[PODCAST] US Open Rundown 29th March 2021
- European equity indices have opened mixed but with a slight positive bias whilst US equity futures are negative and the RTY is the underperformer, -0.8%
- The Dollar has strengthened and surpassed last week’s highs; exerting further pressure on the EUR as EUR/GBP has hit YTD lows of 0.8510
- German Chancellor Merkel threatened the use of federal law to toughen pandemic restrictions
- The stuck tanker in the Suez Canal has reportedly been refloated with engineers partially freeing the ship
- White House Press Secretary Psaki stated that President Biden plans to split his Build Back Better package into two separate proposals
- Looking ahead, highlights include ECB net PEPP purchases & Fed’s Waller
- Note, UK & European clocks have switched to Daylight Saving Time with the UK moving from GMT to BST; as such, the London - New York time gap will revert to the usual 5-hours
US CDC reported total COVID-19 cases rose to 30.04mln from 29.98mln the day before and total deaths rose to 546.1k from 545.3k the day before, while New York reported a surge in cases on Sunday with 9,395 new infections in the prior 24 hours as they state continues to lack a plan for rolling out vaccines to all adults. (Newswires/FT)
UK COVID-19 cases +3,862 (prev. +4,715) and deaths +19 (prev. +58), France cases +37,014 (prev. +42,619) and deaths +131 (prev. +190), Italy cases +19,611 (prev. +23,839) and deaths +297 (prev. +380). (Newswires)
UK Culture Minister Downden responded "later this month we will see Moderna (MRNA)" when asked about the Moderna vaccine timing and stated that they will make a decision regarding allocations if there is a surplus of vaccines. The Culture Minister also responded that they are looking at all these issues as part of a taskforce which will report beginning of next month when asked if the government is considering a traffic light option on holidays, while he stated they are looking at ventilation, behaviour, spread risk and COVID-19 certification regarding live events. (Newswires)
UK is planning COVID-19 vaccine booster shots for those aged over 70 years old from September to protect them against variants of the virus. In other news, UK Transport Minister Shapps stated that truck drivers arriving in the UK for over 2 days will be required to take a COVID-19 test within 48 hours and a test every 72 hours after. (Newswires/Telegraph)
German Chancellor Merkel threatened the use of federal law to toughen pandemic restrictions and is not convinced that measures already taken will snap a 3rd wave of the virus. Merkel added that additional measures including curfews and reducing contacts could be important instruments to halt exponential growth, while she warned that they do not have much time and that they need to become more flexible regarding vaccinations. (Newswires)
Sinopharm (1099 HK) CNBG executive stated that antibodies triggered by 2 of their COVID-19 vaccine products have good neutralising effect on UK and South African variants, while it added that it will depend on Phase 3 clinical trials whether a booster vaccine shot is necessary. In related news, the UAE is to produce the Co.’s COVID-19 vaccine. (Newswires/FT)
Russian President Putin stated that he expects the Russian population to achieve herd immunity and to lift virus restriction by end-summer, while he also stated that he only felt slight pain after receiving a Russian-made COVID-19 vaccine. (Newswires)
Hong Kong is to maintain most social distancing rules until April 14th, with beaches and pools re-opened but bars kept close. (Newswires)
Asia-Pac equity markets eventually traded mostly higher as the region picked up the baton from last week's late surge on Wall St although upside was capped and sentiment was somewhat choppy with participants tentative heading into quarter-end, as well as Friday’s NFP jobs data and Easter holiday closures. ASX 200 (-0.4%) failed to hold on to opening gains with the index pressured by underperformance in tech and a subdued financial sector, while a 3-day lockdown in the Queensland state capital of Brisbane and China’s final ruling for tariffs of between 116.2%-218.4% on imported wines from Australia clouded risk sentiment. Nikkei 225 (+0.7%) initially outperformed due to the recent JPY weakness and after the upper house of parliament approved a record budget of JPY 106.6tln for fiscal 2021 but with some weak spots including Nomura Holdings after it flagged a USD 2bln charge from losses in its US operations which was said to be linked to the Archegos margin call sell down. Note, gains for the Nikkei were trimmed ahead of the European entrance. Elsewhere, Hang Seng (+0.1%) and Shanghai Comp. (+0.5%) gradually composed themselves after the early choppy price action with sentiment eventually helped by stronger earnings from China’s megabanks including ICBC, CCB and Bocom, while Sinopec is higher despite posting lower profits and reports of the Co. is to acquire stakes in five assets from its parent valued at a total of nearly CNY 7bln. In addition, there was a large surge in Industrial Profits which grew by 178.9% Y/Y for January-February, although like the recent strong trade and activity data for China, it was most likely due to distortions from base effects and there was also some IPO-related disappointment in which Bilibili shares fell as much as 6% in its Hong Kong debut. Finally, 10yr JGBs were lower with prices subdued amid the outperformance in Japanese stocks, recent softness in USTs and with the lack of BoJ purchases in the market today, while the Summary of Opinions from the March meeting didn’t provide any meaningful fresh insights regarding the BoJ’s clarification that long-term yields can move +/-25bps from the 0% target.
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 6.5416 vs exp. 6.5418 (prev. 6.5376)
The US is becoming concerned that China is considering seizing control of Taiwan, as they are seemingly moving to a period of being 'more impatient and more prepared to test the limits'; assessment was made after considering behaviour over 2-months, according to a Senior US Official. (FT)
US Trade Representative Tai stated that the US is not ready to lift the tariffs on China, while it was separately reported that the US condemned China’s sanctions on two US Commission on International Religious Freedom Commissioners. (Newswires/WSJ)
US Secretary of State Blinken said he sees adversarial, competitive, and cooperative aspects to US-China relationship. While there were comments from a Xinjiang region government spokesman that the US, UK, EU and Canada have engaged in political manipulation to destabilize China. (Newswires)
BoJ Summary of Opinions from the March meeting stated it is important to firmly continue with policy responses to the impact of COVID-19 and it should continue to provide support for financing, mainly of firms, as well as to ensure stability in financial markets. BoJ stated ensuring current policy framework can be sustained in a stable fashion is important to maintaining loose policy and that they must heighten transparency of policy by clarifying the band it allows rates to move from the target, whereby it is desirable to give long-term yields the flexibility to move +/- 25bps from the target. Furthermore, it stated that it is desirable for BoJ to buy ETFs in a flexible manner and that deflation risk in Japan is still higher than that of unwelcome inflation. (Newswires)
- Chinese Industrial Profits YTD (Feb) Y/Y 178.9% (Prev. 4.1%)
White House Press Secretary Psaki stated that President Biden plans to split his Build Back Better package into two separate proposals in which the first part involving infrastructure will be unveiled on Wednesday and more details for the second part will be provided later in April. (Newswires/Mail)
US President Biden's plan to pay for his coming infrastructure package via large tax hikes is being met with resistance from moderate Democrats. (Axios)
BoE Governor Bailey joined calls for a tougher government stance on the large tech companies which put consumers at risk by allowing scam financial promotions on their online services. (Newswires)
The BoE is reportedly calling on banks to seek its approval prior to relocating UK jobs or operations to the EU and is concerned that the bloc's regulators are demanding more to move than what is necessary for financial stability post-Brexit. (FT)
ECB's Lane stated that the central bank must remain a key stabilizer of the eurozone economy as the bloc is at risk of suffering longer-term damage from its double-dip recession that was caused by the fallout from the COVID-19 pandemic. (Newswires)
ECB's de Cos reiterates an accommodative policy stance remains necessary. (Newswires)
US Secretary of State Blinken responded that it is up to those that are building and trying to complete it when asked if there is anything the US can do to stop the Nord Stream 2 pipeline from being completed. (Newswires)
European equities (Eurostoxx 50 +0.4%) have seen a relatively choppy start to the week ahead of quarter-end on Wednesday. From a macro perspective, concerns continue to mount about the impact of a third COVID-19 wave in some Eurozone countries with German Chancellor Merkel not convinced that measures taken thus far will be sufficient in slowing the spread of the virus. Stateside, White House Press Secretary Psaki stated that President Biden plans to split his Build Back Better package into two separate proposals in which the first part involving infrastructure will be unveiled on Wednesday and more details for the second part will be provided later in April. Note, stimulus hopes have not been sufficient enough to provide reprieve for US equity futures with the e-mini S&P down 0.4% and the e-mini Russell 2000 lagging, lower by 0.8%. Back to Europe, sectors are mixed with Food & Beverage, Media and Personal Goods faring better than peers. To the downside, Financials are a notable laggard amid losses in Credit Suisse (-13.8%) after the Co. warned there 'could be highly significant and material (impact) to Q1 results' due to a significant US-based hedge fund defaulting on margin calls last week; reports suggest the losses could be in the range of USD 3-4bln. Deutsche Bank (-4.5%) have also taken a hit this morning with reports suggesting the Co. also had exposure to the troubled fund, Archegos, however, sources have noted that Deutsche’s exposure is a fraction of what others hold. Elsewhere, softness can also be seen in other cyclically-exposed names (albeit, to a lesser extent) with Travel & Leisure and Basic Resources posting losses; downside for the latter has acted as a drag on the FTSE 100 (-0.1%). Oil & Gas names sit in mildly negative territory alongside losses in the crude complex after the refloating of the stuck tanker in the Suez Canal.
Visa (V) is to permit payment settlements using cryptocurrency, explicitly USD Coin (USDC). (Newswires)
Credit Suisse (CSGN SW) - Co. says there 'could be highly significant and material (impact) to Q1 results' due to a significant US-based hedge fund defaulting on margin calls last week, currently in the process of exiting the positions. Will provide further updates when possible. (Newswires)
Deutsche Bank (DBK GY) exposure to Archegos is a fraction of what others hold, according to sources. (Newswires)
DXY/JPY - The Dollar remains mixed against major counterparts in contrast to gains vs most EM currencies, but gradually rising following relatively rangebound trade as the index nudges a fraction above last week’s 92.917 peak within a tight 92.919-729 band. However, residual positioning for March 31 that coincides with the end of the quarter and 2020/21 financial year could spark more price action and volatility as Monday’s session unfolds, especially in absence of any key data or events, aside from the weekly ECB QE updates and Dallas Fed manufacturing business index. Looking at portfolio rebalancing models, signals are said to be strongest and most bullish for the Buck against the Yen, but Usd/Jpy continues to encounter decent offers into 110.00 and is currently hovering above 109.60 after Japan’s upper house of parliament voted in favour of a record Jpy 106.6 tn budget for the next fiscal year and the latest BoJ Summary of Opinions effectively reiterated policy support due to the adverse impact of COVID-19.
CAD/NZD/AUD - Ongoing weakness in oil prices is weighing on the Loonie as Usd/Cad straddles 1.2600 awaiting minor Canadian data tomorrow before monthly GDP and ppi on Wednesday, while the Kiwi is still suffering from NZ Government measures designed to cap house prices in advance of building consents, ironically, with Nzd/Usd sub-0.7000 and Aud/Nzd nudging nearer 109.50 even though the Aussie is softer vs its US rival under 0.7750 in wake of Brisbane beginning a 3-day lockdown.
GBP/EUR - The Pound is outperforming as the UK starts stage 2 of PM Johnson’s exit from lockdown, but also as fears over a shortage of vaccines ease with the prospect of Moderna supplies arriving shortly. Cable is holding on to the 1.3800 handle, albeit just and with a large helping hand from the Euro via cross flows that have pushed Eur/Gbp down to a new y-t-d base around 0.8510, while Eur/Usd languishes below 1.1800 between 1.1795-63 parameters amidst downbeat remarks from ECB chief economist Lane and German Chancellor Merkel mulling the use of federal law to tighten pandemic restrictions.
CHF - A rise in Swiss sight deposits and domestic banks suggests a return to intervention during SNB quarterly policy review week, but the Franc is a tad firmer vs the Buck and Euro through 0.9400 and 1.1050 respectively ahead of the March KOF indicator on Tuesday.
EM - Contrasting performances from the Lira and Yuan, as Usd/Try pares back from 8.1730+ following comments from new CBRT Governor Kavcioglu playing down prospects of a rate reversal at the April 15 meeting or even in the coming months, while Usd/Cnh climbs to circa 6.5700 following a 6.5416 Usd/Cny midpoint fix from the PBoC and more angst between China and the US over trade tariffs and Taiwan. Elsewhere, the Rub, Mxn and Zar are all down with crude, Gold and other commodities irrespective of Russia indicating that it might use some of its wealth fund to buy bullion.
Turkish Central Bank Governor Kavcioglu suggests that a rate cut in April is not guaranteed stating that he does not find a biased approach that will immediately cut interest rates in April or the following months. (Newswires)
It’s too premature to suggest that all month end business might have been completed already, but the early bid in Eurozone and UK bonds has certainly fizzled out and given way to retracement that could be partly technical in futures and cash terms. Indeed, Bunds briefly breached the 50% Fib of last Friday’s down move, but topped out before reaching the next upside chart target being flagged by some at 172.40, while Gilts never really cleared their prior session high with enough gusto to test last week’s pinnacles so both 10 year benchmarks have eased back from 172.34 and 128.64 towards 171.82 and 128.26 lows and have stalled around -35 bp and 75 bp in the process. However, US Treasuries remain at par awaiting the return of US participants and a light pm agenda that consists of the Dallas Fed manufacturing business index post-ECB PEPP and APP updates.
WTI and Brent front month futures opened the first session of the week softer, which is in-fitting with Asia’s lead, but have since seen some upside from intra-day lows with Brent now trading flat on the day. Initial pressure came as a result of the Ever-Given container ship being refloated in the Suez Canal. Henceforth, many oil-laden tankers backed up will be free to move, which would see an increase of supply reaching its intended destination and stop the blockage of one of the world’s busiest waterways. Moreover, the anticipated movement of the ship saw an immediate reaction as oil prices moved sharply lower as potential supply fears were curbed. Elsewhere, fundamental drivers remain the same with focus on vaccination progress and lockdown measures. The May WTI contract trades towards the top-end of the USD 60.00/bbl handle (vs low 59.41/bbl) whilst its Brent counterpart trades low USD 64.00/bbl handle (vs low 63.13/bbl). Looking ahead, notable risk events include the JMMC & OPEC+ meetings later in the week, where expectations remain that OPEC+ will maintain lower output levels. Spot gold and silver are both in the red, with more notable losses in the latter alongside USD strength. Spot gold trades around the USD 1,725/oz mark (vs high USD 1,732/oz) and silver sub USD 25/oz (vs high USD 25.08/oz). In base metals, LME copper resides softer in early morning trade after giving back gains seen on Friday. Finally, Chinese steel futures opened the week on a firmer footing, with rebar and hot-rolled coil up more than 3% in the wake of firm domestic industrial & manufacturing activity data.
The stuck tanker in the Suez Canal has reportedly been refloated in which engineers partially freed the ship and tugboats are working to straighten its course. Prior reports indicated that the White House sees some impact of the Suez Canal situation on energy markets, and it was monitoring market conditions with a willingness to respond appropriately, if needed. Egyptian President el-Sisi ordered preparations to unload the ship, if the last ditch-efforts to unblock it failed. There were later reports, the stranded ship is almost completely floated and will undergo initial inspections before being moved, while the ship's engine has started and preparations are being made to move it to the Great Lakes area. Following this, Ever Given has begun to refloat successfully with the path rectified by as much as 80%, where tugging operations will resume when tide rises at 13:30BST. On the ramifications, Maersk (MAERSKB DC) stated the blockages in the Suez Canal had led to a backlog that could take weeks or potentially months to unravel. (Newswires/WSJ/FT)
Norilsk Nickel's Norilsk division has completed phase two of repairs at the Taimyrsky and Oktyabrsky mines with the third stage of the plan looking at restoring normal operations at the mines. Under which, Oktyabrsky would resume full production in the first ten days of June and Taimyrsky is set to resume in May. (Newswires)
North Sea Oseberg crude stream is to load 4 cargoes in May (vs. 5 in April), according to trade sources. Whilst, North Sea Troll crude stream is to load 6 cargoes in May (vs. 4 in April), according to trade sources. (Newswires)
Russia supports rollover for OPEC+ oil output to May, whilst looking for a small increase for itself, according to sources. (Newswires)