[PODCAST] US Open Rundown 13th January 2021
- European indices have been somewhat choppy but relatively contained thus far, Euro Stoxx 50 -0.1%; with similar performance in US futures ES -0.1%
- US Officials have reportedly been told that JNJ is up to two-months behind its COVID-19 vaccine production schedule, NY Times
- 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
- Core fixed counterparts are firmer, to the detriment of European banking names, with the US 10yr yield at 1.12%; USD remains elevated across most major counterparts
- Looking ahead, highlights include US CPI, DoEs, Fed's Bullard, Brainard, Harker, Clarida & supply from the 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)
Johnson & Johnson (JNJ) - Federal officials have been told that the company has fallen as much as two months behind the original production schedule and won’t catch up until the end of April, NY Times; at that point they were to deliver 60mln doses. (NY Times)
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)
Italy Health Minister says the government is to further extend the COVID-19 state of emergency to April 30th. (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. (-0.3%) 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)
Taipei Economic and Cultural Representative Office head confirmed that UN Ambassador Craft’s visit to Taiwan was 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)
BoJ reportedly to consider downgrading its view of the economy due to consumption being impacted by COVID-19 emergency measures, Nikkei; however, could see a upward revision to 2022 growth forecasts. (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.
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 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)
ECB's Lagarde: Start of the year has been more positive than some argued, December projections and assumptions are still plausible and correct respectively. Reiterates language around the possibility for a PEPP recalibration if needed and that it does not all have to be utilised. Says they will carefully monitor but not target FX movements. (Newswires)
ECB's Villeroy says we are closely following the negative effects of the EUR rate and monetary conditions will be kept favourable for as long as necessary. (Newswires)
Iran conducts missile naval exercise in Gulf of Oman, according to Sky News Arabia. (Twitter)
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)
European indices trade relatively choppy (Euro Stoxx 50 -0.2%) following a mixed APAC session whereby indices treaded water at first before dipping into the red; albeit the breadth of the losses is modest thus far. Meanwhile, US equity futures have also drifted into negative territory in tandem with their counterparts across the pond amid a lack of fresh macro catalysts to latch onto ahead of the US entrance. Broader European sectors are mixed with no clear risk bias to be derived. Delving deeper into the sectors, some of the performances experienced are driven by stock-specific news for sector-heavyweights: Telecoms stand as the outperformer as Telefonica (+9.6%) lifts the sector amid news that American Towers is to purchase Telxius from Telefonica for around EUR 7.7bln in which the Spanish telecom name will use to reduce debt. Consumer Staples are propped up after Carrefour (+9.2%) was approached by Canadian convenience store group Alimentation Couche-Tard regarding a takeover deal which would form a joint entity valued at over USD 50bln, for which the Canadian company reportedly offered Carrefour EUR 20/shr vs share price of around EUR 17/shr at the time. Meanwhile, the Energy sector loses steam, but still remains in positive territory as it tracks price action in the crude complex. On the other end of the spectrum, Travel & Leisure resides as a laggard amid the ongoing COVID-19 woes. In terms of other individual movers, Germany’s ProSiebenSat (-5.8%) is pressured by reports KKR is said to be expected to sell a 4.7% stake priced at around EUR 13.42/shr via accelerated bookbuilding. Meanwhile, Just Eat Takeaway (-4.3%) shares yield despite reporting an increase in revenue on the back of lockdowns as the group warned it will need to invest heavily to keep up current momentum as the rollout of vaccines may prompt orders to deplete.
China Dec vehicle sales +6.4% (prev. +12.6% in Nov); 2020 sales -1.9% (prev. -8.2% in 2019), according to the industry association. (Newswires)
Geely Auto (0175 HK) and Foxconn (2354 TW) confirm 50/50 JV to provide auto production and consulting services. (Newswires)
IHS Markit (INFO) Q4 USD: EPS 0.72 vs exp. 0.67; revenue 1.107bln vs exp. 1.11bln; net profit 151mln
Infosys (INFY) - FY21 revenue guidance increased to 4.5-5.0% in CC, operating margin guidance increased to 24.0-24.5%. Approved definitive agreement to purchase assets and onboard employees of Carter Digital.
USD - The Dollar is trying to regain a foothold after what proved to be a ‘turnaround Tuesday’ in terms of its recovery efforts, as the DXY fell short of the prior day’s high when in the ascendency and ultimately failed to ‘close’ above the low before losing grip of the 90.000 level, albeit briefly and marginally. The index is now flitting between 89.922-90.259 with a loss of momentum via several Fed commentators indicating little inclination to slow the pace of asset purchases, while the UST yield backdrop is less supportive after a strong 10 year auction prompted broad short covering in futures and some particularly large blocked purchases. However, upcoming US inflation data has the potential to reinflate the Buck and rekindle QE taper talk from today’s array of Fed officials that are scheduled either side of the Beige Book, and the last leg of this week’s issuance could spark a resumption of bear-steepening given less concession for the Usd 24 bn 30 year offering.
EUR - Not the biggest G10 mover or most volatile, but under the microscope following an attempt to reclaim 1.2200+ status vs the Greenback that faded and 2 ECB speakers reiterating that FX rates are being watched in context of the negative effects, including on prices and the wider economic impact – see Headline Feed at 8.47GMT and 9.11GMT for comments from Villeroy and President Lagarde respectively. Eur/Usd is now hovering around the bottom of a 1.2223-1.2172 range awaiting the outcome of Italy’s coalition showdown, with little reaction to weaker than forecast Italian or Eurozone ip along the way.
GBP - In contrast to the Euro and most other majors, the Pound has picked up where it left off yesterday, as Cable extended its rebound to touch 1.3700 and Eur/Gbp tests 0.8900 bids/support in wake of BoE Governor Bailey’s latest reservations about going down the negative rate path. However, Sterling faces a formidable hurdle at the current 2021 peak against the Dollar circa 1.2704, not to mention the bleak fundamental outlook caused by the latest UK national lockdown.
JPY/CHF/CAD/NZD/AUD - All softer vs their US counterpart, with the Yen heading back down towards 104.00 after meeting resistance just ahead of 103.50, as Japan looks to widen COVID-19 restrictions across more prefectures and further reports suggest an economic downgrade by the BoJ. Similarly, the Franc looks vulnerable approaching 0.8900 having crested 0.8850, the Loonie is nearer 1.2750 than 1.2700, the Kiwi back below 0.7200 after a brief boost from ANZ revising its RBNZ forecast up from a NIRP call previously and the Aussie is under 0.7750 again.
SCANDI/EM- The Sek is still underperforming relative to the Nok even though the latter has lost some traction from oil, with the former only just keeping its head above 10.1000 vs the Eur in wake of changes to the Riksbank’s currency reserves financing arrangements. Elsewhere, the Rub continues to watch Brent moves, while assessing any impact from the Russian Finance Ministry resuming FX purchases from Friday through February 4th.
Notable FX Expiries, NY Cut:
- USD/JPY: 103.00 (1.4BLN), 103.75 (675M), 104.00 (458M), 104.15 (915M)
Bunds and Eurozone peers are off best levels, but holding more of their recovery gains than Gilts or USTs following 2 ECB members reiterating that the Eur exchange rate is being monitored closely due to the adverse impact on prices and the export side of the economy. Notwithstanding a rather tepid Bobl auction, German debt futures are hovering just shy of Eurex highs, at 135.02 for the 5 year contract and 177.00 in 10s, while Gilts have actually retreated through 134.00 to 133.82 vs 134.23 at one stage and the T-note is close to the bottom of its 136-19+ to 136-13 band in the run up to a hectic pm agenda on paper (CPI, more Fed speak and 30 year supply).
WTI and Brent front-month futures have drifted off best levels in early European trade, with the complex continuing to feel underlying support from the voluntary excess cuts pledged by Saudi whilst a tenser geopolitical landscape coupled with a softer Buck and a larger-than-expected drawdown in Private Inventories also keep prices near their recent levels, albeit markets are still eyeing demand impacts from the COVID-19 resurgence. Kicking off with supply side developments, yesterday’s Private Inventory report printed a larger than expected draw of 5.8mln bbls (vs exp -2.3mln bbl), while distillate fuel stocks also came in at a larger draw than forecasts. Markets will be awaiting the weekly EIA numbers later in the session whereby headline crude stocks are seen drawing by 2.26mln bbls. On the geopolitical front, reports via Sky News Arabia suggested that Iran has conducted a naval missile exercise in the Gulf of Oman, located at the mouth of the Strait of Hormuz where around a fifth of global oil passes through (according to 2018 data). This reported exercise comes against the backdrop of heightened tensions between Iran and the outgoing Trump administration in which the former previously threatened to disrupt oil shipments through the Strait of Hormuz if the US attempts to “strangle” its economy. As a reminder, in 2019, four vessels were attacked just outside the Strait, whilst earlier this month, Iran seized a South-Korean-flagged tanker and detained its crew in the Gulf. Moving onto the demand side of the equation, the first of the trio of monthly oil market reports - the EIA STEO - cut its forecast for 2021 world oil demand growth by 220k BPD to a 5.56mln BPD YY increase and sees 2022 world oil demand to hit 101.08mln BPD, up by 3.31mln BPD from 2021. Further, the EIA forecasts Brent crude oil spot prices to average USD 53bbl in both 2021 and 2022 compared with an average of USD 42/bbl in 2020. The agency did caveat that “the January STEO remains subject to heightened levels of uncertainty because responses to COVID-19 continue to evolve.” Looking ahead, tomorrow sees the release of the OPEC MOMR followed by the IEA’s take on Friday. Currently, Brent Mar resides just below USD 57/bbl having waned off its USD 57.40 high (vs USD 56.70 low), whilst WTI hit a peak of USD 53.90/bbl (vs low 53.29/bbl) before drifting lower. Elsewhere, spot gold and spot silver have given up their earlier gains as the Dollar recoups some lost ground, with the former now around USD 1850/oz (vs high USD 1863/oz). Finally, turning to base metals, LME copper has drifted off best levels as the Buck gains traction despite the mild gains seen across stock markets. Nickel prices meanwhile gained in Shanghai amid worries about supply disruptions in its top ore producers Philippines and New Caledonia.
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)
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)
Exxon Mobil (XOM) Beaumont, Texas refinery (366k BPD) reports flaring, according to a community alert. (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)