Original insights into market moving news

[PODCAST] European Open Rundown 18th February 2021

  • Asian equity markets traded indecisively as the region took its cue from a similarly uninspiring lead from the US
  • FOMC minutes proved to be uneventful in which the account noted that the Fed is still far from its inflation and employment goals
  • The DXY held firm after its brief incursion above 91.00, EUR/USD capped by 1.2050, GBP/USD stuck on a 1.38 handle
  • Italian PM Draghi's government won a vote of confidence at the Senate
  • WTI briefly breached USD 62.00/bbl amid recent inventory data and weather disruptions in the US
  • Looking ahead, highlights include CBRT rate decision, ECB minutes, US building permits, housing starts, IJC, Philadelphia Fed, EZ consumer confidence, DoEs, BoE's Saunders, Fed's Brainard, Bostic, ECB's Schnabel, supply from Spain, France & the US
  • Earnings from Airbus, Daimler, Orange, Barclays, Credit Suisse, Walmart


FOMC minutes stated that various participants noted the importance of the Fed clearly communicating its assessment of progress toward its longer-run goals well in advance of the time when it could be judged substantial enough to warrant a change in the pace of purchases and that the increase in the Federal Reserve's balance sheet since last March had materially eased financial conditions and was providing substantial support to the economy. The Committee's guidance for asset purchases indicated that asset purchases would continue at least at the current pace until substantial further progress toward its employment and inflation goals had been achieved, while it added that with the economy still far from those goals, participants judged that it was likely to take some time for substantial further progress to be achieved.

Many participants stressed the importance of distinguishing between such one-time changes in relative prices and changes in the underlying trend for inflation, noting that changes in relative prices could temporarily raise measured inflation but would be unlikely to have a lasting effect. Furthermore, the minutes stated that weaker demand and earlier declines in oil prices were holding down consumer price inflation, while the pace of the recovery in economic activity and employment had moderated in recent months, with weakness concentrated in the sectors of the economy most adversely affected by the resurgence of the virus and by greater social distancing. (Newswires)


US COVID-19 cases +57,970 (prev. +56,384), deaths +1,396 (prev. +1,217); vaccines administered 56.3mln (prev. 55.2mln), while a major newswire tally stated US cases rose at least 71,553 to 27.9mln and deaths increased by at least 2,340 to 490.8k. (Newswires)

White House said Johnson & Johnson (JNJ) does not have a large inventory of COVID-19 vaccine doses and that approval could come in the next couple of weeks, while there were separate comments from the CDC Director that vaccinations are not yet at the level to drive down the number of COVID cases. (Newswires)

UK Government Officials have been working on a potential timetable for the easing of COVID-19 restrictions which would see higher/further education back in mid-April alongside non-essential retail, to be followed by the broader hospitality and leisure facilities in late-April, then entertainment/sport venues in early-May. Note, the article highlights the roadmap cannot be completed until the PM has received the findings of a study into COVID-19 vaccine and infection levels. (Sky News)

Imperial College's React study shows that COVID-19 infections have decreased by ~66% since lockdown commenced; from 1.57% of people in early-January to 0.51% in England as of mid-February and from 2.83% of people to 0.54% in London respectively. (BBC News)

NY Governor Cuomo said outdoor amusement parks can reopen on 9th April at 33% capacity, while other reports noted that New York State Senate moved to curb New York Governor Cuomo of pandemic-related powers. (Newswires/ NYT)

In vitro study found that sera from individuals immunized with the Pfizer (PFE)/BioNTech (BNTX) COVID-19 vaccine neutralized South African variant spike mutations although other reports noted that it seems to be significantly less effective and produced only a third of antibodies than it did for the original virus. Furthermore, letters published in the New England Journal of Medicine noted that Pfizer/BioNTech vaccine had efficacy of 92.6% from just the first dose which suggested benefits could be increased by deferring second doses until all priority groups receive the first dose, while Moderna (MRNA) letter to NEJM noted that protection from its vaccine against the South African variant still needs to be determined. (Newswires/FT/NEJM)


Asian equity markets traded indecisively as the region took its cue from a similarly uninspiring lead from the US where underperformance in tech clouded over sentiment and with strong data raising some questions regarding large stimulus. ASX 200 (Unch.) lacked firm direction as participants digested a slew of mixed earnings from several blue-chip stocks including Rio Tinto and ANZ Bank, although energy names were pressured and failed to benefit from the continued upside in oil prices after weaker results from Woodside Petroleum and Origin Energy. Nikkei 225 (-0.2%) was initially kept afloat but with upside later reversed by recent currency inflows and KOSPI (-0.9%) continued to suffer from concerns related to increased infections post-Lunar New Year. Hang Seng (-1.2%) and Shanghai Comp. (+1.0%) were varied as property names and financials dragged Hong Kong lower, while mainland China was lifted on return from the week-long closure with the PBoC conducting a CNY 200bln 1yr MLF operation and MOFCOM also announced that combined sales of domestic retail and catering enterprises rose 28.7% Y/Y to CNY 821bln during the Spring Festival golden week. Finally, 10yr JGBs were higher with prices recovering from the recent selling pressure as yields stabilized although gains were capped after weaker results at the 20yr JGB auction in which the b/c and accepted prices both declined from previous.

PBoC injected CNY 20bln through 7-day reverse repos with the rate maintained at 2.20% for a net drain of CNY 260bln, although the PBoC later announced to conduct CNY 200bln of 1yr MLF at rate of 2.95% vs prev. 2.95%. (Newswires) PBoC set USD/CNY mid-point at 6.4536 vs exp. 6.4560 (prev. 6.4391)

US Chamber of Commerce report suggested that decoupling with China could impact annual sales in the US aircraft and aviation sector by as much as USD 51bln and result to as many as 225k job losses, as well as cost the US chip industry USD 83bln in lost revenue and 124k job losses. (WSJ)


Italian PM Draghi's government won a vote of confidence at the Senate where lawmakers voted (262 vs 40) in favour of the new government and which was more than the 152 needed for a majority. (Newswires/ING)

The UK is making moves to scrap EU limits on state aid in order to allow the government to provide additional support to businesses impacted by the costs of lockdowns. (Times)


In FX markets, the DXY held firm after its brief incursion above the 91.00 level. Although yields have since cooled off from the rampant mood earlier in the week, they remained near cyclicals highs, while data releases stateside have been solid. Focus during the prior session also turned to the FOMC minutes which proved to be uneventful in which the account reiterated the view for asset purchases to continue at least at the current pace until substantial further progress toward its targets had been achieved and that with the economy still far from those goals, participants judged that it was likely to take some time for substantial further progress to be achieved. EUR/USD was contained by resistance at 1.2050 after it recently gave up ground to the greenback’s advances although the single currency is off its lows with ING suggesting the 1.2000 psychological level and nearby 100DMA could act as a fairly solid support level and after Italian PM Draghi’s government overwhelmingly won its first confidence vote at the Senate. GBP/USD was rangebound, whilst USD/JPY traded choppy in reflection of the indecisive risk tone. Antipodeans were kept afloat but with upside restricted after mixed jobs data from Australia in which headline Employment Change missed expectations but was solely fuelled by Full-Time Jobs and the Unemployment Rate fell to 6.4% from 6.6% but coincided with a decline in the Participation Rate.

  • Australian Employment Change (Jan) 29.1k vs. Exp. 40.0k (Prev. 50.0k)
  • Australian Full Time Employment Change (Jan) 59.0k (Prev. 35.7k)
  • Australian Unemployment Rate (Jan) 6.4% vs. Exp. 6.5% (Prev. 6.6%)
  • Australian Participation Rate (Jan) 66.1% vs. Exp. 66.2% (Prev. 66.2%)


WTI crude futures briefly rose above the USD 62.00/bbl level with advances spurred by a larger than expected drawdown to headline crude stockpiles in the latest private inventory report and amid continued disruptions in the US from the winter storm with oil production reportedly down by around 4mln bpd and with Texas Governor announcing a ban of natgas exports from the state through to Sunday. Furthermore, focus was also on recent comments from the OPEC SecGen and Saudi Energy Minister. Gold prices eked marginal gains but with upside restricted with the greenback holding steady, while copper surged overnight as Chinese participants returned to the market from the Lunar New Year holidays and which coincided with firm gains across Dalian iron ore futures and Shanghai metal prices.

US Private Inventories (bbls): Crude -5.8mln (exp. -2.4mln), Cushing -3mln, Gasoline +3.9mln (exp. +1.4mln), Distillates -3.5mln (exp. -1.6mln). (Newswires)

US oil production is down around 4mln BPD with Permian production down as much as 80%, while at least 2.6mln bpd of refining capacity is offline. (Newswires/Platts)

Texas Governor Abbott ordered producers to not export natural gas out of the state until Sunday, while the Mexican Economy Minister later stated that they contacted the US government representative in Mexico seeking to guarantee natgas supply for Mexico and Mexico Deputy Trade Minister warned that natgas export restrictions announced by the Texas Governor will irredeemably impact US and Mexico's economies. (Newswires)

Phillips 66 Sweeny refinery (265k bpd) in Texas reported a 3rd party vendor suspended the primary source of nitrogen gas supply due to inclement weather and that it is actively engaged in procuring nitrogen, as well as examining alternatives, while LyondellBasell's Houston refinery (268k bpd) was reportedly shut due to cold weather. (Newswires)


US President Biden held a call with Israeli PM Netanyahu and affirmed a personal history of steadfast commitment to Israel's security and intends to strengthen their defence cooperation. (Newswires)

US State Department urged Iran to reverse steps regarding IAEA which it said goes beyond what the nuclear deal allows and stated that the path for diplomacy remains with Iran. (Newswires)

White House Cyber Adviser said an advanced persistent actor like Russia is likely responsible for the Solarwinds (SWI) hacking. (Newswires)


The Treasury sell-off abated on Wednesday, with 10-year yields topping out at around 1.33% overnight. A big beat for retail sales and an above-expected PPI report resulted in buying action along the Treasury curve, which bull-flattened in wake of the data; the rational is that pandemic statistics are on a decent trajectory, the vaccine rollout is expected to see all Americans vaccinated by the end of July, the consumer is spending stimulus checks rather than banking them in their savings account -- all of this lends to the argument that Biden's USD 1.9trln stimulus plan might be too big. Analysts at Morgan Stanley recently suggested that a fiscal plan above USD 1.5trln would be needed to see the Treasury ramp up issuance; traders may be reasoning that the doves are going to have a hard time pushing through all of Biden's fiscal largesse. The 20-year auction saw a large tail (2.3bps), while Bid-to-cover was also softer on average. Dealers took a larger chunk than the average, as indirect demand was weak, although direct demand was above recent averages. T-note futures (H1) settle 1 tick lower at 135-24.

Fed's Kaplan (non-voter) said he will be analysing how much of firmer inflation is temporary versus persistent and reiterated that as the country weathers the virus, it would be healthier to wean from extraordinary Fed policy as soon as possible. (Newswires)

US President Biden may not take executive action on cancelling student debt with the White House noting it is unclear if the President has authority to take such measures. (Politico)