Original insights into market moving news

[PODCAST] US Open Rundown 17th February 2021

  • European indices are modestly softer while US futures are essentially flat ahead of a number of US risk events, including FOMC minutes
  • USTs are a touch firmer with yields flattening as such and off of yesterday's cycle highs of 1.33% in the 10-year
  • Crude remains bolstered amid US oil production reportedly decreasing by a third and Texas warning of fuel shortages
  • DXY is firmer and extending on initially contained ranges to the modest detriment of major peers ex-JPY given the yield pause
  • Looking ahead, highlights include US PPI, Retail Sales, Industrial Production, Canadian CPI, FOMC Minutes, Fed's Rosengren, Kaplan, BoE's Ramsden, Saudi Energy Minister and supply from the US


US President Biden said every American who wants a vaccine will receive it by the end of July, while he noted that Pfizer (PFE) and Moderna (MRNA) have sped up their delivery schedule under the Defense Production Act. (Newswires)

The UK's lockdown is unlikely to be eased until UK COVID cases are in the hundreds (currently over 10k per day). Additionally, PM Johnson's plan is unlikely to commit to a clear timetable in the coming months and instead promise a series of reviews. (Telegraph) This narrative was subsequently rebuffed by Politico regarding the cases in the hundreds criteria. NHS Test and Trace is forming plans that would see a "surge" in testing in which, over 400k rapid lateral flow tests would be sent to homes and workplaces every day. (Times)

Some COVID-19 vaccine makers are reportedly having difficulties sourcing supplies of giant plastic bags used in the manufacturing process; with manufacturers being within days of stalling production as a result according to sources. (FT)

Australia's Victoria state Premier confirmed to ease COVID-19 lockdown restrictions in the state from today and it was also reported that New South Wales will start its vaccine rollout on Monday. Elsewhere, New Zealand PM Ardern announced Auckland restrictions will be eased to level 2 from Thursday and the rest of the country will move to level 1, while she added they will review it again on Monday and that New Zealand does not currently have a widespread outbreak. (Newswires)

Pfizer (PFE) & BioNTech (BNTX) supplying EU with an additional 200mln doses of COVID-19 vaccine. (Newswires)

European Commission is, today, to announce a deal for a further 150mln doses of Moderna's (MRNA) COVID-19 vaccine and for the same amount next year, FT citing sources. (FT)

UK has received ethics committee approval for a human challenge COVID-19 study, will see 90 individuals exposed to the virus. (Newswires)


Asia-Pac equity markets traded mostly lower after the lacklustre handover from Wall Street where the major indices finished mixed and retreated from fresh intraday records as the rising yield environment provided a headwind for stocks. ASX 200 (-0.5%) was negative with underperformance in gold miners after the precious metal retreated beneath USD 1800/oz and consumer staples were also pressured by declines in supermarket operator Coles despite posting profit growth in H1, as it warned sales in the sector could moderate significantly or even decline in H2 and beyond. However, the losses in the broader market were cushioned as participants digested a slew of mixed results including a jump in Westpac profits which boosted shares in the big 4 lender and with some slight encouragement from the announcement to lift the 5-day snap lockdown in Victoria state. Nikkei 225 (-0.6%) conformed to the subdued mood after reports suggested the government was not planning to lift COVID-19 emergency measures and following mixed data in which Machinery Orders showed surprise growth for December but Exports and Imports in January missed estimates, while KOSPI (-0.9%) suffered after domestic COVID-19 cases rose to the highest since early January following the Lunar New Year holiday. Conversely, Taiwan’s TAIEX (+3.5%) surged as it played catch up to the recent global advances on return from its 11-day closure and the Hang Seng (+1.1%) shrugged off early losses to extend on its best levels since early 2018 amid Hong Kong IPO optimism for this year and ahead of the return of mainland participants tomorrow. Finally, 10yr JGBs continued to weaken on spillover selling from USTs and with domestic yields tracking stateside counterparts which earlier rose to fresh cycle highs, while the absence of BoJ purchases in the market also contributed to the lack of demand for Japanese government bonds.

US President Biden said there will be repercussion for China concerning human rights abuses. (Newswires)

  • Japanese Machinery Orders (Dec) M/M 5.2% vs. Exp. -6.2% (Prev. 1.5%)
  • Japanese Machinery Orders (Dec) Y/Y 11.8% vs. Exp. -3.0% (Prev. -11.3%)
  • Japanese Trade Balance (JPY)(Jan) -323.9B vs. Exp. -600.0B (Prev. 751.0B, Rev. 749.6B)
  • Japanese Exports (Jan) Y/Y 6.4% vs. Exp. 6.6% (Prev. 2.0%)
  • Japanese Imports (Jan) Y/Y -9.5% vs. Exp. -6.0% (Prev. -11.6%)

Chinese Lunar New Year Passenger Volumes -45% Y/Y, according to CCTV. (Newswires)


US President Biden said we will be better off in September than we are currently and reiterated that bigger is better right now in regards to stimulus, while he added that the key to raising minimum wages to USD 15/hr is moving gradually and that he is prepared to write off USD 10k in regards to student debt but not USD 50k which he doesn't think he has the authority to do so. (Newswires)


UK Chancellor Sunak is reportedly mulling reducing national insurance contribution from employers in the March budget and reinstating the GBP 1,000 job retention bonus for every worker that employers bring back from furlough. (The Sun)

US Treasury Secretary Yellen held a call with ECB's Lagarde in which they discussed support for strong global recovery, financial stability and climate change, while Yellen emphasized deeper transatlantic cooperation on economic and fiscal issues. Furthermore, Yellen commended the swift and decisive policy measures by the ECB regarding the pandemic and discussed tools to nurture growth and create jobs in both US and Europe. Yellen also held a call with European Commission's Dombrovskis in which she stressed the importance of cooperation on the pandemic, supporting global recovery, combatting income inequality and climate change. (Newswires)

UK CPI YY (Jan) 0.7% vs. Exp. 0.6% (Prev. 0.6%); MM (Jan) -0.2% vs. Exp. -0.4% (Prev. 0.3%)

  • Core CPI YY (Jan) 1.4% vs. Exp. 1.3% (Prev. 1.4%);MM(Jan) -0.5% vs. Exp. -0.7% (Prev. 0.3%)

Italian PM Draghi says that the recovery fund might be reshaped but the main points will remain those laid out by the last government. (Newswires)


European stocks opened today’s session relatively flat/mixed but with a downside bias following a similarly downbeat APAC close. Meanwhile, US equity futures are trading flat but with the cyclically-driven Russell 2000 futures modestly underperforming. Bourses in Europe continue to follow the slightly softer trend (Euro Stoxx 50 -0.3%), considering the lack of news flow thus far in the run-up to FOMC minutes. Sectors are mainly in the red with no distinct risk bias and with some seemingly moving on idiosyncratic factors. Energy is the outperformer following the price action in the crude complex and the sectorial laggard is Retail (-2.9%) as Kering’s (-7.9%) biggest brand Gucci fell short of LFL sales expectations -10.3% vs exp. -7.2%. Moreover, in-fitting with this, the Consumer Discretionary sector and the CAC are softer, with Kering accounting for over 3% of the index’s weighting. Elsewhere, Rio Tinto (+3.4%) is higher after Co. announced FY profit after tax of USD 10.4bln vs prev. USD 7.0bln and a dividend of USD 5.57/shr vs prev. USD 4.43/shr. Meanwhile, British American Tobacco (-5.4%) trades lower, potentially due to commentary surrounding FY21 global tobacco volume , which is expected to fall by 3.0%. Akzo Nobel are (+1.6%) higher in the wake of their better-than-expected earnings. Turning away from earnings, Nestle (-0.3%) trades modestly into the red amid reports that it is offloading regional spring water brands, purified water business and beverage delivery operations in US and Canada to One Rock Capital Partners for USD 4.3bln.

Rio Tinto (RIO LN) - FY profit after tax USD 10.4bln vs prev. USD 7.0bln Y/Y, revenue USD 44.6bln vs prev. USD 43.2bln Y/Y, declares final ordinary dividend of USD 3.09/shr and special dividend of USD 0.93/shr. FY21 and FY22 capex seen around USD 7.5bln vs prev. USD 7.0bln each. Co. guides FY23 capex at around USD 7.5bln. Co. announces a total dividend of USD 5.57/shr vs prev. USD 4.43/shr. Net cash generated from operating activities was primarily driven by higher iron ore prices and stability in operating performance. Policy direction in the medium-term indicates a strong copper-intensive outlook with the continued rise of electric vehicles, potential green stimulus packages around the world and the Chinese push for carbon neutrality by 2060. (Newswires/Rio Tinto)

British American Tobacco (BATS LN) – FY operating profit GBP 9.962bln, revenue GBP 25.8bln vs exp. GBP 25.6bln, basic share GBP 2.80. Saw growth in new categories in-spite of the pandemic. FY dividend of GBP 2.156/shr vs exp. GBP 2.10/shr; interim dividend of GBP 0.25/shr. FY21 global tobacco industry volume seen -3%. Remain confident in 3-5% revenue growth guidance post-COVID; on target to attain 50mln non-combustible brands consumers by 2030. (Newswires)


DXY - It remains largely a long term rates and reflation rather than general risk sentiment story in terms of Dollar direction and corresponding moves in other currencies by default, but global stocks are beginning to get twitchy about the implications of soaring yields and steeper curves to keep the Greenback underpinned on safe haven grounds even when US Treasuries and bond peers enjoy bouts of consolidation and recuperation. Indeed, the index is just shy of a fresh rebound high and mostly above the 21 DMA that comes in at 90.624 today within a 90.844-617 band in the run up to a raft of data, more Fed speak and FOMC minutes from the January policy meeting. However, the impending Usd 27 bn 20 year note auction results may have more bearing for the Buck via any reaction in USTs.

CHF/EUR - The Franc and Euro are bearing the brunt of the Dollar renaissance, as the former slips below 0.8950 and latter to circa 1.2060 with little in the way of support until 1.2050 for psychological reasons. Moreover, the single currency is also feeling the weight of relative Sterling strength or resilience as Eur/Gbp extends even further to the downside and through 0.8690.

NZD/AUD/GBP - Little traction from news that COVID-19 restrictions will be relaxed in Auckland and NZ as a whole from tomorrow, with the Kiwi pulling back beneath 0.7200 vs its US rival and underperforming against the Aussie as the Aud/Nzd cross rebounds from around 1.0750 to 1.0786. Conversely, Aud/Usd is keeping sight of 0.7250 in the run up to jobs data and some timely comments from RBA’s Kent overnight on the labour market (needs to be tight to lift earnings and inflation). Note, the Assistant Governor also announced tweaks to FX swaps in favour of longer term foreign currency purchases, but with no impact on the value of the Aud. Elsewhere, the Pound has lost grip of the 1.3900 handle even though UK inflation metrics were firmer than forecast and Cable now awaits rhetoric from BoE’s Ramsden for some independent impetus.

JPY/CAD - The Yen has clawed back some lost ground after sliding under 106.00 as JGBs play catch-up in yields and long end swap rates spike, but Usd/Jpy is still elevated following the breach of key resistance levels. Similarly, the Loonie failed to tread water above 1.2700, but has pared some of its decline from 1.2719 before Canadian CPI alongside firmer crude.

SCANDI/EM/PM - Unchanged Swedish Money Market projections for CPIF appear to be assisting the Sek a bit more than a bounce in oil prices for the Nok that is also acknowledging a lower Norwegian oil investment forecast, but the Kronas firmer than EMs and precious metals that are losing more ground vs the Usd in stark contrast Bitcoin that has accelerated beyond Usd 50k to the brink of Usd 51.75k.


Although 10 year debt futures have rebounded further from new cycle lows and cash yields vice-versa, it would be foolish to suggest that bonds have now reclaimed sufficient ground to have passed the point of no return. However, from a pure momentum perspective the relative length of recovery and respite is encouraging for short term charts and price formation as Bunds hover just below a fresh 174.97 Eurex peak vs 174.38 at one stage, Gilts a fraction under 131.00 having been as high as 131.11 compared to 130.67 at the early Liffe low and the T-note towards the top of a 135-28+/135-17 overnight range. Moreover, decent demand for German and UK issuance backs up purported Asian buying on the premise that the bear steepening has reached levels that are attractive, so all eyes on the 20 year US sale for a bit more confirmation. Prior to that a raft of NA data, Fed orators and also FOMC minutes.


WTI and Brent front month futures continue with their upward trajectories as the complex remains elevated by underlying fundamentals (vaccine/reflationary/recovery hopes and OPEC+ support), alongside the short-term supply cripple in Texas amid serious adverse weather conditions – with US output hit by some 3.5mln BPD, roughly equivalent to Iraq’s oil production. Texas produced around 4.6mln BPD according to the latest data by the EIA. These factors have kept WTI buoyed around 60.50/bbl (vs low USD 59.55/bbl) whilst its Brent counterpart probes USD 64/bbl (vs low USD 62.75/bbl). Crude prices at these levels have prompted market chatter regarding OPEC+ politics and policy; it's expected that hawkish producers, namely Russia, will exert some pressure on the group to ease output cuts, with recent commentary from Russia’s Novak also suggesting that the market is balanced. However, Saudi will have to avoid a rift widening as the Kingdom itself is currently poised to reintroduced the 1mln BPD of oil which was taken offline as a goodwill gesture in January. ING suggests “It is unlikely that the group would bring a little over 2.2mln BPD of supply back onto the market, aware that the market would baulk at such a decision”, but highlights that there is room for some sort of easing, contingent on how much output volume Saudi decides to return from its cuts. Note, the Saudi Energy Minister is set to speak today at 12:00GMT/07:00EST at the IEA-IEF-OPEC Symposium on Energy Outlooks. Focus will be on his short/medium term outlooks - which could provide some hints as to the producer’s preferred policy route ahead of the JMMC and OPEC+ meeting on Mar 3rd and 4th respectively. The minister will likely reaffirm the group’s flexibility and the need to be proactive, whilst attempting to steer clear of any direct comments on the upcoming meeting itself. Remarks surrounding the Texas developments could echo the Qatari Energy Minister’s view in which he highlighted the temporary nature of the weather disruptions and the robustness of the US oil market. Analysts at ING have upgraded their oil forecasts, with 2021 Brent seen averaging USD 65/bbl (vs. prev. USD 60/bbl) – “While we see limited further upside in the first half of this year, it is over the second half of this year where we see more upside, given the expectation of a stronger demand recovery over this period.” That being said, the bank is aware of the clear downside risks lingering, including 1) further COVID waves, 2) Fed tapering and 3) the “swift” return of Iranian oil into the market and 4) the non-zero chance of OPEC+ not reaching an accord. Elsewhere, precious metals erred lower during early European hours with spot gold losing further ground below USD 1,800/oz as a result of rising real yields, a firmer Dollar and the confirmed “death cross” setup from a technical standpoint. Downside levels for the yellow metal include USD 1,774.85/oz, USD 1,773.10/oz and USD 1,764/oz, marking the 1st Dec, 27th Nov and 30th Nov lows respectively. Turning to base metals, LME copper is softer today amid the firmer Buck and the broader defensive bias but remains comfortable above USD 8,000/t.

US oil production reportedly dropped by a third amid the winter storm and it was also reported that Texas warned fuel shortages are developing in the western half of the state, while Oklahoma state reportedly adopted an emergency rule concerning rationing of natgas. Reports also noted that Houston power outages could persist for several more days and the Houston shipping channel was closed to all traffic amid the extreme weather. Marathon's El Paso refinery (131k bpd) reported an unplanned shutdown of its process unit due a malfunction of equipment amid extremely low temperatures. (Newswires)