Original insights into market moving news

[PODCAST] US Open Rundown 11th February 2021

  • European bourses trade mixed as earnings take focus in the absence of fresh catalysts post-Powell
  • US President Biden and Chinese President Xi spoke for the first time since Biden came into office
  • US senior administration official said the US will examine new targeted restrictions on sensitive tech exports to China and will not act hastily to remove China tariffs
  • European Commission forecasts the EU economy to reach the pre-crisis level of output earlier than anticipated
  • FX remains contained with a softer USD while core debt has lifted to new highs for the week; with yields subdued and the US curve flattening
  • Looking ahead highlights include US initial/continued jobless claims, OPEC MOMR, Banxico rate decision, and supply from the US


While a major newswire tally stated US cases increased by at least 107,378 to 27.37mln and deaths rose by at least 3,356 to 471.9k. (Newswires)

AstraZeneca (AZN LN) - Co. making in excess of 100mln doses a month of COVID-19 vaccine and global capacity will rise to over 200mln by April. (Newswires)

AstraZeneca (AZN LN) - Co. says first US COVID-19 vaccine trial release is "only weeks away". (Newswires)

EU could conclude a deal this week or next with Novavax (NVAX) for COVID-19 vaccine supply, according to EU sources. (Newswires)


Asia-Pac lacked firm direction as risk appetite was sapped by holiday closures for many key markets in the region and following an uninspired handover from the US where the major indices finished flat after having mostly recovered from an initial sell-programme slump. ASX 200 (-0.1%) was choppy as advances in miners were offset by underperformance in tech and a subdued financials sector, with earnings results the main catalysts for today’s biggest movers including Newcrest Mining which was the best performer following a jump in H1 net, while AMP shares were at the other end of the spectrum with double-digit percentage losses due to weaker FY results and news that Ares Management abandoned its pursuit for the financial services company. Hang Seng (+0.5%) was indecisive in half-day trade for Lunar New Year’s Eve and amid a lack of Stock Connect flows with mainland bourses already shut for a week, while losses in index heavyweight Tencent added to the initial downbeat mood after an executive was reported to be under investigation related to a corruption case in China. However, losses in the index were later pared amid dialogue between US President Biden and Chinese President Xi which was the first call between the leaders since Biden took office and in which Biden noted the US priority was to preserve a free and open Indo-Pacific and wants to ensure they have an opportunity for an open line of communication, while Chinese President Xi also suggested that cooperation is the only correct choice between the two countries. As a reminder, Japan, China, South Korea, Taiwan and Vietnam were all closed for holidays.

US President Biden later stated there is a need to meet increasing challenges posed by China and that his task force will provide recommendations on key China-related priorities in the upcoming few months. (Newswires/WSJ)

White House announced that President Biden spoke with Chinese President Xi on Wednesday and said the US priority was to preserve a free and open Indo-Pacific, while President Biden told Chinese President Xi that the US will work with China when it is beneficial for the American people and noted concerns about China's crackdown in Hong Kong, human rights abuses in Xinjiang and assertive moves against Taiwan. Furthermore, a US senior administration official said the US wants to create positions of strength in dealing with China and needs to play the long game to prevail over time, while the official added that President Biden will be practical, hard-headed and clear-eyed in dealing with China's President and that the US is unlikely to reduce military presence in Asia-Pacific under the Biden administration. (Newswires)

Chinese President Xi told US President Biden that confrontation between US and China would be a disaster for both nations and hopes the US cautiously handles matters related to Taiwan, Hong Kong and Xinjiang, according to State TV. Furthermore, Chinese President Xi told US President Biden that the 2 countries should re-establish various dialogue mechanisms to understand each other's political intentions and avoid misunderstandings and misjudgements, while Xi added that cooperation is the only correct choice between the two countries and that China and US should respect each other, as well as manage disputes in a constructive manner. (Newswires)

US senior administration official said the US will examine new targeted restrictions on sensitive tech exports to China and will not act hastily to remove China tariffs although there will be changes to trade policy, while tariffs on China will remain in place while the US reviews its trade policy and trade policy will be based on the assumption that the US will be better off working with allies instead of unilaterally. (Newswires)


US President Biden is reportedly mulling considering nominating Lisa Cook for Federal Reserve seat. (Newswires)

US Treasury Secretary Yellen said the US is seeing an explosion of risk related to fraud, money laundering, terrorist financing and data privacy, while she noted that misuse of cryptocurrencies and virtual assets is increasing and cryptocurrencies have been used to launder profits of online drug traffickers and to finance terrorism. Yellen also commented the pandemic underscored the problem of 'broadband deserts' and that millions were lacking access to financial services, while she added that the Treasury can leverage financial sector innovation to address issues and promote financial inclusions, as well as improve competitiveness. (Newswires)

Dozens of former GOP officials that oppose former President Trump were reportedly in discussions to form a 3rd party that would focus on principled conservatism. (Newswires)

US banks and industry figures have reportedly been in discussion with the Fed to extend the COVID-19 capital relief exemptions beyond their current March expiry. (FT)


UK RICS Housing Survey (Jan) 50 vs. Exp. 60.0 (Prev. 65.0, Rev. 63). RICS said other measures of UK housing market also weakened last month. (Newswires)

British Retail Consortium said 3 national lockdowns had around GBP 22bln impact to retailers and that 2020 was the worst year on record. (Newswires)

USTR office said they look forward to working with European allies to find a solution that levels the playing field in Airbus (AIR FP)/Boeing (BA) dispute once the USTR nominee is confirmed. (Newswires)

ECB's Villeroy says decarbonising ECB's balance sheet may target corporate assets purchased or held as collateral. (Newswires)

ECB's De Guindos sees a "significant" rebound of Eurozone economy in H2 2021; H1 2021 will be worse than expected. (Newswires)

Eurozone ministers on Monday will discuss how to manage corporate transition from state help, according to an EU document. (Newsires)

European Commission says GDP is now forecast to grow by 3.7% in 2021 and 3.9% in 2022 in the EU, and by 3.8% in both years in the euro area. The EU economy would reach the pre-crisis level of output earlier than anticipated back in the Autumn Forecast. (Newswires)

EU Chief Brexit Negotiator Barnier says EU needs more clarification from UK before financial services equivalence decision. (Newswires)


US Secretary of State Blinken and Saudi Foreign Minister discussed joint efforts to bolster Saudi defences and outlined a diplomatic outreach to find a negotiated political settlement to the war in Yemen. (Newswires)

European Council President Michel says EU will work with the US, the UK and other partners to coordinate a robust response against Russia’s disruptive actions, hybrid activities and misinformation. (Twitter)


European equities have kicked off the with modest upside across the board before the gains somewhat dispersed, with the region now seeing mixed trade (Euro Stoxx 50 +0.4%). US equity futures meanwhile also vary with the ES (+0.3%), NQ (+0.5%) and YM (+0.3%) modestly firmer whilst the RTY (+0.2%) narrowly lags its peers – but again the breadth of the price action remains shallow. The tone around the market is relatively tentative post-Powell and amid a lack of fresh catalysts, thus earnings take the helm in the interim with the season in full swing in Europe – as such the major bourses see diverging performances. UK’s FTSE 100 (+0.3%) is buoyed as one of the largest weighted stocks AstraZeneca (+1.8%/6% weighting) stands firm after topping Q4 revenue estimates and declared a stable second interim dividend of USD 1.9/shr. The gravitas of AstraZeneca’s gains also keeps the Healthcare sector among one of the top performers in Europe, second only to IT. The tech sector experiences a rebound after yesterday’s losses, with potential added impetus to the growth/momentum narrative after Fed Chair Powell downplayed the significance of an increase in inflation, whilst the constructive steps taken by US and China via presidential communication opens the door for a more civil diplomatic relationship. On the flip side, Banks give up ground as yields decline following the US CPI figure yesterday and commentary from the Fed Chair – however Credit Agricole (+4%) bucks the trend after topping revenue expectations. However, in a similar vein to SocGen, the bank noted a decline in FICC activities “due to a slowdown in hedging activities caused by a massive return of liquidity and lower volatility.” Back to the sectors, Oil & Gas reside as the laggard amid overnight losses in crude prices. Individual movers are largely earnings-oriented: Pernod Ricard (-1.8%), ArcelorMittal (-1%), Clarient (-2.5%), Commerzbank (-5.8%), UniCredit (-2.7%). Finally, Volkswagen (+0.8%) is firmer following reports the Co. has teamed up with Microsoft (MSFT) to accelerate the development of automated driving.

AstraZeneca (AZN LN) - Q4 revenue USD 7.42bln vs exp. USD 7.17bln. Core EPS USD 1.07bln vs exp. USD 1.09bln. Co. declares a stable second interim dividend of USD 1.9/shr, FY dividend unchanged at USD 2.8/shr. Total revenue this year is expected to increase by low-teen percentages. (Newswires)

Royal Dutch Shell (RDSA LN) - Co. reiterates that it maintain the progressive dividend policy, increasing dividend per share by around 4% per year, subject to Board approval. Co. retains near-term annual capex at USD 19-22bln and reduce net debt to USD 65bln. "In the near term we expect to maintain underlying operating expenses of no higher than USD 35bln, and pursue divestments averaging USD 4bln a year."

Pepsi (PEP) - Q4 2020 (USD): Adj EPS 1.47 (exp. 1.46); Revenue 22.5bln (exp. 21.8bln)


AUD/NZD/CAD - Resistance around 0.7750 vs the Greenback is still capping Aud/Usd, but the Aussie is forming a firm platform above 0.7700 and consolidating gains on the 1.0700 handle against its Antipodean counterpart in wake of a rather bullish update on economic developments from Treasury Secretary Kennedy overnight. In short, the recovery is exceeding expectations and the return to record labour market participation is somewhat surprising, while public spending is elevated and seen rising. Meanwhile, the Kiwi is hovering in the low 0.7200 area awaiting NZ’s January manufacturing PMI and FPI for some independent direction, and the Loonie has retained 1.2700+ status ahead of Canadian wholesale trade and the BoC’s Q4 Senior Loan Officer Survey on Friday.

USD - Aside from the aforementioned mild Aussie outperformance, the Dollar is narrowly mixed vs major peers and the scant DXY range (90.471-323) highlights the lack of price action or inclination to venture far in holiday-thinned volumes due to full or half day market closures in various Asian centres beyond China that has started its Lunar New Year vacation. However, the Buck still appears prone to further downside after dovish/downbeat remarks from Fed chair Powell, benign US CPI another unwind of Treasury curve bear-steepening following another solid leg of this week’s Quarterly Refunding. Ahead, IJC and the 3rd auction plus details of the upcoming 20 year note and 30 year TIPS offerings.

EUR/GBP/CHF/JPY - The Euro has recoiled into an even tighter band inside 1.2150-00, while the Pound continues to hover above 1.3800, the Franc rotate around 0.8900 and Yen meander between 104.55-77, with the latter still capped by the 100 DMA on forays through 104.50, but supported into 105.00 where decent option expiry interest resides (1.1 bn from the round number to 105.05).

EM - Broad gains vs the Usd, but the Zar trading with an extra spring in its step near 14.6500 post-SA mining production data showing a surprise rebound in output and pre-President Ramaphosa’s State of the Nation address, while the Mxn has breached the psychological 20.0000 mark in the run up to Banxico.


A grinding bid in EU stocks with Dax and FTSE futures flirting with 14k and 6.5k again respectively, may have dampened renewed demand for core bonds, but technical factors could also be listed amongst factors behind the loss of recovery momentum in Bunds, Gilts and US Treasuries. The respective 10 year benchmarks have waned from 176.64, 132.67 and 137-02, with the former also prone to a relatively slow and measured advance in BTPs through 153.00 as attention turns to the latest weekly snapshot of the US labour market via IJC metrics hot on the heels of Fed chair Powell’s rather dour view of the real state of conditions. Also looming, the last batch of Quarterly Refunding in the form of Usd 30 bn long bonds and (size) details for next week’s 20 year T-note and 30 year TIPS sales.


WTI and Brent front month futures consolidate in early European trade following some overnight losses, whereby the former the former pulled back from its USD 58.90/bbl high and the latter waned from its USD 61.70/bbl best. That being said, the complex still remains elevated in the grander scheme as vaccine and stimulus hopes couple with OPEC+ support to underpin the complex. The morning also saw the release of the IEA Oil Market Report ahead of the OPEC’s release later today (time TBC). The IEA left its 2021 forecast unchanged, but downgraded its prior forecast by -200k BPD due to changes in historical data. The agency noted that demand expected to fall by 1mln in Q1 2021 from low Q4 levels, but is set to rise strongly thereafter. IEA also warned of rapid stock drawdown expected in H2 2021. However, oil prices largely side-lined the release as markets are pricing in the rise in demand in the latter part of the year. Earlier this week, the EIA STEO downgraded their forecast for 2021 world oil demand growth by 180k BPD, which sees some 5.38mln BPD Y/Y increase. EIA did however increase its 2022 forecast for world oil demand growth by 190k BPD. Further adding to the demand narrative, the European Commission winter forecasts suggested the “EU economy would reach the pre-crisis level of output earlier than anticipated back in the Autumn Forecast”. Meanwhile, eyes are kept on geopolitics, namely surrounding Iran and its nuclear activity as Russian Foreign Minister Ryabkov expect a compromise on a return to the nuclear deal before the February 21st date to avoid escalation, according to Al Jazeera. On a more constructive note, the phone call between US President Biden and his Chinese counterpart Xi expressed mutual respect in a call that set the tone for US-Sino relations. Turning to metals, spot gold and silver are relatively uneventful amid a lack of fresh catalysts, with spot gold around the unchanged mark at 1840/oz as inflationary hopes are simmered down or at least more controlled. Finally, LME copper trades lacklustre awaiting fundamental developments for further direction as Shanghai copper and Dalian iron ore observe Chinese Lunar New Year.

IEA Oil Market Report: 2021 forecast unchanged, but -200k BPD due to changes in historical data; demand expected to fall by 1mln in Q1 2021 from low Q4 levels, but demand is set to rise strongly; rapid stock drawdown expected in H2 2021. (Newswires)

  • COVID related lockdowns and spread of variants weigh heavily in near-term
  • Global oil demand set to grow by 5.4mln BPD in 2021 to 96.4mln BPD
  • Supply set to rise 590k BPD in Jan as OPEC+ cuts ease and Non-OPEC+ increase output