Original insights into market moving news

[PODCAST] European Open Rundown 25th March 2021

  • Asian equity markets were choppy as the region attempted to shrug-off the weak handover from Wall St
  • US Treasury Secretary Yellen and Democratic Senator Manchin voiced their support for corporate tax increases
  • In FX, the DXY reversed course after breaching its 200DMA to the upside, EUR/USD found a base at 1.18, GBP/USD trades sub-1.37
  • The UK and EU are working on specific steps they can take to create a win-win situation, according to a joint statement
  • Looking ahead, highlights include German GFK sentiment, SNB, SARB & Banxico rate decisions, US GDP (final), IJC, US President Biden press conference, BoE's Bailey, ECB's Lagarde, Schnabel, de Guindos, Fed's Williams, Clarida, Bostic, Evans, Daly, supply from Italy & the US (7yr)


US COVID-19 cases +58,922 (prev. +55,902), deaths +778 (prev. +986), vaccines administered 130mln (prev. 128mln), those fully vaccinated 46.366mln (prev. 45.534mln). (Newswires)

AstraZeneca (AZN LN) announced positive primary analysis of Phase 3 trial for its vaccine in the US confirmed efficacy. Co. stated vaccine efficacy against symptomatic COVID-19 was at 76% (prev. 79%), while efficacy against severe and critical diseases was at 100% (prev. 100%) and efficacy for people aged 65 years and over was at 85% (prev. 80%), while it added that the vaccine was well tolerated and no safety concerns were identified. (Newswires)

EU Health Commissioner said AstraZeneca (AZN LN) submitted a formal request to the EMA to authorise its Dutch Halix vaccine plant and that the EMA is aiming for a swift assessment this week, as well as hopes for first deliveries by the end of March. Separately, AstraZeneca stated that 16mln doses of its COVID-19 vaccine for Europe are waiting for quality control. (Newswires)

UK and EU are working on specific steps they can take to create a win-win situation and expand vaccine supply for all citizens in which discussions will continue, according to a joint statement. (Newswires)

Unicef said COVID-19 vaccine deliveries to the Covax facility for lower income countries are likely to face delays due to a setback in securing export licenses for further doses approved by the Serum Institute of India, while they are in talks with the Indian government to ensure deliveries as soon as possible. (Newswires)


Asian equity markets were choppy as the region attempted to shrug-off the weak handover from Wall St where risk appetite was sapped amid further chatter of tax hikes in which both Treasury Secretary Yellen and Democratic Senator Manchin voiced their support for corporate tax increases. In addition, month- and quarter-end flows were also being touted as a potential factor coming into prominence while the declines were led by underperformance in small caps and tech which escalated to an initial bloodbath among Hong Kong-listed tech giants. Nonetheless, ASX 200 (+0.2%) was kept afloat for most of the session by resilience in defensive sectors and after officials including RBA Deputy Governor Debelle continued to speak highly of the domestic economy. Nikkei 225 (+1.2%) coattailed on favourable currency flows with exporters cheering USD/JPY’s attempt to reclaim the 109.00 handle and the KOSPI (+0.1%) swung between gains and losses following news that North Korea fired another two missiles which Japan suggested may have been ballistic missiles and would therefore be in violation of UN resolutions, although South Korea later referred to them as short-range projectiles. Hang Seng (-0.2%) and Shanghai Comp. (Unch.) were pressured at the open with a slump seen in the large tech names including Alibaba, Xiaomi, and Tencent following the US tech rout and amid delisting fears after the SEC recently adopted measures which could boot foreign companies off US exchanges if they do not comply with auditing standards. This dragged all components of the Hang Seng TECH Index into the red at early trade, while the recent China Q1 Beige Book was also tepid in which it noted that the service sector improved only marginally which is a sign consumption remains weak and a reason to remain cautious, although Chinese markets eventually rebounded from most the earlier losses. Finally, 10yr JGBs were softer amid a pullback in USTs and with demand sapped as Japanese stocks outperformed their regional peers, while the 40yr JGB auction provided some mild support as the results showed a relatively stable b/c and higher accepted prices.

PBoC injected CNY 10bln via 7-day reverse repos with the rate at 2.20% for a net neutral daily position and the PBoC also sold CNY 5bln in 6-month CNY denominated bills in Hong Kong at a coupon rate of 2.60%. (Newswires) PBoC set USD/CNY mid-point at 6.5282 vs exp. 6.5289 (prev. 6.5228)

PBoC said it will maintain credit support continuity and stability for small and micro firms, while it will increase financial support to home leasing and maintain the stance that housing is for living not for speculating. Furthermore, the central bank stated that current recovery for China's economy is not yet solid and that it will guide banks to step up support for carbon emission reduction financing services. (Newswires)

Chinese press speculated the PBoC could conduct its annual RRR review as early as today or April 6th based on prior years in which an adjustment could provide a boost to liquidity of CNY 50bln-100bln, while other reports suggested Chinese exporters are on course to get a USD 60bln windfall from Americans spending their stimulus checks. (Newswires/21st Century Business Herald)

China Q1 Beige Book stated that the services sector improved only marginally against a strong rebound in the broader economy which is a sign consumption remains weak, while it added that retail strengthened and the recovery was less uneven but a subdued services sector is a reason to stay cautious. (Newswires)

US and EU decided to re-launch bilateral dialogue on China, according to a joint statement. (Newswires)


UK PM Johnson said low taxes are the best way forward and that they want to be as competitive as possible. In other news, PM Johnson said pub landlords could be given authority to bar anyone without a COVID-19 jab in the future and other reports noted that pubs could demand proof of vaccination or may insist drinkers conduct a test. (Newswires/Sky News/The Sun)

BoE's Haldane said he senses that the economic recovery will come quickly and stated that people are desperate to get out and spend, while he added that a rip-roaring recovery is possible if UK savings are spent and that UK excess savings are about GBP 150bln. (Newswires)

USTR Tai discussed with her German counterpart their strong interest in resolving the aircraft subsidy dispute, while she also discussed the global steel and aluminium overcapacity in a meeting with the German economy official. (Newswires)


In FX markets, the DXY was temperamental as risk appetite swayed and initially breached its 200 DMA to the upside for the first time since May last year to print an intraday high around 92.67 which was also helped by mild upside in yields, although the DXY then met resistance and reversed course as the regional bourses began to improve. EUR/USD saw mild reprieve after finding a base near the 1.1800 level and GBP/USD lost 1.3700 status. Of note for the UK, BoE's Haldane providing some optimism as he senses the economic recovery will come quickly and that a rip-roaring recovery is possible if UK savings are spent, although upside for currencies on both sides of the Channel were restricted by ongoing vaccine-related frictions. USD/JPY tested the 109.00 level and JPY-crosses steadily rebounded in tandem with the outperformance in Japan, while antipodeans also benefitted amid the gradual improvement in risk appetite and with the 10yr yield in Australia and New Zealand gaining by around 5bps and 6bps respectively.


WTI crude futures pulled back below the USD 60/bbl level but still held on to the majority of the spoils from the aggressive rebound during yesterday's where prices rallied by over 5% amid several supportive factors including current blockage in the Suez Canal, stronger PMI data in Europe and German Chancellor Merkel's Easter lockdown reversal, while it was also suggested that OPEC+ is likely to keep output mostly steady at the April meeting due to lockdowns and increasing oil exports by Iran. Elsewhere, Gold prices were kept rangebound by an indecisive greenback and copper prices continued on yesterday's retreat to breach the USD 4.00/lb amid the flimsy risk appetite.

Iron ore miner Fortescue's founder says that whilst iron ore has been unaffected by tensions between China and Australia, he does not rule out a potential future impact remarking that they are 'planning for an uncertain future'. (FT)


North Korea fired two missiles which Japanese officials stated were ballistic missiles and did not enter Japan's EEZ, although South Korea's Military later noted that the projectiles were 2 short-range missiles. Japanese officials stated that the missile launches are a serious problem for Japan and the international community, while there were comments from US Pacific Command that they are monitoring the situation and that the launch shows North Korea is a threat to its neighbours. (Newswires)

US Secretary of State Blinken and EU's Borrell said they will coordinate to address Russia's challenging behaviour. (Newswires)


Treasuries bull-flattened after a mid-session sell-off reversed after the 5-year auction. By settlement, 2s -0.7bps at 0.147%, 5s -1.8bps at 0.811%, 10s -2.8bps at 1.610%, 30s -3.9bps at 2.310%; TYM1 volumes were light again. Short-end inflation breakevens widened, supported by the oil rally. Latest SOFR unch. at 1bps. NY Fed saw USD 21.902bln in demand at its RRP op (seeing seven-op avg. rise to 15.69bln from 12.564bln). Sovereigns were bid out of APAC with desks noting a third consecutive session of support, with chunky purchases in 10-year futures. Kiwi debt was particularly strong after its latest QE op failed to find many offers, seeing yields plummet. However, after a strong batch of Markit PMI data out of Europe, risk assets found a bid, and yields on both sides of the pond began to ascend off lows. The belly led the move with attention on 5s and 7s Treasury auctions, in addition to rate-lock-related paying flows in swaps with non-sovereign supply swooping in to usurp some belly demand. USTs found there lows in the tail-end of European trade, moving sideways and little changed for several hours, only to ramp higher into the close after stocks continued to suffer and following the "good enough" 5-year auction: tailed the 0.847% WI by 0.3bps, covered 2.36x (vs avg. 0bps), dealers and indirects took less than average after directs took a healthy amount. Overall, not an impressive auction by any means, neither any signs of participants "piling back in", but a left tail scenario avoided, and it's always worth remembering that auction sizes are at historically elevated levels, so the bar for super-strong auctions is higher. Attention now looms on Thursday's 7-year auction reopening. T-note (M1) futures settled 5+ ticks higher at 132-03.

Fed's Daly (voter) said we will not be preemptively taking the punch bowl away from the US economy and that as we start to see the economy recover and unemployment rate fall, we want to "be strong" and not get overly joyous. Daly also suggested the Fed will look for a sustained achievement of 2% inflation and she expects a very strong economic rebound in the fall followed by moderate growth thereafter. Furthermore, she added that the US economy is a long way from goals and declined to say when she expects a rate hike but noted we will need a healthy dose of patience. (Newswires)

Fed's Evans (voter) stated that the US economic recovery has been stronger than he expected, while he forecasts growth at 6.5% this year and sees unemployment rate to decline to around 4.5% this year. Evans also commented there are a lot of reasons to be optimistic but there are concerns and that he is worried about scarring effects for large parts of the workforce, while he suggested it is extraordinary that 10yr rates are as low as they are with all the fiscal spending. (Newswires)

Fed's Williams (voter) said we will see good improvements in the economy as virus cases decline and more people are vaccinated, while he added there is still a way to go to improve the unemployment rate but is seeing improvements in large parts of the economy. Furthermore, he expects the pace of the recovery to be rapid later this year and suggested the problem right now is low inflation as the economy is technically still in a downturn with high unemployment and that will suppress inflation for some time. (Newswires)

US Treasury issued 37mln economic impact payments this week valued at USD 83bln and that total payments issued under the Biden stimulus plan have reached USD 325bln, while it will continue to issue payments in batches. (Newswires)

FBN's Gasparino tweeted that as the White House leaks details of its USD 3tln infrastructure package, a growing number of "big investors" believe the Federal Reserve will soon launch a yield curve control operation. (Twitter)