[PODCAST] US Open Rundown 29th April 2021
- European bourses are somewhat mixed but slightly firmer overall after a heavy earnings morning in Europe while US futures are bolstered post large tech earnings
- Apple and Facebook beat on top & bottom lines and are firmer in pre-market trade, with upside also in Qualcomm while Ford is pressured
- President Biden unveiled his American Families plan which was in-line with earlier reports and prompted the expected Republican pushback
- The USD is firmer but sub-91.00 with peers contained ex-JPY which is pressured on US yields bear-steepening and amid the absence of Japanese participants
- Looking ahead, highlights include German CPI (Prelim), US GDP (Advance), PCE Prices (Advance) & Initial Jobless Claims, Fed's Williams, Quarles, ECB's de Guindos
- Earnings from Amazon, Altria, McDonald's, Gilead, Mastercard
US CDC said it is committed to a resumption of US passenger cruise industry operations by mid-summer. In other news, USTR Tai met with Bill Gates to discuss increasing COVID-19 vaccine production and the proposed IP waiver for vaccines, while she also held a discussion with Moderna (MRNA) CEO regarding a proposed waiver of intellectual property rights. (Newswires)
Moderna (MRNA) increases 2021 COVID-19 vaccine supply forecast to 0.8-1.0bln doses, additional investment to increase global supply of up to 3bln doses in 2022; development data regarding the current formula could support a 3-month refrigerated, 2-8 degrees Celsius, shelf life. (Newswires)
White House said the US is delivering supplies worth over USD 100mln in approaching days to provide relief for India and has re-directed its own order of AstraZeneca (AZN LN) manufacturing supplies to India which would allow India to make 20mln vaccine doses. (Newswires)
Two Australian men died a few days after receiving the AstraZeneca (AZN LN) vaccine, although the link between deaths and the vaccine was not yet established which health authorities are reviewing. (Sydney News Today)
German Health Minister says the rapid rise in infections seem to have stopped but numbers are still too high, adding that the reversal towards declining COVID cases is not yet sufficient. (Newswires)
Asian equity markets traded positively in reaction to the continued dovish tone from the FOMC and beat on earnings amongst the tech giants including Apple, Facebook and Qualcomm. In addition, focus was also on President Biden’s first address to a joint session of Congress where he stated America is on the move again and that the American Jobs Plan is a blue-collar blueprint to build America, while he called on Congress to pass the USD 15/hour minimum wage and extend child tax credit through at least end-2025, as well as outlined the American Families Plan. This facilitated a continued upside in US equity futures to push the Emini S&P to a record high and briefly above the 4,200 level although gains for Asia bourses were tempered amid a heavy slate of earnings and with Japanese participants absent due to a holiday closure. ASX 200 (+0.3%) was positive with outperformance in gold miners amid a rebound in the precious metal in the aftermath of the dovish FOMC, but with gains in the index capped by losses in consumer stocks after weaker quarterly sales from Woolworths and with Treasury Wine Estates dampened by a 4% decline of Australian wine exports in the year to end-March. KOSPI (-0.2%) benefitted initially as its top constituent Samsung Electronics remained afloat following its final Q1 earnings results which topped forecasts for net profit and posted a slight increase in revenue from the preliminary. Hang Seng (+0.8%) and Shanghai Comp. (+0.5%) also gained with sentiment encouraged by earnings releases including China’s largest oil company Sinopec and big 4 bank China Construction Bank.
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 6.4715 vs exp. 6.4718 (prev. 6.4853)
Agricultural Bank of China (1288 HK) Q1 net CNY 65.9bln vs. prev. CNY 64.2bln
- PetroChina (0857 HK) Q1 revenue CNY 551.9bln vs prev. CNY 509.09bln, profit attributable CNY 27.721bln vs CNY 16.23bln
- ICBC (1398 HK) Q1 net profit CNY 87.53 vs. prev. CNY 85.5bln
- Bank of China (3988 HK) Q1 net profit CNY 54bln vs. prev. CNY 52.6bln
Tencent (700 HK) faces a fine from China's competition regulator which could be valued at least USD 1.54bln and the antitrust investigation could force a sale of its music business, according to sources. (Newswires)
US President Biden stated in his first address to a joint session of Congress that America is on the move again and US is poised to take off but added that there is still more to do in fighting COVID-19 and we cannot let our guard down, while he called on Congress to pass USD 15/hour minimum wage and to extend child tax credit through at least end-2025. President Biden also stated the American Jobs Plan is a blue-collar blueprint to build America, while he later outlined details of the American Families Plan which will provide access to quality and affordable childcare, as well as up to 12 weeks paid family/medical leave and also called to lower prescription drug costs but also suggested it is time for corporate America and the wealthiest 1% of Americans to pay their fair share. Furthermore, President Biden stated US is in competition with China and will stand up to unfair trade practices such as subsidies for SOEs, theft of US technologies and IP, while he told Chinese President Xi the US will maintain a strong military presence in Indo-Pacific and made it clear to Russian President Putin that the US doesn't seek escalation but their actions have consequences. (Newswires)
US Senate Democrats are said to resist President Biden's plans to ask Congress to pay for the entire USD 1.8tln American Families Plan with some wanting him to finance it with deficit spending, while there were also comments from White House economic adviser Boushey that President Biden's proposed tax hikes on the wealthy could apply to at least some of this year’s earnings. (Axios)
US President Biden's USD 400,000 earnings tax cap reportedly only applies to individuals and not married couples filing jointly, according to Axios citing a White House official. (Axios)
US Senate expected to vote today on the water & infrastructure bill, according to Fox's Pergram. (Twitter)
UK auto production rose by 47% Y/Y in March which was the first increase since August 2019, according to SMMT. (Newswires)
Britain is set to formally recognise the EU Ambassador in London for the first time post-Brexit. (The Times)
Brussels pledges to apply strict rules regarding the Recovery Fund spending to ensure the funds are well spent. (FT)
ECB's de Guindos says we would expect a strong activity increase in H2; best to err on the side of prudence when it comes to a stimulus withdrawal; EZ inflation could be above 2% at year-end, could be a new moderation in inflation next year. (Newswires)
EU Consumer Confidence Final (Apr) -8.1 vs. Exp. -8.1 (Prev. -8.1, Rev. -10.8)
- Economic Sentiment (Apr) 110.3 vs. Exp. 102.2 (Prev. 101.0, Rev. 100.9)
- Industrial Sentiment (Apr) 10.7 vs. Exp. 4.0 (Prev. 2.0, Rev. 2.1)
German Unemployment Change SA (Apr) 9k vs. Exp. -10.0k (Prev. -8.0k, Rev. -6k); Unemployment Rate SA (Apr) 6.0% vs. Exp. 6.0% (Prev. 6.0%)
Chinese warships have warned away a US destroyer stalking the Liaoning aircraft carrier group, Global Times citing the Chinese Defense Ministry; reportedly the USS Mustin. (Newswires)
Russia has announced detailed and useful discussions with the US re. talks on Iran's nuclear programme, Sky News Arabia. (Twitter)
Major bourses in Europe, for the most part, see gains (Euro Stoxx 50 +0.3%) although to varying degrees as earnings take the driving seat with the FOMC meeting and Biden’s speech are out of the way and heading into month-end. US equity futures meanwhile remain elevated with the NQ (+1.0%) leading the gains whilst its peers see broad-based upside. Heading into month-end, JPM forecasts balanced mutual funds to sell some USD 30bln of equity, although, by historical portfolio rebalancing standards, this is quite modest. Back in Europe, the AEX (+0.9%) narrowly outperforms among the majors as the index is propped up by heavyweights Unilever (+3.0%) and Shell (+2.0%) post-earnings, with the latter beating on the top and bottom lines whilst increasing its dividend. Conversely, the DAX (-0.1%) underperforms as losses in German autos keep gains capped, whilst post-earnings BASF (-1.6%) provides further pressure. Sectors are mostly higher but again it is hard to discern a particular risk tone or theme as idiosyncratic factors are at play. Autos sit at the bottom of the pile amid the ongoing chip shortage coupled with Ford (-2.7% pre-mkt) earnings that were not well received. Telecoms outperform as Nokia (+14%) and Swisscom (+5%) were bolstered following their metrics, whilst further tailwinds are felt from BT (+2.1%) amid reports the Co. is in talks with Amazon, Disney, and others regarding a potential sale of its sports arm. Oil & Gas also see a firm performance amid the numbers from Shell, Total (+1.4%), and Equinor (+3.3%), and against the backdrop of firmer oil prices. Individual movers are largely earning-oriented and include the likes of Lufthansa (-2.5%), Airbus (+2.2%), Standard Chartered (+5.7%), Natwest (-3%), Logitech (+1.3%) and Clariant (-3%).
JP Morgan estimates circa EUR 30bln of equity selling by balanced mutual funds globally into end-April; seen as 'rather modest' by historical rebalancing standards. (Newswires)
Apple Inc (AAPL) - Q2 2021 (USD): EPS 1.40 (exp. 0.99/0.98 GAAP), Revenue 85.9bln (exp. 77.35bln); authorises increases of USD 90bln to existing share repurchase programme; saw no material issue with supply chain constraints. iPad: 7.81bln (exp. 5.58bln). iPhone: 47.94bln (exp. 41.43bln). Mac: 9.1bln (exp. 6.86bln). Services: 16.9bln (exp. 15.57bln). Qtrly Dividend: 0.22 (exp. 0.21. Apple hit 660mln paid subscribers in Q2 (prev. 620mln in Q1). Click here for the full report. (Newswires/Apple) Shares +2.7% pre-market
Facebook Inc (FB) - Q1 2021 (USD): EPS 3.30 (exp. 2.37/2.34 GAAP), Revenue 26.2bln (exp. 23.67bln). Advertising Revenue: 25.439bln (exp. 23.41bln). Daily Active Users (DAU): 1.88bln (exp. 1.93bln). Monthly Active Users (MAU): 2.85bln (exp. 2.95bln). Click here for the full report. (PR Newswires/Facebook) Shares +7% pre-market
USD - The Dollar remains in a clear bear trend following another dovish message from the Fed and Chair Powell in the post-meeting press conference/Q&A, but perhaps there was enough in the latest official statement and assessment to indicate more confidence or less caution about the economic outlook. Indeed, the FOMC no longer deems downside risks to be considerable, upgraded activity levels to strengthening from turning up and acknowledged rising inflation, albeit still mainly due to transitory factors. Meanwhile, US President Biden’s first address to a joint Congress was largely as expected in terms of content and details of the America Families Plan, so no real surprises or reason for the Greenback and markets in general to dwell for too long. Hence, Treasuries have reverted to bear-steepening mode and are providing the Buck with some impetus to pare deeper losses after the DXY slipped to fresh April and cycle lows under 90.500 at 90.422 in the run up to a raft of data before Fed’s Williams appears at the NY Economic Club. The index is currently hovering just shy of a 90.721 recovery high amidst with the Dollar firmer vs most components and major counterparts.
JPY - Holiday-thinned volumes may well be compounding price action, but the Yen is bearing the brunt of the aforementioned Greenback rebound and yield/curve retracement, as Usd/Jpy retests the 109.00 level vs sub-108.50. However, while Japan observes Showa Day, decent option expiries could keep the headline pair contained before Tokyo CPI, jobs and ip tomorrow given 1.9 bn and 1.3 bn rolling off at 108.50 and 109.00 respectively.
AUD/NZD/CHF/EUR - Also handing back gains vs their US rival, with the Aussie back under 0.7800 irrespective of an acceleration in Q1 export prices and perhaps more conscious of comments by Treasurer Frydenberg putting a 4% handle on the jobless rate to generate stronger wages and inflation, while predicting that it will take 2 years before returning to full employment. Similarly, no sustained impetus for the Kiwi to reach 0.7300 via improvements in NBNZ business sentiment or the activity outlook after trade data showing an almost flat balance, as Nzd/Usd hovers below 0.7250. Elsewhere, the Franc is now straddling 0.9100 and the Euro has breached key chart resistance in the form of a descending trendline, but hit another obstacle at 1.2150 before waning amidst a barrage of mostly firmer than expected Eurozone data/surveys that should keep Eur/Usd afloat along with 1.1 bn option expiry interest either side of 1.2100 (1.2095-1.2105 specifically).
GBP/CAD - Relative G10 outperformers, as the Pound rebounds firmly from midweek session lows to straddle 1.3950 vs the Buck and probe 0.8675 against the Euro, though again on little fundamental bar firmer oil prices that are boosting the Loonie around 1.2300 and even loftier multi-year peaks circa 1.2287.
SCANDI/EM - No surprise that the Nok, Rub and Mxn to are also deriving traction from the latest upturn in crude, albeit to varying degrees, while the Zar is drawing some momentum via stronger than forecast SA PPI and partial Gold revival. The Cnh continues to track PBoC settings for the Cny and Try has regrouped following hawkish CBRT commentary/guidance and initial declines on the back of downbeat GDP and inflation projections. Conversely, the Sek has failed to derive much from significantly stronger than anticipated Swedish GDP and sentiment indicators for some as yet not obvious reason aside from 10.1000 still proving impenetrable vs the Eur and Nok/Sek breaking even higher through 1.0180.
Notable FX Expiries, NY Cut:
- EUR/USD: 1.2095-1.2105 (1.1BLN), 1.2135-40 (561M), 1.2200 (945M)
- USD/JPY: 108.00-15 (700M), 108.50 (1.9BLN), 108.75 (326M), 109.00 (1.3BLN)
Australian Treasurer Frydenberg said the unemployment rate will recover to full employment in around 2 years and that the budget will work to reduce unemployment, but added that health and economic uncertainty remains. (Newswires)
- Australian Export Prices (Q1) Q/Q11.2% (Prev. 5.5%)
- Australian Import Prices (Q1) Q/Q 0.2% (Prev. -1.0%)
- New Zealand NBNZ Business Confidence (Apr) -2.0% (Prev. -4.1%)
- New Zealand NBNZ Activity Outlook (Apr) 22.2% (Prev. 16.6%)
CBRT forecast: food-price inflation, 2021 13% (prev. 11.5%), 2022 9.8% (prev. 9.4%); inflation expected to gradually converge to target. 2022 year-end inflation mid point 7.5% (prev. 7.0%). (Newswires)
Core bonds have gradually retreated further from ‘dovish’ Fed inspired highs to the point that Bunds, Gilts and USTs are now not that far off pre-FOMC troughs, as yields rebound and curves re-steepen ahead of the usual data deluge into month end. The respective 10 year benchmarks remain heavy as fresh intraday lows are probed at 170.11 (vs 170.04 on Eurex yesterday). 127.76 (against 127.62 on Liffe Wednesday) and 131-25+ (compared to 131-23). Next on the agenda, prelim German CPI then advance US GDP and ICJ before pending home sales and Fed’s Williams with an early opportunity to add a personal touch to latest official policy guidance and economic views.
WTI and Brent front month futures continue edging higher in conjunction with the broader sentiment across markets following Powell and Biden’s appearances since the European close yesterday. The upside could also be supported by the overall bullish inventory data seen during the week, whilst eyes remain on India’s situations amid its rampant “double variant”, although the nation is receiving international support. On this note, analysts at ING suggest that Indian refiners are erring towards increased refined product exports in a bid to tackle a domestic glut. “Increased export flows from India are a risk to regional product cracks, with additional supply potentially weighing on them. This is particularly the case, given that refiners in the country so far appear to have made only marginal cuts to run rates.”, the Dutch bank states. WTI resides just around USD 64.75/bbl (vs low USD 63.35/bbl) and Brent hovers sub-USD 67.75/bbl (vs low USD 66.64/bbl). Elsewhere, spot gold and silver are mixed but price action during European trade has been pegged to the Buck, with the former still around the USD 1,775/oz and spot silver just north of USD 26/oz. Turning to base metals, LME copper remains firm after testing but failing to breach USD 10,000/t to the upside, with overnight prices again experiencing upside as Chinese players entered the market. LME nickel meanwhile topped the USD 17,000/t mark yesterday with some citing restocking ahead of the Chinese labour day holiday between May 1st and 5th.
World Gold Council said India gold consumption could falter during the June quarter due to COVID-19 restrictions but could rebound in H2 on pent up demand. (Newswires)