Original insights into market moving news

[PODCAST] US Open Rundown 16th February 2021

  • US futures are firmer, ES +0.4%, but off earlier highs with European equities softer, Euro Stoxx 50 -0.1%, and the reflation trade resuming; Russell 200 +0.8%, US 10yr-yield surpassing 1.25%
  • Crude was initially firmer given refiners shutting facilities due to the US weather; however, benchmarks came under pressure as WTI dropped below USD 60/bbl
  • APAC trade was hindered late-doors following FT reports that China is mulling curbs on rare earth metals exports targeting the US defense sector; LMT explicitly mentioned
  • German ZEW Sentiment beat expectations by some margin; briefly bolstering equity sentiment and causing further downside pressure on EZ core debt
  • DXY has been hindered all morning to the benefit of broader peers, though gains are modest and the EUR was initially little moved on the ZEW number
  • Looking ahead, highlights include NY Fed Manufacturing, Japanese Trade, Fed's Daly, Bowman, George and Kaplan


US COVID-19 cases increased by at least 53,789 to 27.77mln and deaths increased by at least 1,019 to 486.7k, according to a major newswire tally. (Newswires)

WHO said the AstraZeneca (AZN LN) COVID-19 vaccine has been approved for emergency use. (Newswires)

UK PM Johnson said we do not have sufficient clarity on the data yet for what we can say next week and that the virus remains a real threat with the infection level still very high, while he intends for this lockdown to be the last but also noted that there will be some people who will not benefit from the vaccine as they are less than 100% effective. Furthermore, PM Johnson commented on vaccine passports in which he stated that domestically, we will be relying on mass vaccination and rapid on-the-day testing. (Newswires)

Novavax (NVAX) announced expanded collaboration and license agreement with SK Bioscience for the production of 40mln doses of its COVID-19 vaccine for South Korea. In relevant news, South Korea PM Chung stated that the government reached agreements to acquire additional COVID-19 vaccines for 23mln people. (Newswires) Separately, Novavax is close to enrolling the 30k participants necessary for their US trial, says CEO Erck; adding, that the FDA is considering approving the COVID-19 vaccine candidate based on UK trial data which is already available. However, this is yet to be confirmed and for context the FDA denied a similar request for AstraZeneca’s candidate. (FT)

Western Australia Premier Andrews warned they are ready to extend the lockdown which is set to finish tomorrow and stated they will not make an announcement on easing of restrictions till then with the next 24 hours crucial, while reports noted that a resumption of flights was already postponed. (FT)

Russian vaccines are effective against the UK coronavirus strain, according to the research centre. (Vector via Sputnik)


Asian equity markets traded higher across the board to extend on Monday’s gains amid a lack of any major changes on the macro front and as trade continued to pick up from the holiday lull caused by the Lunar New Year/Spring Festival holidays in China and Presidents’ Day stateside. ASX 200 (+0.7%) was positive with the index led by cyclicals and with miners encouraged after BHP results in which the mining giant reported an increase in H1 underlying net and revenue, as well as declared a record interim dividend. Big 4 bank NAB was also kept afloat despite flat results with Q1 cash earnings inline with the previous year, although this was still 47% higher than the quarterly average during first 6 months of 2020 and it noted a 96% decline in credit impairment charges. Nikkei 225 (+1.3%) added to its highest levels in more than three decades as exporters cheered a weaker currency and with BoJ Governor Kuroda sticking to the dovish script in which he affirmed that ETF purchases are part of the monetary easing program and that the BoJ will not end nor seek an exit from ETF purchases for the time being. Hang Seng (+1.9%) was jubilant on return from the holiday closures with notable advances in the blue-chip energy stocks as they played catch up to the continued ascent in oil prices and with financials also bolstered by the rising yield environment and due to some expectations HSBC could resume dividends following next week’s board meeting, while IMAX China shares rocketed over 30% after China’s box office revenue reached CNY 5bln during the first 3 days of the Spring Festival holidays. However, some of the gains for the regional bourses and US equity futures were later reversed in late trade after reports that China is mulling curbs on rare earth metals exports, targeting the US defense sector. Finally, 10yr JGBs were lacklustre amid the gains in stocks and follows recent pressure in T-note futures as the US 10yr yield rose higher by as much as 5bps to briefly touch 1.25% and the US 30yr yield extended further above 2.00%, while weaker results at the 5yr JGB auction also dragged the 10yr benchmark to beneath 151.50 and saw its respective yield increase to 8bps which is the highest in almost a year.

China is reportedly mulling curbs on rare earth metals exports targeting the US defense sector. The Chinese govt reportedly wants to know how badly companies in the US and Europe would be hit in the event of a ban during disputes; wants to know if the US will have trouble manufacturing Lockheed Martin's (LMT) F-35 jets if rare earth exports were to be restricted. (FT)

BoJ Governor Kuroda said the BoJ will continue current monetary policy to support the economy and that the virus is having a major effect on both domestic and overseas economies. Kuroda also stated that buying ETFs are part of the monetary easing program and the BoJ will not end nor seek an exit from such purchases for the time being, while he added there is still very high uncertainty over economic outlook. Adds, it is difficult to see domestic consumer inflation attaining 2%, even by 2023. A natural increase in long-term rates could push up the cost of debt issuance but this is something the government must accept. No current plan to end ETF purchases, or permanently reduce these; are aware of problems regarding this being pointed out - but the policy has a positive impact on both the economy and prices. (Newswires)

Toyota (7203 JT) is to suspend work on 14 lines across 9 factories in Japan due to the recent earthquake. (Newswires)


US Democrats could face a decision later on this week on whether to progress with a minimum-wage increase; amid work by Republicans Romney & Cotton on legislation to increase the minimum but mandate e-Verify. (Punchbowl News)


Eurogroup President Donohoe said economic policies should stay in place for as long as needed and that national budgets should be approached in a coordinated manner in which they want a common approach on the budgetary stance by summer. Donohoe added that there will be a move to more targeted support measures for firms as the recovery phase is kicking in but also noted that some businesses will not be viable in the longer-term and there will be more discussions on which firms will be viable in April. (Newswires)

German ZEW Economic Sentiment (Feb) 71.2 vs. Exp. 59.6 (Prev. 61.8). Market experts are optimistic about the future, they are confident that the German economy will be back on the growth track within the next six months. Consumption and retail trade in particular are expected to recover significantly, accompanied by higher inflation expectations. (Newswires)

  • German ZEW Current Conditions (Feb) -67.2 vs. Exp. -67.0 (Prev. -66.4). (Newswires)
  • EU ZEW Survey Expectations (Feb) 69.6 (Prev. 58.3)


Rockets were fired near Erbil Airport in the Kurdistan Region of Iraq which was reportedly indirect fire on US-led coalition forces, while the US military confirmed that a contractor was killed in the attack and several were injured. US Secretary of State Blinken later stated that the US is outraged by the attack and has reached out to the Kurdistan Regional Government PM to discuss the attack, as well as pledged support for an investigation and vowed to hold accountable those that were responsible. (Newswires/AFP)

North Korea attempted hack into Pfizer seeking COVID-19 vaccine and treatment technology. (Yonhap)

Arab alliance says they have intercepted and destroyed a booby-trapped drone fired by the Houthi militia towards Abha International Airport, with no injuries or losses reported. (Sky News Arabia)


European stocks opened Tuesday’s session with modest gains across the board despite the firmer APAC handover, but sentiment was somewhat tainted heading into cash trade following reports that China is mulling curbs over rare earth metals exports to the US, in a move that could impact US-Sino relations in the early days of the Biden Admin. US equity futures meanwhile trade in positive territory with some outperformance seen in the RTY (+0.8%) as the US waits to play catch-up on its return. Bourses in Europe meanwhile continued to trade sideways during early hours (Euro Stoxx 50 +0.1%) due to the lack of news flow and catalysts, although the sizeable upside surprise in the German ZEW sentiment survey provided the region and overall sentiment with a mild uplift. Sectors are predominantly in the green and portray a cyclical bias with Oil & Gas as the outperformer (+1.3%) as oil prices remain somewhat elevated, on the flip side the defensive Healthcare (-0.3%) and Consumer Staples (-0.1%) are both softer on the session. The sectorial laggard in the session thus far is Media (-0.5%) following Vivendi’s (-2.2%) outperformance yesterday. Cineworld (+6.0%) is the individual outperformer amid reports that they are proposing a vaccine passport to allow them to re-open. Elsewhere, HSBC (+2.7%) is higher after Co. shares rose over 5% in Hong Kong trade with traders attributing it to the resumption of the dividend programme following the board meeting on 23rd February. Meanwhile, cooperate updates from mining giants BHP (+1%) and Glenore (+3%) prop up the Materials sector, with the former declaring a record interim dividend alongside a constructive view on Chinese demand, while the latter topped adj. EBITDA forecasts and recommended a distribution of USD 0.12/shr vs exp. USD 0.06/shr.

BHP (BHP LN) - Co. H1 underlying net AUD 6.0bln vs prev. AUD 5.2bln Y/Y underlying EBITDA AUD 14.7bln vs prev. AUD 12.1bln Y/Y, rev. AUD 25.6bln vs prev. AUD 22.3bln Y/Y, declares record interim dividend of AUD 1.01/shr and stated that scale of stimulus in key economies should provide solid support for a recovery but also noted the short-term outlook remains uncertain. (Newswires) Co. rose some 2.6% in Australian trade

Glencore (GLEN LN) – FY adj. EBITDA USD 4.43bln vs exp. USD 3.88bln, net income ex-items USD 2.5bln, significant items resulted in a net loss to equity holders of USD 1.9bln largely due to impairment charges in Mopani, Colombia and Africa; recommending a distribution of USD 0.12/shr vs exp. USD 0.06/shr. Long-term adj. EBIT guidance unchanged at USD 2.2-3.2bln. Net debt of USD 15.8bln; repositioned within the USD 10-16bln target. FY21: copper production guidance 1.22m/T, coal production guidance 113m/T. Katanga copper operation has seen a notable improvement. (Newswires)


NZD/AUD - Having been pipped by the Pound on Monday, the Kiwi is now clearly ahead of its major rivals, albeit largely at the expense of ongoing weakness in its US counterpart and Aussie underperformance as opposed to anything NZ specific or supportive. Indeed, as the DXY continues to languish below 90.500 between 90.375-201 parameters, Nzd/Usd has advanced beyond 0.7250, and the Aud/Nzd cross is now eyeing 1.0720 as Aud/Usd retreats from a pop over 0.7800 in wake of dovish RBA minutes befitting the QE extension last Tuesday and guidance indicating no change in rates for at least 3 years. Moreover, news that lockdown in Melbourne may be extended and a downturn in the CNH following reports that China is considering a curb on the export of rare earth metals, aimed at the US defence sector, are also undermining the Aussie to an extent.

GBP/EUR - Although Sterling has pared some gains and given up pole position on the G10 grid as noted above, Cable looks more assured on the 1.3900 handle and Eur/Gbp edged closer to 0.8700 before bouncing as the Euro takes its turn to forge further gains vs the Dollar. However, Eur/Usd is still facing formidable technical resistance in the form of the 50 DMA (1.2157) not to mention hefty option expiry interest up at 1.2200 (1.5 bn) if it manages to make a clean upside break with impetus from an upbeat ZEW headline economic sentiment reading and relatively upbeat accompanying comments.

CHF/CAD/JPY - The Franc is also firmer against the Buck through 0.8900, but on a par with the Euro just above 1.0800 amidst SNB intervention, while the Loonie extended towards 1.2600 alongside WTI on approach to Usd 61/brl before fading in tandem. Conversely, the Yen remains depressed on risk grounds and BoJ Governor Kuroda stating no intention of ending ETF purchases any time soon, with Usd/Jpy pivoting 105.50 that aligns with the 200 DMA ahead of Japanese machinery orders and trade data.

SCANDI/EM/CRYPTO - The Nok has breached 10.2000 vs the Eur, and on top of recent crude-related appreciation the Krona will be relieved to Norwegian oil workers and the SAFE labour union have agreed a pay deal to avoid strike action. Meanwhile, the Sek has finally cracked 10.1000 and is close to pre-Riksbank peaks on the brink of 10.0000 awaiting minutes of the meeting on Friday. Elsewhere, the Try has extended gains beyond 7.0000 in the run up to the CBRT and Zar to just shy of 14.4000 on better prospects of vaccines to combat SA’s coronavirus strain, while Bitcoin still has the bit literally between its teeth and is on the cusp of Usd 50k.


Well that didn’t last long in terms of a bout of consolidation, and early reservations about reading too much into the bounce are proving to be rather prudent if not quite prophetic. There are contributing factors behind the latest downturn in bonds, like the considerable beat vs consensus in ZEW economic sentiment and bullish statements from the institute about the outlook, while syndicated issuance may be weighing on BTPs and caution in Gilts after a solid 2024 DMO sale in case the impending 2057 auction is not as well received despite concession. However, US Treasuries were never really convinced or persuaded to join the rebound in Bunds and Gilts that topped out at 175.45 and 131.49, with the 10 year T-note remaining below par within a 136-15-02 range and in bear-steepening mode, so the recent reversals in EU equivalents to 175.12 and 131.21 respectively is not that surprising. Ahead, NY Fed manufacturing and several Fed speakers.

Italy has set the yield for its new 10yr BTP to 4bps above the 2031 BTP, the new 30yr I/L BTP has been tightened to 22bps above the 2041 I/L; total orders in excess of EUR 134bln. (Newswires)


WTI and Brent front month futures gave up their mild overnight gains as European cash equity trade went underway with no particular catalyst at the time to entice the price action, albeit a more likely explanation could be the broader sentiment deterioration around this time. Throughout the session, the crude benchmarks have been ebbing lower with WTI further below USD 60/bbl (vs high 60/bbl), whilst its Brent counterpart meanders just north of USD 63/bbl (vs high 63.34/bbl). That being said in the grander scheme, fundamentals keep prices buoyed near recent highs, with short term supply woes emanating from the deep freeze across Texas, prompting the wells and refineries to restrict or close operations. Exxon began shutting its 369k BPD Beaumont and 560k BPD Baytown refineries, whilst Citgo Petroleum said some units at its 167k BPD Corpus Christi oil refinery were shutting. Further, LyondellBasell’s 264k BPD Houston refinery is to operate at minimum production whilst it shut most units at Marathon Petroleum’s 585k BPD Galveston Bay plant. In terms of pipeline impacts, Enbridge said a 585k bpd crude oil pipeline that runs from its terminal to Cushing, Oklahoma (the largest US oil storage hub) was halted because of power outages. Kinder Morgan also reported gas-pipeline capacity constraints in Arkansas, Illinois, Louisiana, New Mexico and Texas. Meanwhile, Norway's SAFE labour union agreed a wage deal for Mongstad Port workers to avert a shutdown of major oil and gas fields. As a reminder, Equinor yesterday warned that a walkout would put more than 600k barrels of daily crude output from the Johan Sverdrup and Troll fields at risk. Barring weather developments in Texas, participants will be keeping and eagle-eye on commentary out of any OPEC+ members, who will be closely watched for any nuances as to what the group could opt to do or propose against the backdrop of mass vaccinations and oil prices back at pre-COVID levels. Moving onto demand, the continued stimulus-lift and vaccine hopes keep prices underpinned, however, it is worth highlighting an S&P Global report yesterday which highlights a notable absence of Chinese demand for Atlantic basin crudes during the February and March cycles, with sources citing the refinery maintenance season in the country. Elsewhere, spot gold and silver are modestly firmer as a function of the softening Dollar, with the former around 1823/oz and contained within recent ranges. Turning to base metals, LME copper trades on a modestly firmer footing with aid derived by the softer Dollar and as mining giant BHP highlighted robust Chinese demand for the base metal.

Motiva announced to shut its Port Arthur, Texas refinery (637k BPD) due to freezing temperatures in Texas, while ExxonMobil is shutting in Baytown, Texas refinery (584k bpd) and chemical plant complex due to the weather. It was also reported that Valero is shutting its Port Arthur, Texas refinery (250k bpd), while Colonial Pipeline noted it is continuing operation of its system with currently no significant impact on its operations due to the adverse weather. (Newswires)

A winter storm warning has now been issued for the entirety of North Texas. (WFAA)

Norway's SAFE labour union agreed a wage deal for Mongstad Port workers to avert a shutdown of major oil and gas fields. (Newswires)

Kazakhstan Energy Minister said they exported 5.5mln tons of oil and produced 7.01mln tons of oil in January, while they plan to produce 83.4mln tons of oil this year. (Newswires/Twitter)

Fuji Oil has restarted the 143K BPD CDU at the Sodeguara, Japan refinery after it was shutdown due to the recent earthquake. (Newswires)

UBS is increasing its Brent oil forecasts by USD 5/bbl; mid-2021 USD 65/bbl; H2-2021 USD 68/bbl and March-2022 USD 70/bbl. (Newswires)