[PODCAST] US Open Rundown 30th March 2021
- European equity indices are firmer across the board, but US equity futures are mixed with NQ the underperformer, -0.4%
- DXY has continued to strengthen as yields rise, residing on the 93.00 handle but off highs with JPY and EUR hindered given relative-yield effects
- Saudi Arabia is reportedly ready to support an OPEC+ oil cut extension into May and June and is prepared to extend voluntary cuts
- Wall Street banks were summoned by US regulators following the Archegos sell down where the SEC and FINRA are said to have consulted with banks
- Looking ahead, highlights include German national CPI, US consumer confidence, Fed's Quarles, Bostic & Williams
UK PM Johnson, French President Macron and German Chancellor Merkel called for a pandemic treaty to put vaccine nationalism aside and ensure the pandemic remains defeated in which they suggested that nobody is safe until everyone is safe. (Newswires/Telegraph/Daily Mail)
Italian Health Ministry are to implement a compulsory 5-day quarantine and test on those travelling to and from the EU, according to sources. (Newswires)
Berlin's state hospitals halt AstraZeneca (AZN LN) COVID vaccinations to women aged below 55, according to Tagesspiegel. (Newswires)
Asia-Pac stocks just about shrugged off the early indecision following the negative bias stateside where the DJIA posted fresh record levels but most indices declined as sentiment was dampened due to the fallout from the USD 20bln Archegos liquidation and with a rise in yields, as well as ongoing COVID-19 concerns adding to the glum mood. ASX 200 (-0.9%) and Nikkei 225 (+0.2%) swung between gains and losses with the former eventually dragged lower by weakness across commodity-related sectors and reports of further virus cases in Queensland where there is an ongoing 3-day lockdown in the state capital, while the Japanese benchmark lacked firm direction as Nomura shares extended on the prior day’s largest decline on record, triggered by the losses related to the recent Archegos margin call but with losses in the index cushioned by currency weakness and mostly better than expected Unemployment and Retail Sales data. Hang Seng (+0.8%) and Shanghai Comp. (+0.6%) were initially choppy amid a deluge of earnings releases and heading into quarter-end, although Chinese markets eventually gained as participants digested the FTSE Russell announcement for the inclusion of Chinese government bonds to its FTSE World Government Bond Index at a weight of 5.25% which will occur over 36 months from the effective date of 29th October 2021 which HSBC estimated could result to around USD 130bln of inflows to Chinese bonds. Finally, 10yr JGBs were lacklustre amid the spillover selling from USTs and with demand also sapped amid the 2yr JGB auction later which resulted into a lower b/c despite a decline in accepted 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 6.5641 vs exp. 6.5625 (prev. 6.5416)
China's Parliament unanimously approved the Hong Kong electoral system reform plan which cuts the number of seats in the legislature which are democratically elected and establishes a vetting committee to pre-approve potential candidates. (Hong Kong Free Press)
The US is to make it easier for diplomats to meet with Taiwanese officials through looser restrictions which is likely to provoke China. (FT)
FTSE Russell says China government bond will account for 5.25% of index, while Malaysia is removed from the watchlist and will remain in the FTSE World Government Bond Index. China's inclusion will occur over 36 months commencing from the effective date of 29th October 2021. India and Saudi Arabia have been added to the watchlist for inclusion in FTSE Emerging Government Bond Index. Russia and Vietnam remain on watchlist for global equity market reclassification. (Newswires)
BoJ says credit costs have been increasing predominantly as a increasing number of institutions have increased loan-loss provisions; capital adequacy ratios of regional financial institutions likely to continue on a downward trend. (Newswires)
- Japanese Retail Sales (Feb) M/M 3.1% vs. Exp.0.8% (Prev. -0.5%)
- Japanese Retail Sales (Feb) Y/Y -1.5% vs. Exp. -2.8% (Prev. -2.4%)
- Japanese Unemployment Rate (Feb) 2.9% vs. Exp. 3.0% (Prev. 2.9%)
Wall Street banks were summoned by US regulators following the Archegos sell down in which the SEC and FINRA were said to have consulted with banks, while other reports also stated that banks reportedly discussed cooperation to avert a selling frenzy and had met last week to consider an orderly unwinding of Hwang's leveraged equity positions. (Newswires/FT)
ECB's Vasiliauskas warned that the ECB must be cautious when pivoting away from its emergency stimulus even if the economy recovers as expected, while he noted that the central bank has tightened prematurely in the past. (Newswires)
ECB's Knot says they could skew its bond purchases towards greener assets but should not be responsible for developing the new benchmarks for climate-friendly QE. (Newswires)
US Treasury Secretary Yellen spoke with French Finance Minister Le Maire on the importance of working towards a solution in OECD tax discussions, while Yellen also expressed support for multilateral action to promote global rebound and help low-income nations. (Newswires)
- UK Lloyds Business Barometer (Mar) 15 (Prev. 2)
German North Rhine-Westphalia State CPI YY (Mar) 1.8% (Prev. 1.3%)
- German North Rhine-Westphalia State CPI MM* (Mar) 0.5% (Prev. 0.8%)
- German Bavaria State CPI YY (Mar) 1.8% (Prev. 1.3%)**
- German Bavaria State CPI MM (Mar) 0.5% (Prev. 0.6%)
North Korea Leader Kim's sister criticized South Korean President Moon for recent remarks regarding North Korea's missile launches, while it was also reported that the US is considering additional measures in response to the recent missile tests by North Korea, according to reports citing comments from the US Ambassador to the UN Linda Thomas-Greenfield. In other news, China and North Korea are set to resume trade mid-April amid the opening of a new bridge between the two nations. (KCNA/SCMP/Nikkei)
Japan's Defence Minister says he is concerned about attempts to alter the status quo in the South East China Sea. (Newswires)
Russian Kremlin says we should prevent Russia-US relations from further deteriorating, according to twitter source. (Sputnik News)
European equities (Eurostoxx 50 +0.2%) have kicked the session off on a firmer footing once again with little in the way of fresh macro newsflow driving the move. One of the key themes for the session thus far has been continued rises in global bond yields with the US 10yr yield taking out its recent 1.7540% peak to breach 1.77% to the upside. In the US, this has placed some pressure on the rate-sensitive e-mini Nasdaq 100 (-0.4%), which lags its stateside counterparts; e-mini S&P U/C and e-mini Russell +0.5%. In the more cyclically-focused European indices, banking names have led the charge higher with the Stoxx 600 Banking Index up by around 2% amid the favourable yield environment. Notable gains have also been observed in Basic Resources, Insurance, Autos and Travel & Leisure. Market participants will be eyeing the sustainability of the latter in lieu of the ongoing third wave of COVID-19 in the Eurozone which has subsequently prompted UK press to speculate that “next week’s review of international travel will likely conclude that it’s too soon to say when the borders can be reopened”, according to The Sun. To the downside, Health Care names reside in negative territory with defensive names shunned in early trade. In terms of stock specifics, Volkswagen (+3.1%) is a notable gainer in the auto sector as market participants continue to weigh up the Co.’s future in the EV space with recent reports suggesting a potential name change for its American unit to Voltswagen of America. In the financial sector Credit Suisse (-1.7%) was initially a beneficiary of the broader impulses in banking names, however, the Co. continues to remain in the news cycle given its exposure to the recent Archegos liquidation – and that initial strength has since reversed. Accordingly, one of the Co.’s. largest shareholders has requested that Chairman, Urs Rohner, receives a pay cut after a series of mistakes while speculation continues to mount around the magnitude of its exposure. In the tobacco space, a “good start to the year” was not enough to prevent Imperial Brands (-1.7%) from delving into the red following its latest trading update with the sector also hampered by comments from the UK Environment Ministry suggesting it could force tobacco names to pay for the clearing up of cigarette butts.
JP Morgan research note says that Wells Fargo's (WFC) involvement in Archegos could increase regulatory scrutiny or potentially delay the lifting of its asset cap. (Newswires)
Paypal (PYPL) confirming the launch of 'checkout with Crypto'. (Newswires)
DXY/JPY/EUR - The Dollar index has finally attained 93.000+ status and is still bid between 92.882-93.176 parameters alongside US Treasury yields that have risen to new cycle highs along certain parts of the curve, but the DXY may have derived sufficient momentum to breach the psychological mark regardless given bullish month end factors, like the strong rebalancing buy signal vs the Yen, or further depreciation in the Euro on 3rd wave pandemic concerns. Indeed, Usd/Jpy has made a clean break above 110.00 to test 110.30 and Eur/Usd down through 1.1750 towards 1.1730 at one stage, leaving little in the way of support from a technical perspective before 110.50 and 1.1700 respectively. Ahead, US consumer confidence and a couple of Fed speakers, as Quarles and Williams orate as neutrals and current FOMC voters.
CHF - Not much protection for the Franc via big beat vs consensus in the Swiss KOF indicator as Usd/Chf hovers above 0.9400 and Eur/Chf straddles 1.1050 with very tight confines awaiting official reserves and ZEW investor sentiment on Wednesday.
NZD/AUD/GBP/CAD - All managing to hang on to the Greenback’s coattails, with the Kiwi and Aussie benefiting from only isolated and contained COVID-19 outbreaks and a sharp rise in bond yields overnight, while the Pound is also gleaning underlying impetus from the UK’s advanced position on vaccinations that is keeping the roadmap to lifting lockdown intact (for now at least). Nzd/Usd is just holding above 0.7000 as Aud/Usd pivots 0.7650 and Aud/Nzd rotates around 1.0900, while Cable is holding close to 1.3750 and Usd/Cad is keeping tabs on 1.2600 ahead of Canadian average earnings data.
SCANDI/EM/PM - Little independent direction for the Norwegian Krona via choppy crude prices or not as weak as expected retail sales, but Eur/Nok is hovering around 10.0500 and Nok/Sek is extending towards 1.0200 as Eur/Sek eyes 10.2500 following somewhat mixed Swedish sentiment indicators and in advance of scheduled comments from Riksbank Governor Ingves. Elsewhere, a sea of red for EM currencies and precious metals, but headline-grabbing declines for the Try following more retaliation against the CBRT for tightening the reins by Turkish President Erdogan who has now fired the Deputy Governor. Meanwhile, Xau has fallen below Usd 1700/oz as Gold folds amidst the Usd and UST squeeze.
Turkish President Erdogan fired Turkish Central Bank Deputy Governor Cetinkaya and Mustafa Duman has been appointed as his replacement. (Newswires)
Bounces are becoming less pronounced, prolonged and frequent for bonds as losses in futures stack up, while yields continue to ratchet higher. Bunds have now been down to 170.74 (-88 ticks), Gilts as low as 127.48 (-62 ticks) and the 10 year T-note is hovering off a 130-26 base (17/32+ below parity), with equivalent cash rates approaching -25 bp, 85 bp and 1.77% respectively. It seems like all the remaining asset portfolio reweighting that favoured debt over equities has now been completed, aside from fine-tuning perhaps, and it may take something pretty big and/or unforeseen to turn the tide given the bearish tone and heightened focus on fiscal stimulus amidst reports that US President Biden may be mulling a multi-part package worth Usd 4 tn.
German Federal Finance Agency says it will not need to make major alterations to its debt issuance plan for 2021. (Newswires)
WTI and Brent front month futures opened the session on a softer footing but in a contained range, however, losses have since accelerated with the complex residing just off session lows. Downward pressure was seen in the wake of traffic resuming through the Suez Canal, however, attention may now begin to switch elsewhere. On this, eyes are expected to turn to the OPEC+ meeting later in the week, where participants will discuss maintaining output cuts. Due to the fragile COVID situation and fresh lockdowns, sources state that Saudi Arabia will support extending oil cuts through June as well as continuing its own 1mln BPD cut. Moreover, this would be in a bid to boost oil prices given the current uncertainty surrounding the virus and the economic outlook. As such, the market expectation is skewed towards an extension of cuts. The May WTI contract trades marginally above USD 61.00/bbl (vs high USD 62.27/bbl) whilst its Brent counterpart trades mid USD 64.00/bbl (vs high USD 65.41/bbl). Spot gold and spot silver are both seeing downside and are continuing to face downward pressure in correlation with Dollar strength and rising US yields. With the DXY reaching a 4-month high and yields a 14-month peak, gold notched its lowest price in more than three weeks as it slipped below USD 1,700/oz in early morning trade. At the time of writing, spot gold trades at USD 1,697/oz (vs high USD 1,714/oz) and silver trades just shy of USD 24.50/oz (vs high USD 24.76/oz). Onto base metals, LME copper saw overnight gains because of strong consumer demand in China, albeit gains have since been trimmed with the metal residing around 0.7% down for the session.
Saudi Arabia is reportedly ready to support OPEC+ oil cut extension into May and June, while it is also prepared to extend its voluntary cuts as it sees global demand as not yet strong enough to bring back additional supply, according to a source. (Newswires)
North Sea Brent crude stream to load 3 cargoes in Mar vs April's 3, according to sources. (Newswires)