Original insights into market moving news

[PODCAST] European Open Rundown 9th August 2021

  • APAC stocks traded cautiously with volumes light in Japan's absence; China eventually outperformed
  • Spot gold and silver saw mini flash crashes in early and thin trade, while crude futures remained subdued
  • In FX, DXY drifted off best levels, EUR/USD briefly dipped to a four-month low and USD/JPY traded sideways
  • Beijing has imposed domestic travel restrictions and Israel warned of fresh lockdowns amid rising COVID cases
  • Chinese July CPI and PPI topped expectations, whilst Trade Balance beat but imports and exports momentum slowed
  • US infrastructure deal cleared its final serious Senate hurdle, putting the legislation on a path to passage as soon as late Monday
  • Looking ahead, highlights include German Trade Balance, EZ Sentix, Fed’s Barkin & Bostic


Israel is reinstating restrictions and also warned of a fresh lockdown as serious cases hit a four-month high. (Telegraph) Note, Israel was a front-runner in vaccinations

Beijing has imposed domestic travel restrictions whereby people from medium- or high-risk regions will be prevented from buying tickets for air and railway services. (Global Times)

Australia's New South Wales reported 283 (vs 291 on Friday) new locally-acquired COVID-19 cases. (Newswires)

Norwegian Cruise Line (NHC) is granted preliminary injunction allowing it to sail from Florida with 100% vaccinated crew and guests; first sailing on August 15th. (Newswires)

NIH's Dr. Fauci said there will be more "breakthrough" cases with the Delta variant. (Newswires) A leading FDA researcher, Dr. Peter Marks, said "Covid-19 vaccine booster might just be a one-time shot, not a yearly one". (CNN)

The White House is in early talks about a range of options on vaccine mandates and notes that reporting around cruises and universities isn't accurate - no decision yet made on extending unemployment benefits. (Newswires)


APAC stocks kicked off the week with mild losses before eventually trading mostly higher, but the tone across the markets remained cautious and volumes light in the absence of Japan. This followed a mixed Wall Street performance on Friday in which the tech-burdened indices - the SPX and particularly the NDX - suffered on the back of pronounced Treasury curve steepening after the solid US jobs report. Meanwhile, the Russell 2000 was bid amid strength in cyclical stocks, benefitting from the improved economic outlook. US futures resumed trade relatively flat but drifted lower in the first half of the session, alongside losses in oil futures and a mini flash-crash in spot gold and silver (see the commodities section below), as APAC players had the first chance to react to the US jobs report in the thin early markets. US equity futures thereafter trimmed some losses, but the RTY (-0.5%) sees marginally more pronounced losses vs its YM (-0.1%), ES (-0.2%) and NQ (-0.3%) counterparts heading into the European open. European futures followed overnight sentiment with the DAX (-0.2%) and FTSE 100 (-0.2%) futures subdued since their opens. Back to APAC, Japanese markets are away observing Mountain Day whilst over in Australia, ASX 200 (+0.1%) gradually trimmed gains throughout the session but held its head above 7,500, with Suncorp (+6.5%) the top performer on strong earnings alongside press speculation that it may be a takeover target by ANZ Bank. The KOSPI (Unch) traded lacklustre throughout the session as COVID cases remain elevated, whilst Yonhap sources suggested the US and South Korea will conduct military exercises during the next two weeks in a move likely to rock relations with North Korea. The Hang Seng (+0.9%) and Shanghai Comp (+1.0%) were initially choppy as the region balanced above-forecast inflation, slowing imports and exports, and a rise in COVID cases, but later solidified an upside bias and outperformed the region with no real fundamental drivers at the time.

  • Chinese CPI YY (Jul) 1.0% vs. Exp. 0.8% (Prev. 1.1%)
  • Chinese CPI MM (Jul) 0.3% vs. Exp. 0.2% (Prev. -0.4%)
  • Chinese PPI YY (Jul) 9.0% vs. Exp. 8.8% (Prev. 8.8%)
  • Chinese Trade Balance USD (Jul) 56.58B vs. Exp. 51.54B (Prev. 51.53B)
  • Chinese Exports YY (Jul) 19.3% vs. Exp. 20.8% (Prev. 32.2%)
  • Chinese Imports YY (Jul) 28.1% vs. Exp. 33.0% (Prev. 36.7%)

The rise in Chinese CPI was mainly due to the impact of extreme weather and rising travel needs during summer holidays. Analysts project China's PPI growth will slightly slow down to 8% in Q3, calling for more measures to curb impact of soaring international commodity prices on supply chains while spurring domestic consumption to maintain 5-6% GDP growth in H2. (Global Times)

There have been reports citing Chinese State media that Beijing warned of speculation in the chip market. (Newswires) China People's Daily published an article reminding citizens the adverse consequences of aesthetic medicines. (People's Daily)

Chinese cotton industry is moving ahead with plans to replace the Better Cotton Initiative (BCI), leader in the global cotton industry, according to Global Times - article cites Xinjiang cotton claims. (Global Times)

China’s ByteDance reportedly aims for a Hong Kong IPO despite the tech crackdown, according to the FT. However, these sources were later refuted. (FT/Newswires) NetEase's (9999 HK) Music Services is reportedly to delay its Hong Kong IPO launch. (Newswires)

Goldman Sachs has revised down its Chinese Q3 real GDP growth forecast to 2.3% QQ from 5.8%, with the FY forecast now at 8.3% vs prev. 8.6%. (Newswires)

  • PBoC injected CNY 10bln via 7-day reverse repos at a maintained rate of 2.20% for a net neutral daily position. (Newswires)
  • PBoC set USD/CNY mid-point at 6.4840 vs exp. 6.4813 (prev. 6.4625)

Japanese PM Suga's administration's support has fallen below 30% for the first time since Suga became PM, according to Asahi paper. (Newswires) This comes ahead of the Japanese elections towards the end of September.


Senior UK Tory MPs have warned PM Johnson not to move against Chancellor Sunak, following reports of tensions which led the PM to threaten demoting Sunak. (FT)

Professional services group BDO’s latest business trends report found that the UK jobs market strengthened in July, but many firms reported labour shortages, partly due to the pandemic and Brexit. (The Guardian)

ECB's Weidmann has urged the ECB not to drag out its PEPP progamme, and noted that EZ inflation might pick up more rapidly. Should the inflation outlook rise sustainably, the ECB would have to act in line with its price stability objective, Weidmann said. (Welt am Sonntag)

Poland has backed down in a Rule-of-Law spat with the EU. (Newswires)


In FX, the DXY initially extended on Friday’s NFP-induced gains and inched closer towards 93.000 to the upside, before pulling back in the second half of the session to a low at 92.773. G10 peers were dictated by the Buck, with EUR/USD briefly dipping below 1.1750 to a four-month low, whilst GBP/USD meandered just above 1.3850. The non-US Dollars narrowly underperformed in the first half of the session amid losses across commodities, whilst the slowdown in Chinese import momentum only added to the gloom. However, as the DXY pulled back and sentiment somewhat improved, the antipodeans trimmed losses. AUD/USD fleetingly dipped below support at 0.7350 and NZD/USD briefly gave up its 0.7000-status before the Kiwi outperformed as AUD/NZD failed to breach 1.0500 to the upside. USD/CAD was underpinned by Friday’s uninspiring Canadian jobs report and persisting weakness in oil prices. USD/JPY was caged to a 15-pip range, with Japanese participants also away from desks in observance of Mountain Day.


WTI and Brent front month futures saw early downside and prices remained pressured as the Delta variant further threatens the demand side of the equation, with Beijing tightening domestic travel whilst Israel - one of the front-runners in the vaccination race - is reinstating restrictions and warned of a fresh lockdown as serious cases hit a four-month high. Furthermore, reports noted that the EU is said to be looking into the possibility of bringing back a US travel ban as it no longer meets conditions to be part of the list – dampening the jet fuel demand outlook. On the flipside, Saudi Aramco reported strong results over the weekend, reflecting a strong rebound in energy demand, with the CEO “extremely positive” on the H2 outlook, albeit that remains contingent on COVID developments. Elsewhere, precious metals took focus overnight amid a mini flash-crash across spot gold and silver. Despite a lack of news flow, spot gold was pressured since the open in thin markets amid bearish fundamentals and technicals, as APAC reacted to the US jobs reports, whilst a technical “death cross” in gold was also flagged. Thereafter, a breach of USD 1,750/oz triggered liquidation stops to the downside, and a flash crash to around USD 1,680/oz shortly followed – with some noting of USD 4bln in notional gold contracts for sale on Sunday night. Spot silver followed in sympathy and printed a low of USD 22.39/oz vs a high of USD 24.36/oz. The complex then saw dip-buying and prices nursed some wounds. Base metals are also softer amid a double whammy from Chinese data, with imports and exports momentum slowing and hot PPI still threatening Chinese State intervention. As a reminder, the Caixin PMI release from last week suggested “the rate of input cost inflation quickened notably in the latest [July] survey period… with the increase exceeding the long-run series average.” - Dalian iron ore futures post losses of 5% whilst Shanghai stainless steel futures fell around 4%. Elsewhere, LME copper is more resilient with shallower losses, and with BHP’s looming Escondida copper mine strike to keep on the radar.

Saudi Aramco (2222 SR) reported Q2 net profit USD 25.46bln vs exp. USD 23.2bln. Co. declared total Q2 dividends of USD 18.8bln. The results “reflect a strong rebound in worldwide energy demand and we are heading into the second half of 2021 more resilient and more flexible, as the global recovery gains momentum,” Aramco CEO said, adding that the group remains extremely positive above H2 2021. CEO said the firm is in talks with China and other places for downstream investment opportunities. (Newswires)

US Baker Hughes (w/e August 6th): Oil +2 at 387, Nat Gas flat at 103, and Total +3 at 491. (Newswires)

Qatar sets September Marine and land crude OSPs at Oman/Dubai +USD 2.25/bbls, according to a pricing document. (Newswires)

NHC said there is a 40% chance of a cyclone formation alongside a 30% chance of another, both in the next 48 hours in an area in the Caribbean Sea. (Newswires) The five-day weather outlook show trajectories towards the Gulf of Mexico

Peru's PM Bellido said mining companies have abandoned environmental responsibilities in search of profit. (Newswires) Peru was the second largest copper producer in 2020


South Korea and the US will conduct a preliminary training this week in the run-up to next week's main summertime military exercise that North Korea has warned against staging, sources said. (Yonhap) As a reminder, North Korean leader Kim Jung Un’s influential sister warned recently that the annual military drills between South Korea and the US this month will undermine prospects for better ties between the Koreas.

Senior EU officials said negotiators are optimistic about the chances of reviving the nuclear deal with Iran. (Politico)


Treasuries were gently easing lower from their APAC highs (134-12 for T-Notes) on Thursday ahead of the US jobs report. The beat on headlines jobs added, improvement in unemployment metrics, and pick-up in wage pressures saw a knee-jerk lower across the curve in a bear-steepening fashion, with T-Notes finally printing a low for the session a few hours after at 133-29+, with cash 10s clocking a high yield of 1.3%, the highest since July 23rd. One desk noted that real money accounts had been entering fresh steepeners, citing the higher wage gains and knock-on inflation concerns as a catalyst. The desk also said that Hedge Funds were active after a couple of large leverage funds were linked to a 50k sale of Sept T-Note futures and 20k sale of Sept Treasury Bond futures. Yields edged slightly off their lows into the afternoon, with next week's Treasury supply likely further dissuading any would-be dip buyers. T-Note (U1) futures settled 16 ticks lower at 134-00.

US infrastructure deal cleared its final serious Senate hurdle Sunday night, putting the legislation on a path to passage as soon as late Monday, Politico reported. In a 68-29 vote, the Senate closed down debate on a bill that spends USD 550bln in new money on the nation’s physical infrastructure. (Politico)

Fed's Kaplan (2023 voter) reiterated calls for gradual and balanced tapering starting soon. (Newswires)

US Democrats will be releasing their budget resolution on Monday, according to US Senator Sanders cited by Punchbowl's Sherman. (Twitter)

US President Biden has extended payment pause for student loan borrowers through January. (CNBC)

Cisco (CSCO) is developing a subscription service to help companies move or repatriate computing tasks from AWS (AMZN) to private data centres . (The Information)