Original insights into market moving news

[PODCAST] European Open Rundown 13th January 2021

  • Asian equity markets mostly lacked firm direction as bourses took their cue from the rangebound session in the US where tech losses were offset by cyclicals
  • In FX markets, the DXY briefly slipped below 90.00, EUR/USD reclaimed 1.22 and GBP/USD eyes 1.37
  • Several FOMC speakers pushed back on the prospect of tapering bond purchases
  • US House voted to urge VP Pence to begin the 25th Amendment process to remove President Trump from office
  • US President-elect Biden is to seek a deal with Republicans on COVID-19 relief instead of attempting to push through legislation without their support, according to sources
  • Looking ahead, highlights include EZ industrial production, US CPI, DoEs, ECB's Lagarde, Fed's Bullard, Brainard, Harker, Clarida, supply from the UK, Germany and US


US coronavirus cases increased by at least 226,954 to 22.69mln and deaths rose by a record of at least 4,336 to 380.5k, according to a major newswire tally, while AFP also noted US COVID-19 daily death toll reached a new record of almost 4,500, citing Johns Hopkins. (Newswires)

US CDC head approved the order to expand negative COVID-19 testing requirement to almost all arriving international air passengers beginning January 26th whereby air passengers will be required to get a viral test within 3 days before their flight to the US departs. (Newswires)

US CDC said it distributed 27.7mln doses of COVID-19 vaccine as of January 12th vs 25.5mln doses distributed as of January 11th, while it administered 9.3mln vaccine doses as of January 12th vs 9.0mln as of January 11th. In relevant news, the US government agreed with Regeneron (REGN) to purchase additional COVID-19 antibody cocktail doses with the deal involving 1.25mln additional doses. (Newswires)

US Operation Warp Speed Chief Slaoui said the Novavax (NVAX) trial outcome is expected in late March or April and the US could have single digit million doses of Johnson & Johnson (JNJ) vaccines in H2 of February, while AstraZeneca (AZN LN) is on track to submit application for US EUA around March pending on data. (Newswires)

Canada's Ontario province declared an emergency over surging COVID-19 cases and has issued a stay-at-home order starting January 14th, while it will restrict non-essential construction. (Newswires)

Japanese PM Suga is to conduct a press conference at 1000GMT which follows earlier reports that Japan is to announce an emergency due to COVID-19 in seven additional prefectures. (Newswires)

Netherlands PM Rutte is to extend the lockdown by three weeks until February 9th. (Newswires)

UK COVID-19 cases +45,533 (prev. +46,169) and deaths +1,243 (prev. +529). (Newswires)


Asian equity markets mostly lacked firm direction as bourses took their cue from the rangebound session in the US where tech losses were offset by cyclicals and with participants tentative ahead of the start of earnings season. ASX 200 (+0.1%) and Nikkei 225 (+1.0%) were mixed for most of the session with weakness seen across most sectors in Australia although the declines in the index were eventually reversed by strength in commodity names as energy stocks mirrored the outperformance stateside after WTI crude prices extended above USD 53.00/bbl, while the Japanese benchmark outperformed led by a rally in power names and miners which helped Tokyo shrug-off detrimental currency inflows and reports that Japan could announce an emergency in 7 additional prefectures. Hang Seng (-0.2%) and Shanghai Comp. (-0.7%) were indecisive after the PBoC continued with its tepid liquidity efforts which reports suggested shows an intent to keep policy appropriate and not take a sharp turn this year, while participants also digested mixed loans and financing data from China in which New Yuan Loans topped estimates but Aggregate Financing disappointed which is the broadest measure of Chinese credit growth. Finally, 10yr JGBs were steady amid the indecisive risk tone and after the recent reversal of the bear steepening in USTs, while the 5yr JGB auction also contributed to the humdrum picture as the results showed a slightly weaker b/c and lowest accepted price.

PBoC injected CNY 2bln via 7-day reverse repos at a rate of 2.20% for a net daily drain of CNY 8bln. (Newswires) PBoC set USD/CNY mid-point at 6.4605 vs exp. 6.4531 (prev. 6.4823)

US State Department announced that it will cancel all foreign travel for the last 8 days of the Trump administration including Secretary of State Pompeo’s trip to Europe which sources stated was after being refused meetings with Luxembourg and EU officials, while the Taipei Economic and Cultural Representative Office head confirmed that UN Ambassador Craft’s visit to Taiwan was also cancelled. (Newswires/SCMP)

China accused Australia of weaponizing the 'national security' concept after a bid to acquire a construction firm for AUD 300mln was blocked by Treasurer Frydenberg. (The Australian)


US State Department reportedly notified European firms of sanction risks for conducting business related to the Nord Stream 2 pipeline and urged them to exit before it is too late, according to sources. (Newswires)

The Italian Cabinet approved redrafted plans on the use of the recovery fund money, adverting a Gov’t crisis at this stage; although, Italia Viva ministers abstained from the vote. (Politico)


In FX markets, the DXY resumed its weakness and briefly fell back beneath the 90.00 level amid several contributing factors including a reversal in some of the recent yield steepening and push-back on Fed tapering expectations after a slew of speakers whereby Fed’s Bullard suggested they were "not close" to bond tapering yet and Fed's George thought it was too soon to speculate about possible changes to the central bank’s policy, while Fed’s Mester also said it was very premature to think we're getting to the point to change the policy stance. Furthermore, HSBC analysts were said to be unconvinced the recent upside in yields was supportive for the greenback and suggested the front-end needs to be higher for it to matter for FX and Deutsche Bank is reportedly seeking buy opportunities for EUR/USD which it sees consolidating between 1.2000-1.2500. The weakness in the greenback kept EUR/USD elevated above 1.2200 despite the reports of various lockdown extensions for the bloc and GBP/USD approached closer to 1.3700 in the wake of yesterday's comments from BoE Governor Bailey. USD/JPY extended its retreat beneath the 104.00 handle owing to the USD weakness and antipodeans held on to recent gains on strength in commodities and with NZD/USD slightly firmer after ANZ Bank dropped its call for the RBNZ to cut the OCR into negative territory this year.


WTI crude futures edged closer towards USD 54.00/bbl and Brent crude breached USD 57.00/bbl in a continuation of yesterday's price action which clearly favoured reflation-style trades and with support seen following the latest private sector inventory report which showed a larger than expected draw in headline crude inventories of 5.8mln bbls, while the latest EIA STEO saw a downward revision to global oil demand forecasts for this year. Gold was rangebound above the USD 1850/oz level and copper also notched mild gains after having bounced off support at 3.60/lb.

US Private Energy Inventories (bbls): Crude -5.8mln (exp. -2.3mln), Cushing -0.2mln, Gasoline +1.9mln (exp. +2.7mln), Distillate +4.4mln (exp. +2.7mln). (Newswires)

EIA STEO cut forecast for 2021 world oil demand growth by 220k BPD to a 5.56mln BPD Y/Y increase and sees 2022 world oil demand to hit 101.08mln BPD, up by 3.31mln BPD from 2021. Furthermore, it sees US crude output to fall 190k BPD to 11.1mln BPD in 2021 (prev. forecast of a 240k BPD decline last month) and rise 390k BPD to 11.49mln BPD in 2022. (Newswires)

Saudi Arabia reduced crude oil supplies to several refiners in Asia and Europe after its recent 1mln bpd voluntary output cut for February and March, while reports added that Saudi Aramco will supply less crude as part of long-term contracts next month in which some Asian buyers will receive as much as 20%-30% less than they had sought. (Newswires)

UBS forecasts silver at USD 30/oz, platinum at USD 1,250/oz and palladium at USD 2,900/oz this year, while it forecasts gold at USD 1,800 by year-end. (Newswires)


Israel was reported to have conducted airstrikes near the Syria/Iraq border in an area controlled by Iranian-backed militias. (Twitter)

US counterintelligence chief said he is worried about the China and Russian threats to COVID-19 vaccine supply chain. (Newswires)


Treasuries were ultimately little changed after a strong 10-year auction and some Fed push-back on tapering expectations reversed an earlier bear-steepener. By settlement, 2s +0.2bps at 14.7bps, 10s +0.4bps at 113.8bps, 30s +0.7bps at 188.6bps; futures volumes were strong; real yields were flat. Bonds entered the US session on the backfoot, with the same bearish drivers being touted, in addition to concession for the duration auctions; reports also suggested mortgage hedging added pressure to the long-end amid 10s and 30s making new cycle high yields of 118.7bps and 191.5bps respectively. However, one would have been rewarded to extract the "buy the dip" philosophy from stocks into Treasuries ahead of the 10-year auction, which was solid: stopped through by 0.8bps, covered more than average, and dealers took a smaller share as participation was strong, although mostly in directs rather than indirects (a proxy for foreign demand). The strong auction bodes well for Wednesday's 30-year bond offering. The strong demand also saw a follow-through rally for USTs in latter trade that saw yields end the day little changed; reports of a large bond fund block buying 30k TYH contracts helped. Aside from the 30-year offering, tomorrow's CPI print could be an influential one given the recent rally in inflation breakevens above the 2% mark. A downside surprise could see a washout of long positions in inflation assets. T-note (H1) futures settled 1 tick lower at 136-12+.

Fed Discount Rate Minutes stated all Fed banks wanted no change to discount rate ahead of December's meeting and directors reported that the pandemic continued to weigh on economic conditions with the extent of the impact varying by sector. Furthermore, several directors remarked on continued high demand for residential mortgages and refinancing, while many directors noted sustained strong activity in the manufacturing sector including the automotive industry although retail spending was mixed, depending on sector and district. (Newswires)

Fed's Bullard (non-voter) said outlook for 2021 remains quite strong and sees unemployment dropping below 5% this year, while he responded "not close" to bond tapering yet when asked and noted he is a little bit more concerned by financial stability risks. (Newswires)

Fed's George (non-voter) said it is too soon to speculate about possible changes to Fed policy and that inflation could hit Fed's target "more quickly than some might expect" after the pandemic, though not a "near term threat". (Newswires)

Fed's Mester (non-voter) said the Fed will make sure it communicates well in advance intentions for asset purchases which will be tapered once the Fed is ready to make changes and not reduced suddenly, while it is very premature to think we're getting to the point to change policy stance. (Newswires)

Fed’s Rosengren (non-voter) said the Fed will continue to purchase long-term assets until the economy is on a stronger economic footing and he does not expect US economy to reach 2% sustained inflation over the next two years. Rosengren added that financial conditions remain favourable and highly accommodative fiscal and monetary policy will provide significant tailwind for risky assets in 2021. (Newswires)

US President-elect Biden is to seek a deal with Republicans on COVID-19 relief instead of attempting to push through legislation without their support, according to sources. Senate Democrat Leader Schumer said direct payments for individuals will be raised to USD 2,000 under the COVID-19 relief plan and there were comments from Senator Gillibrand that Democrats plan to update the COVID-19 aid bill the House passed in May with fixes such as making sure paid leave is in the bill as well as some of the protections for small business that didn't make it in and will try to pass that bill within the first weeks of the new Biden administration. (Newswires)

US House voted (223-205) to urge VP Pence to begin the 25th Amendment process to remove President Trump from office, although there were earlier reports that VP Pence told House Speaker Pelosi in a letter that he does not believe invoking the 25th Amendment is in best interest of the country or consistent with the constitution, while he also suggested doing so would set a terrible precedent. (Newswires)

US House Committee approved debate rules for a second impeachment of President Trump and will vote on President Trump's impeachment on Thursday at 15:00EST, while a senior administration official said the White House is expecting 2 dozen of defections among Republicans who will vote to support impeachment of President Trump. (Newswires)

US Senate GOP Leader McConnell reportedly told associates he believes US President Trump committed impeachable offenses and he is pleased that Democrats are moving to impeach him, according to NYT. In related news, sources said there is a greater than 50-50 chance that McConnell would vote to convict President Trump in an impeachment trial. (New York Times/Axios)

US Chamber of Commerce leader Donohue said the US should remove tariffs that hurt US manufacturers and farmers and should catch up to countries that are signing new trade agreements. (Newswires)