Original insights into market moving news

[PODCAST] European Open Rundown 23rd April 2021

  • Asia-Pac stocks head into the weekend mixed after the region partially shrugged off the early headwinds from the US
  • Sentiment in the US was spooked by reports that President Biden plans to hike capital gains tax to as much as 43.4%
  • The Japanese government is seeking an emergency declaration for Tokyo, Osaka, Kyoto and Hyogo between April 25th-May 11th
  • The DXY heads into the European session marginally softer after initial gains petered out during the overnight session
  • Looking ahead, highlights include UK retail sales, Eurozone, UK & US flash PMIs, CBR rate decision, ECB's Lagarde. Earnings from Daimler, Honeywell and American Express


US COVID-19 cases +62,827 (prev. +61,229), deaths +875 (prev. 800), total vaccine doses administered 219mln (prev. 215.95mln), those fully vaccinated 89.246mln (prev. 87.59mln), while there also comments from US President Biden who said "we officially" reached the goal of 200mln vaccines. (Newswires)

WHO issued a statement of Strategic Advisory Group of Experts (SAGE) regarding immunization on continued review of emerging evidence regarding AstraZeneca (AZN LN) vaccines and stated it continues to support the conclusion that the benefits outweigh the costs, while further clarification of precautions and types of risk have been added. (Newswires)

French PM Castex said schools will reopen next week as planned and the government will lift domestic travel restrictions on May 3rd, while they will also consider whether to open some businesses around mid-May on a regional basis with decisions due in the upcoming days. (Newswires)

Japanese Economic Minister Nishimura said the government seeks a state of emergency for Tokyo, Osaka, Kyoto and Hyogo between April 25th-May 11th and wants to significantly cut the flow of people with stricter measures including asking certain businesses to close. Nishimura added they will request establishments that serve alcohol to close during the emergency and big sporting events will be conducted without spectators, while they want to ask department stores bigger than 1,000 square metres to close. Furthermore, Nishimura said that experts approved the state of emergency plan and there were also comments from Finance Minister Aso that they are discussing support related to the state of emergency. (Newswires)


Asia-Pac stocks head into the weekend mixed after the region partially shrugged off the early headwinds from the US where sentiment was spooked by reports that President Biden plans to hike capital gains tax to as much as 43.4% from the current top rate of 23.8%, which pressured the major indices and dragged all sectors in the red. Asian bourses suffered from early spillover selling although losses in the ASX 200 (-0.2%) were stemmed as telecoms remained afloat following the outcome of the 5G spectrum auction in which the top 3 telcos spent over AUD 600mln and with the largest-weighted financials sector cushioned by gains in AMP on plans for a demerger and listing of AMP Capital's private markets investment management business. Nikkei 225 (-0.8%) underperformed due to recent currency inflows and as participants brace for a return to a state of emergency with the government seeking an emergency declaration for Tokyo, Osaka, Kyoto and Hyogo between April 25th-May 11th and wants to significantly reduce the flow of people with stricter measures such as asking certain businesses to close including establishments that serve alcohol. Hang Seng (+1.0%) and Shanghai Comp. (+0.1%) were positive amid strength in Chinese tech names and with focus shifting to earnings whereby Ping An Insurance benefitted from profit growth for Q1, while CNOOC was less decisive despite a 4.7% Y/Y increase in its Q1 total net production. Finally, 10yr JGBs mirrored the choppy price action in T-note futures despite the underperformance of Japanese stocks and with demand also hampered by the lack of BoJ purchases in the market today, while the Australian 2024 bond auction had little effect on the 3yr yield which was relatively flat although both Aussie and Kiwi 10yr yields edged higher by around 3bps.

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 reference rate at 6.4934 vs exp. 6.4918 (prev. 6.4902)

Chinese Embassy in UK said it urges the UK to have a correct understanding on Xinjiang issues and take concrete measures to respect China's core interests, while it also urges UK to immediately correct its wrong actions in response to the UK Parliament motion on Xinjiang. Furthermore, China's Global Times tweeted that UK Parliament declaring genocide against Uyghurs in Xinjiang is a flat-out lie which violates international law and is an outrageous smear with blatant interference which China strongly opposes, citing the Chinese Embassy. (Newswires/Twitter)

  • Japanese National CPI (Mar) Y/Y -0.2% vs. Exp. -0.2% (Prev. -0.4%)
  • Japanese National CPI Ex. Fresh Food (Mar) Y/Y -0.1% vs. Exp. -0.1% (Prev. -0.4%)
  • Japanese National CPI Ex. Fresh Food & Energy (Mar) Y/Y 0.3% vs. Exp. 0.3% (Prev. 0.2%)


UK ministers reportedly asked company executives to set up an investment council that will advise the government on how to improve competitiveness and entice investment from abroad. (FT)

  • UK GfK Consumer Confidence* (Apr) -15 vs. Exp. -12.0 (Prev. -16.0)


In FX markets, the DXY was lacklustre overnight and slightly retraced some of the gains seen in the prior session where it springboarded from the 91.00 level amid the risk aversion in US following the reports that President Biden is to propose a hike in the capital gains tax to as much as 43.4%. Nonetheless, the advances in the greenback petered out during Asia trade as risk sentiment somewhat improved and amid calmer yields, as well as the recent mixed data stateside. EUR/USD briefly dipped beneath the 1.2000 level amid yesterday's USD strength although the single currency has since nursed some of the losses, while the prior day’s ECB meeting failed to provide any fireworks. GBP/USD also bounced off the prior day’s lows but with the rebound limited as price action stalled around 1.3850 and with UK finding itself at the end of Chinese criticism after the UK Parliament passed a motion declaring genocide regarding Uyghurs in Xinjiang. USD/JPY was choppy following its return to a sub-108.00 level and after inline national CPI data which remained in negative territory, while both AUD/USD and NZD/USD benefitted from a floor around 0.7700 and 0.7150 levels, as well as the slight improvement in risk appetite.


Commodities were kept afloat overnight with mild gains in WTI crude futures which briefly retested the USD 62.00/bbl, helped by a slight improvement in the risk appetite and following prior reports that Libyan oil production fell under 1mln BPD and could decline further due to budgetary issues. Furthermore, sources suggested next week's OPEC+ meeting will likely just be for monitoring the market, while it was separately noted that they will be holding a JMMC and ministerial meeting next week which is contrary to prior suggestions that a ministerial meeting could be abandoned. Gold prices were uneventful, while copper was supported amid the somewhat improved risk tone although has met resistance around the USD 4.30/lb.

OPEC Secretary-General said if the NOPEC bill is approved by the US Congress and signed by the President, it could lead to fines on member countries and OPEC members could face seizure of assets on US territory or under third-party control, while they will contact several US entities to make the case against approval of the NOPEC bill to US officials. (Newswires)

Two OPEC+ sources said they did not expect the meeting next week to yield any changes to the current deal and one of the sources thinks the next meeting will be just monitoring the market, while it was also separately reported that OPEC+ will hold a ministerial meeting and a JMMC next week, according to Energy Intel citing sources. (Twitter)

Nigeria lowered May Bonny crude OSP to USD -0.90/bbl versus dated Brent and Qua Iboe OSP was lowered to USD -0.97/bbl versus dated Brent. (Newswires)

CME raised crude oil futures NYMEX maintenance margins by 3.9% to USD 5,300/contract. (Newswires)


Russia reportedly scrambled a fighter jet to escort a US spy plane over the Pacific, according to IFAX. (IFAX)

The Pentagon warned lawmakers this week about the growing and urgent threat of directed-energy attacks on US troops in the Middle East and elsewhere, according to Politico citing sources. (Politico)

Iran has reportedly switched to using one cascade of advanced centrifuges at its Natanz plant to enrich uranium to up to 60% purity, from two cascades beforehand, according to a IAEA report, while there were also comments from a US general who stated that the moves by Iran on its nuclear programme are not irreversible. (Newswires)

Saudi-led coalition intercepted an explosives-laden drone launched by Houthis towards the southern region of the kingdom. (Newswires)


Treasuries had a choppy session, rising overnight, falling in the morning, only to rise again into the close after risk aversion on the back of tax hike headlines. By settlement, 2s +0.2bps at 0.151%, 5s -0.3bps at 0.797%, 10s -1.4bps at 1.550%, 20s -2.1bps at 2.128%, 30s -2.5bps at 2.238%; TYM1 volumes were average. Inflation breakevens narrower by a bp or so amid nominals leading the decline. Fed bought USD 1.75bln 20-30yr Treasuries, O/C 2.09x (prev. 2.77x). US sold USD 18bln in 5-year TIPS. 1-month bills sold at 0.5bps, covered 3.73x; 2-month bills sold at 1.5bps, covered 3.14x. NY Fed RRP demand at USD 102.644bln across 25 bidders (prev. USD 81.329bln across 33 bidders). SOFR unch. at 1bps. There was decent strength on volume overnight for Treasuries, with the 20yr most active after the solid 20yr bond auction on Wednesday. The in-vogue Japanese MoF data also showed more net buying of foreign bonds from the key market participant in the recent week ending April 17th, although slightly slower than the prior week as the New Year spending splurge cools: JPY 906bln (USD 8.4bln) vs prev JPY 1.7trn (USD 16bln). Strength out of Aussie bonds was present too into the RBA's QE op. The APAC session yield decline proved a red herring, however, with some stock gains out of Europe accompanied by yields climbing higher. There was little market reaction to the chunky dip (below expectations) in initial jobless claims data in the US, although likely kept bonds on the defensive. But, there was a spillover T-bid from EGBs amid Lagarde noting in the ECB press conference that the board had not discussed tapering the PEPP programme. That proved short-lived after the Fed had finished its activity in the long-end, with the belly of the curve leading the downside as the US announced its belly auctions for next week. Yields had looked like they were going to sleep cheaper into the close, but thanks to the plans for the US to double its capital gains tax headline, there was a knee-jerk risk-off move on volume, seeing duration modestly firmer ahead of Friday's PMIs. T-notes (M1) settled half-a-tick higher at 132-17+.

US President Biden will propose a capital gains tax as high as 43.4% (39.6%+3.8% investment income tax from 2013) for the wealthy on earnings of over USD 1mln per year and propose raising the marginal income tax rate to 39.6% from 37%, according to sources. This follows earlier reports that President Biden is to propose higher taxation on the rich in order to fund childcare with the plan to be outlined next week, while it will raise taxes on millionaire investors to fund education and other spending plans, but will not take steps to expand health coverage or reduce prescription drug prices, according to people familiar with the proposal. (Newswires/NYT)

White House said President Biden is continuing to meet with the policy team to finalize details of the American Family Plan and is to invite lawmakers to the White House after his address to Congress next week, while the Press Secretary said that the administration is still finalizing how to pay for the plan. Furthermore, the White House commented that President Biden sees the GOP infrastructure plan as a starting point after the Senate GOP proposed a USD 568bln infrastructure plan which involves repurposing unused spending money for infrastructure, while it extends the SALT cap and has no corporate tax hikes. (Newswires)

Two "key" US senators made a new push to attach legislation to the bill aimed at boosting US competitiveness that would allow tens of thousands of self-driving vehicles on US roads, speeding the timeline for commercial use of automated vehicles. Reports noted that Senators Peters (Democrat) and Thune (Republican) have circulated a draft that would grant the NHTSA the power to initially exempt 15k self-driving vehicles per manufacturer from safety standards and which would rise to 80k within three years, while they hope to win approval on Wednesday when the panel takes up the bill to provide USD 100bln in funding for science and technology R&D over concerns about maintaining US competitiveness with China. (Newswires)