Original insights into market moving news

[PODCAST] European Open Rundown 13th July 2021

  • Asia-Pac stocks traded higher across the board; Hong Kong outperformed and US equity futures were flat
  • In FX, the DXY was flat above 92.00, EUR/USD traded sideways and antipodeans outperformed
  • Chinese trade data topped estimates but Customs warned of many uncertainties and instabilities in H2 due to the pandemic
  • US President Biden's administration is said to be mulling a digital trade deal to counter China's digital presence in Asia
  • OPEC+ delegates believe the next ministerial meeting to discuss oil output policy won't occur until next month at the earliest
  • Looking ahead, highlights include German CPI (Final), US CPI, Fed's Bostic & Rosengren, Fed Discount Rate Minutes, IEA MOMR, BoE Financial Stability Report, supply from Italy, Germany and the US
  • Earnings include JPMorgan & Goldman Sachs


The US FDA warned that adverse events following use of Johnson & Johnson (JNJ) COVID-19 vaccine suggested an increased risk of Guillain-Barre syndrome in 42 days following vaccination. FDA added there have been 100 preliminary reports of Guillain-Barre syndrome from 12.5mln doses administered of the Janssen vaccine in which 95 of the 100 were serious and required hospitalization, while there was 1 death reported from the 100 preliminary reports. Furthermore, it stated that although evidence suggests an association between the vaccine and increased risk of the syndrome, it is insufficient to establish a causal relationship and the FDA affirmed that the known and potential benefits of the vaccine outweigh the known and potential risks. There were also comments from JNJ that it is in discussions with the FDA about rare cases of Guillain-Barre syndrome that were reported after vaccination with the Janssen COVID-19 vaccine, while it added that the probability of having the syndrome occur is very low and the rate of reported cases is higher than the background rate by just a small degree. (Newswires)

French President Macron said France is facing a strong resurgence of the pandemic and that a curfew is to be reinstated in Martinique and Reunion Island. (Newswires)


Asia-Pac stocks traded higher across the board after a similar positive performance in US where the major indices posted fresh record closes once again but with upside capped heading into the key events including US CPI data and the start of earnings season later today, while participants also digested the latest Chinese trade figures. ASX 200 (+0.3%) was led higher by outperformance in tech and materials, although the advances were limited after a deterioration in Business Sentiment and amid speculation that the Sydney lockdown could be extended by another 4-6 weeks - which would likely impact the economy severely, with Goldman Sachs already lowering its Australian Q3 GDP forecast to 0.6% from 1.0% due to the current Sydney restrictions. Nikkei 225 (+0.6%) remained elevated as exporters benefitted from the currency-related tailwinds, and the KOSPI (+0.7%) was underpinned after the South Korean Minimum Wage Commission agreed to increase minimum wages by 5.1%. Hang Seng (+1.9%) and Shanghai Comp. (+0.2%) adhered to the broad constructive mood with the outperformance in Hong Kong led by autos and tech, with Tencent among the biggest gainers after China’s market regulator gave unconditional approval for the Co. to take Sogou private, although gains in the mainland were moderated amid the ongoing crackdown concerns, which are said to have prompted ByteDance to shelve its IPO due to regulators' warnings over data security alongside other issues, and Didi confirmed the takedown of 25 additional apps which it operated in China. Participants also digested the latest trade data from China which showed USD-denominated Exports and Imports topped estimates, although its Customs noted that trade is expected to slow in H2 due to a higher base in 2020, as well as suggested many uncertainties and instabilities in H2 due to the pandemic. Finally, 10yr JGBs were flat after the subdued performance in USTs, with demand also sapped by the gains in stocks and following weaker results at the 20yr JGB auction.

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 6.4757 vs exp. 6.4720 (prev. 6.4785)

  • Chinese Trade Balance (USD)(Jun) 51.53B vs. Exp. 44.2B (Prev. 45.54B)
  • Chinese Exports YY (USD)(Jun) 32.2% vs. Exp. 23.1% (Prev. 27.9%)
  • Chinese Imports YY (USD)(Jun) 36.7% vs. Exp. 30.0% (Prev. 51.1%)

China Customs said trade is expected to slow in H2 due to a higher base in 2020, while it added that trade still faces many uncertainties and instabilities in H2 due to the pandemic. (Newswires)

US President Biden's administration is said to be mulling a digital trade deal to counter China's digital presence in Asia, which could involve countries including Australia, Japan, Canada, Singapore and Chile although it is still in early stages, according to sources. In other news, President Biden was said to have asked the US appeals court to dismiss the TikTok case, according to a court document. (Newswires)


UK PM Johnson is reportedly facing a new dispute with MPs regarding the cut to the aid package as rebels within the party seek to force a reversal of the GBP 4bln reduction to the aid bill after the PM agreed to put it to a vote in the Commons. (FT)

Barclaycard reported UK June Consumer Spending rose 11.1% compared to June 2019, while it added that spending in bars and pubs increased by most since September last year due to warm weather and sporting events. (Newswires)

  • UK BRC Retail Sales YY (Jun) 6.7% (Prev. 18.5%)

ECB may use tools to rein in excessive dividends, according to an official. In addition, reports also noted comments from Bank of Spain Deputy Governor Delgado that the ECB will most likely lift its dividend cap this year and that banks should pursue a more average payout policy. (Newswires)

ECB's President Lagarde said she is not under the illusion that at every policy meeting there will be unanimous consent as there will be some variations and this is ok. Stressed the importance of making policy 'especially forceful or persistent'. (FT)

European Commission is reportedly to offer financial support in an effort to gain support for its climate plan. (FT)

French President Macron said France needs a pension reform as soon as the health situation improves and noted that the retirement age needs to be pushed back. Macron stated that every pension must be at least EUR 1000/month and pension special regimes will be scrapped in some sectors, while he added that France will not finance new spending with tax hikes. (Newswires)


In FX, the DXY was flat amid a non-committal mood heading into this week’s key risk events including US CPI data later today, Friday’s Retail Sales and Fed Chair Powell’s appearances from mid-week. There were also several comments from Fed officials which seemed to lean back from tapering, including from Barkin who suggested that the labour market has not healed enough to taper QE and Williams stated the US economy has not yet achieved 'substantial further progress' test for reducing asset purchases, while Kashkari noted the economy is poised for a strong recovery but reiterated there are still 7mln-10mln Americans out of work. EUR/USD eked marginal gains as it composed itself from yesterday’s fluctuations, whereby the single currency whipsawed through 1.1850 mark despite early comments from ECB's de Guindos that inflation risks are tilted to the upside and the central bank sees the risks to growth as broadly balanced but should not be complacent amid the spread of the COVID variants. GBP/USD attempted to reclaim the 1.3900 handle but price action was rangebound with a muted reaction in the currency after the UK confirmed to move to the next stage of the roadmap next Monday as planned, and PM Johnson warned to exercise extreme caution when the legal restrictions are removed. USD/JPY and JPY crosses were kept afloat by the positive risk tone, which also marginally spurred antipodeans along with the slight gains in commodities.

  • Australian NAB Business Confidence (Jun) 11 (Prev. 20)
  • Australian NAB Business Conditions (Jun) 24 (Prev. 37)


WTI crude futures reclaimed the USD 74.00/bbl level but upside was capped amid the coronavirus restrictions in Asia and ongoing uncertainty regarding the OPEC+ talks where producers are yet to make progress on the UAE-Saudi Arabia impasse. This has led to expectations among delegates that a meeting won't likely occur until next month, while Iran talks also remain stagnant, although US has made it clear it is willing to conduct another round of discussions and is not imposing a deadline. Gold prices held above the USD 1800/oz level amid an uneventful greenback, and copper also slightly gained due to the constructive mood but with price action contained amid the looming risk events.

EIA forecasts total US shale regions oil production for August +42k BPD at 7.907mln BPD (prev. +28k BPD in July). (Newswires)

Energy Intelligence tweeted that some OPEC+ delegates believe the next ministerial meeting to discuss oil output policy won't occur until next month at the earliest. (Twitter)

US Treasury issued a general license authorising certain transactions of liquefied petroleum gas to Venezuela. (Newswires)


US State Department spokesperson said question of whether Iran would be prepared for a seventh round of indirect talks can only be addressed by Tehran, while the US has made clear it is prepared for a seventh round and is not imposing a deadline on talks. (Newswires)

EU agreed to a sanctions regime to target leaders in Lebanon amid a stalemate in forming a government that had lasted for nearly a year. (FT)

North Korean propaganda website reportedly warned South Korea against proceeding with joint military drills with the US. (Yonhap)

Venezuelan opposition leader Guevara was arrested by secret police and will be charged with terrorism and treason. (AFP)


Treasuries gave up an early bid, and steepened over the course of the session ahead of supply in 3yr and 10yr today, and 30yr bonds tomorrow, while participants will be eying Tuesday's CPI data, the start of bank earnings, and ahead, Fed chair Powell is due to testify to lawmakers on Wednesday and Thursday. There was a bull-flattening impulse as the US day got under way, and ahead of 3yr and 10yr supply. As the US cash equity day got underway, the Treasury bid had eased, supported as equities pared losses, and the curve was steepening out. Fed speak didn't really shift the Treasury trading dynamic, despite some interesting details from Barkin (wants to see the employment-population ratio rise above 59% before talking about tapering), while Fed's Williams said 'substantial further progress' test has not yet been met; does not view either Tsys or MBS buys as more focussed on housing; sees bond purchases ending before rate hikes; Kashkari generally steered clear of policy-related comments, but reiterated that the US was poised for strong recovery, though there are still 7-10mln Americans out of work). The US sold new 3yr notes, tailing 0.2bps, and yields ticked higher in wake of the auction; traders are watching this week's auctions for signs about how demand is holding up for US paper ahead of Tuesday's CPI report, and as yields have narrowed in recent sessions; the indirect bid at the 3s auction fell a touch from the prior auction, though still held above its previous 6-auction average. Similar was seen in the 10yr sale, although the auction stopped-through the screens by 0.3bps. Ahead, Tuesday's 30yr bond sale will come in wake of the CPI report, and will help provide a context on the move lower in breakevens recently, and this week's auction performance will help gauge domestic and overseas buying interest within that framing (see CPI preview below). More Fedspeak this week (Powell to lawmakers on Wednesday and Thursday), and bank earnings will also be of note, with the majors begin reporting season from Tuesday. T-note (U1) futures settle 0.5 ticks lower at 133-13.

Fed's Kashkari (2023 voter) said the US is poised for a strong recovery but reiterated there are still 7-10mln Americans out of work, while he added that the labour market is the most important factor for inflation and still sees inflation as transitory. (Newswires)

US Commerce Secretary Raimondo said she is working to get all Democrats to support proposed USD 400bln spending on home care for elderly and disabled, while she added that failure to proceed with such spending will be a large drag for the economy and noted that 1.5mln women have still not returned to the workforce following the pandemic exodus. Furthermore, Commerce Secretary Raimondo said she is pressing the White House to relax travel restrictions to the US. (Newswires)

US Senate Majority Leader Schumer said there has been progress on bipartisan infrastructure deal and Democrats are working on developing a budget resolution for consideration later this month. It was separately reported that US Republican Senator Portman said a bipartisan infrastructure deal still needs to be improved and that it would be difficult to produce a bill this week amid issues with the payfors. (Punchbowl/Twitter)