[PODCAST] US Open Rundown 18th February 2021
- European indices and US futures are softer on the session as the NQ -0.8% continues to lag and European sectors are dictated by earnings; Euro Stoxx 50 -0.3%, ES -0.4%
- Study on the Pfizer/BioNTech vaccine seemingly indicates that it is significantly less effective on the South African variant
- WTI and Brent have drifted from best levels but remain supported by the ongoing US weather situation; APIs printed a larger than expected draw last night
- USTs are modestly firmer with yields a touch softer but still in proximity to best levels; 10yr yield at 1.29%
- DXY has continued to drift to the benefit of major peers with GBP reclaiming 1.3900 as peers across the board derive modest gains
- Looking ahead, highlights include, ECB minutes, US building permits, housing starts, IJC, Philadelphia Fed, EZ consumer confidence, DoEs, Fed's Brainard, Bostic, ECB's Schnabel, supply from the US
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)
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)
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 (-1.5%) continued to suffer from concerns related to increased infections post-Lunar New Year. Hang Seng (-1.6%) and Shanghai Comp. (+0.6%) 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)
BoJ may replace some numerical guidelines for its purchases of ETFs with a pledge to ramp-up buying in volatile conditions, sources state. No final decision has been made. (Newswires)
Nissan (7201 JT) is to suspend production at two assembly plants in Japan for two days as of February 22nd due to the recent earthquake. (Nikkei)
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)
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)
ONS says BoE CHAPS payment data shows spending is at 72% of the February 2020 average in the week to Feb 11th. (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)
European stocks kicked off the session mixed (Euro Stoxx 50 -0.2%) following on from a similarly varying APAC lead as Mainland China returned from its week-long Lunar New Year holiday. Meanwhile, US equity futures are trading marginally softer with the tech heavy NQ futures (-0.5%) narrowly underperforming . A divergence is seen between US equity futures and the performance in APAC & Europe, as the latter are also being influenced by a slew of large-cap earnings, whereas in the US Walmart report their earnings today which marks the unofficial end of US earning season. Bourses in Europe continue to follow the mixed trend amidst a lack of fresh catalysts. Sectors are mixed with no distinct risk bias. The Materials sector (+1.1%) is the outperformer which is in part down to base metals prices seeing a rise aided by Mainland China’s return. Consumer Discretionary (+0.4%) resides among the winners after Daimler (+1.5%) amid an overall stellar report and guidance whereby the expects sales, revenues and EBIT in 2021 to be significantly above the prior-year’s level and intends to spin-off Daimler Truck with majority listing on the stock exchange, expected to be completed before year-end 2021. Food & Beverage meanwhile (-0.4%) is pressured after European heavyweight Nestle (-0.3%) announced its FY20 earnings, which holds a 30% weighting in the sector. Financials (-0.7%) is the laggard, with Credit Suisse (-0.2%) and Barclays (-2%) softer following their earnings, with the former noting a major litigation provisions and York impairment and the latter disregarding share-buyback and dividend announcements. Continuing with earnings, Airbus (-4.0%) are lower after reporting a depleted year-end order book. Away from earnings, ThyssenKrupp (-4.0%) opened lower after Co. ended discussions with Liberty Steel regarding the potential sale of ThyssenKrupp’s steel unit but it is now flat on the session. Richemont (+0.6%) and Swatch (+0.8%) are seeing moderate gains despite Swiss watch exports trending lower in Jan at -11% Y/Y vs prev. -2.5% Y/Y.
Huawei has reportedly informed suppliers that smartphone component orders will decrease by over 60% this year to 70-80mln from the 189mln shipped last year. (Nikkei)
Note: this morning we have seen a number of earnings updates from the likes of Nestle, Barclays, Credit Suisse, Daimler among others – please see Daily European Equity Opening News and Additional Equity Stories headlines from the European morning.
GBP/AUD/DXY - Sterling has rebounded firmly with Cable retesting resistance above 1.3900, partly on the back of a broad Buck downturn that has culminated in the index reversing further from Wednesday’s 91.057 pinnacle to 90.685 and back near the 21 DMA (90.658 today) which now forms support ahead of 90.500. However, the Pound is also up on favourable cross flows as Eur/Gbp resumes its relentless decline after a tame bounce to 0.8700 and is now sub-0.8670. Elsewhere, the Aussie is back over 0.7750 vs its US counterpart and edging nearer 1.0800 against its Antipodean rival in wake of a somewhat mixed labour report in terms of outward appearance, but with internals better than the headline and jobless rate encouraging.
NZD/EUR/CHF/JPY/CAD - Notwithstanding, the aforementioned Aud/Nzd trajectory, the Kiwi has reclaimed 0.7200+ status vs its US namesake ahead of NZ PPI data, while the Euro has breached resistance and offers said to be situated at 1.2050 to peer beyond 1.2170, but decent option expiry interest between 1.2065-75 (1.1 bn) could hamper further progress towards 1.2100 where even larger expiries lurk (2 bn up to 1.2110). Similarly, the Franc has clawed back losses relative to the Greenback from almost 0.9000 to circa 0.8964 following Swiss trade data showing a much wider surplus, but steeper fall in watch exports, the Yen is rebounding further from under 106.00 to probe 105.70 and away from 106.00-105.95 (1 bn) option expiries at this stage, and the Loonie is back on the 1.2600 handle, albeit marginally before Canadian retail sales on Friday.
SCANDI/EM- The Sek has not derived much support or traction from firmer than expected Swedish inflation data as Eur/Sek holds above 10.0000 awaiting developments on the COVID-19 front after the country proposed a lockdown decree yesterday (suggesting it could be enacted for the first time since the pandemic broke), while the Nok is pivoting 10.2250 vs the Eur in the run up to Norges Bank Governor Olsen’s Annual Speech later today with little impetus from flat oil off new peaks. Meanwhile, mixed trade in EM currencies as the PBoC returned from Chinese Lunar New Year to set a softer Cny midpoint fix and drain 7-day liquidity before injecting 1 year funds, with the Cnh currently around 6.4550 vs 6.4300 earlier. USD/TRY has moved below the 7.00 mark following the CBRT announcement, where rates were left unchanged at 17.0% as expected and remarking that additional tightening will be delivered if required.
- 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%)
Although US Treasuries remain quite close to recovery highs and relatively resilient, Bunds and Gilts have succumbed to more outright and spread selling that has seen the respective 10 year debt futures hit fresh intraday lows of 147.77 and 130.89 before mild bounces. No new catalyst, but the early recovery effort has simply petered ahead of the US cash open, more data, Fed speak and supply in the form of 30 year TIPS after the long bond tainted a hitherto solid Quarterly Refunding.
WTI and Brent Apr’21 futures are waning off overnight highs in early European hours following their most recent run to fresh recovery-phase highs, bolstered by the most recent (and delayed) Private Inventory figures which printed a deeper than expected draw of 5.8mln bbls (vs exp. -2.4mln). Meanwhile, the complex remains elevated by the underlying fundamentals of mass vaccinations and OPEC+ tweaks, with the Texas deep freeze also keeping prices propped up as a lion’s share of Texan output is shuttered. Analysts at ING suggest that it is clear the impact from the cold weather is more severe than markets initially expected, with a clear demand hit amid refiners having shut or decreased operations. “It is estimated that around 3.6mln BPD of refining capacity has been idled, and for now at least, crude oil production losses appear to exceed the fall in refinery operating rates”, the bank says, adding that “there is the risk that it takes several days for operations to return to normal after the big freeze.” This weather phenomenon is likely to be reflected in next week’s inventory and production figures as trades eye today’s EIA release as a scheduled energy-specific catalyst, with the headline forecast to draw 2.429mln bbls. Turning to OPEC, yesterday’s address by the Saudi Energy Minister hinted that the Kingdom is seeking a more conservative approach – backed by the WSJ sources yesterday. Eyes on this front will remain on whether the group can come to an accord as preferences diverge against the backdrop of higher oil prices. It is also worth being cognisant of any developments that could knock the demand recovery hopes – with some reports suggesting that India may implement a fresh lockdown in some regions due to increasing cases and positivity rates. WTI resides just under USD 61.50/bbl (vs high USD 62.25/bbl), while its Brent counterpart dipped back below USD 65/bbl (vs high USD 65.50/bbl). Other risk events on the slate today include the ECB Minutes and weekly US jobless/continued claims. Elsewhere, precious metals see somewhat of a divergence with spot gold reaping reward from the softer Buck as prices attempt a recovery from YTD lows (around USD 1,768/oz) ahead of the 30th Nov 2020 low at USD 1,764/oz. Elsewhere, base metals surged overnight as mainland China returned from its week-long holiday, with Dalian iron ore leaping some 7% and Shanghai copper rising over 5% to near-10yr highs amid rosy demand prospects, a softer buck and supply concerns.
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)
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)