Original insights into market moving news

[PODCAST] European Open Rundown 23rd February 2021

  • Asian equity markets eventually traded mostly positive after initial choppy price action following on from the mostly negative lead via Wall St
  • Sentiment in the US was pressured amid underperformance in tech and continued increases in yields
  • In FX, the DXY continued to fade yesterday’s initial strength, EUR/USD resides above 1.2150, GBP/USD firmly on a 1.40 handle
  • The US House Budget Committee advanced the USD 1.9trln COVID-19 aid bill as expected
  • WTI crude futures reclaimed the USD 62.00/bbl level and later tested USD 63.00/bbl
  • Looking ahead, highlights include UK labour market report, EZ CPI (final), US consumer confidence, Fed Chair Powell's semi-annual testimony to the Senate, BoC's Macklem, supply from UK and US


US COVID-19 cases increased by at least 58,354 to 28.26mln and deaths increased by at least 1,437 to a total 500.8k, according to a major newswire tally. (Newswires)

New Jersey Governor Murphy said any New Jersey venues with 5k+ capacity for sports or entertainment will be allowed to open with 10% capacity for indoor events from March 1st. There were also reports that New York Governor Cuomo gave the go-ahead for cinemas to reopen in the City with a 25% capacity, while AMC (AMC) is to reopen all of its 13 New York City theatres on March 5th. (Newswires)

Moderna (MRNA) is looking to double its vaccine deliveries to the US government by April and stated in its prepared congressional testimony that it is on course to deliver 100mln vaccine doses to the US by end-March. There were also comments from Pfizer (PFE) that it expects to produce 13mln doses a week by mid-March and Johnson & Johnson (JNJ) said it could supply 20mln doses by end-March, while Novavax (NVAX) is prepared to deliver 110mln vaccine doses to US by Q3 under current agreements. (Newswires)


Asian equity markets eventually traded mostly positive after initial choppy price action following on from the mostly negative lead from Wall St where sentiment was pressured amid underperformance in tech and continued increases in yields as US money markets brought forward bets of a Fed rate increase and priced in a 70% chance of a 25bps hike by end-2022. ASX 200 (+0.9%) shrugged off the early tech-led declines and found support from strength in the commodity-related sectors especially energy stocks after oil prices continued to rally and as financials benefitted from the rising yield environment. KOSPI (+0.1%) lagged its peers in a resumption of this year’s consolidation above the 3,000 level and with a miss on earnings from drug manufacturer Celltrion weighing on other domestic pharmaceutical heavyweights. Hang Seng (+1.6%) and Shanghai Comp. (+0.6%) began indecisively following a tepid liquidity effort by the PBoC which injected a net CNY 10bln, while US-China tensions continued to linger as US House Speaker Pelosi suggested all options are on the table in holding China accountable for human rights abuses and State Department spokesman stated that recent comments by China Foreign Minister Wang Yi reflected the continued pattern of Beijing averting the blame. However, Chinese markets then gained with Hong Kong leading the advances as the Chinese oil majors reacted to further upside in crude prices and with HSBC (+1.5%) leading the banks amid its earnings release in which it reported a decline in FY net and revenue but announced a resumption of its interim dividend. As a reminder, Japanese markets were closed in observance of the Emperor’s Birthday holiday.

PBoC injected CNY 10bln via 7-day reverse repos at rate of 2.20% for a net daily injection of CNY 10bln. (Newswires) PBoC set USD/CNY mid-point at 6.4516 vs exp. 6.4542 (prev. 6.4563)

US House Speaker Pelosi said all options on the table for holding China accountable for human rights abuses, while a State Department spokesman later stated that China Foreign Minister Wang Yi's comments reflect the continued pattern of Beijing averting the blame. (Newswires)

China Global Times tweeted that China urges the UK and others to look at their own human rights problems, stop politicizing human rights and make a real effort for the sound development of global human rights cause, citing Chinese Mission Spokesperson Liu. (Twitter)

  • Chinese House Prices (Jan) Y/Y 3.9% (prev. 3.8%)


UK Chancellor Sunak is reportedly likely to prolong the support for furloughed workers until May. (The Times)

BoE's Vlieghe said we may not see interest rates similar to before the financial crisis during his lifetime, while he commented on negative rates in which he stated that bank liabilities in the UK are only slightly more retail heavy than in the Eurozone and that transmission of negative rates via banks might be weaker in the UK vs the Eurozone but transmission via FX and bond market channels could be stronger. (Newswires)

ECB's Villeroy said there is no risk of overheating and financing conditions remain very accommodative with no risk of a lasting pick up in inflation. (Newswires)


In FX markets, the DXY continued to fade yesterday’s initial strength and slipped beneath the 90.00 level as focus in Capitol Hill remained on stimulus whereby the House Budget Committee advanced the USD 1.9trln COVID-19 aid bill as expected. This will now go to a House vote later in the week, while participants also look ahead to Fed Chair Powell’s semi-annual testimony in Congress where he is expected to stick to the dovish script. EUR/USD benefitted from the weakness in the greenback to extend on yesterday’s data-driven momentum, with the single currency also finding a platform at 1.2150 and nearby 50-DMA of 1.2153. GBP/USD held on to recent gains and has a firm grip on the 1.4000 handle after UK PM Johnson outlined his 4-step blueprint to exit the lockdown. USD/JPY languished at a weekly low around the 105.00 level amid the absence of Japanese participants and antipodeans were rangebound as they took a breather near 3-year highs, with NZD/USD also contained after a miss on quarterly Retail Sales and heading into tomorrow’s RBNZ rate decision where the central bank is expected to maintain the OCR at 0.25% and LSAP at NZD 100bln.

  • New Zealand Retail Sales (Q4) Q/Q -2.7% vs exp. -0.5% (prev. 28.0%)
  • New Zealand Retail Sales (Q4) Y/Y 4.8% (prev. 8.3%)


Commodities traded higher as risk appetite gradually improved throughout the overnight session with outperformance in WTI crude futures which reclaimed the USD 62.00/bbl level and later tested USD 63.00/bbl with oil prices lifted by global reopening efforts. Furthermore, gains were exacerbated as Chinese participants came to the fore which saw Shanghai crude contracts surge over 5% in early trade, while Goldman Sachs and Morgan Stanley also upped their oil price forecasts with the former anticipating WTI to reach USD 66.00/bbl this year vs prev. estimate of USD 58.50/bbl. Elsewhere, gold held above the USD 1800/oz level and copper edged higher amid the ongoing optimism for a global recovery.

ExxonMobil (XOM) Baytown, Texas refinery (584k BPD) began to restart activities and Marathon's Galveston Bay, Texas refinery (585k bpd) was also reported to restart its crude unit. (Newswires)

Goldman Sachs raised 2021 WTI crude price forecasts to USD 66.00/bbl from USD 58.50/bbl and raised 2022 forecast to and USD 67.00/bbl from USD 62.00/bbl, while it expects US output to increase sharply next year but wont return to previous peak growth levels. (Newswires)

Morgan Stanley raised WTI price estimate for Q2 to USD 62.50/bbl from USD 52.50/bbl, Q3 estimate raised to USD 67.50/bbl from USD 57.50/bbl and Q4 estimate was raised to USD 62.50/bbl from USD 57.50/bbl. (Newswires)


US State Department spokesperson said Iran 60% uranium enrichment comments sounds like a threat and will not respond to hypotheticals and posturing. A US official reiterated that Washington will not ease sanctions on Iran until the two sides sit down to talk and played down Iranian suggestion that it could enrich uranium to 60% whereby the official stated it would be "concerning" but Iran has yet to act. The official added focus should be on whether Iran comes back to the negotiating table rather than on such rhetoric and said the US wants to avoid escalation as it pursues compliance by both sides with the 2015 nuclear deal. (Newswires)

US State Department spokesperson said the US continues to examine entities involved in potentially sanctionable activity in relation to Nord Stream 2 pipeline. (Newswires)


USTs were choppy but ultimately lower on Monday after a mid-session bounce reversed into latter trade. By settlement, 2s +0.6bps at 0.115%, 10s +3.2bps at 1.377%, 30s +5.1bps at 2.192%; TYH1 volumes were well above average; 5-year TIPS -5bps at -1.81%, 10-year TIPS +2bps at -0.786%, and 30-year TIPS +5bps at 0.078%. The rise in yields continues to be the primary market focus, with much fanfare on "highest since" levels-type commentary, although fundamentally, there hasn't been much changed on the macro front since Friday, although commodities do continue to rally. In fact, there have been several bank strategists closing their near-term steepener calls lately. Part of the overnight pressure in bonds was a result of spillover from down under, with the Australian 10-year yield rising by nearly 20bps, the largest move since last March. However, later comments from ECB's Lagarde saw offers hit across the sovereign complex as the single currency overlord declared the bank was closely monitoring the rise in long-term nominal yields, bringing T-Notes flat on the session. But, as stocks bounced firmer into the latter part of trade, so did yields, bringing the 1.40% (10s) and 2.20% (30s) back into focus. Rates traders are now looking vigilantly to Fed Chair Powell's comments in the Senate on Tuesday (and House on Wednesday), in addition to Vice Chair Clarida on Wednesday, where the officials could communicate any shifts in stance to their, at least until now, indifference to rises in nominal yields given the rising velocity of the move; NY Fed President Williams didn't sound too concerned on Friday. T-note (H1) settled 4 ticks lower at 135-10+.

Fed's Kaplan (non-voter) said epidemiologists warned him the US could face one more COVID surge and that is a key risk, while he repeated the Fed will need to withdraw extraordinary measures after the pandemic has been weathered. Kaplan also said it would not surprise him if Treasury yields rose as the growth outlook improves and short-term inflation pressures would not be a surprise and they will be monitoring the underlying trends. (Newswires)

US House Budget Committee advanced the USD 1.9trln COVID-19 aid bill as expected, which will now go to a House vote later this week. There were separate comments from Democrat Senator Wyden that he wants to get the COVID-19 bill passed in early March. (Fox Business News/Politico)

US Deputy Treasury Secretary nominee Adeyamo said the US needs targeted investment in critical industries and tech, while policies to protect workers and industries from anti-competitive behaviour are also needed. Furthermore, he suggested US must work with allies to confront those that threaten economic or national security and that the Treasury should use tools in response to authoritarian governments and combat China's unfair economic practices. (Newswires)