Original insights into market moving news

[PODCAST] European Open Rundown 23rd March 2021

  • Asian equities deteriorated throughout the APAC session amid losses in Chinese markets
  • China responded to fresh sanctions by the US, EU and UK in which it unveiled travel bans on 10 EU individuals and four entities
  • AstraZeneca may have provided outdated info about its COVID-19 vaccine trial, according to the NIH
  • In FX, the DXY remains below 92.00, EUR/USD and GBP/USD trade on 1.19 and 1.38 handles respectively, antipodeans lag
  • Reports noted that US President Biden's economic advisers are preparing to present him with USD 3tln in new spending for the next phase of his economic agenda
  • Looking ahead, highlights include UK labour market report, ECB gross purchases, US new home sales, NZ trade, BoJ minutes, BoE's Cunliffe, Bailey, Fed's Bullard, Bostic, Barkin, Powell, Williams, Brainard, supply from the Netherlands, UK & US


US COVID-19 cases +39,466 (prev. +60,558), deaths +479 (prev. +777), vaccines administered 127mln (prev. 124mln), those fully vaccinated 44.91mln (prev. 44.141mln). (Newswires)

US President Biden's administration is said to be concerned that Johnson & Johnson (JNJ) may miss its vaccine target as the full tranche of vaccines the Co. committed delivering to the US in February may not be ready until April. (Politico)

US National Institute of Allergy and Infectious Diseases stated the data and safety monitoring board was concerned by info released from the AstraZeneca (AZN LN) trial which may have included outdated info and may have provided an incomplete view on efficacy data, while it urged the Co. to work with the data and safety monitoring board to review efficacy and ensure the most accurate, up-to-date data is made public ASAP. (Newswires)

UK Health Minister Hancock raised the prospect of banning travel from EU countries as cases rise and stated we are all aware of the possibility that we may have to red list all of our European neighbours although that would be done with huge regret. Furthermore, there were separate reports that Britons face a GBP 5,000 fine for travelling abroad without a reasonable excuse such as for work purposes or family matters and the threat of penalties for holidaying will remain in place until end-June. (BBC/Daily Mail)

German Chancellor Merkel said COVID-19 infections are increasing thanks to the British variant and that it is a race to get vaccinations done, while she added that we are in a very serious situation and announced stricter Easter lockdown restrictions. Merkel also stated that we must halt opening measures where cases are more than 100 for every 100k per week and there will be a period of quiet days with reduced social contact between April 1st-5th, which will be an extended Easter where people should stay at home and that for most of the time, strictly only food shops will be open. Furthermore, Merkel said they will decide responsibly on AstraZeneca (AZN LN) exports and suggested we are effectively in a new pandemic with the British variant which is more dangerous, deadly and prolonged. (Newswires)


Asian equity markets deteriorated throughout the session with the initial euphoria from the tech-led gains on Wall Street and the softer yield environment derailed as Chinese markets entered the fray following the latest sanctions announcements. ASX 200 (-0.1%) began positively amid strength in utilities and telecoms although gains were then wiped out as financials suffered due to softer yields and amid insurance claims from the ongoing flooding with warnings issued for Victoria state and east of the country. Nikkei 225 (-0.5%) was lifted at the open following the positive handover from US peers and with Goldman Sachs raising its 12-month target for the Nikkei 225 and TOPIX by 8.8% and 10.8% to 32,250 and 2,150, respectively, before the index eventually succumbed to the headwinds from currency inflows. Hang Seng (-1.6%) and Shanghai Comp. (-1.1%) were the worst performers and dragged down their regional peers after the US, Canada, UK and EU announced an array of sanctions on China over Uyghur Muslims to which China responded with its own travel bans and stated that the measures were based on lies and disinformation, while Baidu’s Hong Kong debut was viewed as a damp squib in which the Co.'s shares reversed early minimal gains. Finally, 10yr JGBs traded indecisive but held on to Monday’s gains with price action contained amid an indecisive risk tone and softer demand at the enhanced liquidity auction for 2yr, 5yr, 10yr and 20yr JGBs, while New Zealand yields were hit overnight with the 10yr down over 6bps following the government announcement of a NZD 3.8bln fund to accelerate housing supply and curb the rising house prices.

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 6.5036 vs exp. 6.5056 (prev. 6.5191)

US intelligence recommended that the US should mull leading a multilateral coalition with South American countries to push back against illegal fishing and trade practices by China. In other news, White House National Security Adviser Sullivan confirmed earlier reports that President Biden's Climate Envoy Kerry is to meet with his China counterpart on climate issues. (Newswires/Axios)

White House said it expected tough and direct talks with China which is what happened and that the Alaska meeting was substantive, while it also stated that it continues to have concerns about human rights in China related to Xinjiang in which it cannot rule out further actions on China and is evaluating the next steps. (Newswires)

China responded to fresh sanctions by the US, EU and UK in which it imposed travel bans and stated that the measures were based on lies and disinformation, while it severely undermined ties with the bloc. There were later comments from China's Foreign Minister Wang that it is wrong for the EU to sabotage international law and called on countries to oppose such actions when asked about the EU sanctions, while China's Foreign Ministry also summoned the EU Ambassador to lodge a protest regarding the sanctions. (Newswires/FT)

China-Russia joint statement following a meeting of their Foreign Ministers called on other countries to refrain from politicizing human rights issues and using them to interfere in domestic affairs, while it stated that other countries need to recognise the legal right of sovereign nations to choose own development path and that there is no one standard of democracy. Furthermore, Russian Foreign Minister Lavrov said Russia no longer has relations with the EU after Brussels destroyed them and instead Russia has relations with individual nations, while he added that Russia and China regard European and Western sanctions as unacceptable. (Newswires)

China Finance Ministry said it is to further extend favourable tax policies for companies and individuals impacted by the pandemic, while China is also reported to strengthen capital management at central government SOEs and control risk of overseas funds. (Newswires)

Japan's Finance Ministry stated it will use JPY 2.2tln of coronavirus reserve funds with JPY 598bln to be used on aid for non-regular workers, while the government also unveiled measures to help midsize and large companies boost capital funds in which it targets supporting restaurants and hotel businesses impacted by pandemic restrictions. (Newswires)


USTR Tai discussed an ongoing review of US-UK free trade negotiations with UK Trade Minister Truss, while Tai also discussed with European Commission's Dombrovskis their strong interest in resolving the argument related to aircraft subsidies, as well as addressing global steel and aluminium capacity. (Newswires)

UK Chancellor Sunak will today publish several consultations on calls to enhance the nation's tax system. Sunak will refrain from unveiling big new revenue-raising measures but will attempt to clamp down on tax avoiders. (Times)

The UK is set to announce an enhanced trade deal with Canada after both sides ratified a post-Brexit agreement last week, according to Trade Secretary Truss. (CityAM)


In FX markets, the DXY attempted to nurse recent losses but remained below the 92.00 level following yesterday’s softening of yields and recent commentary from the FOMC including Fed Chair Powell who will state at the upcoming Congressional Testimony that the situation today is much improved but the economic recovery is far from complete and the Fed will continue to support the economy for as long as it takes, while Fed’s Bowman also stated that monetary policy will remain accommodative until economic recovery is more fully complete. EUR/USD slightly eased after yesterday’s advances were stopped short just shy of 1.1950 with the single currency not helped by the deteriorating virus situation for key members across the bloc. GBP/USD was subdued and declined back below 1.3850 after it failed to benefit from reports which suggested both the UK and EU are seeking to break the vaccine export deadlock by sharing deliveries of AstraZeneca’s vaccines from the Dutch plant. USD/JPY and JPY-crosses pulled back as risk appetite waned and antipodeans underperformed whereby NZD/USD took the brunt from the New Zealand government announcement of a NZD 3.8bln fund to accelerate housing supply and curb the rising house prices which resulted to a more than 6bps decline in New Zealand 10yr yields.

New Zealand government announced NZD 3.8bln fund to accelerate housing supply in short-medium term, while Finance Minister Robertson commented that the recent house price increase is harmful to affordability and presents a risk to economic stability. (Newswires)


WTI crude futures declined below the USD 61.00/bbl level and with demand dampened amid the deteriorating COVID-19 situation in Europe. Furthermore, there were several recent pertinent headlines for the complex including OPEC+ compliance increasing in February to 113% and optimistic comments from Saudi Aramco's CEO on the energy market although these failed to spur price action, while focus now turns to the latest inventory reports beginning with the private sector stockpile data later. Elsewhere, gold prices were uneventful as the greenback nursed some losses and copper prices deteriorated amid underperformance in China where Shanghai commodity prices were pressured which saw aluminium futures hit limit down.

CME raised RBOB gasoline futures maintenance margins for April by 14% to USD 5,700/contract from USD 5,000/contract. (Newswires)


US and South Korea are reportedly observing North Korea closely amid signs that rocket launchers are being deployed to border islets. (Yonhap)

US Secretary of State Blinkin, in a call with Libya's PM, stressed the need to implement a ceasefire agreement. (Newswires)


Treasuries bull-flattened as Turkey woes and European lockdowns supported the move back lower in yields from cycle highs last week. By settlement, 2s -0.2bps at 0.149%, 5s -2.6bps at 0.856%, 10s -5bps at 1.682%, 30s -6.8bps at 2.383%; TYM1 volumes were lighter than usual. Inflation breakevens were led wider by the long-end amid the stronger bid for TIPS. EMFX concerns out of Turkey overnight supported the haven flow into USTs, while fresh German lockdown extensions and UK travel warnings dimmed global growth outlooks. Desks noted that Asian real money accounts had been on the bid, while dealers had been lurking on the offer ahead of this week's Treasury supply (2s, 5s, 7s) and busy corporate deal pipeline. Those selling pressures picked up heading into US trade, supported by rate-lock related paying flows, IFR noted, on the back of Oracle announcing a duration-heavy six-part issuance (which just launched for USD 15bln at pixel time with maturities ranging from 5-40yr). The bounce of yields off their lows was ultimately short-lived, with the Fed's 7-20yr buyback supporting the cash bid; note, the Fed concentrated all its purchases in off the run 20-year issues again amid that section of the curve trading relatively the cheapest. T-note (M1) futures settled 10+ ticks higher at 131-17+.

Fed Chair Powell's congressional testimony will state that the economic recovery is far from complete although the situation today is much improved, and indicators of economic activity and employment have turned up recently. Powell also noted that the recovery has progressed more quickly than generally expected and looks to be strengthening, while he added the Fed will continue to support the economy for as long as it takes in which it is committed to using full range of tools to support the economy and that the path of the economy continues to depend on the course of the virus. (Newswires)

Fed's Bowman (voter) said she is concerned small business remains at risk even as recovery progresses with strong growth expected and that monetary policy will remain accommodative until the economic recovery is more fully complete, while she added that it will take time to achieve inflation and employment goals. Furthermore, she stated that severe pandemic restrictions in some US areas came at a very high economic cost and bankers suggested federal programs such as PPP may only have postponed but not eliminated financial pressure to small companies. (Newswires)

US Treasury Secretary Yellen's House testimony will state that she is confident Americans will get to the other side of the pandemic in the expanding economy due to the stimulus package and suggested that the US may return to full employment next year. (Newswires)

US President Biden's economic advisers are reportedly preparing to present him with USD 3tln in new spending for the next phase of his economic agenda which will be broken into two packages starting with infrastructure, according to a report citing sources. However, the White House later commented that the report that President Biden is looking at USD 3trln of new spending for the economy is premature and not a reflection of White House thinking. (Newswires/NYT)

White House officials will meet with energy industry executives ahead of Biden's climate and infrastructure plan, according to sources. (CNBC)

A new batch of USD 1,400 stimulus payments will be coming on Wednesday, according to reports citing the IRS. (CNBC)