Original insights into market moving news

[PODCAST] European Open Rundown 11th January 2021

  • Asian equity markets began the week indecisively as ongoing COVID-19 concerns and US-China tensions contributed to the cautious mood
  • Secretary of State Pompeo announced the US is to remove all self-imposed restrictions on executive branch agencies’ interactions with their counterparts from Taiwan
  • US National Security Adviser O'Brien said the US is examining additional options to respond to China regarding the virus and Hong Kong
  • In FX markets, the DXY gained a firmer footing above 90.00, EUR/USD slipped below 1.22, GBP/USD hovers around 1.35 and USD/JPY reclaimed 104.00
  • US President-elect Biden stated he will propose an economic package on Thursday in the trillions of dollars which will include unemployment insurance and rent forbearance
  • US House Speaker Pelosi said the House will take up a resolution to impeach US President Trump unless VP Pence and the cabinet invoke the 25th amendment
  • Looking ahead, highlights include EZ Sentix Index, BoE's Tenreyro, ECB's Lagarde, Fed's Bostic, Kaplan, US 3yr supply


US CDC reported COVID-19 cases rose to a total 22.10mln from 21.85mln the day before and deaths rose to a total 371.1k from 367.7k, while a major newswire tally stated US cases rose by at least 199,213 to a total of 22.24mln and deaths rose by at least 1,859 to a total of 374.2k. (Newswires)

US President-elect Biden is reportedly planning to speed up vaccinations after his inauguration with gyms and stadiums to be used as staging areas. (Newswires)

White House coronavirus task force said there could be a new variant of the virus that evolved in the US and is driving the spread, while the new variant is already spreading in communities and may be 50% more transmissible, according to a report that was issued to states on January 3rd. However, several government officials stated over the weekend that reports of a highly contagious new COVID-19 variant in the US were based on speculative statements made by Dr. Birx and were inaccurate. (Newswires/NYT)

UK COVID-19 cases +54,940 (prev. +59,937) and deaths +563 (prev. +1,035), Italy cases +18,627 (prev. +19,978) and deaths +361 (prev. +483), France cases +15,944 and deaths +151 over a 24-hour period. (Newswires)

UK Health Minister Hancock said it is a very, very serious situation for the health service, while he also stated that vaccinations are on track to reach 2mln per week and are running at over 200k daily. Furthermore, Hancock states he hopes progress is made on ending restrictions before end-March and noted that every adult will be offered a vaccine by Autumn. (Newswires)

UK government is considering tightening the lockdown and ministers are considering a "tough crackdown" to pressure people to stay at home after the daily coronavirus death toll hit a new record. Furthermore, police officers have been told to fine people GBP 200 if they believe they are in breach of the rules and refuse to return home at the first time of asking, in new guidance issued to all chief constables. (Telegraph)

French Health Ministry confirmed that the first doses of Moderna’s (MRNA) COVID-19 vaccine will arrive in France this Monday and that approval of the vaccine will allow France to have a further 50k of vaccine doses this week, while it hopes to have 8mln doses of Moderna’s vaccine between now and end-June. (Newswires)

German Chancellor Merkel said doctors and nurses in many hospitals are near to being overwhelmed and that virus mutations increase the level of concern, while she added the approaching weeks are set to be the country’s toughest yet and that they need to consistently adhere to the tougher lockdown measures. (Newswires)

China’s national health commission said the nation has administered almost 9mln COVID-19 vaccine doses and that it sees risk that the virus will spread more in the winter, while it added that the vaccine will be free for all citizens and stated the WHO expert team will go to China on January 14th to investigate the origins of the virus. In separate news, China's Hebei suspended sales of tickets to Beijing and passengers are required to provide negative nucleic acid tests taken within 72 hours if they want to travel to the capital by train, while it was also reported that China will continue to suspend flights to and from the UK effective Monday. (Newswires/Global Times)

Japan’s Kyoto, Osaka and Hyogo prefectures have requested for the government to declare a state of emergency for their regions. There were also separate reports the Japanese National Institute of Infectious Diseases said authorities discovered a new strain of COVID-19 in four passengers arriving from Brazil, which has similarities to the variants found in UK and South Africa. (Newswires)

Russia’s RDIF stated that Algeria was the first African country to register the Sputnik V vaccine. (Newswires)


Asian equity markets began the week indecisive amid tentativeness following the US NFP jobs data and with Japanese participants away for Coming of Age Day, while ongoing COVID-19 concerns and US-China tensions also contributed to the cautious overnight mood. ASX 200 (-0.9%) traded negative with better-than-expected Retail Sales and the lifting of the 3-day lockdown in Brisbane failing to lift the index which was pressured as tech and miners led the broad declines across sectors, while NZX 50 (-2.8%) was the worst hit after the RBNZ announced an illegal breach of one of its data systems. KOSPI (-0.4%) initially extended on record levels boosted by continued gains in Samsung Electronics which also notched fresh all-time highs after last week’s preliminary results and Hyundai Motor briefly surged by another 10% on the Apple EV tie-up reports, although the index then fluctuated between gains and losses with the latest trade figures providing headwinds after South Korean exports declined 15.4% Y/Y during the first 10-days of the 2021. Hang Seng (+0.7%) and Shanghai Comp. (-0.4%) were choppy as optimism from firmer than expected inflation data was offset by increased tensions after US Secretary of State Pompeo announced the US is to remove all self-imposed restrictions on executive branch agencies’ interactions with their counterparts from Taiwan ahead of the US Ambassador visit which China have already warned against. Furthermore, the White House is said to be examining additional options to respond to China regarding the virus and Hong Kong, while it was also reported that MOFCOM issued new rules which prevent companies from complying with foreign laws that prohibit transactions with Chinese companies.

PBoC injected CNY 5bln via 7-day reverse repos at a rate of 2.20% for a net daily drain of CNY 15bln. (Newswires) PBoC set USD/CNY mid-point at 6.4764 vs exp. 6.4781 (prev. 6.4708)

  • Chinese CPI (Dec) M/M 0.7% vs. Exp. 0.4% (Prev. -0.6%)
  • Chinese CPI (Dec) Y/Y 0.2% vs. Exp. 0.1% (Prev. -0.5%)
  • Chinese PPI (Dec) Y/Y -0.4% vs. Exp. -0.8% (Prev. -1.5%)

US National Security Adviser O'Brien said the US is examining additional options to respond to China regarding the virus and Hong Kong, while there were separate reports that US banks including Goldman Sachs, JPMorgan and Morgan Stanley are among those set to delist 500 structured products listed in Hong Kong due to President Trump’s executive order. (Newswires/FT)

China’s MOFCOM issued new rules on unjustified extraterritorial application of foreign legislation which prevent companies from complying with foreign laws that prohibit transactions with Chinese companies which is effective immediately. (Newswires)

A transition official said that US President-elect Biden made it clear on the campaign trail that he was committed to the 1979 Taiwan Relations Act, which has defined relations with the country and to the one-China policy, while the official added that once in office, he will continue to support a peaceful resolution of cross-strait issues consistent with the wishes and best interests of the people of Taiwan. (Newswires)

US Secretary of State Pompeo said he is lifting all self-imposed restrictions on executive branch agencies’ interactions with their counterparts from Taiwan, which he added will benefit both of our great democracies. There were also comments from China’s Global Times editor Hu that if this is the new starting point of US’ Taiwan policy, it will also start the countdown of the survival of the Taiwan authority. Furthermore, Hu added PLA fighter jets can fly over Taiwan island anytime and the option of using military means to solve Taiwan question will also be put on the table. (Twitter)

South Korea January 1st-10th Trade Balance at provisional deficit of USD 636mln, while Exports fell 15.4% Y/Y and Imports fell 22.9% Y/Y. (Newswires)

Sriwijaya Air Flight 182 which was a 26-year-old Boeing 737-524 plane and was carrying 62 people was confirmed to have crashed into the Java Sea shortly after taking off from Jakarta, Indonesia. It was reported that debris was found although the search was delayed by darkness and bad weather. (Newswires)

RBNZ responded to an illegal breach of one of its data systems in which a third-party file sharing service used by the Bank to share and store some sensitive information was illegally accessed, while Governor Orr said the breach has been contained and the Bank is treating the matter with the highest priority and acting with urgency. Furthermore, the RBNZ later stated it was advised by the third-party provider that the attack wasn't specific to the Reserve Bank, while compromised data may include some commercially and personally sensitive info. (Newswires)


UK Chancellor Sunak is expected to postpone plans for tax increases in his March budget which raises concerns about the “colossal” scale of the economic fallout from COVID-19. (Times)

UK Cabinet Minister Gove warned businesses to brace for “significant disruption” at the border with France after the latter ordered its ports to crack down on lorries arriving from Britain with the incorrect documents. (Telegraph)

UK Trade and Agriculture Commission chief said they are to push for tough standards on imported food and suggested there should not be any backsliding or race to the bottom after having spent decades evolving food standards. (FT)

UK is to launch legislation as soon as in the week ahead to return the trading of Swiss shares back to London in the coming weeks. (FT)

Italy Finance Minister Gualtieri said the government will seek parliament approval to raise the deficit later this month to pay for vaccines, healthcare, support for companies and workers. (Newswires)

EU's Dombrovskis said he is ready to end the Boeing/Airbus dispute and he hopes the incoming US government will be more cooperative. It was also separately reported that EU Commissioner for Internal Market Breton is confident that EU will find an agreement with the US on digital tax. (Newswires)

Italian President Mattarella has informed the ruling parties that they need to approve the EU recovery plan prior to resolving the internal political crisis that may destabilise the Gov't. (Newswires)


In FX markets, USD strength took the limelight with the DXY gaining a firmer footing on the 90.00 level with rising yields stateside and the overnight risk aversion providing support for the currency. The greenback’s major counterparts were softer across the board in which EUR/USD slipped beneath the 1.2200 level and GBP/USD tested 1.3500 to the downside due to the USD appreciation and COVID-19 concerns in Europe as German Chancellor Merkel warned that doctors and nurses in many hospitals are near to being overwhelmed and with the UK government considering tightening the lockdown. Elsewhere, USD/JPY broke above 104.00 due to the advances in the base currency and antipodeans softened due to their high-beta statuses and alongside declines in commodity prices, as well as a weaker CNY reference rate setting by the PBoC with the improved Australian Retail Sales for November of 7.1% vs prelim. 7.0% largely ignored.


Commodities declined overnight in which WTI crude futures trickled below USD 52.00/bbl with prices pressured by the cautious risk tone, ongoing COVID-19 concerns and with the latest Baker Hughes Rig Count showing an increase in online US rigs. Elsewhere, gold failed to reclaim the USD 1850/oz level and retreated to around a monthly low with prices weighed on by a firmer greenback and rising yields, while copper also suffered due to the tentative mood and alongside the broad weakness across global commodity prices including in China where Dalian iron ore futures declined by about 4% shortly after the open of Shanghai commodities trade.

Baker Hughes US Rig Count (w/e Jan. 8th): Oil rigs +8 at 275, natgas +1 at 84, total +9 to 360. (Newswires)

Kuwait set February crude OSP to Asia at Oman/Dubai + USD 0.65/bbl which is higher by USD 0.65/bbl from the prior month, while Iran set February Iranian light crude price to Asia at Oman/Dubai + USD 0.80/bbl which is higher by USD 0.55/bbl from the prior month. (Newswires)


North Korean leader Kim said on Friday that the fundamental attitude to North Korea will not change no matter who rules the US, while he added the US is our biggest enemy and that North Korea will proceed with its nuclear submarine. There were separate comments from South Korea President Moon that North and South Korea should prove that peace and prosperity in the peninsula contribute to the international community and that they will make efforts for a breakthrough in inter-Korean ties and North Korea-US talks. (Newswires)

Indian army said it arrested a Chinese soldier in Ladakh and that the soldier's actions were under investigation, while China called on India to immediately return the soldier according to the relevant mechanism reached by two countries and contribute to de-escalation of border tensions. (Newswires)

US plans to designate Yemen's Houthi movement as foreign terrorist as soon as Monday, according to sources. (Newswires)


Treasuries continued to sell-off on Friday, looking through the negative NFP print, while finding some support on Senator Manchin's stimulus check comments in late trade. By settlement, 2s unch. at 13.9bps, 10s +4.6bps at 111.7bps, 30s +3.1bps at 187.6bps; futures volumes were very strong; 5yr TIPS +3.2bps at -161.5bps, 10yr TIPS +9.1bps at -94.6bps, 30yr TIPS +8.1bps at -19.9bps; inflation breakevens were lower. The first catalyst today the NFP print, which saw knee-jerk selling in USTs. However, the tape was choppy, with bidders then emerging, to then revert to selling pressures. Participants have to consider the two policy channels now at play, where bad data supports the case for more fiscal stimulus (bearish bonds), although could also wet the appetite for more QE from the Fed. On the latter, all eyes were on Vice-Chair Clarida who later said that he was looking past the December employment report and is optimistic on the recovery, which saw yields spike higher. However, he went on to say that he was happy with the current Fed policy and would not consider tapering asset purchases this year, offsetting the more hawkish tone set by some of the regional Fed members earlier in the week, seeing yields pare somewhat, although bears were pleased to hear him say he would not be considering any WAM extension or more purchases. The final catalyst, which saw yields move lower and risk assets come under pressure, was the surprise comments from Democratic Senator Manchin who said he would "absolutely not" support USD 2,000 stimulus checks. However, those comments were later walked back on (partly). The rates market now looks to next week's auctions (3s, 10s and 30s), where the recent yield pick-ups will be expected to allure a higher participation. T-note (H1) futures settled 9+ ticks lower at 136-21.

US President-elect Biden said December jobs report shows we need more immediate relief now and that taking immediate action even with deficit financing will help the economy. Biden added he will be laying out the groundwork for his economic package next week and stated that more direct relief flowing to families is needed including finishing USD 2,000 stimulus checks, while he reaffirmed support for a USD 15 minimum wage that he hopes Congress will pass. Furthermore, Biden stated he will propose an economic package next Thursday in the trillions of dollars which will include unemployment insurance and rent forbearance. (Newswires)

US Democratic Senator Manchin was initially reported to have said he will "absolutely not" support USD 2,000 stimulus checks as he would prefer to prioritize getting vaccines out so jobs can return. However, it was noted that this was in reference to whether the checks should be the Number 1 priority and he later tweeted that if the next round of stimulus checks goes out, they should be to those who need it. (Newswires)

US Small Business Administration said it is determining the amount of additional relief assistance can be provided with newly issued congressional appropriation and that it was charged with making debt relief payment and is working to implement newly enacted assistance. (Newswires)

US Senate Republican Leader McConnell circulated procedures for the Senate impeachment trial of President Trump in which the memo stated that no trial can proceed until January 19th which is the eve before President-elect Biden’s inauguration, while there were comments from GOP Senator Toomey that he thinks President Trump should resign and could face criminal liability following the storming of the Capitol. Furthermore, Senate Democrat leader Schumer said the threat from violent extremist groups remains high and Democrat Rep. Clyburn separately noted that impeachment articles could be on the House floor on Tuesday or Wednesday. (Newswires)

US House Speaker Pelosi said the House will bring impeachment legislation to the floor and that President Trump is an imminent threat to the constitution and democracy. Pelosi commented that the House is to vote on measure seeking to remove President Trump and that they are giving VP Pence a couple more days to invoke 25th Amendment, and if nothing, the House will vote. (Newswires)