Original insights into market moving news

[PODCAST] European Open Rundown 9th June 2021

  • Asian equities traded mixed with price action confined to relatively tight ranges
  • Chinese CPI missed forecasts while PPI continued to surge and registered the fastest pace of increase in factory gate prices since 2008
  • Talks between US President Biden and Senator Capito have officially ended with Biden moving onto talks with a bipartisan group of senators
  • In FX, the DXY holds on to 90.00 status, EUR/USD and GBP/USD trade on 1.21 and 1.41 handles respectively
  • WTI crude futures extended on gains after breaching the USD 70/bbl level for the first time since 2018
  • Looking ahead, highlights include BoC rate decision, DoEs, supply from the UK, Germany, and the US


White House is launching working groups with Canada, Mexico, EU and UK to figure out how best to reopen travel safely, according to a White House official. Furthermore, working groups will be led by White House COVID response team and that National Security Council is to make road maps to reopen international travel safely, while any US decisions to ease travel restrictions "will be fully guided by the objective analysis and recommendations by public health and medical experts". (Newswires)

US CDC eased travel recommendations to 61 countries including Japan to Level 3 from Level 4 and eased travel recommendation rating on the US to Level 3 from Level 4. Furthermore, it eased recommendations for Japan, Canada, Mexico, Iran, France and other countries from 'avoid travel' to 'make sure you are fully vaccinated before travelling'. (Newswires)

White House stated that it cannot expediate FDA review of AstraZeneca (AZN) COVID vaccine. (Newswires)

US and EU draft seeks a COVID review "free from interference" and are both set to back a renewed probe into COVID origins. (Newswires)

UK Chancellor Sunak is reportedly willing to accept a four-week delay to the 21st June COVID-19 reopening, rather than a 'halfway house' delay that could be confusing. (Guardian)

Restrictions in Melbourne, Australia are set to be eased on Thursday night with a 25KM travel bubble to be imposed for the city's residents. (Newswires)


Asian equities traded mixed with price action confined to within relatively tight ranges as the tentative mood in global markets persisted heading closer to this week's risk events, with sentiment also clouded by lingering China-related frictions and following a breakdown of US infrastructure talks. ASX 200 (-0.2%) lacked conviction with upside in mining names and tech offset by underperformance in consumer staples and financials. In addition, Consumer Confidence data in Australia continued to dwindle and the confirmation that Melbourne lockdown measures will be eased on Thursday evening did little to spur the index. Nikkei 225 (-0.3%) was subdued after meeting resistance just shy of the 29k level although downside was limited and participants continued to await the reopen of Eisai shares which remained untraded for a 2nd consecutive day amid heavy buy order, while the KOSPI (-0.2%) remained uninspired despite the upward revisions to South Korea’s final Q1 GDP data. Hang Seng (Unch.) and Shanghai Comp. (+0.4%) were indecisive after mixed Chinese inflation data in which CPI missed forecasts, but PPI continued to surge and registered the fastest pace of increase in factory gate prices since 2008. Risk appetite for the region was also hampered by ongoing frictions after the US Senate voted to pass the sweeping China competition bill and with the US to launch a "strike force" targeting trade abuses including from China, while the US Commerce Department was reportedly considering a Section 232 investigation on the national security impact of neodymium magnets which are largely imported from China. Finally, 10yr JGBs marginally extended on yesterday’s advances which were in tandem with the global bond rally, to test resistance at 151.50 and with upside helped by the BoJ’s presence in the market for more than JPY 1.4tln of JGBs heavily concentrated in 1yr-10yr maturities.

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 6.3956 vs exp. 6.3980 (prev. 6.3909)

  • Chinese PPI YY (May) 9% vs. Exp. 8.5% (Prev. 6.8%); highest since 2008
  • Chinese CPI MM (May) -0.2% vs. Exp. -0.1% (Prev. -0.3%)
  • Chinese CPI YY (May) 1.3% vs. Exp. 1.6% (Prev. 0.9%)
  • South Korean GDP (Q1 F) Q/Q 1.7% (Prev. 1.6%)
  • South Korean GDP (Q1 F) Y/Y 1.9% (Prev. 1.8%)

China NDRC said it is determined to ensure supply and keep prices stable for goods linked to livelihoods and will improve pork reserve mechanism, stabilise hog output and ensure effective supply of pork, while China will set up a pork market alert system. There were also comments from the China Commerce Ministry which suggested to not be blindly optimistic about China's foreign trade in 2021 and said it will step up foreign trade firms' ability to manage FX risks. (Newswires)

A COVID-19 outbreak in southern China is reportedly curbing some activity in the nation's largest ports which has stoked concerns further disruption of international trade could lift export prices. (FT)

US Senate voted 68-32 to pass the sweeping China competition legislation valued at USD 250bln. It was separately reported that the US House Foreign Affairs Committee will likely be delaying the markup of their own version of the bill called the EAGLE Act next week (originally June 15), while members are hopeful for a bipartisan agreement with more time. (Newswires/Politico)

Japanese Defence Minister Kishi said unilateral attempts to alter the status quo with force in East and South China Seas are becoming increasingly serious, while Japanese Foreign Minister Motegi later commented that they agreed with the Australian view regarding the importance of peace and stability in the Taiwan Strait. (Newswires)


UK Chancellor Sunak is reportedly pushing for a financial services carve out in the UK from the proposed G7 global tax plan amid concerns over global banks with head offices in the UK being affected, while Sunak is to push for adjustments at G20 next month. (FT)

Chief Negotiator of Task Force Europe Frost has insisted that Brussels must drop threats of legal action and tariffs on Britain as he prepares to meet with EU Commission VP Sefcovic in a bid to unlock the impasse on the Northern Ireland Protocol. (Times)

EU and US are reportedly set to agree on a resolution to major trade disputes and will layout the route to a trade accord, while they are to pledge an end to aircraft and metals dispute this year, according to draft summit conclusions. (Newswires)

Germany and France are reportedly leading the effort to dilute EU's stricter bank capital requirements. (FT)


In FX markets, the DXY held above the 90.00 level although price action was lacklustre and kept to within a tight range amid the ongoing Fed blackout period and as participants continued to await the upcoming US CPI data, while there was also a breakdown of infrastructure talks between US President Biden and Republican Senator Capito with the administration now moving on to talks with the bipartisan group of Senators. EUR/USD eked mild gains with a lack of firm commitment for the single currency ahead of Thursday’s ECB meeting, while GBP/USD was also marginally higher after finding a platform around 1.4150 but with upside capped by lingering Northern Ireland issues and following comments from BoE's Haldane who noted that uncertainties around the job market remain 'pretty acute'. USD/JPY and JPY-crosses were rangebound in tandem with the indecisive picture in stocks, which alongside softer Australian Consumer Confidence and mixed New Zealand Business Surveys, also kept antipodeans in check.

  • Australian Westpac Consumer Confidence Index (Jun) 107.2 (Prev. 113.1)
  • Australian Westpac Consumer Confidence (Jun) M/M -5.2% (Prev. -4.8%)
  • New Zealand ANZ Activity Outlook (Jun P) 29.1% (Prev. 27.1%)
  • New Zealand ANZ Business Confidence (Jun P) -0.4 (Prev. 1.8)

Australian Bureau of Statistics reported that total weekly payroll jobs change for May 8th-22nd rose 0.3% (prev. -0.5%), wages rose 0.6% (prev. -1.3%). (Newswires)

Brazil Economy Minister Guedes said they are extending emergency aid for two-to-three months and sees GDP between +4 to +5% in 2020, while the country will reduce deficit this year even with expenses to fight COVID pandemic and estimates full vaccination of Brazilian population two-to-three months away. (Newswires)

US VP Harris said economic dialogue in September will focus on how to expand US-Mexico economic relationship. In other news, the Mexican Deputy Finance Minister said they are not planning tax hikes in the upcoming fiscal reform and that the government aims to raise the tax take to 15% of GDP from a current level of just above 14%, while the fiscal plan will include steps to improve taxing efficiency and close loopholes. (Newswires)


WTI crude futures extended on gains after breaching the USD 70/bbl level for the first time since 2018 with upside helped by the reopening narrative stateside with the White House launching working groups with other countries on reopening travel safely and after the CDC eased travel recommendations to 61 countries. Furthermore, the pathway towards the Iranian nuclear deal still looks bumpy with Secretary of State Blinken anticipating hundreds of sanctions would remain in place even if Iran and the US return to compliance with the JCPOA. Participants also got the opportunity to mull over the latest EIA STEO in which world oil demand forecasts were reduced, while the components of the private sector inventory report were bearish although this only resulted in brief headwinds for oil. Gold prices remained steady amid a flat greenback as focus remained on the looming US inflation data and copper was also subdued by the broad cautiousness.

US Private Inventory Data (bbls): Crude -2.1mln (exp. -2.0mln), Gasoline +2.4mln (exp. +0.7mln), Distillate +3.8mln (exp. +1.4mln), Cushing -0.4mln. (Newswires)

EIA STEO cut 2021 world oil demand growth forecast by 10k BPD to +5.41mln BPD Y/Y and cut 2022 world oil demand forecast by 90k BPD to +3.64mln BPD Y/Y. Furthermore, US 2021 crude output forecast was raised to a fall of 230k BPD to 11.08mln BPD (prev. fall of 290k BPD), while US 2022 crude output forecast was cut to a rise of 710k BPD to 11.79mln BPD (prev. rise of 820k BPD). (Newswires)

US stated it is exploring the potential of offshore wind development in the Gulf of Mexico. (Newswires)

China is reportedly mulling price controls for a surging coal market. (Newswires)


US said to the IAEA board that if Iran does not allow monitoring as was agreed with the IAEA, that would seriously complicate talks on the nuclear deal, according to a statement. (Newswires)

Syrian air defences responded to Israeli aggression following reports of explosions heard over Damascus. (Newswires)


Treasuries caught a strong bid in the EU/US handover absent fresh catalysts, although hovered sideways and slightly off highs for the rest of the day. By settlement, 2s -0.4bps at 0.153%, 3s -1.1bps at 0.301%, 5s -2.7bps at 0.766%, 7s -3.9bps at 1.200%, 10s -4.2bps at 1.528%, 20s -3.9bps at 2.131%, 30s -4.5bps at 2.207%; TYU1 volumes was average today despite the strong morning flurry. 5yr TIPS +2.2bps at -1.745%, 10yr TIPS -1.0bps at -0.855%, and 30yr TIPS -3.2bps at -0.092%. SOFR and EFFR both unchanged at 1bp and 6bps, respectively. The T-bid extended further as more US players arrived, on decent volume too - some had attributed strength to a recent sell side research report. On which, it's also worth noting in the past week or so there has been a slew of strategists recommending short Treasury vol trades into the summer, to which we could be seeing more vol exposure being unwound in the space. The bid saw 10s break through resistance at 1.52%, which also coincided with a chunky 5s30s flattener bet that supported the long-end bid. The pre-market rally soon lost momentum into the US morning, however, with one desk noting a cessation of short-covering (note that the latest JPM Treasury Client Survey saw shorts pared slightly from multi-year highs going into this week, so there is likely lots of "shorts to squeeze", if need be), seeing prices of highs, and then sideways right through to settlement. The solid 3yr auction amid the scramble for yield at the front-end saw little reaction on the curve, with attention now looming to Wednesday's 10yr offering from the Treasury. T-note (U1) futures settled 11 ticks higher at 132-14+.

Talks between US President Biden and Senator Capito have officially ended with President Biden moving onto talks with groups of Republicans and Democrats. Furthermore, President Biden spoke with Republican Senator Cassidy and Democrats Sinema and Manchin in which he urged them to continue work developing a bipartisan infrastructure proposal and he will contact them while on the upcoming European trip. (Newswires/Punchbowl)

US Senator Capito was said to be extremely disappointed talks ended and suggested that they missed a real opportunity for 20 Republicans on infrastructure, while she added the second track the administration took with other senators was disappointing to her, according to Fox's Pergram. (Twitter)

US Commerce Secretary Raimondo said not boosting US manufacturing would be "devastating", while White House Adviser Harrell separately commented that the Export-Import Bank is looking at expanding financing for construction of manufacturing in the US. (Newswires)

White House Economic Adviser Fazili said the US will "double down" on efforts to fix chip supply and the private sector may also need to take action to address supply chain vulnerabilities, while supply chain bottlenecks are expected to be temporary and will resolve in the next few weeks. (Newswires)