measures. (Newswires)

Australia's Queensland state Premier announced a 3-day lockdown in Greater Brisbane due to COVID-19, while Australian PM Morrison said the COVID-19 situation in Brisbane is serious and that they will require pre-flight COVID testing on international flights, as well as reduce caps by half on international arrivals to some states through to February 15th. (Newswires)

Japan's Kyoto, Osaka and Hyogo are reportedly to cooperate and request for the government to declare a state of emergency for them. (Newswires)


Asian equity markets traded mostly positive on momentum from the fresh all-time highs on Wall St where the Nasdaq led the advances as large-cap tech names clawed back losses after the dust settled from the blue sweep and with better-than-expected data adding to the constructive mood. ASX 200 (+0.7%) and Nikkei 225 (+2.0%) were higher with outperformance seen in Australia’s tech and financials but with gains in the index capped by weakness in miners and after the Queensland Premier announced a 3-day lockdown in Greater Brisbane due to COVID-19, while Japanese exporters benefitted from favourable currency effects which have offset the headwinds from the State of Emergency declaration for Tokyo and neighbouring prefectures, as well as mixed Household Spending figures. KOSPI (+3.3%) was the biggest gainer with index heavyweight Samsung Electronics underpinned after its preliminary Q4 results in which oper. profit slightly missed expectations at KRW 9.0tln vs exp. KRW 9.1tln but still showed a 25% increase Y/Y and Hyundai Motor shares were in 5th gear with gains of nearly 20% following reports the Co. could partner with Apple for self-driving cars, despite the automaker confirming nothing has been decided yet and that the US tech giant was in discussions with various car manufacturers. Hang Seng (+1.3%) and Shanghai Comp. (-0.4%) were mixed with the mainland faltering after the PBoC’s operations resulted to a net weekly liquidity drain of CNY 505bln and due to ongoing tensions with US after MSCI and FTSE Russell announced to delete the Chinese telco giants from their indexes, while Beijing also warned that Washington will pay a heavy price if it proceeds with an Ambassador visit to Taiwan scheduled for next week. Finally, 10yr JGBs were subdued and languished at the prior day's lows amid gains in stocks and after continued pressure in USTs, with mixed 30yr JGB auction results also keeping price action drab.

PBoC injected CNY 5bln via 7-day reverse repos at a rate of 2.20% for a net weekly drain of CNY 505bln. (Newswires) PBoC set USD/CNY mid-point at 6.4708 vs exp. 6.4694 (prev. 6.4608)

MSCI Indexes announced is to delete China Mobile (941 HK), China Telecom (728 HK) and China Unicom (762 HK), while FTSE Russell is also to delete the Chinese telecom giants from global indexes. (Newswires)

US President Trump’s administration officials are expected to discuss a proposed expansion of an executive order banning US investment in alleged Chinese military companies, according to sources. (Newswires)

US Mission to UN said the US Ambassador will visit Taiwan from January 13th-15th to meet with senior Taiwan counterparts and members of the diplomatic community, while the Ambassador will reinforce US government's strong, ongoing support to Taiwan's international space, in accord with the One-China policy. It was also reported that Beijing warned that Washington will pay a heavy price if the UN Ambassador goes to Taiwan and stated the US is playing with fire concerning the UN Mission to Taiwan. (Newswires/AFP/SCMP)

China may require the US consulate in Hong Kong to cut staff, register with Chinese authorities, restrict activities and may also consider investigating some Americans or US enterprises if US imposes more sanctions over Hong Kong, according to Global Times citing analysts. (Global Times)

South Korean court ordered Japan to pay KRW 100mln to each comfort woman during World War 2, while Japanese Chief Cabinet Secretary Kato later responded that the ruling regarding comfort women in South Korea was already decided in the 1960s and that recent ruling is regrettable which must be dismissed. (Newswires)

  • Japanese All Household Spending (Nov) M/M -1.8% vs. Exp. -1.3% (Prev. 2.1%). (Newswires)
  • Japanese All Household Spending (Nov) Y/Y 1.1% vs. Exp. -1.5% (Prev. 1.9%)


USTR said it has decided to suspend tariff action against French products related to France's Digital Services Tax and that suspending tariff action against France will promote a coordinated response in 10 other investigations involving other countries. There were later comments from the French Junior Trade Minister that France will pursue its efforts to reach a deal on a digital tax after the US suspended its plans to impose tariffs on France's products. (Newswires)


In FX markets, the USD maintained yesterday’s rebound which analysts had attributed to a short squeeze with the likes of Citi noting after several weeks of short positioning, it was now neutral following significant readjustments heading into the end of 2020, with a beat on ISM Non-Manufacturing PMI data and lower than expected jobless claims also conducive to the greenback’s rise. There was a plethora of Fed speakers in which some officials continued to brush upon the idea of tapering with Fed's Evans stating any change to asset purchases depends on how the recovery proceeds and that they will have a better idea of recovery dynamics possibly by June, while Fed’s Harker does not see the Fed paring bond purchases right now but can see it being tweaked 'later' although warned of a potential disruption in markets if this was done prematurely. Nonetheless, the DXY mildly extended on gains overnight and briefly tested the 90.00 level to the upside with slight tailwinds for the currency after a change in tone from US President Trump who condemned the riots and stated that his focus was on a smooth and orderly transition, but with upside ultimately capped ahead of the looming key US jobs report. EUR/USD was pressured with price action across the FX space predominantly at the influence of a stronger USD, while GBP/USD languished near yesterday’s lows. Elsewhere, USD/JPY held on to recent gains and made a brief attempt to reclaim the 104.00 handle amid USD-strength and the positive risk tone, while antipodeans were rangebound due to a lack of pertinent data releases and a choppy CNH.


Commodities were quiet overnight with WTI crude futures consolidating around the USD 51.00/bbl level amid a lack of fresh catalysts for the energy complex and with support from the mostly constructive risk tone offset by global COVID concerns including in the US which registered its largest one-day increase in infections. Elsewhere, gold was little changed with the precious metal kept subdued as the greenback held firm, while copper prices edged marginal gains alongside the mostly heightened risk appetite and strength in Chinese iron ore prices which surged 3% at the open of Shanghai metals trading.


North Korea leader Kim reportedly reviewed ties with South Korea and vowed to seek an 'all-out' expansion of external relations, according to state media cited by Yonhap. However, other reports noted North Korea also vowed a military build up. (Yonhap/Nikkei)


Bonds continued to sell-off after the cyclical trade extends post-GA Senate results, in addition to some hawkish commentary from Fed officials. By settlement, 2s -0.4bps at 14.1bps, 10s +3.6bps at 107.8bps, 30s +3.2bps at 185.3bps; futures volumes were even stronger today; real yields were lower in the short-end but higher at the long-end; inflation breakevens continued to widen with the 5yr measure now at 2.06%. The majority of the day's moved occurred in the US session, coming as stocks continued to rally to ATHs; interestingly the duration-sensitive Nasdaq lead the gains, although that comes after some recent underperformance. However, aside from the reflation and fiscal stimulus ramp-up expectations, there also has been a notable pick-up in attention to a string of Fed officials' commentary focusing around asset purchases. Aside from the mentioning of potential tapering in the FOMC minutes on Wednesday, Fed's Evans spoke today, talking about conditions he would require to consider tapering asset purchases, saying that if by June unemployment is heading down to 5% and progress on inflation is being made, more QE may not be needed; Evans also said it would not be unreasonable if the Fed first raises rates in mid-2024. More broadly, Evans' comments echo those of Bostic and Mester, and clues from more influential members of the Fed will be telling to confirm this shift in thinking towards moving away from QE; Clarida speaks on Friday. T-note (H1) futures settled 8 ticks lower at 136-30+.

US President-elect Biden is reportedly mulling a 'one-two' stimulus jab involving the balance of the USD 2,000 coronavirus checks and USD 3tln tax and infrastructure package, according to Axios. In separate news, Biden is to announce Commerce Secretary nominee Gina Raimondo, Labor Secretary nominee Marty Walsh and Small Business Administrator nominee Isabel Guzman today. (Axios/Newswires)

US President Trump said he is outraged by violence of the mob and that those who engaged in acts do not represent the US and will pay, while he added that his focus is on a smooth and orderly transition. It was separately reported President Trump told aides he is considering pardoning himself before leaving the White House on January 20th and was said to be preparing a list of aides and family members that could get a pre-emptive pardon which may include himself. (Newswires/Twitter)

US House Speaker Pelosi joined Democratic Senate Leader Schumer in calling for President Trump's immediate removal through the 25th amendment and stated if the Vice President and the cabinet do not act, congress may be prepared to move forward with impeachment. However, it was later reported that VP Pence was against invoking the 25th Amendment to remove President Trump. (Newswires)

US Secretary of State Pompeo and Treasury Secretary Mnuchin were said to be among cabinet members that discussed 25th Amendment with staff according to CNBC citing sources, although sources later denied the report and stated that Treasury Secretary Mnuchin did not discuss 25th Amendment with staff. In other news, US Education Secretary Devos submitted her resignation to President Trump and four more senior advisers in the National Security Council have resigned following the recent violence on Capitol Hill. (Newswires)

Fed's Bostic (voter) reiterated his view that the Fed may taper purchases earlier than expected. (Newswires)

Fed's Evans (voter) said any change to asset purchases depends on how the recovery proceeds and that they will have a better idea of recovery dynamics by springtime and maybe June, while he added if by then, unemployment is coming down to 5% and making progress on inflation, more QE may not be needed. Furthermore, he would advocate using QE to send a message on Fed's commitment to 2% inflation if needed and noted it would not be unreasonable if the Fed first raises rates in mid-2024. (Newswires)

Fed's Bullard (non-voter) said COVID-19 vaccines mean crisis is expected to wane in months ahead and sees US recovery in H1 2021, while he suggested policy response has been designed for a larger shock than what occurred. Bullard also said it is inappropriate to pin down any date for changes to its bond purchases given the pandemic and that FOMC language on bond buying gives Fed latitude to make a state-contingent call on the next move. (Newswires)

Fed's Kaplan (non-voter) said the Fed should not intervene to prevent yields rising and sees yields rising due to better economic outlook, while he sees 2021 growth between 4.5-5% (prev. > 4%; vs median dot plot of 4.2%). (Newswires)

Fed's Mester (non-voter) is optimistic H2 growth this year will be quite a bit stronger than in 2020, while she stated Fed policy is well calibrated to expectations of softening H1 and a firmer H2. Furthermore, Mester added the Fed will be patiently accommodative and it will take a while before inflation reaches 2% and is on path to above 2%. (Newswires)

Fed plans to return USD 62bln to the US Treasury from its lending facilities. (Newswires)