[PODCAST] US Open Rundown 23rd February 2021
- Equity indices are notably pressured, Euro Stoxx 50 -1.5%, while the FTSE 100 -0.8% is the relative-outperformer and NQ, -1.7%, underperforms as tech lags; TSLA -6.0%
- Crude remains underpinned but has given up earlier highs given the broader deterioration while precious metals are hindered but XAU fares comparatively better
- The USD has derived support from the broader sentiment to the modest, and mixed, detriment of major peers while USTs lift slightly and yields dip, but remain near highs
- Moderna is on course to deliver 100mln vaccine doses to US by end-March & Novavax is prepared to deliver 110mln vaccine doses by Q3
- Looking ahead, highlights include US Consumer confidence, US Rich Fed comp index, Fed’s discount minutes & Powell presenting semi-annual testimony to the Senate (15:00GMT/10:00EST)
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)
AMC (AMC) is to reopen all of its 13 New York City theatres on March 5th. (Newswires)
Moderna (MRNA) stated in its prepared congressional testimony that it is on course to deliver 100mln vaccine doses to the US by end-March. Novavax (NVAX) is prepared to deliver 110mln vaccine doses to US by Q3 under current agreements. (Newswires)
European Medicines Agency has commenced the evaluation of Gilead's (GILD) Veklury (Remdesivir) in COVID-19 patients. (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 (-0.3%) 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 (+1.0%) and Shanghai Comp. (-0.2%) 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 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%)
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)
Anti-Big Tech crusader Timothy Wu is likely to join the White House National Economic Council, according to sources. (Politico)
UK Chancellor Sunak is reportedly likely to prolong the support for furloughed workers until May. (The Times)
UK ILO Unemployment Rate (Dec) 5.1% vs. Exp. 5.1% (Prev. 5.0%); Claimant Count Unemployment Change (Jan) -20k (Prev. 7.0k, Rev. -20.4k)
- Avg Earnings (Ex-Bonus) (Dec) 4.1% vs. Exp. 4.0% (Prev. 3.6%); Avg Week Earnings 3M YY (Dec) 4.7% vs. Exp. 4.1% (Prev. 3.6%, Rev. 3.7%)
- ONS Jan Flash: Employment estimate -2.5% YY; +83k vs December 2020, 726k fewer payrolled employees than in February 2020
EU HICP Final YY (Jan) 0.9% vs. Exp. 0.9% (Prev. 0.9%)
- EU HICP-X F&E Final YY (Jan) 1.4% vs. Exp. 1.4% (Prev. 1.4%)
- EU HICP-X tobacco YY (Jan) 0.8% (Prev. -0.4%)
Russian authorities have reported an explosion on a gas pipeline, in a region in proximity to Kazakhstan. (Ria)
Iran's Foreign Minister Zarif says they are considering an 'informal (P5+1) meeting, which would see the US invited. (Twitter)
European equities kicked off the session with mild gains across the board, but the momentum then reversed and major bourses now trade notably lower (Euro Stoxx 50 -1.4%) following on from a mixed APAC handover. US equity futures have also given up overnight gains, with the tech-led NQ (-1.8%) again the underperformer during early European trade – as traders and investors seemingly rotate out of “stay at home” tech stocks and into more commodity and recovery-driven names. Meanwhile in Europe, UK’s FTSE 100 cash (-0.8%) was initially resilient, and remains comparatively so to a degree, after UK PM Johnson provided recovery stocks with a boost as he unveiled a roadmap out of lockdown - with the 'finish-line' currently on June 21st. This announcement has seen a surge in airline bookings, with easyJet (+8.2%) reporting that summer flight bookings rose 337% W/W and holiday bookings surged 630%. In turn, assisting regional airlines with impetus as IAG (+6%) and Ryanair (+4.3%) cheer the light at the of the tunnel, whilst EU airliners Lufthansa (+7%) and Air France-KLM (+5%) are dragged higher in tandem – note, this would also be bullish for the energy complex amid higher jet fuel demand. As such, the gains across the oil complex has also translated to gains among the FTSE 100’s oil giants Shell (+1.7%) and BP (+2.8%), whilst the extended rally in base metals, namely copper, has again bolstered UK miners – with index heavyweights Rio Tinto (+1.7%) and BHP (+3%) reaping rewards. The performances mentioned above is reflected in the regional sectors, with Travel & Leisure topping the charts, closely followed by Oil & Gas, Basic Resources and Banks. The latter is supported by the overall higher yield environment, whilst HSBC (-1.3%) conformed to the broader sentiment after topping FY/Q4 pretax and FY CET1 ratio forecasts and announced a dividend. However, the group downgraded the language surrounding its ROTE target. Tech is the notable laggard in tandem with the performance in NQ futures, with healthcare also residing towards the bottom of the pile. In terms of movers, the top gainers in the region consists of the most-hit pandemic stocks including the likes of Cineworld (+11%), airliners, aircraft manufacturers and hotel names, with the other side of the spectrum is comprised of the COVID-beneficiaries including Ocado (-5%) and Delivery Hero (-4%).
Home Depot Inc (HD) Q4 20 (USD): EPS 2.65 (exp. 2.62), Revenue 32.3bln (exp. 30.73bln). Not providing FY21 guidance. Same-store sales 24.5% vs exp. 18.8%; US same-store sales +25% vs exp. +19.4%. (PR Newswires)
Wells Fargo (WFC) - Co. has agreed to sell Wells Fargo Asset Management for USD 2.1bln to GTCR & Reverence Capital Partners. (Newswires)
USD - The Dollar has lost a bit more of its yield advantage, but not all attraction as a safe-haven it seems given that the index has regained some composure after a more pronounced pull-back from recent recovery highs. The DXY is holding around 90.000 within a 89.941-90.194 range ahead of US housing data, consumer confidence, regional Fed surveys, Discount Rate meeting minutes, the first semi-annual testimony from chair Powell and the Usd 60 bn 2 year note auction that could set the tone for this week’s issuance remit. Note also, the Greenback is getting a boost from another abrupt and sustained reversal in crypto currencies like Bitcoin that is back below the Usd 50k mark and has been down to Usd 45k vs its new circa Usd 58.5k record peak.
GBP/EUR/NOK/CAD - Relative G10 outperformers, or at least displaying some resilience in face of the Buck bounce, as Sterling eyes 1.4100 in wake of UK PM Johnson’s 4 step plan to reopen the nation, and the Euro finds support around 1.2150 where technical levels form a cluster with hefty option expiry interest (50 DMA at 1.2154 today, 50% Fib of the fall from 1.2349 in January to 1.1952 current m-t-day low at 1.2151 and 1.6 bn at the 1.2155 strike). Meanwhile, further upside in oil, with WTI touching Usd 63/brl and Brent above Usd 66.75 at one stage is helping the Norwegian Crown to pare losses between 10.3425-10.2825 parameters against the Euro and keeping the Loonie anchored to 1.2600 vs its US counterpart in advance of comments from BoC Governor Macklem.
NZD/AUD - Both off best levels as broad risk sentiment sours, but the Kiwi has unwound declines vs the Aussie from around 1.0827 following weaker than forecast NZ retail sales and another boost for the latter via base metals. Hence, Nzd/Usd is holding firmer on the 0.7300 handle than Aud/Usd in relation to 0.7900 before construction work done, wages, RBNZ policy meeting and press conference.
JPY/CHF/SEK - The Yen could not maintain momentum through 105.00 overnight, perhaps due to the lack of Japanese participation on the Emperor’s Birthday market holiday, but the Franc is underperforming again and back beneath 0.9000 with little support from mildly less deflationary Swiss producer and import prices on a y/y basis. Indeed, Eur/Chf is firmly above 1.0900 and has nudged 1.0949 in keeping with upside in Eur/Sek after recent approaches towards 10.0000 failed to breach the round number and the cross retraces amidst more dovish-leaning Riksbank remarks (Bremen latest) and a rise in Swedish unemployment.
EM - Broad depreciation vs the Usd, bar the crude bloc, but Gold’s drift back down from above the 10 DMA and an increase in SA’s Q4 jobless total is weighing on the Zar.
- 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%)
Not quite all change, but the tables have turned somewhat in familiar if not typical Tuesday fashion, with Bunds and their Eurozone cohorts now underperforming after leading the recovery yesterday when ECB President Lagarde ‘intervened’ in context of carefully monitoring long term yields. The 10 year German benchmark has been below 174.00 to 173.94 (-78 ticks), Gilts down to 129.67 (-54 ticks), but paring losses after a relatively well received 2050 DMO offering and the T-note is hovering near the top of a 135-07+/135-15+ overnight band. Ahead, Fed chair Powell’s Senate testimony could top a pretty busy pm agenda even though the text is already out of the bag and supply looms before API weekly stocks.
Blackrock has downgraded government bonds with an increased underweight on USTs; downgrades EZ peripheral bonds to neutral. (Newswires)
WTI and Brent front month futures have given up intraday gains as sentiment across the market deteriorated during early European trade. WTI now resides closer to USD 62/bbl (vs high USD 63/bbl) and Brent has relinquished its USD 66/bbl handle (vs high USD 66.79/bbl). However looking at the bigger picture, the complex remains elevated by underlying fundamentals still being present such as OPEC+ support and vaccination progress. Moreover, production in the oil-pumping state of Texas is returning at a slower pace than previously anticipated. In turn, due to this weather event and Texas producing just under half of all US oil, a distortion in this week’s inventory and production figure may be seen. On the demand side, UK PM Johnson announced the UK’s roadmap for lifting restrictions against COVID moving ahead. This announcement translates into a bullish prospect for jet fuel demand, as within the plan it highlights the opening of holidays and ability to travel abroad in the Summer. Both the supply and demand factors could be regarded as the driving force behind the firmer price action overnight, whilst sentiment took helm in early hours. Notable tail-risks on the table surrounds the UK lockdown plan, which is data driven and hence, if the figures are not favourable it could see a change to the roadmap moving forward. Also, the OPEC+ confab is next week (JMMC on the 3rd and OPEC+ on the 4th), and participations will pay close attention to the sentiment between Saudi Arabia & Russia. With the COVID outlook looking increasingly favourable, the conservative Saudi Arabia and hawkish Russia may clash heads, again, thus a clear downside risk is present heading into the policy-setting meeting. Elsewhere, precious metals seem to be influenced by Buck, with spot gold relatively contained just above USD 1800/oz and spot silver resides around USD 27.85/oz (vs high USD 27.94/oz) . Turning to base metals, LME copper remains above USD 9,000/t but trades off best levels and edging closer to session lows as the firming Dollar and destination sentiment weigh on the recovery-driven metal. More on copper, Chile's state-owned Codelco, the world's largest copper producer, states the recent spike in the price of the red metal could increase miner’s costs. Lastly, Dalian iron ore futures fell 2% after top steel-producing city Tangshan issued a second-level pollution alert forcing mills to curb production.
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)
Nigeria Qua Iboe to load 190k BPD in April vs. 190k BPD planned in March, according to a loading programme. (Newswires)
Nigeria's Bonny light crude stream to load 222k cargoes in April vs 184k planned for March; Bonga crude stream to load 95k cargoes in April vs 123k planned for March, via the programme. (Newswires)