Original insights into market moving news

[PODCAST] US Open Rundown 19th February 2021

  • European indices and US futures are supported as the RTY +0.9% outperforms with US yields firmer but off highs
  • Crude is under pressure, but off lows, as Texas weather and potential geopolitical risk-premia begins to unwind
  • Biden will reportedly say the US is not looking for a cold war with China but parties should work to challenge abusive practices, ahead of today's summit
  • Flash PMIs have been broadly firmer, with UK Services and German Manufacturing notably increasing; DXY has been under pressure as Cable eclipses 1.40 and peers derive impetus
  • Looking ahead, highlights include US flash PMIs, Canadian retail sales, US existing home sales, BoE's Vlieghe, Fed's Williams, Barkin, Rosengren & President Biden meeting with EU Officials 


Vaccines appear to lower COVID-19 infections and transmissions by 2/3, according to data from Public Health England (set to be published later this month), as disclosed by The Telegraph in which it labels the study as the first to use "real world data". (Telegraph)

German Head of the Public Health Agency says that infections appear to be stagnating at a level that is too high. (Newswires)

Around half of all Italian regions could be placed in the 'orange' tier from the current 'yellow' one regarding COVID-19 due to recent contagion data and variant concerns, according to Ansa; this would see the closure of restaurants and bars in the areas. (Ansa)


Asian equity markets traded initially negatively, though China did pick-up towards the close, following a weak handover from Wall St where major indices declined as markets remained in consolidation mode following discouraging releases. ASX 200 (-1.3%) was dragged lower by underperformance in the commodity-related stocks, especially energy names due to the pullback in oil prices and after Woodside Petroleum was forced to delay talks to sell LNG to China amid ongoing trade frictions, with a miss on Retail Sales adding to the glum mood. Nikkei 225 (-0.7%) retreated beneath the 30k level with large automakers suffering from recent disruptions due to chip supply issues and Toyota also warned its Mexico operations will be impacted by a natgas shortage. Hang Seng (+0.2%) and Shanghai Comp. (+0.6%) were initially uninspired before posting mild gains. Baby-related stocks were underpinned by reports China is considering lifting birth restrictions in the northeast part of the country. The PBoC continued with its liquidity drains and Chinese press reports stated that the central bank may keep its open market operations at a limited scale, although PBoC-affiliated media suggested not to mistake the recent liquidity withdrawal as a policy signal. Finally, 10yr JGBs were subdued after failing to benefit from the widespread risk aversion and despite the presence of the BoJ in the market for nearly JPY 1.2tln of JGBs in 1yr-10yr maturities, while the 10yr JGB yield hovered around 0.10% to reach its highest since November 2018.

PBoC injected CNY 20bln via 7-day reverse repos at rate of 2.20% for a net daily drain of CNY 80bln, while it sold CNY 10bln of 3-month bills in Hong Kong at coupon of 2.70% and CNY 15bln 1-year bills at coupon of 2.74%. (Newswires) PBoC set USD/CNY at 6.4624 vs. Exp. 6.4669 (Prev. 6.4536)

  • Japanese National CPI (Jan) Y/Y -0.6% vs. Exp. -0.7% (Prev. -1.2%)
  • Japanese National CPI Ex. Fresh Food (Jan) Y/Y -0.6% vs. Exp. -0.7% (Prev. -1.0%)
  • Japanese National CPI Ex. Fresh Food & Energy (Jan) Y/Y 0.1% vs. Exp. 0.0% (Prev. -0.4%)

Japan downgrades view on the overall economy; says economy is showing some weakness though improving; cuts view on consumer spending for third straight month; raises view on capital spending, imports an corporate profits. (Newswires)

China may reportedly ban rare earth technology exports amid security woes in the event of a trade war; although there are no plans to impose rare-earth curbs to the US at the moment, according to sources. (Newswires)


US Treasury Secretary Yellen reiterated that the benefits of stimulus will outweigh the costs and she hopes to see progress on the bill in the next two weeks, while she added the Fed has the tools to deal with inflation and she wants to make sure stimulus cheques are appropriately targeted. Yellen also stated that details of the infrastructure plan have not yet been provided but noted a tax increase would likely be used to pay for part of Biden's infrastructure package which will be proposed later this year and suggested that the US could return to full employment by next year. (Newswires)

Ahead of the G7 summit, a US official says that President Biden is not looking for a "new cold War" with China, but believes that the US, Europe and democracies should challenge its abusive practices. (Newsquawk)


UK Chancellor Sunak is reportedly extending the furlough scheme until summer. (FT)

Lord Frost has been given the task of taking on the EU over its "heavy-handed" approach to the Northern Ireland protocol, according to insiders. (Telegraph)

ECB President Lagarde warned that countries must not brutally remove stimulus which instead should be eased gradually and carefully. (CNN)

ECB's Villeroy said France should progressively end financial support for the economy in the year head as health restrictions are removed, while he added that there is no risk of the economy overheating or for a sustained rebound of inflation in Europe. (Newswires)

German Finance Ministry expects a subdued economy in the weeks ahead due to COVID-19 restrictions, while it added that tax income fell 11.1% Y/Y in January due to the pandemic. Furthermore, it sees inflation to stay near the January level of 1.0% in the months ahead and stated that leading indicators suggest industry is supporting the economy but services are impacted by the lockdown. (Newswires)

Around half of all Italian regions could be placed in the 'orange' tier from the current 'yellow' one regarding COVID-19 due to recent contagion data and variant concerns, according to Ansa; this would see the closure of restaurants and bars in the areas. (Ansa)

EU Markit Manufacturing Flash PMI (Feb) 57.7 vs. Exp. 54.3 (Prev. 54.8); Services Flash PMI (Feb) 44.7 vs. Exp. 45.9 (Prev. 45.4)

  • Composite Flash PMI (Feb) 48.1 vs. Exp. 48 (Prev. 47.8)

German Markit Manufacturing Flash PMI (Feb) 60.6 vs. Exp. 56.5 (Prev. 57.1); Services Flash PMI (Feb) 45.9 vs. Exp. 46.5 (Prev. 46.7)

  • Composite Flash PMI (Feb) 51.3 vs. Exp. 50.5 (Prev. 50.8)

UK Flash Services PMI (Feb) 49.7 vs. Exp. 41 (Prev. 39.5); Manufacturing PMI (Feb) 54.9 vs. Exp. 53.2 (Prev. 54.1)

  • Composite PMI (Feb) 49.8 vs. Exp. 42.2 (Prev. 41.2)


  • UK Retail Sales YY (Jan) -5.9% vs. Exp. -1.3% (Prev. 2.9%)
  • UK Retail Sales MM (Jan) -8.2% vs. Exp. -2.5% (Prev. 0.3%)
  • UK GfK Consumer Confidence (Feb) -23 vs. Exp. -27.0 (Prev. -28.0); highest since March. (Newswires)


Comments from a US official that the US would agree to meet with Iran on returning to the nuclear deal in a broader meeting along with the P5+1 and stated it is difficult to contemplate a renewed JCPOA being sustained if regional issues are not resolved. Furthermore, the official warned it would be a dangerous move if Iran suspends additional protocols and blocks access to IAEA inspections, while the official added that there is an opportunity for the first time in years to end maximum pressure on Iran and return to diplomacy and that US will also ease travel restrictions on Iranian diplomats. On the matter, Politico reports that one option on the table is to have some sort of interim agreement that can build confidence on both sides. EU says a meeting on the Iranian nuclear deal is possible but no date set yet. (Newswires)

US imposed visa restrictions on 43 Belarusians including justice officials and government personnel, while Secretary of State Blinken commented that the US remains alarmed by the crackdown on peaceful protestors, activists and journalists in Belarus. (Newswires)

US State Department may release its report on the Nord Stream 2 as early as today which will name companies believed to be involved in building the pipeline although sanctions could take time and reports noted US is not expected to include German companies in the sanctions list. (Newswires/RIA)


European stocks opened the last session of the week with a firmer footing evident across the board (Euro Stoxx 50 +0.5%) following a mixed/softer APAC lead. Meanwhile, US equity futures are trading with mild upside as the RTY outpacing peers and perhaps provides some weight to the reflationary narrative. Back to Europe, bourses did trade mixed during the early cash hours, although the region was lifted into positive territory following the release of regional Flash PMI figures. The FTSE 100 (unch) felt early pressure due to the firm up of the Pound as GBP/USD eclipsed 1.4000 to the upside, with mass vaccination a potential driving force. The UK benchmark then staged a brief recovery following blockbuster UK PMI figures which topped forecasts on all fronts, although the Sterling strength took the helm again. Moving on, sectors in Europe opened predominantly in the green but are currently trading mixed with no indicative risk bias. The Personal & Household goods (+0.7%) sector is an outperformer due to Moncler (+6.8%) and Hermes (+5.5%) reporting stellar earnings. Banking (+0.3%) opened firmer amid higher yields and NatWest (+1.0%) has seen morning gains despite underwhelming earnings metrics as the Co. looks to resumed payments. Oil & Gas (-0.6%) is the laggard which is in-fitting with WTI and Brent price action. On to individual movers, Leonardo (+7.7%) is gaining after reports the Co. is set to raise over EUR 2bln from the listing of its US unit DRS. Porsche (+3.0%) is seeing further upside after yesterday’s news of the potential IPO which would in turn boost VW’s market cap. Sticking with the auto sector, Renault (-5.5%) is dented after they reported sub-par earnings whilst announcing they will not pay a 2020 dividend and warning that the chip shortage is likely to impact 100k vehicles for the year and will likely reach a peak in Q2. The chip shortage news could result in a follow through action for other Autos and be used as a gauge of what is expected by auto-makers going forward. Other notable earnings include Allianz (+1.3%) and Swiss Re (+0.4%).

Baby/Child-related Products - Reports indicate that China is considering lifting birth restrictions in the northeast part of the country. (Newswires)

Uber (UBER) has lost its court case on workers rights via a unanimous decision. (Newswires) -3.5% in the pre-market


AUD/NZD - A strong end to the week for the Antipodean Dollars and considerably firmer rebounds from lows vs their US counterpart, as Aud/Usd takes a firmer grasp of the 0.7800 handle and Nzd/Usd tags along. The Aussie has shrugged aside somewhat disappointing preliminary consumption figures for January amidst a spike in bond yields, partly in catch up trade, but also on the back of Westpac lifting its 10 year cash rate forecast for end 2021 to 1.9% from 1.5% and a tad more than the US Treasury equivalent to widen the differential marginally (latter now seen at 1.8% vs 1.5% previously). Meanwhile, the Kiwi has revisited 0.7265+ w-t-d peaks by virtue of the fact that the Aud/Nzd cross remains capped below 1.0800 more than anything NZ specific although the output component of Q4 PPI rose 0.4% from -0.3% in the prior quarter.

EUR/JPY/DXY - The Euro has also taken advantage of EGB/UST yield divergence, though unlike the Aussie Eur/Usd has extended gains beyond 1.2100 to around 1.2140 with assistance from flash Eurozone PMIs showing ongoing strength in manufacturing to more than offset services sector underperformance. Similarly, the Yen is putting the squeeze on Greenback as the index retreats further from 91.000 through the 21 DMA (90.662), 90.500 and the 50 DMA (90.378) to 90.243, with Usd/Jpy back below 105.50 and the 21 DMA (105.48) in wake of fractionally firmer expected Japanese CPI.

CHF/CAD/GBP - Also firmer vs the Buck, as the Franc pivots 0.8950, Loonie hovers around 1.2650 awaiting Canadian retail sales and Pound probes barrier defences at 1.4000 following significant beats in UK PMIs, including services that were so ravaged by the return to lockdown last time. On that note, ONS retail sales data was extremely weak in contrast to public finances, but neither impacted that much.

SCANDI/EM/PM - Dovish-leaning Riksbank minutes have not derailed the Sek from its 10.0500 axis against the Eur, but retreating oil prices amidst efforts to restore US crude output after weather enforced shutdowns are undermining the Nok circa 10.2400 in cross terms, Rub and Mxn to varying degrees. However, precious metals are reeling again and cryptos continue to rally, with Gold tripping some stops sub-key support around Usd 1765/oz and Bitcoin posting yet another ATH close to Usd 53k.

  • Australian Retail Sales (Jan P) M/M 0.6% vs. Exp. 2.0% (Prev. -4.2%). (Newswires)


Crude prices and debt have not been in sync or strictly correlated, but the resurgence in oil amidst severe weather in the US disrupting supply has fuelled the reflation story for sure. Hence, some unwinding of the premium for sub-normal output may be providing bonds with a bit of a buffer against even heavier losses as Bunds, Gilts and the 10 year T-note hover above worst levels (174.24, 130.40 and 135-21+ respectively), albeit still looking very vulnerable ahead of the US open and a relatively busy agenda including the flash Markit PMIs, Canadian retail sales, US existing home sales and Fed speak.


WTI and Brent Apr’21 futures continue to post losses with the former extending losses below USD 60/bbl (vs high USD 60.16/bbl) whilst the latter dips below USD 63.50/bbl (vs high 63.62/bbl). The complex has waned off lows as the broader risk sentiment picked up following the EZ and UK flash PMI data, although oil prices remain pressured amid some supply-side developments - as the complex carries on unwinding the Texas deep-freeze premium with the oil patch is slowly restarting wells – reflected in the steeper losses in WTI vs Brent. Some geopolitical premium is also potentially unravelling amid reports the Biden admin is willing to negotiate with Iran, with an interim agreement mulled in a bid to build confidence on both sides. Expanding on the first point, Texas produced some 4.6mln BPD of oil according to the latest EIA data, whereby a bulk was shuttered throughout the week. However, as the deep-freeze in the region abates and power is restored, the question now turns to how swiftly operations can fully resume. Oil traders, alongside executives, hope for production to be re-available within days, although warned that a small number may remain shut for longer due to repairs – with the actual timeframe for full restoration still up in the air. Elaborating on the geopolitical factor, markets have been flirting with the prospect of Iranian oil returning to the market amid hopes US will lift some sanctions against the country. Cold water was poured on this earlier in the month after President Biden firmly suggested he will not lift sanctions to get Iran to the negotiating table with regards to its nuclear activity. However, reports overnight via Politico suggested scope for a new deal between the countries, with an interim deal touted as an option to ease tensions between the sides. “A broader deal could possibly include non-nuclear aspects, such as limits on Iran’s ballistic missile program, and have provisions that last longer than the original deal or are permanent”, the report said. This development raises the possibility of Iranian oil returning to the market, albeit it’ll then have to tackle the OPEC+ hurdle in relation to the output cut quotas – likely to be a topic to touch upon in the upcoming JMMC and OPEC+ meetings on Mar 3rd and 4th respectively. Meanwhile, the demand backdrop remains constructive with reports also suggesting that vaccines appear to lower COVID-19 infections and transmissions by 2/3, according to data from Public Health England (set to be published later this month), as disclosed by The Telegraph in which it labels the study as the first to use "real world data”. Elsewhere precious metals are mixed with spot gold resuming its real-yield-driven downside after yesterday testing support at around USD 1,764/oz, whilst the technical “death cross” confirmation earlier in the weak flagged a bearish signal. Spot silver meanwhile is firmer as a function of the softer Dollar. Turning to base metals, Dalian iron ore futures fell overnight amid a significant increase in post-Lunar New Year inventories. Meanwhile, LME copper rallied past USD 8,700/oz on rosy demand prospects, the softer Buck, and mild recovery in stocks. On this note, analysts at GS raised their 3/6/12M copper targets to USD 9,200/t, USD 9,800/t, and USD 10,500/t respectively (from USD 8,500/t, UDF 9,000/t, and USD 10,000/t previously).

Goldman Sachs said it expects the weather shock to support petroleum cracks in the short-term and that industrial and shale disruptions will reduce refinery gas (-50k bpd) and diesel consumption (-150k bpd), while it adds travel disruption will impact gasoline (-250k bpd) and jet fuel (-60k bpd) demand. (Newswires)

CME raised COMEX copper futures maintenance margins by 8.7% to USD 5,000/contract. (Newswires)

Morgan Stanley says the impact on US Nat Gas prices of extreme cold & winter storms in US south central should be short-lived. (Newswires)