[PODCAST] US Open Rundown 27th April 2021
- Equity indices have been drifting throughout the morning with European bourses slightly lower than relatively unchanged US futures ahead of large-cap earnings
- Tesla is lower in pre-market trade despite Q1 earnings beating on top and bottom lines with the Co. profiting from its Bitcoin holdings
- BoJ kept policy settings unchanged reducing inflation but increasing growth forecasts while the Riksbank reiterated its stance
- The DXY is firmer and oscillating 91.00 while core debt is little changed ahead of US supply and post tepid German issuance
- Looking ahead, highlights include US consumer confidence, 7yr supply from the US
- Earnings from Alphabet, Microsoft, Raytheon, 3M, Starbucks, Visa
US COVID-19 cases +34,641 (prev. +52,957), deaths +294 (prev. +630), total vaccines administered 230.77mln (prev. 230.65mln), fully vaccinated 95.9mln (prev. 95.8mln), while there were comments from NIH’s Fauci that Americans should begin to see a turning point in the pandemic “within a few weeks”. (Newswires/CNBC)
USTR Tai reportedly met with AstraZeneca's (AZN LN) US chief in which they discussed increased production and a proposed waiver of intellectual property rights under the WTO. It was previously reported that the White House stated the US will not require the AstraZeneca COVID vaccines over the next couple of months and that the FDA will confirm AstraZeneca doses meet quality standards before any shipments. (Newswires)
Asia-Pac stocks failed to take impetus from the mostly positive close and fresh record levels stateside, whereby the regional bourses remained cautious heading into the looming risk events and amid ongoing COVID-19 concerns. ASX 200 (-0.2%) was pressured with the index dragged lower by underperformance in tech and industrials but with losses stemmed as the mining-related sectors were kept afloat by the recent surge in copper and iron ore prices, while M&A newsflow provided some support with Bingo Industries underpinned after it entered into scheme implementation deed regarding the AUD 2.3bln buyout offer from MIRA and Tabcorp was also lifted after it received a proposal valued at AUD 3.5bln from Entain. Nikkei 225 (-0.5%) was subdued amid the ongoing state of emergency for key areas and unsurprising BoJ policy announcement although the downside was cushioned by a softer currency. Hang Seng (-0.1%) and Shanghai Comp. (U/C) conformed to the uninspired mood initially in-spite of a surge in Industrial Profits for March which was likely due to base effects and with sentiment also dampened by crackdown concerns for the tech sector after China’s market regulator launched an anti-monopoly investigation into Meituan. However, HSBC shares were a notable mover with gains of around 2% following strong Q1 earnings; and the Shanghai Composite did recoup this earlier losses by the close. Finally, 10yr JGBs languished after the prior day’s retreat beneath the 151.50 level, with demand hampered after T-note futures slightly pulled back and following the lack of fireworks at the BoJ policy announcement where the central bank refrained from any policy tweaks but lowered the current fiscal year Core CPI estimate, as expected.
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 6.4924 vs exp. 6.4930 (prev. 6.4913)
- Chinese Industrial Profits (Mar) Y/Y 92.3% (Prev. 20.1%)
- Chinese Industrial Profits (Mar) Y/Y 137.0% (Prev. 178.9%)
MSCI said that in the absence of guidance published by May 17th from the Office of Foreign Assets Control, it will delete CGN Power (2826 HK), China National Chemical Engineering (601117 CH), China Shipbuilding Industry Co (601989 CH) and Inspur International (596 HK) from the MSCI China All Share Indexes. (Newswires)
BoJ kept policy settings unchanged, as expected, with rates kept at -0.10% and QQE with YCC maintained to target 10yr JGB yields at 0.0%. BoJ stated that Japan's economy is likely to improve as a trend but the pace of rebound is to remain moderate and it noted high uncertainties regarding consequences of COVID-19 with large uncertainty on the outlook. BoJ suggested that risks to the economic outlook are currently skewed to the downside with downside risks larger for the price outlook although it noted that exports and output continue to increase, while capex is showing some weakness but is picking up. Furthermore, the BoJ lowered its Core CPI forecasts for the current fiscal year to 0.1% from 0.5% but raised fiscal 2022 Core CPI forecast to 0.8% from 0.7% and also upgraded its Real GDP growth forecast through to fiscal 2022. (Newswires)
US President Biden is committed to raising capital gains taxes for the rich when they die, before passing wealth to their heirs, according to reports citing people familiar with the matter. (Axios)
President Biden is intending to sign an executive order today increasing the minimum wage paid by federal contractors to USD 15/hr (prev. USD 10.95/hr); expected to take effect from next year, according to NY Times citing a document. (NY Times)
US Senator Manchin (Democrat) reportedly wants the infrastructure bill split into two parts to raise the chances of obtaining bipartisan support, according to CNN's Manu Raju. (Twitter)
German Finance Minister Scholz and French Finance Minister Le Maire will jointly present the German and French recovery and resilience plans today at 13:30BST. On the matter, German government expects to receive approximately EUR 28bln from the EU COVID reconstruction fund, according to a source (Newswires)
A group of MEPs have written a letter to European Commission President von der Leyen expressing concerns that Hungary's recovery plan proposal could "result in 20% of the funding to disappear in opaque funding structures which are exempt from budgetary control standards". (Politico)
White House is working on details of an increasingly likely summit between US President Biden and Russian President Putin which could occur as soon as early summer, the Biden administration is preparing to send US Secretary of State Blinken to Ukraine next month. (CNN)
Iranian government spokesperson says they are prepared for a prisoner exchange with the US and proposals are under review, via Al Jazeera. (Twitter)
Saudi Defense Ministry says it has destroyed an explosive-laden boat off the port of Yanbu. (Newswires) Follows, and contradicts, earlier reports that no vessels were attacked after reports that there was an explosion on the NCC Dammam vessel Most recently, Energy Intel indicates the Jazan Port has been closed as a precautionary measure. (Twitter)
Major bourses in Europe have been drifting lower (Euro Stoxx 50 -0.4%) following yet another uninspiring cash open in what is seemingly the quiet before the storm as earnings are set to pick up pace and the FOMC looms. State-side, futures are relatively flat with the RTY eking ahead as participants await the US entrance alongside a slew of corporate updates. Back to Europe, the region sees no standout performers, although the UK’s FTSE 100 (+0.1%) is kept afloat amid earnings from heavyweights HSBC (+1.9%) and BP (+1.1%), with the former topping its revenue and profit forecasts and announcing ECL release of USD 400mln vs a charge of USD 3bln last year. Meanwhile, BP is bolstered by all-around firm metrics alongside the announcement of a USD 500mln share buyback in Q2, whilst its CEO said a pre-COVID level dividend could be on the table next year. Sectors in Europe are mixed with no overarching theme. Travel & Leisure reside as the top performer – with reports suggesting that UK Transport Secretary Shapps has called for a meeting between G7 counterparts at the June 11th summit to form a global travel system that would form international standards for 'green list' countries accepted digital vaccination/test proof as a condition of entry. Further, Sweden’s Evolution Gaming (+10%) provides the sector with tailwinds post-earnings. On the flip side, the Auto sector lags amid the ongoing supply shortage coupled with some pre-market downside for post-earnings Tesla (-2.5%). Further, the financial sector is the red despite HSBC’s gains as UBS (-2.7%) shares are pressured after reporting a USD 744mln hit in relation to the Archegos default. In terms of individual stocks, earnings-related movers include ABB (+2%). Novartis (+1%), Novozymes (8%) and Maersk (+1.6%). Elsewhere, Entain (+0.5%) sees modest gains after submitting a revised AUD 3.5bln bid for Tabcorp.
Tesla Inc (TSLA) - Q1 2021 (USD): Adj. EPS 0.93 (exp. 0.79), Revenue 10.39bln (exp. 10.29bln). FCF of 293mln. Debt and finance lease reduction of 1.2bln. Net cash outflow of 1.2bln related to Bitcoin. In total, 2.2bln decrease in cash and cash equivalents to 17.1bln. Click here for the full earnings summary. (Newswires) Shares fell 2.5% in the pre-market
Apple (AAPL) - EU will later this week issue charges against the Co. regarding concerns that rules set for developers on the App store breaches EU laws, sources said. Separately, next gen Mac processors entered mass production this month with TSMC (TSM), Nikkei sources state. Elsewhere, Co's new privacy restrictions could mean advertisers will get more ad-performance data for ads bought through Apple than through third parties, WSJ reports. (FT/Nikkei/WSJ)
Brussels is said to be nearing the finalisation of new legislative powers to combat international public subsidies, FT reports; the draft set to be unveiled next week, will give powers to intervene in takeovers of EU companies. (Newswires)
DXY - The Dollar index has now climbed above the 91.000 level that was proving elusive after a narrow miss at 90.989 on Monday, but whether it can sustain gains above and the close higher remains to be seen given chart resistance in the form of the 100 DMA and 21 WMA at 91.025 and 91.070 respectively vs a 91.072 peak thus far. However, the Greenback continues to outpace low yielders and perhaps more encouragingly has also clawed back some lost ground against high beta, commodity and cyclical currencies that started the week so well. Moreover, the Buck is holding up well considering impending month end rebalancing flows that are unusually negative for April, according to Citi’s hedging model with a 1.7 SD seen only 5% of the time since 2004. Ahead, US consumer confidence and the 7 year note auction after somewhat mixed 2 and 5 year results yesterday could keep Treasury yields on a firmer footing before attention reverts to the FOMC tomorrow.
SCANDI - Firmer oil prices appear to be helping the Nok stay close to 10.0000 vs the Eur, but the Sek remains below 10.1000 in wake of the latest Riksbank policy meeting where rates, QE and the projected repo path were all left unchanged, as low inflation pressures countered a slightly better assessment of the economic outlook – see headline feed at 8.30BST for more details, analysis, initial market reaction and a link to the full statement. Meanwhile, Swedish data may also be weighing on the Crown that is now slipping towards 10.1550, with unemployment rising in March and the trade surplus narrowing.
NZD/CHF/AUD - The Kiwi has derived little in the way of added impetus following the reopening of NZ markets from the long ANZAC Day weekend, as Nzd/Usd fades on the 0.7200 handle and Aud/Nzd stays elevated nearer 1.0800 than 1.0750 in the run up to trade data. Nevertheless, the Aussie is also waning vs its US counterpart after relinquishing 0.7800+ status and eyeing Q1 CPI for some independent direction to supplement or offset underlying support via copper and other base metals. Elsewhere, the Franc is still tracking external moves in the main, around 0.9150 against the US Dollar and 1.1050 vs the single currency.
CAD/GBP/EUR/JPY - All conceding ground to the firmer Greenback recovery, with the Loonie back below 1.2400 ahead of comments from BoC Governor Macklem that could revive its hawkish vibes, while Sterling, the Euro and Yen are striving to hold above 1.3850, 1.2050 and 108.50 respectively, latter largely shrugging off the on hold BoJ. Note also, Eur/Usd will be looking for some technical traction via the 100 DMA close to the half round number if not leverage from the Eur/Gbp cross that is probing 0.8700 again, while Usd/Jpy should be capped by decent option expiry interest at the 108.75 strike (1.4 bn) if 108.50 is cleared convincingly.
EM road declines or retreats vs the Usd, though the Cnh remains over 6.5000 in line with the latest PBoC Cny midpoint fix and following robust Chinese industrial profits overnight, while the Try is still unwinding recent underperformance circa 8.2500 irrespective of a typically feisty response from Turkish President Erdogan to US President Biden labelling mass Armenian deaths as genocide.
Notable FX Expiries, NY Cut:
- AUD/USD: 0.7710 (1.2BLN), 0.7725 (460M), 0.7800 (281M), 0.7830 (1.5BLN)
- USD/JPY: 107.55 (292M), 107.75 (240M), 108.50 (505M), 108.75 (1.4BLN)
Riksbank holds its rate at 0.00% and the main QE parameters maintained as expected; Repo Rate Path unchanged for the entirety of horizon as expected ; says inflationary pressures remain low but economic outlook slightly brighter. (Riksbank)
S&P affirmed Canada at AAA; Outlook Stable and stated that this year's Budget commitment to extend support measures amid the pandemic will contribute to fiscal deficits, but added that it expects Canada's economy to post a strong recovery this year. (Newswires)
Bonds are still running into resistance and offers into upticks rather than gleaning much lasting bullish impetus from dovish global Central Bank stances/guidance for the most part, and sovereign issuance combined with another hefty corporate pipeline could well be a contributing if not compelling factor. Indeed, a rather tepid German 2028 sale does not really bode well for the looming US 7 year offering, while Gilts have not derived much comfort from avid demand for the 30 year UK syndication as books top deal size more than 10-fold. However, the core 10 year futures are hovering closer to highs than lows between 170.90-64, 128.59-32 and 132-12+/132-07 parameters on Eurex, Liffe and in electronic trade as stocks decline and the spotlight turns to the pm agenda. For the record, UK debt is also digesting a considerably stronger than forecast rebound in CBI distributive trends, albeit not too surprising given that the 2nd stage of exit from lockdown began on April 12th in the UK.
WTI and Brent front month futures eke mild gains as participants gear up for today’s JMMC (13:00BST/08:00EDT) in what was a last-minute change to the schedule, with the OPEC+ meeting still currently set for tomorrow according to OPEC’s website. As a reminder, the JMMC only makes recommendations rather than policy decisions. Nonetheless, today could see a flurry of sources – with market expectations skewered towards no change in quotas – however, it’s worth noting that OPEC+ has surprised markets at most meeting this year thus far. Aside from OPEC headlines, participants will be eyeing the weekly Private Inventory data as a scheduled catalyst. Further, there has been reports that an oil ship has reported an oil leak off Saudi’s Yanbu port, although later reports suggested this was not an attack. Further, a cargo vessel reportedly rammed into a tanker carrying 1mln barrels off the coast of Qingdoa in China. However no immediate price action was seen in wake of these reports. WTI resides off best levels now under the USD 62.50/bbl mark (vs range 61.91-62.74/bbl) while its Brent counterpart trades on either side of USD 66/bbl (vs range 65.66-66.44/bbl). Elsewhere, spot gold and silver are uneventful within recent ranges in the run-up to the FOMC announcement tomorrow. Meanwhile, copper continues to turn heads as LME prices eye USD 10,000/t to the upside. Analysts at ING note that the relative strength in LME vs Shanghai copper has led to an open export arbitrage for some players, which could deter some speculative buying in London in the very short term.
The JMMC meeting will be taking place today at 13:00BST/08:00EDT in what was a last minute change, according to EnergyIntel's Bakr. (Twitter) Link to newsquawk JMMC primer