Original insights into market moving news

[PODCAST] European Open Rundown 19th March 2021

  • Asian equity markets traded negatively following the tech sell-off in the US where the Nasdaq dropped 3% amid a jump in yields
  • Talks in Alaska have so far underscored the icy US-China relations with plenty of rebukes from both side
  • Oil prices declined by around 8% for its largest decline in 6 months with WTI briefly slipping below USD 60.00/bbl
  • The BoJ stood pat on rates but widened the yield target band to +/-25bps and scrapped the ETF target as speculated
  • In FX, the DXY held on to yesterday's gains, EUR/USD tested support at 1.19 and GBP/USD briefly gave up 1.39 status
  • Looking ahead, highlights include Canadian retail sales, US-China meeting in Alaska, ECB's Panetta, WHO COVID-19 AstraZeneca update, quadruple witching


US COVID-19 cases +56,900 (prev. +51,954), deaths +1,118 (prev. +995); vaccines administered 116mln (prev. 113mln); fully vaccinated 40.981mln (prev. 39.989mln). (Newswires)

US President Biden tweeted that the US will reach the goal of 100mln doses in his first 100 days in office on Friday which will be just 58 days in. There were separate comments from White House Coronavirus Advisor Slavitt that some states are letting their guards down with 17 states experiencing rising cases and variants are growing, while he acknowledged vaccinations are averaging 2.5mln per day. (Newswires)

Italy said it will resume the use of AstraZeneca's (AZN LN) COVID-19 vaccine on Friday following the EMA report and Sweden said it needs a couple of days to evaluate the ruling, while the German region of Rhineland-Palatinate is to resume AstraZeneca vaccinations following the EMA statement. (Newswires)

French PM Castex said new measures are needed in all French regions hit badly by COVID-19 and they have to enforce new restrictive measures in several regions which includes Paris effective Friday at midnight and will last for four weeks. French Finance Minister Le Maire said new COVID measures will cost an extra EUR 1.2bln per month and a Finance Ministry source stated new measures will weigh 0.2ppts on France's GDP. (Newswires)


Asian equity markets traded negatively following the tech sell-off in the US where the Nasdaq dropped 3% amid a jump in yields and energy underperformed as oil prices declined by around 8% for its largest decline in 6 months, while talks in Alaska have so far underscored the icy US-China relations with plenty of rebukes from both sides. ASX 200 (-0.6%) was dragged lower by commodity-related stocks including oil names following the overnight drop in crude prices which saw WTI briefly slip beneath the USD 60/bbl level and with a surprise contraction in domestic retail sales adding to the glum mood, but with losses in the index stemmed as the top-weighted financials sector marginally benefitted from the rise in yields. Nikkei 225 (-1.5%) gave back the 30K status with participants cautious amid the BoJ announcement where the central bank widened the yield target band to +/-25bps and scrapped the ETF target as speculated, while it also announced that it will now only purchase ETFs linked to the TOPIX (+0.1%) which saw the respective index eventually pare earlier losses. Hang Seng (-2.1%) and Shanghai Comp. (-1.7%) were weaker following the blunt rhetoric between US and China at their meeting in Alaska where US Secretary of State Blinken said that Chinese actions threaten rules-based order and that the US will raise issues of Xinjiang, Hong Kong, Taiwan and cyber-attacks, while a senior US administration official later said the Chinese delegation seems to have arrived intent on grandstanding and are focused on public theatrics, as well as dramatics instead of substance. This was after China’s top diplomat Yang responded to Blinken’s comments with a tirade in which he stated the US has many problems regarding human rights and uses military strength, as well as financial supremacy to pressure countries, while he also alleged that US is the champion of cyber-attacks. Finally, 10yr JGBs weakened with price action choppy amid the BoJ announcement whereby there was an initial knee-jerk reaction to the upside as a major newswire reported that the yield target band was kept unchanged, but then pared the move on clarification that the band had in fact been widened which dragged prices back below the 151.00 level but with the downside stemmed given that the adjustment was previously flagged by sources.

PBoC injected CNY 10bln via 7-day reverse repos with the rate at 2.20% for a net neutral daily position. (Newswires) PBoC set USD/CNY mid-point at 6.5098 vs. exp. 6.5074 (prev. 6.4859)

US Secretary of State Blinken told Chinese officials that US is committed to strengthening rules-based order and that US will raise issues of Xinjiang, Hong Kong, Taiwan and cyber-attacks, while he added that Chinese actions threaten rules-based order that maintains global stability. There were also comments from White House National Security Adviser Sullivan that the US will speak frankly about its concerns and does not seek conflict but will stand up for its principles and allies. Furthermore, a US Senior Administration Official said the Chinese delegation in Alaska talks seems to have arrived intent on grandstanding and are focused on public theatrics, as well as dramatics instead of substance, while it was later reported that they will also hold talks from 09:00 local time (13:00EDT/17:00GMT) on Friday. (Newswires)

Chinese top diplomat Yang said the US has many problems regarding human rights and that many Americans don't have confidence in the US, while he claimed US uses military strength and financial supremacy to pressure countries, as well as abuses concepts of national security to threaten future of international trade and incites some countries to attack China. Yang also said Xinjiang, Hong Kong and Taiwan are inseparable Chinese territory with China firmly opposing US interference in its internal affairs and stated the US does not represent the western world nor global opinion and is the champion of cyber-attacks. (Newswires)

Chinese Foreign Minister Wang said US and China shouldn't let relations continue to deteriorate and should stop the trend of difficulties, while he added the US should abandon the practice of interfering with China's internal affairs and that announcing sanctions is not the way to welcome guests. Furthermore, Chinese officials in Alaska said the US made groundless attacks on China's policies which provoked disputes and that the US exceeded time in opening remarks which violated protocol. (Newswires)

US Republican lawmakers reintroduced on Thursday a bill that would revoke the permanent normal trading status that Washington has had with Beijing for the past two decades. (SCMP)

BoJ maintained its rate at -0.1% and kept the 10yr JGB yield target at 0.0% but raised the target band to allow yields to fluctuate +/-25bps from target. BoJ also maintained the annual ETF purchase a ceiling at JPY 12tln and J-REITS at ceiling of JPY 180bln although removed annual ETF and J-REITS purchase targets and will now only buy ETFs linked to the TOPIX. Furthermore, the BoJ stated it will buy the necessary amount of JGBs without setting an upper limit and will not respond rigidly to interest rates temporarily deviating from the downside limit, while it will continue buying certain amounts of commercial paper and corporate bonds even after the September deadline and tweaked the tiered deposit reserve system in which it will modify the method to calculate macro add-on balances under the complementary deposit facility. (Newswires)

  • Japanese National CPI (Feb) Y/Y -0.4% vs. Exp. -0.4% (Prev. -0.6%)
  • Japanese National CPI Ex. Fresh Food (Feb) Y/Y -0.4% vs. Exp. -0.4% (Prev. -0.6%)
  • Japanese National CPI Ex. Fresh Food & Energy (Feb) Y/Y 0.2% vs. Exp. 0.2% (Prev. 0.1%)


German regulators reportedly see more probes of tech giants. (Handelsblatt)

  • UK GfK Consumer Confidence (Mar) -16 vs. Exp. -20.0 (Prev. -23.0)


In FX markets, the DXY held on to yesterday’s gains amid the recent rise in yields and lacklustre risk appetite although remained beneath the 92.00 level. EUR/USD was subdued as a counterparty to the USD strength and briefly tested support at 1.1900 with parts of France including Paris to go into a 4-week lockdown as it braces for a third wave of the virus. GBP/USD briefly gave up the 1.3900 status in the aftermath of the recent BoE meeting. USD/JPY was choppy around 109.00 and had gained on the initial headlines that stated the BoJ maintained its implied yield target band, but the support was only brief and the currency reversed course upon a newswire correction that clarified that the central bank had widened the yield target band, while antipodeans were lacklustre due to the risk aversion, weaker oil prices and following a surprise contraction in Australian Retail Sales data.

  • Australian Retail Sales (Feb P) M/M -1.1% vs. Exp. 0.4% (Prev. 0.5%)


WTI crude futures languished following yesterday's near-8% slump and largest daily loss since September despite a lack of pertinent catalyst, with the downside attributed to several overarching factors including concerns of weaker demand from US and China, this week's build in inventories, USD strength and an increasing "reality check" on the "commodity supercycle" enthusiasm that had grown in recent months. Gold was rangebound overnight with the precious metal contained by a steadfast greenback, while copper prices were pressured amid the broad risk aversion and underperformance in its largest purchaser China after high-level talks with US in Alaska underscored their icy relations.

Goldman Sachs expects OPEC+ output to increase by 2.8mln bpd by August and sees Brent rising to USD 80/bbl in summer, while it views recent sell-off as a transient pullback in a large oil price rally and a buying opportunity. (Newswires)


US President Biden is reportedly weighing new sanctions to block the Nord Stream 2 pipeline, while US Secretary of State Blinken said an entity involved in the Nord Stream 2 pipeline risks US sanctions and should immediately abandon work on the pipeline. (Newswires)

Russia President Putin said he is ready to hold open and online talks with US President Biden on Friday or Monday and stated that they must preserve their relations. (Newswires)


A chunky Treasury sell-off overnight sustained, particularly in the belly, while participants begin to question what the "magic level" is for risk assets to succumb to pressure. 2s +3bps at 0.159%, 5s +8.3bps at 0.865%, 10s +8.5bps at 1.726%, 30s +3.2bps at 2.470%. TYM1 volumes were very strong with 2.5mln traded at settlement. Inflation breakevens were narrower, particularly at the short-end, after a chunky sell-off in oil; while longer maturities were supported by the decent 10yr TIPS auction. Treasuries had been steepening hard overnight, with duration across sovereigns finding pressure on strong Aussie employment data, and then again after the Nikkei report that BoJ is said to widen the target yield band to +/-25bps and scrap JPY 6tln ETF target. The selling caught traction further as European trade got underway, to see T-Notes finally hit their lows heading into the US equity open. However, there were some interesting curve dynamics at play too as US participants came in and initiated shorts in the belly, seeing belly-to-long-end spreads flatten; this pattern is something that Morgan Stanley has highlighted recently, where APAC trade has seen the long-end sell-off, and US participants come in and sell the belly in response. Some of that pressure in the belly was likely accentuated by next week's 2s, 5s, and 7s supply announced today. The data was mixed today, and tape action seemingly not reacting to the disappointing Jobless Claims print being offset by the very strong Philly Fed survey. Some participants had attributed today's Treasury pressure to concerns about the SLR rule not being extended, which some analysts suggest is more likely after the Fed pre-emptively raised the RRP facility counter-party cap. But that may end up being not such a premature decision following a chunky USD 26.57bln in demand at the NY Fed's RRP operation today, while 1- and 2-month bills saw stop out rates as low as 0.5bps and 1bp, respectively today. T-note (M1) futures settled 21+ ticks lower at 131-08+.

US Treasury plans to issue rules within 60 days to allow COVID-19 relief payments to be sent to states, municipalities and territories, while IRS aims to open a portal for low-income families to register for tax credits by late spring or early summer. (Newswires)