Original insights into market moving news

[PODCAST] European Open Rundown 26th March 2021

  • Asia-Pac stocks traded mostly higher following the rebound in the US where small caps atoned for the prior day's underperformance
  • In FX, the DXY slightly eased off 4-month highs, EUR/USD remained sub-1.18, antipodeans outperformed
  • WTI crude futures nursed some of the prior day's losses and reclaimed the USD 59.00/bbl level
  • The US 7-year note sale went down miserably, again, but not quite as bad as February's
  • European Commission President von der Leyen said that companies have to honour their contracts to the EU before exporting vaccines
  • Looking ahead, highlights include UK retail sales, German IFO, US PCE & core PCE, personal income & spending, Uni. of Michigan (final)


US COVID-19 cases +65,083 (prev. +58,922), deaths +1,287 (prev. +778), vaccines administered 133mln (prev. 130mln), those fully vaccinated 47.420mln (prev. 46.366mln), while there were comments from NIH's Collins that Americans must stick with COVID-19 public health measures until at least summer. (Newswires)

European Commission President von der Leyen said "we are at the beginning of a third wave of the virus and the situation is of great concern", while she added that it could have been a much faster response and for that, all pharmaceutical firms would have had to fulfil their contracts. Von der Leyen also commented that Europe is the region that exports most vaccines worldwide and invited others to match its openness. Furthermore, she stated that companies have to honour their contracts to the EU before exporting vaccines which is the case with AstraZeneca (AZN LN) and that the Co. needs to catch up. (Newswires)

German Chancellor Merkel said "we are in a third wave of the virus but also in a new pandemic dominated by the new variants" and stated "we don't want any disturbance of international supply chains but companies must adhere to their vaccine contracts". Merkel also stated that export curbs shouldn't disrupt international trade and she completely trusts the European Commission regarding export controls, while she added that we want a win-win situation with Britain regarding vaccine exports. (Newswires)

French President Macron said it would have been incorrect to block all vaccine exports and stated that Pfizer (PFE) and Moderna (MRNA) respected their contracts with the EU but AstraZeneca (AZN LN) did not. Furthermore, Macron added that we must block all exports when some pharmaceutical firms do not respect their contracts, while there were separate comments from Dutch PM Rutte that he is cautiously optimistic vaccine issues with Britain can be resolved. (Newswires)


Asia-Pac stocks traded mostly higher following the rebound in the US where small caps atoned for the prior day's underperformance. ASX 200 (+0.5%) was propped up by strength in telecoms and commodity-related sectors but with upside capped by weakness in defensives and concerns regarding Australia’s ties with its largest trading partner after Chinese industry representatives confirmed that some Australian hay imports were halted and that they are seeking alternative sources, while Nikkei 225 (+1.6%) continued to outperform and reclaimed the 29k level amid a weaker currency and with the JPY-risk dynamic intact. Hang Seng (+1.4%) and Shanghai Comp. (+1.5%) adhered to the positive mood with Xiaomi and Great Wall Motor among the biggest gainers in Hong Kong after news that the smartphone maker plans to make EVs and is in discussions to partner with and use Great Wall Motor’s factory for the production. Attention was also on a deluge of earnings releases including China’s oil majors CNOOC and PetroChina lagged. Finally, 10yr JGBs were relatively flat with demand hampered by the heightened risk appetite and following on from another soft 7-year auction stateside, although the downside in JGBs was stemmed amid the BoJ’s presence in the market for JPY 850bln of JGBs with mostly 1yr-3yr and 5yr-10yr maturities.

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 6.5376 vs exp. 6.5359 (prev. 6.5282)

US President Biden said he made clear to Chinese President Xi that the US was not looking for confrontation and he stated that the US needs to step up investment in order to compete with China which is out-investing the US by a long shot. Biden added he will invite an alliance of democracies to the US to discuss the future and that US and allies will hold China accountable on Taiwan, South China Sea and other issues. Furthermore, he sees stiff competition with China and stated that China has the overall goal to become the leading country in the world which is not going to happen on his watch, while he will never back down from speaking out about what is happening to Uighurs and Hong Kong. (Newswires)

China's Foreign Ministry sanctioned 9 UK individuals and 4 entities for spreading lies and false information regarding Xinjiang, while it reserved the right to take further measures. (Newswires)

A PBoC working paper suggested that China's potential growth rate or maximum rate of expansion without spurring inflation was between 5.0%-5.7% for the 5-year period to 2025 which represents medium to high growth. There were also reports that suggested the recent China Beige Book showed China is cracking down on debt again as it found borrowing by SOEs fell to the lowest in around a decade. (Newswires/CNBC)

  • Tokyo CPI (Mar) Y/Y -0.2% vs. Exp. -0.2 (Prev. -0.3%)
  • Tokyo CPI Ex. Fresh Food (Mar) Y/Y -0.1% vs. Exp. -0.2 (Prev. -0.3%)
  • Tokyo CPI Ex. Fresh Food & Energy (Mar) Y/Y 0.3% vs. Exp. 0.2 (Prev. 0.2%)


UK-US trade talks are likely to miss the month-end deadline imposed by Washington and discussions will likely be extended. Delays are said to have occurred as a result of the Biden administration focusing on resolving the Boeing/Airbus saga. (FT)

ECB's de Guindos said if a high proportion of the population is vaccinated by the summer, he expects a strong economic rebound in H2. De Guindos also commented that inflation is slightly stronger than expected in January and February, while he added that inflation is to see a transitory and technical rise. (Newswires)

ECB's Schnabel said the ECB will continue to deploy its envelope resolutely and efficiently, guided by its commitment to price stability and that they are to significantly step-up purchases under the PEPP in the second quarter, in line with market conditions. Schnabel also commented that a growing body of evidence suggests that the potential benefits of pushing rates lower may diminish even when uncertainty faded and stated that when rates have been low for a long time, fewer and fewer firms and households are left to respond to an additional monetary policy impulse. (Newswires)

Italy PM Draghi said he urged the EU to follow the US' example in building a capital market union, banking union and safe assets, while it was later reported that PM Draghi is expected to request further borrowing next month. (Newswires)


In FX markets, the DXY slightly eased off 4-month highs amid the positive risk tone although held on to most of yesterday’s gains and remained above its 200DMA. There was plenty of commentary from the Fed again in which officials either stuck to the dovish script or continued to talk up the economy including Fed Chair Powell. The slight pullback in the greenback provided some respite for EUR/USD which had recently stumbled beneath the 1.1800 handle although the recovery of the single currency was constrained after the rhetoric from the EU summit where European Commission President von der Leyen stated that they were at the start of a 3rd wave of the virus and that companies would have to honour their contracts to the EU before exporting vaccines. GBP/USD outperformed its continental peer to trade above 1.3750 as it benefitted from a mild cyclical wave which also spurred antipodeans and helped AUD/USD reclaim the 0.7600 status despite forecasts by Westpac for the RBA to extend QE in mid-October by another AUD 100bln vs prior. forecast of AUD 50bln. USD/JPY added to the gains above 109.00 and JPY-crosses were kept elevated amid the positive risk tone and with the latest Tokyo CPI figures remaining subdued despite mostly topping estimates.


WTI crude futures nursed some of the prior day's losses and reclaimed the USD 59.00/bbl level amid the positive risk tone, although the gains were light as there wasn't much to shift the dial for the complex ahead of next week's OPEC+ confab. In terms of the relevant newsflow, there was a Houthi attack at a Saudi petroleum distribution station but no casualties were reported, and there were also suggestions that the Suez Canal blockage could last weeks although some have downplayed the direct implications this has for the oil market and instead is seen as more an issue for refined products. Gold prices were uneventful, while price action in copper reflected the heighted constructive mood across the region.

Saudi Arabia said a petroleum distribution station in Jazan was attacked and that a fire broke out following the attack by Houthis, although no casualties were reported. (Twitter)


North Korea confirmed that it test-fired a new tactical guided missile on Thursday without leader Kim's inspection. In relevant news, US President Biden earlier stated that there will be responses to North Korea's action if they choose to escalate and that North Korea is the top foreign policy issue for him, while other reports noted that the US condemned North Korea's ballistic missile launch which it stated is destabilizing and that the nuclear and ballistic missile programs constitute serious threats to peace and security. (Newswires/Yonhap)

German Chancellor Merkel said she is grateful to see a de-escalation in the eastern Mediterranean between Turkey and Greece, while she suggested that contact with Turkey is needed at all levels to talk about differences and non-controversial issues. Furthermore, Merkel stated that they gave a mandate to further develop the customs union with Turkey and will revisit this at the June summit. There were also comments from the Turkish Foreign Ministry that they welcome efforts in the EU report and rhetoric in the EU summit conclusions to advance the positive climate, but then added that EU calling Turkish operations in the eastern Mediterranean illegal is against international law and that the EU has no jurisdiction concerning the issue. (Newswires)


Treasuries mainly little changed, barring the long-end which was slightly softer, after another sloppy 7-year auction saw participants "buy the dip". By settlement, 2s -0.8bps at 0.137%, 5s -1.7bps at 0.819%, 7s -0.7bps at 1.262%, 10s unch. at 1.614%, 30s +1.8bps at 2.333%; TYM1 volumes were average, with a noticeable pick-up after the 7s auction. Inflation breakevens were wider by a few bps across the curve. SOFR unch. at 1bps. NY Fed received USD 10.1bln at its RRP op (prev. 21.90bln; seven-op average rises to 17.035bln from 15.69bln). US sold USD 43bln of 8-week bills at 2bps, covered 3.44x; sold USD 43bln of 4-week bills at 1.5bps, covered 3.10x. USTs had been lightly offered overnight amid a reversal of opening losses in Asia bourses. But that downside in sovereigns did not sustain as European trade got underway. Incremental newsflow was light, with desks instead pointing to month-end factors, which point to stocks selling and bond-buying after the recent backup in yields, particularly in the US. The first pots-COVID sub-700k Initial Jobless Claims print had little sway on risk assets. As Europe began to depart, there was much attention on a 10k block liquidation in Ultras, a chunky order for that part of the curve, which saw USTs pull from their highs. The USD 62bln offering was another sloppy one, but not quite as bad as February's: tailed 2.5bps, covered less than average, while non-dealer participation was more in-line with average. The "positives" this time around were that participation appears much more broad-based with Indirects taking a bigger part of their share, rather than the apparent complete nonattendance of foreign bidders last month. But nonetheless, given the more successful Treasury auctions recently, this offering comes as a nasty surprise and has stoked more concerns of supply indigestion in the Treasury market. T-notes futures dropped lower from 132-06 to lows of 131-29, before reversing most of the move into later trade, with some block buys supporting the recovery. It's worth noting that there are quite a few call options expiring tomorrow on the T-Note at the 132-02+ strike, a level which the future reclaimed and hovered around through till settlement. T-note (M1) futures settled 1+ tick higher at 132-04+.

Fed’s Bostic (voter) said the Fed is in a transitional period and it does not want speculation about policy path to undermine momentum, while he expects they will have met rate increase conditions in 2023 but it will take some time still for employment to return to pre-COVID levels. (Newswires)

Fed's Daly (voter) said the US jobs market is definitely still in a ditch, while she suggested we should not be worried about inflation right now and that negative rates are not on her list for possible tools. (Newswires)

Fed's Evans (voter) said things are looking much better than in 2020 and that we have had a much stronger recovery than he was expecting. Evans also stated that inflation is lower than the Fed would like and we need to increase inflation to live up to the Fed's 2% objective, while he added there is still "ways to go" on bringing back lost jobs to the economy and suggested that if the economy recovers faster than expected, the Fed's rate hikes could begin earlier. (Newswires)

Fed announced it will end temporary income-based restrictions on bank dividends and share buybacks for most firms after June 30th, while it added that banks with capital above what is required by 2021 stress tests will no longer be subject to restrictions from June 30th and banks with capital that is below the required will be subject to restrictions until September 30th. (Newswires)

The US Senate voted 92-7 to approve the two-month extension of the small business paycheck protection programme. (Newswires)