Original insights into market moving news

[PODCAST] European Open Rundown 27th July 2021

  • Asian equity markets traded mostly positive as the region found inspiration from Wall St. where all major indices extended on record highs
  • Senate Majority Leader Schumer noted that the Senate may stay in session through the weekend to finish the bill
  • The DXY consolidated after its recent retreat towards 92.50, EUR/USD and GBP/USD sit on 1.18 and 1.38 handles respectively
  • Tesla earnings exceeded expectations after reporting record deliveries; shares higher by 1% after-hours
  • Looking ahead, highlights include US Durable Goods, Consumer Confidence, supply from the UK & US. Earnings from Apple, Alphabet, Microsoft, UPS, General Electric, 3M, Visa, AMD


White House said current vaccination rates are a positive sign about where the country is headed and reiterated they are seeing a rise in COVID cases among unvaccinated Americans, while the White House later stated it has not been determined that it would be illegal for the federal government to mandate vaccines for employees, but no decision has been made. There were also separate reports that the US CDC raised its travel alert warning for Spain to the highest level. (Newswires)

UK is reportedly to consider easing travel restrictions from the EU and US. In other news, leaked data for the UK showed that over half of COVID hospitalisations were patients who only tested positive after admission which suggests that large numbers were being classed as hospitalised by COVID when actually admitted with other ailments, while experts noted that it meant the national statistics may greatly overstate the levels of pressures on the NHS. (FT/Telegraph)

Australia's Victoria state Premier announced the decision to ease lockdown restrictions in the state from midnight tonight and reports noted that South Australia will also exit lockdown, while New South Wales reported 172 locally transmitted COVID-19 infections which is the highest since the Sydney outbreak began. (Newswires)

South Korea extended strictest Level 4 distancing measures in Seoul metropolitan area for another two weeks to August 8th amid a continuing increase in infections. (Newswires)


Asian equity markets traded mostly positive as the region found inspiration from Wall St. where all major indices extended on record highs, led by outperformance in cyclicals and with earnings in focus including the looming results from the mega cap tech giants Apple, Alphabet and Microsoft that are due to report after-market on Tuesday. ASX 200 (+0.7%) was underpinned by strength in the commodity-related sectors following further production updates and with BHP lifted after it reached a deal related to port infrastructure for handling of potash which spurred hopes the Co. may proceed with the multi-billion-dollar Jansen mining project. There was also some encouragement from reports that South Australia and Victoria states will exit their lockdowns, although the most-populous state of New South Wales continued to suffer from increasing infections. Nikkei 225 (+0.6%) remained positive and re-tested the 28k level to the upside as earnings results began to trickle in but with gains limited amid concerns of PM Suga’s approval rating which slipped to a nine-year low beneath the 35% level that is seen as a “point of no return” and which has historically resulted in most LDP PMs stepping down within a year. KOSPI (+0.7%) was buoyed by the latest GDP data which despite missing expectations at 5.9% vs Exp. 6.0%, it was still the fastest pace of growth in a decade and above the 4.2% government projection for this year, while it was also reported that South Korea and North Korea reopened their hotline and that their leaders exchanged several letters since April. Hang Seng (-2.1%) and Shanghai Comp. (-0.2%) were varied with the mainland temperamental following the prior day’s regulatory-triggered sell-off and with the continued downturn in Hong Kong led by underperformance in healthcare and heavy losses in tech, while Evergrande shares saw double-digit declines after it scrapped its special dividend proposal. Finally, 10yr JGBs were marginally lower after the recent pullback in T-notes and amid mild gains in Japanese stocks, while softer demand at the 40yr JGB auction later also added to the headwinds for prices.

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 6.4734 vs exp. 6.4748 (prev. 6.4763)

US SEC official stated that US-listed Chinese companies must disclose risks of interference by the Chinese government as part of their regular reporting responsibilities. (Newswires)

China criticised the UK for recent comments made by UK Defense Secretary Wallace regarding the South China Sea which China stated sowed discord, while China’s Global Times noted that gunboat diplomacy no longer works and that as a country outside of the region, the UK should refrain from overstretching its arms. Furthermore, the Chinese Embassy in UK also urged that Chinese companies are provided with a fair and non-discriminatory business environment. (Newswires/Global Times)

  • Chinese Industrial Profits YY (Jun) 20.0% (Prev. 36.4%)
  • Chinese Industrial Profits YTD YY (Jun) 66.9% (Prev. 83.4%)
  • South Korean GDP QQ (Q2) 0.7% vs. Exp. 0.7% (Prev. 1.7%)
  • South Korean GDP YY (Q2) 5.9% vs. Exp. 6.0% (Prev. 1.9%)


UK government sources admitted that the GBP 23bln Hinkley Point C project could beat risk by UK plans to block China General Nuclear from future UK projects, as the Chinese company is partially bankrolling the Hinkley reactor. (Telegraph)

The UK has informed the EU that fresh proposals from Brussels aimed at resolving the stalemate over the Northern Ireland protocol do not go far enough. (Telegraph)

ECB's Panetta says pandemic-era EU tools such as the NGEU and SURE could be extended/adapted to support multiple policy objectives during the recovery phase and calls for targeted fiscal reform as this 'firepower' is nested within national policies. (Politico)


In FX markets, DXY consolidated after the prior day’s retreat towards the 92.50 level amid a decline in real yields and with the greenback not helped by soft data. On the infrastructure front, talks were said to be in a precarious state after Republicans rejected the Democrats 'global offer' and the GOP reportedly sent out a list of agreements ‘broken’ by Democrats which was seen as another bad sign for bipartisan discussions, although the White House seemed unfazed as it remained optimistic on infrastructure progress and Senate Majority Leader Schumer noted he is committed to passing the bipartisan infrastructure bill and that the Senate may stay in session through the weekend to finish the bill. EUR/USD was rangebound at the 1.1800 handle after the single currency recently gained ground at the expense of the USD and despite yesterday's soft IFO data, while GBP/USD held on to this week’s early gains after it broke through resistance at 1.3800 and with the pair largely ignoring the dovish commentary from outgoing BoE MPC member Vlieghe. USD/JPY and JPY-crosses are choppy amid the tentative risk-appetite, which alongside the lack of pertinent data releases, also kept price action amongst antipodeans contained.


Commodities were rangebound overnight with mild gains in WTI crude futures above the USD 72.00/bbl level following yesterday's rebound which was helped by the positive risk tone in the US and with plenty of fanfare surrounding the declining COVID cases in the UK which analysts suggested could also occur in the US in a few weeks’ time and in turn, provided encouragement for cruise operators and airliners. Elsewhere, there is a lack of updates on the Iranian nuclear deal ahead of incoming President Raisi's inauguration next week with Iran preferring to wait until after the transition, although there were comments from the French Foreign Ministry which stressed the importance of Iran returning to the negotiating table, while focus for the energy turns to the latest inventory reports beginning with the private sector data later today. Gold prices were flat after failing to hold above USD 1800/oz, while copper continued to eke mild gains amid the mostly positive risk tone which helped prices ignore reports of China mulling taxes on steel exports to ease domestic prices.

China is reportedly mulling steel export levies to curb domestic prices. (Newswires)

Rio Tinto (RIO LN) said talks failed to reach a new labour agreement with the union and it is cutting production at BC works aluminium smelter to around 35% of its 432k tonnes annual capacity due to the strike, while Co. added that it will have a significant impact on business and the community. (Newswires)


French Foreign Ministry said it is urgent Iran returns to the negotiating table for the nuclear deal. (Newswires)

The communication line between South Korea and North Korea has been restored, while South Korean President Moon and North Korean Leader Kim exchanged multiple letters since April, according to a South Korean government source. (Newswires)

US President Biden is to end the US military's combat mission in Iraq by year-end after reaching an agreement with Iraqi PM Al-Kadhimi, while President Biden stated the US will continue to train, assist and help to deal with ISIS as it arises but will not going to be in a combat zone by the end of the year. (Sky News)


Treasuries were little changed as US participants faded the O/N rally, although inflation breakevens sit wider amid record lows in reals. 2s -0.4bps at 0.196%, 3s +0.0bps at 0.375%, 5s -0.1bps at 0.717%, 7s -0.5bps at 1.027%, 10s -0.7bps at 1.278%, 20s +0.0bps at 1.845%, 30s +0.0bps at 1.924%; TYU1 volumes were light. 5yr TIPS -6.5bps at -1.930%, 10yr TIPS -7.0bps at -1.119%, 30yr TIPS -5.7bps at -0.366%. SOFR and EFFR both unchanged at 5bps and 10bps, respectively. Bonds gained from the start of the week after the nasty session for China shares amid regulatory concerns and caught a second wind as European players arrived, which was further accentuated by a disappointing German Ifo survey. The strength saw T-Notes hit their peak for the day not long after at 134-19, with cash 10s printing lows of 1.22%. There was also attention on TIPS, with the US 10yr real yield printing a new record low of -1.12%. The tide began to turn as US participants returned from the weekend, seeing yields creep higher into the US session ahead of Treasury supply and the FOMC meeting. Fresh calls for higher yields from Goldman, Barclays, and Morgan Stanley likely added some fuel to the move. T-Notes pared most of their overnight strength to reside around 134-06 for the rest of the session. But, there were some interesting dynamics under the surface, with real yields creeping back lower again into the afternoon, seeing inflation breakevens widen to multi-week highs, coming against DXY weakness and commodity strength. Meanwhile, the strong 2yr auction today (more below) saw little follow-through for the curve ahead of Tuesday's 5yr auction, which will be accompanied by Durable Goods and Conference Board's Consumer Confidence data. T-note (U1) futures settle 2 ticks higher at 134-06+.

US Republicans were said to be sending out a list of agreements "broken" by Democrats on water spending, Davis-Bacon wages and paying for the bill, which is seen as another bad sign for bipartisan infrastructure talks. (Politico)

US Senate Democratic Leader Schumer said he is committed to passing the bipartisan infrastructure bill and the Senate may stay in session through the weekend to finish the bill. There were also separate comments from the White House that it remains confident in reaching agreement and that Democrats made an offer designed to resolve all infrastructure issues, while the White House said it welcomes the GOP counter proposal and is optimistic on infrastructure progress. (Newswires)

US Senator Sanders said a budget measure could be ready for a vote as soon as August. (Newswires)

Amazon (AMZN) denied a report that it will accept Bitcoin this year and denied it is planning to launch its own crypto coin next year, but added that it will continue to explore crypto. (Newswires)

Tesla Inc (TSLA) Q2 2021 (USD): Adj. EPS 1.45 (exp. 0.98/0.58 GAAP), Revenue 11.96bln (exp. 11.30bln). Q2 automotive gross margin 28.4% (exp. 26.1%, prev. 25.4% Y/Y). Q2 cash and cash equivalents USD 16.23bln vs exp. USD 16.55bln. Co. notes of supply challenges and in particular semiconductor shortages, as well as port congestion remained present in Q2. Bitcoin-related impairment of USD 23mln recorded for the quarter. Co. expects car deliveries to increase more than 50% this year. Co. is to delay its Semi electric truck program due to battery cell supply constraints. (Newswires) Shares rose 1% after market