Original insights into market moving news

[PODCAST] European Open Rundown 28th May 2021

  • Asian equity markets traded mostly higher; Nikkei 225 outperformed on the back of the weaker JPY
  • In FX, the DXY consolidated around 90.00, USD/JPY hovered close to 110.00; and the Yuan continued to strengthen
  • US bipartisan bill to counter China received enough support to advance in the US Senate
  • BoJ is reportedly to consider a 6-month extension to the September deadline for the pandemic-relief program
  • OPEC+ is reportedly likely to stick to the existing plan at its June 1st meeting
  • White House said it has concerns about the GOP infrastructure proposal
  • Looking ahead, highlights include the EZ Sentiment Survey, US PCE, Chicago PMI, the US Budget Proposal and supply from Italy


US President Biden said he will release the report on the origins of COVID-19 in full unless there is something he's not aware of. In relevant news, the Office of Director of National Intelligence said it does not know the exact origins of COVID-19 and that two likely scenarios are it emerged naturally from human contact with infected animals, or it was a laboratory accident. Furthermore, it stated that two elements of intelligence community lean towards the first scenario and one leans towards the latter but added there is insufficient evidence at this point to assess that one scenario is more likely than the other, while other reports later stated that US has unexamined intelligence to pore over regarding the origins of the virus. (Newswires/NYT)

Johnson & Johnson (JNJ) is said to be near agreement with US FDA for production in Baltimore, Maryland plant which could allow production of 60mln doses of COVID-19 vaccine. (WSJ)

California Governor Newsom announced a USD 116.5mln vaccine incentive program which aims to get more Californians vaccinated by June 15th whereby all Californians that are aged 12+ who are at least partially vaccinated will be eligible for cash prize draws, while prizes include 10 prizes of USD 1.5mln, 30 winners of USD 50k and 2mln will receive a USD 50 prepaid or grocery card. (Newswires)

WHO said Covax faces a shortfall of 190mln doses of COVID-19 vaccines by the end of June due to the impact of the virus in India. (Newswires)

Japanese Economy Minister Nishimura said the government is seeking to extend the state of emergency to June 20th and that the government experts panel approved the plan to extend the state of emergency, while PM Suga is set to hold a press conference today at 12:00BST/07:00EDT. (Newswires)

Ireland's government is reportedly set to consider relaxing international travel restrictions from July 19th. (RTE)


Asian equity markets traded mostly higher as the region improved upon the slight positive tilt seen on Wall St. and US equity futures also marginally extended on the prior day’s late ramp-up on what was otherwise a choppy session following mixed data releases and heading into month-end. ASX 200 (+1.2%) was underpinned by continued outperformance in the mining-related sectors amid strength in underlying commodity prices and with risk appetite also spurred by potential M&A reports including BetMakers Technology's proposal to acquire Tabcorp’s wagering and media business for AUD 4.0bln, while KKR and Domain Holdings partnered on a surprise AUD 3bln bid for PEXA that boosted shares in Link Administration which the largest shareholder in PEXA with a 44% stake. Nikkei 225 (+2.2%) outperformed as exporters cheered the recent currency weakness and with the BoJ said to consider a 6-month extension to the September deadline for the pandemic-relief program as soon as the next policy meeting on June 17th/18th. Hang Seng (+0.7%) and Shanghai Comp. (Unch.) were mixed with focus in Hong Kong on JD Logistics which jumped over 10% on its debut and which was the 2nd largest IPO for the city so far this year, although the mainland lagged following the recent strengthening of the CNY to a 5-year high against a basket of currencies and amid lingering tensions with the US after the bipartisan bill to counter China received enough support to advance in the US Senate. Finally, 10yr JGBs tracked the recent declines in T-notes with demand hampered by the outperformance of Japanese stocks which pressured prices in the 10yr benchmark beneath 151.50, while the central bank’s presence in the market for over JPY 1.1tln of JGBs heavily concentrated in 3yr-10yr maturities did little to spur a rebound.

PBoC injected CNY10bln 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 6.3858 vs exp. 6.3790 (prev. 6.4030)

US bipartisan bill to counter China received enough support to advance in the US Senate following a delay due to arguments on amendments, while it was earlier reported that Senators Crapo and Schumer reached a tentative deal which cleared the way for cloture on the China bill. (Newswires/Politico)

BoJ is reportedly to consider a 6-month extension to the September deadline for the pandemic-relief program as soon as the next rate review in June. (Nikkei)

  • Tokyo CPI (May) Y/Y -0.4% vs. Exp. -0.5% (Prev. -0.6%)
  • Tokyo CPI Ex. Fresh Food (May) Y/Y -0.2% vs. Exp. -0.2% (Prev. -0.2%)
  • Tokyo CPI Ex. Fresh Food & Energy (May) Y/Y -0.1% vs. Exp. -0.1% (Prev. 0.0%)


Washington is said to be close to providing the necessary commitments to the UK with regards to digital taxation. G7 sources suggested a deal is potentially doable next week. (Times)

UK PM Johnson is mulling plans to impose carbon tax on imports from polluting industries in a move that could protect British farmers from foreign competitors. (Telegraph).

  • UK Lloyds Business Barometer (May) 33 (Prev. 29)


In FX, the DXY continued its consolidation around the 90.00 level and lacked direction after a slew of data releases stateside yesterday. Attention in the US was also on the infrastructure negotiations as the White House noted concerns about the Senate Republican counterproposal. EUR/USD was lacklustre after its failure to hold on to the 1.2200 handle, while GBP/USD dipped below 1.4200 but held on to most of the spoils from yesterday’s outperformance following comments from BoE’s Vlieghe. USD/JPY remained near its best levels in over a month after the prior day's advances which were attributed by some desks to month-end flows, with Citi noting that “USD/JPY buy is the only signal to slightly exceed 0.5 standard deviations as Japanese investors may also need to sell JPY to reduce hedges on foreign bonds”. Elsewhere, antipodeans were mixed with NZD/USD the laggard after meeting resistance at the 0.7300 level and alongside cross-related flows with advances in AUD/NZD following a rebound off support at 1.0600, while CNY strengthened again in the aftermath of another firmer reference rate setting by the PBoC and despite its warnings against one-way expectations in the forex market.


WTI crude futures extended on yesterday's breakout to reclaim the USD 67.00/bbl level amid the constructive overnight risk tone and with some desks attributing yesterday's strength to a "catch up" for oil futures after the products made solid gains following this week EIA inventory data. In terms of the latest pertinent comments, sources noted that OPEC+ is likely to adhere to its current plan of easing oil output cuts when it meets next week, while there was also some jawboning from Goldman Sachs which suggested market tightness in H2 and that there was little evidence the supply response in commodities is sufficient to derail the bull market. Gold prices were flat with the precious metal contained beneath the USD 1900/oz amid an uneventful Greenback and copper was uneventful despite the improved risk appetite and strength in Chinese commodity prices.

OPEC+ is reportedly likely to stick to the existing plan at its June 1st meeting to ease oil output cuts until July, according to sources. (Newswires)

Goldman Sachs said the fundamental path for key commodities including oil, copper and soybeans remains oriented towards incremental tightness in H2 with scant evidence that supply response is enough to derail the bull market, while it added that the bullish thesis in commodities is not about Chinese speculators nor is it growth in Chinese demand, but is about scarcity and a DM-led recovery. (Newswires)


US State Department said it is concerned by recent developments along the Armenia, Azerbaijan border, including the detention of several Armenian soldiers by Azerbaijani forces. (Newswires)


Treasuries extended on losses amid fresh hawkish BoE comments and US fiscal ambitions, but a solid 7yr auction brought yields off lows. By settlement, 2s +0.0bps at 0.147%, 5s +1.6bps at 0.814%, 7s +2.9bps at 1.259%, 10s +3.4bps at 1.608%, 20s +2.8bps at 2.199%, 30s +2.7bps at 2.287%. 5yr TIPS +1.6bps at -1.808%, 10yr TIPS +2.5bps at -0.830%, 30yr TIPS +1.0bps at -0.021%. SOFR and EFFR unch. at 1bp and 6bps, respectively. Note there was a bid on volume for front-month Eurodollar futures today, coming as Credit Suisse's Zoltan called for the potential for the Libor-OIS spread to continue tightening, and even into negative territory. Yields sit little changed on the week although PCE on Friday could cause some commotion, as could index duration extension (exp. +0.12yr by 14:00EDT) and month-end flows given the US/UK market holiday on Monday. T-note (M1) futures settled 7 ticks lower at 132-22; T-note (U1) futures settled 8 ticks lower at 131-25.

Fed's Kaplan (2023 voter) reiterated that it is wise to start talking about moderating asset purchases sooner rather than later and suggested that at this stage, MBS purchases may be having unintended side effects. Furthermore, he repeated that the Fed needs to telegraph taper intentions well in advance and should adjust it gradually, while he added that it would be helpful and unsurprising to see 10-year yields drift up. (Newswires)

US President Biden reiterated calls for raising the corporate tax rate to 28% and earlier said that he told GOP Senator Capito infrastructure negotiations will have to wind up very soon, while a White House spokeswoman said that they expect to make progress on infrastructure plan before Congress comes back on June 7th. (Newswires)

White House said it has concerns about the GOP infrastructure proposal as it provides no substantial new funds and is concerned that GOP's plans to pay for the offer remain unclear, while it is continuing to explore other proposals that may emerge and reiterated earlier commentary that White House will work with Congress next week on infrastructure. (Newswires)

US Treasury Secretary Yellen said she does not believe that President Biden's spending plans will be inflationary, which will be paid out over eight-to-ten years and that the interest burden on US debt will be very manageable. Yellen also commented it is critically important that fiscal policy will be responsible and to not impose tax increases on future generations, while she added that the budget to be presented on Friday will raise debt-to-GDP ratio a bit higher than 100%. Furthermore, Yellen stated that as we get back to pre-pandemic full employment, it will be appropriate for interest rates to rise above rock-bottom levels and that the Biden budget assumes that over time, rates will revert to low but more normal levels. (Newswires)