[PODCAST] US Open Rundown 8th June 2021
- European cash and US equity future remain contained overall though were fleetingly pressured on multiple website outages globally with Fastly possible the cause; newsflow which lifted core debt to fresh highs
- In FX, DXY gains a firmer footing above 90.00; GBP and JPY lag whilst the NOK was lifted on the Norges Bank Survey
- US is reportedly planning trade talks with Taiwan; China is said to be moving ahead and making progress on legislation to counter US sanctions
- A bipartisan group of six senators plans to discuss ideas for an infrastructure package with 20 members on Tuesday
- UK lockdown lifting is reportedly set to be delayed by a fortnight, according to reports, citing comments from a cabinet source
- Looking ahead, highlights include EIA STEO, BoE's Haldane, supply from the US
Canada is set to ease rules for vaccinated travellers. (Newswires)
US lab report prepared in May last year during the Trump administration concluded the hypothesis that the virus leaked from a lab in Wuhan is plausible and deserved further investigation. (WSJ)
UK lockdown lifting is reportedly set to be delayed by a fortnight, according to reports, citing comments from a cabinet source that stated they expect a delay between two weeks and a month. (The Times) The Government is expected to announce their plans for the easing on June 14th, which is currently set for June 21st
BioNTech (BNTX) is planning to produce 4bln COVID-19 vaccine doses next year. (Newswires)
Asian equity markets lacked direction following a similar indecisive performance on Wall Street where the major indices closed mixed as the absence of any significant catalyst, had participants looking ahead to the key events later in the week including the ECB meeting and US CPI data. ASX 200 (+0.2%) was choppy after stalling at fresh record highs and with early advances in the index pared by weakness in mining names and financials, while mixed NAB Business Survey data also added to the non-committal tone. Nikkei 225 (+0.1%) was initially lifted following the revised Q1 GDP figures which showed a narrower than expected contraction to Japan’s economy, although the gains were then briefly wiped out with the index not helped by the recent currency moves and amid concerns of stealth tapering by the BoJ which refrained from ETF purchases throughout the whole of last month for the first time since Governor Kuroda began QQE in 2013. There was plenty of focus on Eisai which remained untraded but set to hit limit up amid a glut of buy orders after the FDA approved the ADUHELM drug for Alzheimer’s disease which earlier boosted shares in development partner Biogen. Hang Seng (-0.3%) and Shanghai Comp. (-0.5%) were choppy with initial upside limited by the continued China-related tensions with the G-7 expected to reference the Taiwan Strait into its summit statement and express concerns about human rights abuses against Uyghur Muslims, as well as the pro-democracy crackdown in Hong Kong. Furthermore, China was said to be making progress on legislation to counter US sanctions and reports citing Secretary of State Blinken also suggested the US is planning trade talks with Taiwan which is likely to add to the tensions with China. Finally, 10yr JGBs were rangebound amid the indecisive mood across the region and with some concerns of stealth tapering by the BoJ after it refrained from ETF purchases throughout the entire of last month, although there was some mild support following the mixed results of the 30yr JGB auction which showed a slightly higher b/c.
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 6.3909 vs exp. 6.3908 (prev. 6.3963)
Chinese retail passenger vehicle sales (May) +1% Y/Y, according to the CPCA; *Tesla (TSLA) *sold 33,460 China-made vehicles in May. (Newswires)
US is reportedly planning trade talks with Taiwan which is likely to add to tensions with China, according to reports citing comments from Secretary of State Blinken. (WSJ)
NATO Secretary General Stoltenberg said following a meeting with US President Biden, that China will be an issue when NATO leaders meet and that China does not share our values. (Newswires)
China is said to be moving ahead and making progress on legislation to counter US sanctions. (Newswires)
- Japanese Revised GDP (Q1) Q/Q -1.0% vs. Exp. -1.2% (Prev. -1.3%)
- Japanese Revised GDP Annualised (Q1) -3.9% vs. Exp. -4.8% (Prev. -5.1%)
Multiple websites are currently down with initial indications that this is due to an outage at Fastly (FSLY), which is a content delivery network; with FT's Taylor among those highlighting the Fastly connection. This newsflow seemingly sparked a risk-off reaction with equity futures in both Europe and the US hitting fresh lows for the session and core debt counterparts climbing to fresh highs; note, the moves coincided with the arrival of US participants which could be a factor as well in what has been relatively quiet trade during the European morning. Link to newsquawk headline with the full list of affected companies and detailed reaction
US Senator Capito said that they are not planning another GOP counteroffer on infrastructure and that she will not speak to President Biden until Tuesday. Furthermore, the Senator was said to not sound too optimistic about talks with President Biden and noted the goalposts keep moving, while she suggested that the White House position was that the GOP offer is "still not enough and that they're looking at other ideas", according to NBC News' Kapur. (Twitter)
A bipartisan group of six senators plans to discuss ideas for an infrastructure package with 20 members on Tuesday although they’re still working on a top line dollar amount and with many details in flux, according to CNN's Raju. (Twitter)
US Commerce Secretary Raimondo said the global shortage of semiconductors will remain a daily challenge for the next year or so. (Newswires)
If infrastructure talks between US President Biden and Senate Rep. Capito fail, the plan B is to look at a roughly USD 900bln “hard” infrastructure plan that focuses on traditional infrastructure projects, however payment is an issue - Punchbowl. (Newswires)
European Commission VP Sefcovic warned the EU would respond swiftly, firmly and resolutely if Britain extends the grace period regarding the Northern Ireland Protocol which expires this month, as ministers in the UK were said to be mulling a unilateral extension for chilled meats. (Telegraph) Separately, the EU is set to present concessions on NI today but will warn Lord Frost that Brussels' "patience is wearing thing" when it comes to the government's confrontational attitude. (Times)
German Finance Minister says they will not be discussing lifting the retirement age
German ZEW Economic Sentiment (Jun) 79.8 vs. Exp. 86.0 (Prev. 84.4)
Major bourses in Europe experienced another lacklustre cash open with sideways action persisting throughout the early European hours and following on from a mostly downbeat APAC handover. The region thereafter adopted a mild but fleeting upside bias in conjunction with upward revisions to Q1 EZ GDP and a sub-par German ZEW - which was accompanied by constructive forward-looking commentary. US equity futures have also been drifting off throughout the morning but came under pressure with some pointing to the mass outages seen across several news vendors including the FT, Guardian, CNN, Reddit and New York Times among others are currently unavailable – which seemingly dented sentiment - but the breadth of the price action remains narrow. Sectors in Europe are mostly firmer with no stand-out bias nor theme. Banks continue to be pressured by the pullback in yields. Oil & Gas also lags amid sluggish crude prices. The upside meanwhile sees Travel & Leisure amid a surge in summer demand, whilst healthcare coat-tails on the State-side sectoral performance yesterday after Biogen shares soared on the FDA green-lighting its Alzheimer's drug. In terms of individual movers, Aviva (+3.5%) is supported by Cevian Capital announcing a 5% stake in the group, suggesting that it should have a value of over GBP 8/shr within three years and more than double its dividend to GBP 0.45. British American Tobacco (+1.8%) rose after the Co. upped its revenue growth guidance to "above 5%" from the prior of "3-5%". Meanwhile, Volkswagen shares (-1.1%) shares opened lower by around 3% with potential catalysts for the move including a Business Insider article about work councils getting more hands-on with bonus payments, alongside perhaps read-across from the earlier Apple EV battery source reports. However, the exact catalyst behind the move remains unclear.
Southwest Airlines (LUV) says May operating revenue performed in line with expectations, sequential increase in June. (Newswires)
IATA says capacity remains 9.7% below pre-COVID levels given the grounding of passenger craft, air cargo remains as the 'good news story' for the sector. (Newswires)
GBP, JPY - The Sterling and Yen remain the main G10 laggards with the former drifting lower in light of reports that the UK June 21st reopening could be delayed by a fortnight, as well as ongoing tensions with the EU over the Northern Ireland protocol. Technicals are also keeping the Pound under pressure – EUR/GBP tested and failed to breach 0.8600 to the downside in early hours in a move that coincided with touted stopped being tripped in GBP/USD at its 21 DMA around 1.4144, according to market contacts. In terms of nearby levels, the pair sees yesterday’s low at 1.4110 ahead of the psychological 1.4100 and with 1.4080 touted as major support. Up next, BoE’s outgoing Chief Economist Haldane is poised to speak at 14:00BST albeit at an Inequality workshop. Elsewhere, the JPY experienced weakness heading into the Tokyo fix overnight with some also noting of investment demand and speculative bargain-hunting. USD/JPY rebounded from its 50 DMA (109.17) and rose above its 21 DMA (109.30) to reside around the 109.50 mark which sees around USD 1bln in OpEx ahead of the NY cut.
DXY - The broader Dollar and index remain on firmer footings with the aid of some overnight inflows as risk sentiment deteriorated, whilst losses in the JPY and GBP offer further tailwinds. The index clambered off its 89.953 low and again mounted its 21 DMA (90.093) to a current high of 90.181 ahead of yesterday's 90.302 high. Looking ahead, the State-side docket remains light with US CPI (Thursday) the main highlight and as Fed officials continue to observe its blackout period.
EUR, AUD, NZD - All relatively flat and mirroring Dollar action. EUR/USD came under gentle pressure just before the 1.2200 mark with some also citing sell orders at the psychological level – with the pair later dipping below its 21 DMA at 1.2177 to a current low at 1.2171. The Single Currency saw was unfazed by the upward EZ GDP revisions and below-forecast German ZEW print which was accompanied by some hopeful economic commentary. The Aussie and Kiwi remain contained by a barrage of nearby DMAs, with AUD/USD meandering around its 21 DMA at 0.7747 whilst its 50 and 100 DMAs overlap at 0.7727. NZD/USD is back under its respective 21 DMA (0.72222) whilst the 50 and 100 reside at 0.7182 and 0.7175 respectively.
NOK - The NOK gained impetus on an overall optimistic Norges Bank Regional Network survey - which suggested that contacts expect substantial output growth ahead as the measures ease through summer. All-in-all, the report indicates that the Norges Bank's policy normalization plans (which look for a rate increase around the end of this year) are on track as things stand. EUR/NOK dipped from its 10.08 high, through its 50 DMA (10.0688) to a current low of 10.5021.
Norges Bank Regional Network Survey: Contacts expect substantial output growth ahead as the measures ease through summer. All sectors expect activity growth to pick up over the next six months. Output growth was strongest in manufacturing and commercial services. At the same time, retail trade and construction report a fall in turnover. In the other sectors, activity levels have shown little change since February. (Norges Bank)
Notable FX Expiries, NY Cut:
- EUR/USD: 1.2065-70 (440M), 1.2175-85 (825M), 1.2200 (1BLN), 1.2225-35 (620M), 1.2250-65 (882M), 1.2300 (1.1BLN)
- AUD/USD: 0.7700-10 (811M), 0.7725 (400M), 0.7745-50 (911M)
- NZD/USD: 0.7150 (450M), 0.7260 (1.2BLN)
- USD/JPY: 108.45-65 (1.7BLN), 109.00-05 (855M), 109.50 (1BLN)
A mildly constructive start to the session though fresh catalysts and firm conviction behind the upside was/is lacking with core debt never climbing too far from the unchanged mark as such. Perhaps the most notable move was in the US 10yr yield whereby the UST upside in the early European morning prompted a low print of 1.552% vs last week’s 1.54% trough; however, the move was short-lived. More broadly, fundamental focus remains on the US inflation numbers and ECB decision due Thursday but before then today’s supply slate is in the spotlight with the US 3yr the headline overall but EGBs fixating on Italian syndication. On this, demand for the 10yr is in excess of EUR 60bln and price guidance has been tightened from BTP +9bpn to +6bp. The last 10yr syndication saw EUR 14bln sold though this was at the height of the pandemic in June 2020 and a better comparison can be found from February where a dual-tranche outing saw EUR 10bln assigned to the 10yr. Thus far, BTPs themselves have been unreactive to the syndication though yesterday’s announcement that it was due did prompt a mild widening of the BTP-Bund yield spread; albeit, and perhaps unsurprisingly, this was marginal in magnitude as participants remain attentive to Thursday’s ECB update particularly around PEPP. Returning to core counterparts, Bunds were marginally supported on mixed ZEW prints for the region though commentary from the institute remains constructive and as such the move failed to spur a convincing test of 172.00 and an uneventful 2028 sale thereafter prompted no reaction. However, Bunds did make a new high of 172.08 following the Fastly related outages to various global website, although much of this upside has since pared back – full details on this available in the Global News section of this document. Finally, ECB’s Centeno is due to speak later but as we are in the ECB’s quiet period his remarks are unlikely to be relevant to current policy. Outside the continent Gilts are relatively flat in-spite of further reports around a potential, minimal, delay to the planned easing of lockdown restrictions and with Northern Ireland tensions/discussions back in focus – although, Gilts benefited alongside other peers on the Fastly related outages and associated sentiment move.
WTI and Brent front month futures remain subdued as the benchmarks largely moved in tandem to risk amid the absence of catalysts, and with the complex looking ahead to this week’s tri of oil market reports. WTI and Brent hit session lows of USD 68.50/bbl and USD 70.70/bbl respectively as APAC sentiment sourced, before trimming losses to trade around USD 69/bbl and 71.25/bbl at the time of writing as equities edge higher - . Aside from the sentiment-driven moves, news flow for crude has been light. Next up, the EIA STEO scheduled for later today will be eyed for commentary on demand heading into the Summer, whilst the agency’s Iran-related risks will also be interesting as JCPOA talks are poised to restart this Thursday. Elsewhere, spot gold and silver have been trundling lower as precious metals continue to tackle the lower yield environment with a perkier Dollar intraday. Spot gold trades sub-1,900/oz (vs 1,903/oz high) but still above its 21 DMA at 1,877/oz, whilst spot silver inches closer towards UDS 27.50/oz from its 27.97/oz peak. Elsewhere, LME copper has trimmed losses as overall market sentiment improves, but prices remain below USD 10,000/t as the upside is capped by US-Sino tensions. Dalian iron ore futures fell for a third straight session overnight, with some citing the decline in China's inventory of construction steel rebar - which slowed sharply last week - indicating easing demand.
LME intends to reopen the Ring for trading on 6th September 2021; electronic liquidity enhancement plans to start in 2022. (Newswires)