[PODCAST] US Open Rundown 10th February 2021
- European bourses are contained with a slight positive bias while US futures post gains of circa 0.3%; earnings remain in focus but US CPI and Chair Powell dominate the schedule ahead
- The session has been devoid of fresh macro drivers with mass APAC closures commencing from tomorrow
- Chinese CPI and PPI missed estimates although still showed the first increase to producer prices in a year
- The DXY remains under pressure but saw some brief respite following reports the BoJ could emphasise rate cuts remain an option in March; sparking modest JPY weakness
- Looking ahead, highlights include US CPI, DoEs, ECB's Lagarde, Panetta, BoE's Bailey, Fed's Powell, supply from the US
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)
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 (+0.2%) 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 (+1.9%) and Shanghai Comp. (+1.4%) 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
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)
BoJ may look to clarify in its March policy review that it has room to lower negative rates further, according to Jiji
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)
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)
German CPI Final MM (Jan) 0.8% vs. Exp. 0.8% (Prev. 0.8%)
- Final YY (Jan) 1.0% vs. Exp. 1.0% (Prev. 1.0%)
China and India have agreed to disengage troops simultaneously from their border as of today, according to the Chinese Defence Ministry (Newswires)
Saudi-led coalition has intercepted and destroyed two explosive drones launched by Yemen's Houthis (Newswires)
Turkish President Erdogan says he will not meet the Greek PM after he "challenged" him and says the Greek PMI should "know his limit" (Newswires)
Iran's Foreign Minister Zarif says they will expand the nuclear program and reduce cooperation with the IAEA if the rest of the parties do not abide by commitments. (Sky News Arabia)
European equities trade mixed (Euro Stoxx 50 +0.1%) as the broader gains seen at the open somewhat tempered down amid a lack of fresh catalysts and as the region tackles with a myriad of large-cap earnings. US equity futures meanwhile see modest gains across the four contract – ES (+0.4%), NQ (+0.5%), YM (+0.4%) and RTY (+0.5%) ahead of US CPI and a busy central bank slate with Fed Chair Powell, ECB President Lagarde and BoE’s Bailey part of the line-up. Meanwhile, the overall narrative remains little changed as earnings take focus in the absence of fresh impetus. Sectors are also mixed in early trade with no real risk profile portrayed. Energy lags its peers despite elevated oil prices, likely on the back of Equinor (-0.2%) whose earnings included a surprise Q4 adj. net loss following net impairments of USD 1.30bln and a write down of USD 0.98bln related to the Tanzania LNG project. On the flipside, Materials top the charts as base metals continue to grind higher on reflationary hopes coupled with a softer Dollar – with the likes of Glenore (+3%) Anglo American (+2.3%), Rio Tinto (+2.2%), and BHP (+1.7%) all deriving impetus from copper prices to keep the FTSE 100 (+0.2%) afloat. Meanwhile, the banking sector is propped up after SocGen (+3.0%) topped net income estimates and announced the payment of a cash dividend and a potential Q4 share buyback programme in accordance with the ECB’s guidance. Interestingly, the group noted that “Fixed Income & Currency activities were hit by a slowdown in client activity, in rate activities and the compression of short-term financing spreads in financing activities” – highlighting somewhat of a dichotomy vs its US peers. ABN AMRO (-3%) bucks the banking trend post-earnings after the group proposed no dividend for 2020 and foresees the COVID-19 impact persisting into 2021. In terms of individual movers, Maersk (-6%) resides at the foot of the Stoxx 600 as FY20 EBITDA missed forecasts and the group sees the current surge in demand as temporary and likely to normalise over the course of the year. Other earnings-related movers include Heineken (-2.3%), Ubisoft (-6%), Smurfit Kappa (+2.7%). Finally, ThyssenKrupp (+6%) is firmer after upgrading its 2021/21 outlook amid improved demand for material and automotive components.
Medical Names – Cambridge University scientists have made a ‘vital step’ in the progress towards a Parkinson’s cure via publishing research which adds new areas to the understanding of a key protein. (Sky News) Novartis (NOVN SW), Pfizer (PFE), Merck (MRK) & Teva Pharmaceuticals (TEVA) are regarding as key companies in the Parkinson’s disease market
SEK/NOK - Almost a perfect 10 for the Swedish Krona that had extended gains vs the Euro through 10.0500 into the Riksbank, but then slipped back as the repo rate, QE and guidance all remained unchanged with only minor or subtle tweaks to the language and distribution of asset purchases for Q2. However, the Board does not expect the Sek to extend on 2020 gains and assumes the dampening effect of its appreciation on inflation will diminish as a result, and the cross is now hovering around 10.0600. For more details of the official Riksbank statements, our analysis and market reaction see the Newsquawk headline feed at 8.30GMT. Conversely, the Norwegian Crown remains elevated between 10.2510-2070 parameters against the single currency following much firmer than forecast inflation data, and especially y/y headline CPI that surged to 2.5% from 1.4% and vs expectations of 1.7% to keep the Norges Bank on a path, albeit lengthy, towards a degree of policy normalisation.
USD - The Dollar has descended into another lower range in DXY terms, but paring declines within a 90.528-249 band thanks to a loss of bullish momentum in certain counterparts and a reversion to bear-steepening along the US Treasury curve in wake of a strong 3 year note auction and the remaining 2 longer-dated tranches of the Quarterly Refunding. Prior to all that, the Buck may derive some direction from CPI data and after today’s 10 year supply the stage will be clear for Fed chair Powell’s virtual appearance at the Economic Club of New York where he will get chance to assess developments since January’s FOMC.
NZD/JPY/AUD/CAD - Kiwi weakness and underperformance look more cross flow related than due to anything NZ specific as Aud/Nzd rebounds further from recent lows to 1.0700+ in wake of an improvement in Westpac consumer sentiment and firm midpoint fix for the CNY by the PBoC. Indeed, the Aussie appears more resilient above 0.7700 vs its US peer than its Antipodean neighbour on the 0.7200 handle, as Usd/CNH probes 6.4200 irrespective the aforementioned broader Greenback bounce. Meanwhile, the Yen has retreated from a brief pop over half round number resistance at 104.50 on the back of a dovish BoJ article in Jiji suggesting that March’s policy review may be used to clarify that there is more room delve deeper below par in rates, but the Loonie is holding around 1.2700 with assistance via a rebound in crude prices before BoC’s Lane orates.
GBP/CHF/EUR - All managing to resist the brunt of the mini Dollar revival, as the Pound retains firm grip of the 1.3800 level, Franc hovers closer to 0.8900 than 0.8935 and Euro maintains 1.2100+ status despite fading into 1.2150 and reversing in sympathy with the Yen following comments from ECB’s de Cos underlining a willingness to adjust all instruments as needed and echoing that amply monetary stimulus is still required. Expect more of the same from President Lagarde and GC member Panetta, plus BoE Governor Bailey on behalf of the MPC.
Riksbank leaves its rate unchanged at 0.00% as expected; maintains asset purchase programme; policy needs to remain expansionary; forecast horizon unchanged. The krona, which has strengthened during most of 2020, is expected to dampen inflation somewhat, particularly during 2021. In the period ahead , however, the krona is assumed to remain relatively unchanged and no longer affect inflation to such a great extent.
Core bonds remain rather tightly bound and perhaps wary that Wall Street may throw another bout of caution to the wind before extending the bull run, or simply biding time to see if the 10 year US auction matches up to a solid 3 year sale. Indeed, Bunds and Gilts have only incrementally stretched ranges to the topside at 176.22 and base at 132.30 before winding in again, albeit with the latter lagging post-2041 DMO issuance and Bobl offering that were both relatively well received. Also ahead, US inflation data and speeches from ECB, BoE and Fed heads amongst others, as Treasuries stick within even narrower overnight session confines.
WTI and Brent front month futures continue on their upward trajectory in early European trade as the complex tracks the softer Dollar and the overall sentiment across the market whilst remaining underpinned by vaccine hopes, reflation and OPEC support. Prices also see underlying support from another surprise draw in Private Inventories (-3.5mln bbl vs exp +1mln bbl), as markets look ahead to the DoE numbers after the US CPI figures, with headline crude expected to show a build of 0.985mln bbls. From a demand perspective, yesterday saw the EIA reduce its 2021 world demand growth forecast by 180k BPD, but raised the 2022 metric by 190k – ahead of the IEA and OPEC reports both released tomorrow. Elsewhere, analysts at ING suggests that this week has seen some weakness in the physical market, particularly in the North Sea. “A number of physical cargoes have been on offer in the North Sea market, which has weighed on differentials”, the bank says, “This is in contrast to the tightness that had been seen in this market just earlier this month.” WTI now meanders around USD 58.50/bbl (vs low 58.13/bbl) whilst its Brent counterpart gains further above USD 61/bbl (vs low USD 60.90/bbl) to a current high of USD 61.57/bbl. Turning to metals, spot gold and silver trade on the front foot on account of the softer USD in the run-up to US CPI, with the former around USD 1840/oz ahead of yesterday’s USD 1848/oz high, whilst spot silver retains is USD 27/oz-status. Platinum prices meanwhile rose some 2.5% as it extended its gains above USD 1200/oz to the highest since 2015 of tighter supply forecasts. In terms of base metals, LME copper prices hit levels last seen eight years ago while Shanghai copper notched a nine-year peak amid the broader sentiment and US stimulus hopes. Similarly, Dalian iron ore futures hit a three-week high with additional support from an improved demand in the base metal for after the Lunar New Year holiday.
Iraq sets Basra Light March OSP to Asia at USD 1.15 over Oman/Dubai, SOMO says; Iraq oil minister says exports should average 2.9mln BPD in February (vs average of 2.87mln BPD in January). (Newswires)