Original insights into market moving news

[PODCAST] European Open Rundown 12th July 2021

  • Asia-Pac stocks began the week on the front foot; Chinese markets conformed to the positive mood following the PBoC's surprise RRR cut on Friday
  • In FX, DXY was lacklustre, EUR/USD held onto its 1.1800 handle, GBP/USD stalled at 1.3900 and USD/JPY found a base at 110.00
  • ECB's Lagarde said she sees a July policy change and that there will be a forward guidance review at the July meeting, while she sees possible measures for 2022 and noted that PEPP may be followed by a transition to a new format
  • US confirmed it blacklisted 34 companies on Friday; China’s Mofcom stated this is unreasonable suppression and a serious breach of international economic and trade rules
  • China's military stated that a US warship unlawfully entered the Paracel Islands in the South China Sea
  • Looking ahead, highlights include the ECB Asset Purchases, Fed’s Williams, Kashkari, ECB’s de Guindos and supply from the US


European Commission President Von der Leyen said that they have delivered enough vaccine doses to member states to be in a position to fully vaccinate 70% of the EU adult population. (Newswires)

UK is reportedly to reduce the gap between taking the first and second doses of COVID-19 vaccines to 4 weeks from the current 8 weeks and is reportedly planning to require COVID-19 passports for customers to enter bars, restaurants and nightclubs under plans to tackle a fourth wave of the virus and which experts hope will boost jab rates among the young. (The Times/Sky News). UK Vaccines Minister Zahawi suggested the government will issue guidance on Monday that people are still "expected" to wear face masks in indoor and enclosed spaces after the legal requirement for wearing masks ends on July 19th. Furthermore, he said he was puzzled where the story came from when asked about if the gap for second doses will be cut and stated that the eight-week interval protection is better than reducing it, while there were also comments from national statistician Diamond that there are big increases in the number for the north-east of the country. (Newswires)

Dutch PM Rutte announced that COVID-19 curbs were to be partially reimposed in the Netherlands from Saturday morning due to the surge in infections and that restrictions will remain in place until August 14th. (Newswires)

Sydney is bracing for a longer and stricter lockdown after continued increases in COVID-19 cases, while the New South Wales Premier stated things are going to get worse before they get better and it was also reported that the Australia-Singapore travel bubble was delayed until at least year-end, according to the Australian Trade Minister. (Newswires)

South African President Ramaphosa said the Cabinet decided to maintain an adjusted alert level 4 for an additional 14 days but noted restaurants will be permitted to operate under strict protocols, while he added the advisory committee is working on how soon the Sinovac (SVA) vaccine could be included in the vaccination programme. (Newswires)

TSMC (2330 TT) said it is in the middle of a contract signing process to acquire COVID-19 vaccine doses from BioNTech (BNTX). (Newswires)


Asia-Pac stocks began the week on the front foot as they followed suit to last Friday’s gains across global counterparts including the cyclical-led advances on Wall St where the major indices posted fresh record closes, with the regional bourses taking their first opportunity to react to the PBoC’s surprise RRR cut. The ASX 200 (+0.8%) traded higher with outperformance in the mining-related sectors frontrunning the advances for the index but with upside capped by losses in consumer stocks and with Australia’s most populous city of Sydney bracing for a longer and stricter lockdown after a further increase of COVID-19 infections which the New South Wales Premier suggested were going to get worse before they get better. The Nikkei 225 (+2.2%) was the biggest gainer with the index encouraged by recent outflows from the JPY and better-than-expected Machinery Orders that printed at its highest since October, while the KOSPI (+0.9%) benefitted from early trade figures including a continuation of the double-digit growth in Exports during the first 10 days of July. Hang Seng (+0.7%) and Shanghai Comp. (+1.0%) conformed to the positive mood after the recent 50bps RRR cut by the PBoC effective from July 15th which will release around CNY 1tln of long-term liquidity and with the latest Chinese financing data also adding to the encouragement, although tensions lingered in the background after the US recently blacklisted 34 companies including 14 that were related to China's ongoing campaign of repression against Muslim minority groups, which China’s Mofcom criticized as unreasonable suppression and vowed to take necessary measures to protect China’s rights and interests. Finally, 10yr JGBs were subdued following the recent bear-steepening in USTs, with demand sapped by the outperformance in Japanese stocks and absence of BoJ purchases in the market today.

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 6.4785 vs exp. 6.4739 (prev. 6.4755)

US confirmed it blacklisted 34 companies on Friday in which 14 of them were related to China's ongoing campaign of repression against Muslim minority groups. China’s Mofcom stated the US inclusion of Chinese companies to its entity list is unreasonable suppression and a serious breach of international economic and trade rules, while it will take necessary measures to protect China’s rights and interests. (Newswires)

China’s Cyberspace Administration stated any company that holds data of more than 1mln Chinese users must provide a safety review prior to listing in the US. (Newswires)

South Korean July 1st-10th Trade Balance at provisional deficit of USD 3.9bln, while Exports rose 14.1% Y/Y and Imports rose 33.3% Y/Y. (Newswires)

Japan's government raised its assessment of machinery orders which it said is showing signs of a pick up, while it was also stated that core machinery orders rose the most M/M increase since October although the recovery in orders from non-manufacturers may take more time. (Newswires)

  • Japanese Machinery Orders MM (May) 7.8% vs. Exp. 2.6% (Prev. 0.6%)
  • Japanese Machinery Orders YY (May) 12.2% vs. Exp. 6.3% (Prev. 6.5%)


G20 Ministers agreed on a minimum corporate tax of at least 15% and the agreement also establishes new tax rules for multinationals which will be partly based on where they sell their goods and services instead of location of their headquarters. Elsewhere, the EU is reportedly to delay plans for a digital levy until the Autumn following pressure from US Treasury Secretary Yellen, according to sources. (Newswires/FT)

Italy’s G20 Presidency stated that additional work is necessary on a global tax deal and that they should avoid rolling out new pandemic related restrictions, while he added that new variants are increasing uncertainty and is what they should concentrate on. (Newswires)

US Treasury Secretary Yellen said the global tax deal will raise revenues for governments for necessary investments and stated that the world should proceed quickly to finalize the global tax deal. Yellen also stated that G20 made good progress on tackling climate change and helping poor nations regarding COVID-19 vaccine rollouts, while she also commented and that multilateral cooperation can make US more competitive in the global economy. (Newswires)

BoJ Governor Kuroda stated that the new tax deal is very important as it overhauls global tax rules which have been in place for a century and he told G20 that policymakers must take further action for financial stability, while Japanese Finance Minister Aso said Japan had called for a new global tax agreement for almost 9 years and noted there wasn’t substantial discussions at the G20 around carbon pricing with the agreement likely to take quite a long time. (Newswires)


UK Trade Minister Truss is to meet with US Trade Representative Tai during her five-day visit to the US. (Newswires) However, sources suggest that a deal with the US before 2023 is unlikely and the UK Trade Minister was now "playing the long game" with this visit. (Telegraph)

UK is considering short-term visas to address a shortage of lorry drivers. (Telegraph)

ECB's Lagarde said she sees a July policy change and that there will be a forward guidance review at the July meeting, while she sees possible measures for 2022 and noted that PEPP may be followed by a transition to a new format. (Newswires)

ECB’s Schnabel stated she does not expect to see excessively high inflation and that current higher inflation is transitory. Schnabel added that the increase in the inflation target is minimal and that people should not fear higher inflation. (Newswires)

ECB’s Villeroy stated the ECB has time to adapt monetary policy in approaching meetings and that strategy is long-term but can be adapted, while he also suggested that they need to distance themselves from the idea that the inflation target is a ceiling. There were reports on Friday that ECB's Villeroy said in the annual letter to French President Macron that France's heavy public debt poses a challenge to the economy but can't be cancelled, while easing the debt burden needs time, growth from investor-friendly reform, and efficient public spending. Furthermore, he stated that EU's Stability and Growth Pact needs amending in a way that neither abandons the pact's core principles nor remains fixated on an outdated cap, while he commented on addressing the labour supply shortage and stated that there is hardly any reform more important than those that increase the quantity and quality of labour in the market. (Newswires)


In FX, the DXY remained lacklustre after retreating towards the 92.00 level during Friday’s session whereby the greenback underperformed amid the broad positive risk tone and despite the rebound in yields, although price action has quietened since then with participants shifting focus to this week’s notable events for the greenback including US CPI data on Tuesday and Fed Chair Powell’s Semi-annual Monetary Policy Report to the Congress from Wednesday. EUR/USD held on to most of its recent gains against the greenback with a firm grip on the 1.1800 handle but with the single currency uneventful to start the week despite various central bank rhetoric including from ECB’s Lagarde who flagged a potential policy change and forward guidance review for the July meeting, as well as possible measures for 2022. GBP/USD stalled after a brief attempt on the 1.3900 handle amid conflicting reports regarding halving the eight-week gap between vaccine doses in the UK which the vaccines minister denied, although much of the focus for the country was on the conclusion of the Euro 2020 final which ended in heartbreak again for England on penalties. USD/JPY found a base at 110.00 and JPY-crosses marginally eased off Friday's best levels but with downside stemmed by the broad constructive risk tone which has also helped limit the pullback for antipodeans despite the ongoing deteriorating COVID-19 situation in Australia and weaker New Zealand Electronic Card Retail Sales data.

NZIER Shadow Board sees the RBNZ to tighten policy within the next year citing a pick up in inflation pressures for New Zealand, while there were also comments from Kiwi Bank that a November rate hike from the RBNZ seems premature. (Newswires)

South Africa’s Eskom announced that they temporarily paused services in areas impacted by community protests for the safety of employees and contractors. (Newswires)


WTI crude futures traded rangebound after prices stalled just shy of the 75.00/bbl level after a weekend of very light newsflow for the energy complex and with prices not helped by the deteriorating COVID-19 situation across various regions, while there have also been some recent concerns of China's growth beginning to slow which were also stoked by the recent surprise RRR cut announcement. Gold marginally retreated towards the USD 1800/oz level despite the lacklustre greenback with a non-committal tone heading into tomorrow's US CPI data, while copper also failed to benefit from the broad constructive and instead gave up its early gains.

US Baker Hughes Rig Count (w/e July 9th): Oil +2 at 378, Nat Gas +2 at 101, Total +4 at 479. (Newswires)

Saudi Arabia will supply full contract volumes of August-loading crude oil to at least five Asian buyers but rejected requests for extra barrels from at least two buyers, according to sources. (Newswires)


White House said US President Biden spoke to Russian President Putin on Friday about ongoing ransomware attacks by criminals based in Russia and underscored need for Russia to take actions to disrupt ransomware groups, while he reiterated that the US will take necessary action to defend Americans and any critical infrastructure. Furthermore, President Biden said it would make sense for the US to attack servers used in ransomware attacks. (Newswires)

China's military stated that a US warship unlawfully entered the Paracel Islands in the South China Sea. (Newswires)


Treasuries bear-steepened in what was an overdue technical correction for bonds as supply beckons and profitable longs closed positions. 2s +2.3bps at 0.215%, 5s +4.6bps at 0.783%, 10s +6.7bps at 1.355%, 30s +7.1bps at 1.981%; TYU1 volumes were decent. 5yr TIPS +0.5bps at -1.692%, 10yr TIPS +2.1bps at -0.933%, 30yr TIPS +2.6bps at -0.227%. SOFR and EFFR both unchanged at 5bps and 10bps, respectively. Treasuries had an active overnight session for the first time in a while, with decent volume sales coming after a nearly two-week rally was snagged. Relief sales is a fitting description, with the move very much a technical "profit taking" for longs, ahead of supply next week, given the broader risk tone in APAC trade was downbeat. US 10yr yields rose to the 1.34% level before Europe arrived, up from Thursday's close of the 1.29% area, which was just above the 200dma for the benchmark. Trade meandered sideways for most of the European session, with T-Notes (U1) chopping around 133-18, way off their Thursday peak of 134-03. T-note (U1) futures settled 15 ticks lower at 133-15+.

Fed’s Quarles (voter) stated that the Financial Stability Board is taking a critical role in coordinating the global approach to climate-related financial risks and the FSB’s climate blueprint is to establish a global disclosure standard and improve data quality. (Newswires)

US President Biden signed an executive order to promote more competition in the US economy, while the White House also stated that President Biden expects Congress to act on the US debt ceiling. (Newswires)

Virgin Galactic (SPCE) successfully completed a first fully crewed space flight which reached space at an altitude of 53.5miles before gliding to a runway landing at Spaceport America. (Newswires)