[PODCAST] European Open Rundown 10th February 2021
- Asian equity indices mostly traded with cautious gains as participants digested a heavy slate of corporate earnings
- Overnight saw a lack of fresh macro drivers ahead of mass holiday closures beginning tomorrow
- Chinese CPI and PPI missed estimates although still showed the first increase to producer prices in a year
- In FX, the DXY remained subdued below 90.50, EUR/USD maintains 1.21 status and GBP/USD trades on a 1.38 handle
- Looking ahead, highlights include Riksbank rate decision, US CPI, DoEs, ECB's Lagarde, Panetta, BoE's Bailey, Fed's Powell, supply from the UK, Germany & the US
- Earnings from SocGen, Equinor, ABN AMRO, Maersk, GM, Coca-Cola, Uber
US COVID-19 cases +86,706 (prev. +91,762), deaths +1,622 (prev. +1,455) and vaccines administered 43.2mln (prev. 42.4mln). (Newswires)
US Health Official Zients said the US is increasing weekly vaccine doses to 11mln from 8.6mln. Furthermore, it was reported in Washington Post that the White House was said to have told Governors in a call that Pfizer (PFE) will be able to deliver 50mln more doses this quarter than originally promised, although a White House aide later refuted the report on the Pfizer (PFE) vaccine supply boost. (Newswires/Washington Post)
FDA granted EUA for Eli Lilly's (LLY) BAMLANIVIMAB administered with ETESEVIMAB for COVID-19 treatment of mild to moderate cases in patients aged 12 and above. (Newswires)
Johnson & Johnson (JNJ) CEO said people may need annual COVID-19 vaccine shots for the next several years. There were also reports Johnson & Johnson is in talks with private Indian drugmaker, Biological E, to possibly run local trials for its COVID-19 vaccine and manufacture it in India, according to sources. (Newswires/CNBC)
Asian equity indices mostly traded with cautious gains as participants digested a heavy slate of corporate earnings, with the region kept tentative amid a lack of fresh macro drivers and heading into the mass holiday closures beginning tomorrow. ASX 200 (+0.5%) was led higher by outperformance in tech and with an improvement in Westpac Consumer Sentiment data adding to the constructive mood, although upside was capped by earnings with financials lacklustre after a decline in earnings from Australia’s largest lender CBA and with multi-national contractor CIMIC plunging despite returning to the black for the year, as it also reported lower revenues and that two executives were jailed in Qatar. Nikkei 225 (Unch.) remained indecisive throughout the session due to a mixed currency and with newsflow dominated by earnings including automakers Toyota, Nissan and Honda which were boosted despite printing weaker 9-month results, as they all upgraded their FY guidance, while Japan Tobacco was heavily pressured due to a fall in profits and with the Co. planning job reductions. Hang Seng (+1.4%) and Shanghai Comp. (+1.0%) were positive following stronger than expected Chinese loans and aggregate financing data, but with the advances mainland initially limited after another PBoC liquidity drain in the last operation before the Lunar New Year holidays and following mixed Chinese inflation figures in which both CPI and PPI missed estimates although still showed the first increase to producer prices in 1 year. Finally, 10yr JGBs consolidated around the 151.50 level with prices attempting to plug the recent losses and avoid an extension to the current losing streak which matched the 2003 record of 10 consecutive declines yesterday. Nonetheless, JGBs lacked firm direction amid the indecisive risk tone in Tokyo and with stronger demand in the enhanced liquidity auction for longer-dated government bonds failing to spur prices.
PBoC injected CNY 20bln via 7-day reverse repos at rate of 2.20% for a net daily drain of CNY 80bln and weekly drain of CNY 100bln, while it will issue CNY 10bln in 3-month bills and CNY 15bln in 1-year bills in Hong Kong on Feb.19th PBoC set USD/CNY mid-point at 6.4391 vs exp. 6.4422 (prev. 6.4533). (Newswires)
- Chinese CPI YY (Jan) -0.3% vs. Exp. 0.0% (Prev. 0.2%)
- Chinese PPI YY (Jan) 0.3% vs. Exp. 0.4% (Prev. -0.4%); first increase in a year
US State Department said the US is closely monitoring India-China border disputes and is very concerned by Beijing's pattern of ongoing attempts to intimidate its neighbours. (Newswires)
US Representative Neal said the US relationship with China needs to be more "strategic" and is concerned about China's hard-line approach to Hong Kong and Taiwan. (Newswires)
BoJ Board Member Nakamura said the BoJ will seek ways to make monetary easing framework more effective and sustainable in the March review and that ETF purchases will remain a necessary tool to eradicate deflationary mindset. Nakamura added that they will examine if asset purchases and various tools are exerting the intended impact and that the BoJ must be prepared to respond effectively and in a timely manner to changes in the economy, prices and financial developments. (Newswires)
US Representative Neal said moving forward with a UK/US trade agreement makes sense now Brexit is concluded without borders in Ireland, while he also said he would like very much to do a US-EU trade agreement. (Newswires)
Italy's 5-Star Movement says they will not join a Draghi Government at all costs, but denies they are splitting over the matter after the online vote was postponed; will be voting on his outlined programme and are waiting for Draghi to meet with unions. (Newswires)
In FX markets, the DXY remained subdued beneath the 90.50 level after it continued to decline during US trade as stocks meandered at record highs. There wasn’t much in terms of fresh developments regarding stimulus although there were comments from President Biden that he has been talking to Republicans and thinks the US is in a position to think big on COVID-19 relief, while the White House separately noted that tax cuts for the highest earners could be rolled back to help reduce the US deficit. GBP/USD gained a firmer footing on the 1.3800 handle to trade at its best levels in almost 3 years and EUR/USD extended above 1.2100 as it benefitted from the USD weakness, as well as the improved political mood in Italy where League party chief Salvini stated that his meeting with Draghi was useful in which the former ECB chief ruled out a return to austerity and committed to not increase taxes. However, more recently, the 5SM have cautioned that they will not join a Draghi government at all costs. USD/JPY languished after its recent retreat but with downside stemmed by a floor at 104.50 and antipodeans traded rangebound with both AUD/USD and NZD/USD taking a breather from this week’s ascent, despite encouraging consumer sentiment data from Australia and a firmer CNY reference rate setting by the PBoC.
- Australian Westpac Consumer Sentiment Index (Feb) 109.1 (Prev. 107.0)
- Australian Westpac Consumer Sentiment (Feb) M/M 1.9% (Prev. -4.5%)
WTI crude futures were little changed and slightly above the USD 58.00/bbl level after the prior day's whipsawing and eventual seventh consecutive session of gains. There hasn't been much of a change to the ongoing narrative of a recovery in demand amid vaccination progress while the latest private inventory report showed a surprise draw in headline crude stockpiles although the reaction in the energy complex was muted with gasoline inventories at a larger than expected build. Gold was marginally higher amid a softer greenback and is on course for a 4th daily gain as markets continue to eye incoming US stimulus and copper prices extended on gains which saw LME prices reach their highest levels in 8 years.
US Private Energy Inventories (bbls): Crude -3.5mln (exp. +1mln), Cushing -1.4mln (exp. -0.79mln), Gasoline +4.8mln (exp. +1.8mln), Distillate -0.5mln (exp. -0.8mln). (Newswires)
South Korea reportedly may release 100mln bbls of government crude oil supply in the event of domestic short supply. (Newswires)
Turkish President Erdogan said Turkey will consider withdrawing its troops from Libya if other foreign forces withdraw their troops first. (Newswires)
Treasuries were unchanged on Tuesday as yields continue to consolidate and take pause from the momentum that took them to cycle highs on Monday morning. By settlement, 2s +0.8bps at 0.119%, 3s unch. at 0.189%, 10s unch. at 1.16%, 30s +0.9bps at 1.953%; TYH1 volumes were weak; TIPS yields fell by a few bps out the curve. Yields had been modestly lower coming out of Europe, with desks noting foreign real money accounts swooping in for the new higher yields. Those flows were exacerbated as profitable steepeners continued to be unwound (some banks such as UBS have recently taken profits on 5s30s). The latest JPMorgan Treasury Client Survey showed net short positions widening out to the highest levels seen since 2018 - with positioning getting one sided the market stands vulnerable to pullbacks, although banks such as Citi and JPM itself have continued to recommend steepeners be held, with the latter noting that other technical positioning factors still not flashing any red lights. Later trade saw yields gradually move off the lows to unchanged, in what was a fairly dull session, which in and of itself is somewhat interesting as the market fails to sustain its multi-week momentum above the cycle high yields. Meanwhile, with 10s and 20s Treasury refunding on Wednesday and Thursday, dealers are likely keeping somewhat on the offer. Yesterday's 3-year auction was a decent one, stopping through the screws and lower than average dealer participation, although it remains to be seen how that reads through to the more duration-heavy offerings later this week, indeed some of that demand could be spillover from the cash glut in the front-end. T-note (H1) futures settled 1 tick higher at 136-23.
US President Biden said he has been talking to Republicans and thinks we are in a position to think big on COVID-19 relief, while he agrees with the USD 75k/per year threshold put forward by Democrats for stimulus checks. There were separate reports the White House said President Biden is open to negotiations when asked about limiting the USD 1,400 direct payments to those making USD 75k or less and the White House stated that tax cuts for the highest earners could be rolled back to help reduce the US deficit. (Newswires)
US House Oversight Committee proposed USD 350bln in state and local aid, while reports also noted that House and Senate Democrats were at loggerheads on the design of expanded support for the unemployed. (Newswires)
US Senate vote 56 vs 44 to uphold Trump impeachment trial as constitutional which paves the way for a full trial at the Senate. (Newswires)