[PODCAST] US Open Rundown 12th August 2021
- Contained and quiet equity trade amid minimal macro developments ahead of US data; ES U/C, Euro Stoxx 50 +0.2%
- The DXY is modestly firmer but little changed with peers equally uninspiring while debt meanders pre-30yr US issuance after yesterday's strong sale
- OPEC members have not collectively discussed output increases following the White House statement, according to sources
- US Treasury Secretary Yellen is said to be considering a trip to China in the coming months, according to sources
- Looking ahead, highlights include US Initial/Continued Jobless Claims, Banxico & CBRT Policy Announcements, OPEC MOMR (11:50BST/06:50EDT), supply from the US
- Earnings: Disney
Australia's capital Canberra is expected to enter a lockdown, according to Canberra Times. (Canberra Times) Three extra local government areas will face increased restrictions in Sydney, Australia, according to an Australian Journalist. (Twitter)
New Zealand will gradually open up its international borders next year and will also speed up the its vaccine rollout. (FT)
Tokyo Panel of Experts said the COVID situation is now out of control. (Newswires)
US FDA is poised to amend the emergency use authorizations for the Pfizer (PFE) and Moderna (MRNA) Covid-19 vaccines Thursday to allow people with compromised immune systems to get a third dose, sources stated (NBC News)
Tokyo COVID-19 infections 4,989 vs yesterday's 4,200; separately, a Health Advisor is requesting stronger emergency measures for around two weeks. (Newswires)
China's Ningbo has suspended flights to/from Beijing due to a 'public health incident'. (Newswires)
Asia-Pac equities traded saw a mixed session with a downside bias and a cautious tone after a Wall Street closed mostly higher; cyclicals and value continued to show outperformance and tech failed to sustain a bid despite lower Treasury yields on the back of cooling CPI. The DJIA outperformed while the NDX lagged, and the VIX fell beneath 16 for the first time since early July. Back to APAC, the ASX 200 (+0.1%) gave up its earlier gains as Australia’s COVID woes deepen, with areas in Sydney tightening restrictions and Canberra tipped to enter a lockdown. The Nikkei 225 (-0.2%) was initially kept afloat by its manufacturing sector, although a firmer JPY and cautious risk tone capped upside. The KOSPI (-0.4%) remained on guard as North Korea did not respond to South Korea’s calls for a third straight day, in the run-up to annual military drills between Washington and Seoul. Elsewhere, the Hang Seng (-0.5%) and Shanghai Comp (-0.2%) traded downbeat amid reports of further sectorial crackdowns, this time the insurance and aesthetic medicines sectors, whilst peak growth and COVID concerns simmer in the background for China.
Some Chinese exchanges are said to have banned "aesthetic medicine instalment loans" in Asset-Backed Security transactions, according to reports citing Chinese press. (Twitter)
Chinese Industry Minister said auto maker should strengthen data protection, in relation to smart vehicles. (Newswires)
US Treasury Secretary Yellen is said to be considering a trip to China in the coming months, sources told Bloomberg News reporter Mohsin; no decision has been made yet, spokesperson said there are no plans for a trip "in the fall". (Twitter)
US Deputy Secretary of State Sherman will meet on Thursday with China's new ambassador to Washington. (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 6.4754 vs exp. 6.4750 (prev. 6.4831)
Fitch affirmed Japan at A; Outlook Negative. Fitch expects BoJ's 2% inflation target to be out of reach in the next few years. (Fitch)
Evergrande has reportedly received loan extensions from several major creditors. (Newswires)
Fed's Daly (2021,2024 voter) thinks the Fed could taper QE later this year or early next, via an FT interview. She is optimistic on the economy. She noted progress in the labour market, but she believes that it is not there yet. (FT)
UK GDP Estimate MM (Jun) 1.0% vs. Exp. 0.8% (Prev. 0.8%, Rev. 0.6%); YY (Jun) 15.2% vs. Exp. 14.9% (Prev. 24.6%)
- 3M/3M (Jun) 4.8% vs. Exp. 4.8% (Prev. 3.6%)
UK RICS Housing Survey (Jul) 79 vs. Exp. 76.0 (Prev. 83.0, Rev. 82). (Newswires)
North Korea did not answer South Korea's phone calls via cross-border communication lines for the third straight day Thursday, according to Yonhap citing officials. (Yonhap)
A Chinese military plane entered Taiwan’s air defense identification zone (ADIZ) on Wednesday, marking the second intrusion this month. (Taiwan Times)
Armenia and Azerbaijan exchanged fired in the Yeraskh section of the border between the nations, according to the Armenian Ministry of Defence. (Newswires)
Iraqi Ministry of Electricity announces "act of sabotage" targeting two power transmission towers in Karbala, Sky News Arabia; destroyed via IEDs. (Twitter)
As many as three agencies inside the Biden administration are at odds with each other over who will take the lead in regulating cryptocurrencies and the broader digital coin business, Fox Business sources said. Senator Warren appears to be backing the development of new legislation that would give the SEC enhanced powers to regulate crypto. (FBN)
European equities (Eurostoxx 50 +0.2%) trade mixed/flat amid a lack of fresh macro impulses for the region. The lead from Asia was predominantly downbeat with pressure observed in Chinese bourses amid further regulatory crackdowns, this time with the insurance and aesthetic medicines sectors in the sights of the government. Stateside, US futures trade in close proximity to the unchanged mark with very mild underperformance in the NQ (-0.1%) vs. ES (U/C) in a minor continuation of yesterday’s underperformance. Sectors in Europe are mixed with Insurance names top of the pile following earnings from Aviva (+4.4%) and Zurich Insurance (+3.7%) who both sit at the top of their respective indices. Telecom names are also firmer on the session amid gains in Deutsche Telekom (+2.9%) after the Co. raised guidance alongside Q2 earnings. To the downside, Basic Resources are the clear laggard (when looking at the Stoxx 600 BR Index), however, this is more a by-product of the Stoxx 600 Basic Resource index not adjusting for Rio Tinto trading ex-div rather than any systemic underperformance in the sector (nb. other miners trade with much shallower losses than the index). In terms of individual movers, Ageon (+7.3%) is the best performer in the Stoxx 600 after delivering strong Q2 results. Deliveroo (+4.7%) also trade firmer on the session as the Co. looks to claw back some of yesterday’s earnings-inspired losses. Competitor, Delivery Hero (-4.5%) trades softer on the session despite raising guidance alongside Q2 results as concerns linger over how long it will take the Co. to make a profit amid recent investments.
Boeing (BA) - India is reportedly set to clear the 737 Max to resume flying. (Newswires)
Researchers and clinicians from six leading Canadian organisations conclude that Biogen's (BIIB) aducanumab requires further testing before approval and widespread use in patients with AD in Canada. (Newswires)
Foxconn (2317 TT) sees Q3 revenue growth 3-15% YY, revenues for consumer electronics growing over 15% YY; cloud product revenue falling 2-15% YY; sees a very small impact on the Co. from the global chip shortage; COVID situation is deteriorating in Asia, need to wait and see for impact on supplies. In discussions with European partners around possible EV production. (Newswires)
USD - The Dollar is mixed and tightly bound against major counterparts, with the DXY holding just off Wednesday's post-US inflation data low (92.800) and now looking towards pipeline prices to see what kind of pressures are building, but perhaps more pertinently at the latest snapshot of the labour market via jobless claims to find out whether there has been further progress following last month’s healthy BLS report. The index is hovering below 93.000 within a 92.962-845 range and inside w-t-d extremes (93.195-92.718) after more taper talk from Fed officials, but no scheduled speakers today leaving the stage clear for long bond issuance once the aforementioned data is out of the way.
AUD/CAD/NZD - It’s marginal, but the Aussie, Loonie and Kiwi are underperforming after taking advantage of the Greenback’s loss of momentum yesterday. Aud/Usd has drifted back down from 0.7377 or so overnight as COVID-19 restrictions are tightened further in Sydney and the capital Canberra prepares to join the list of big cities entering lockdown, according to local media reports. Meanwhile, Usd/Cad is back above 1.2500 against the backdrop of ongoing volatility in crude plus unusually large option expiries between 1.2495 and the big figure (1.6 bn) and the Kiwi has retreated through 0.7050 even though Q3 NZ inflation expectations revealed a jump in the 12 month outlook and firmer 2 year projection to underscore already odds-on pricing for RBNZ tightening next week.
EUR/JPY/CHF/GBP - The Euro is still breathing a huge sigh of relief following its recovery from the clutches of a new y-t-d low, albeit thanks to others in the main if not entirely. However, Eur/Usd remains top heavy around 1.1750 and faces a string of big option expiries beyond the half round number (from 1.1775-90, through 1.1795-00 to 1.1810-15 in 1.6 bn, 1.6 bn and 2 bn respectively). Elsewhere, the Yen has rebounded over 110.50 again, but could also be stymied by option expiry interest given 1.4 bn rolling off at 110.35-30, the Franc has pared losses from sub-0.9240 to hover nearer 0.9200 and the Pound is consolidating above 1.3850 with more direction derived from outside influences and external factors than very mixed UK data. From a technical perspective, Cable sits almost equidistant from 21 and 50 DMAs that come in at 1.3832 and 1.3894 today.
SCANDI/EM - Moderately positive risk sentiment and Brent maintaining its recovery momentum are more likely drivers behind the Sek and Nok revival to post fresh weekly peaks vs the Eur rather than unchanged Swedish money market CPIF forecasts over 1 and 5 year horizons. Meanwhile, the Try and Mxn will be hoping for some independent inspiration from the CBRT and Banxico as the former rebounds further from worst levels with the aid of better than anticipated Turkish ip data in the interim. Note, previews for both policy meetings are available in the Research Suite.
Notable FX Expiries, NY Cut:
- EUR/USD: 1.1650-60 (2.43BLN), 1.1675 (536M), 1.1700-05 (1.7BLN), 1.1775-90 (1.6BLN), 1.1795-00 (1.6BLN), 1.1810-15 (2BLN), 1.1865-70 (1.1BLN)
- EUR/GBP: 0.8450 (1.1BLN), 0.8500 (650M), 0.8515-20 (276M), 0.8590 (520M)
- USD/CAD: 1.2300 (585M), 1.2495-1.2500 (1.6BLN), 1.2525 (447M), 1.2540 (585M), 1.2655 (555M)
- USD/JPY: 109.00 (455M), 109.20 (350M), 109.45-50 (600M), 109.65-75 (600M), 110.00 (480M), 110.30-35 (1.4BLN), 110.95-111.00 (880M)
New Zealand 1yr Inflation Expectations (Q3) 3.02% (Prev. 1.87%
- New Zealand 2yr Inflation Expectations (Q3) 2.27% (Prev. 2.05%)
Lots of huffing and puffing, but ultimately no meaningful extended recovery gains in core debt to breach recent highs that might have turned the tide against post-NFP retracement. Hence, Bunds and Gilts are back on the path of least resistance and US Treasuries displaying a degree of caution before IJC, PPI and the last slug of issuance that comes 2 hours after details of next week’s 20 year and 30 year TIPS auctions are published. Looking at bond levels more closely, the 10 year German benchmark has been down to 176.44 (-13 ticks vs +20 ticks at best), its UK peer is just off a new 129.49 Liffe low (-14 ticks compared to +19 ticks at one stage) and the equivalent T-note is hovering closer to parity (133-18+) than its overnight peak (133-25).
Crude benchmarks have been contained around the unchanged mark for the entirety of the European and APAC sessions, as such ranges are narrow and currently around USD 0.50/bbl for both WTI and Brent. As price action has been minimal, we do reside in close proximity to the highs of yesterday’s session, printed just after the European cash equity close, as the complex derived support from the White House’s initial commentary which implied no immediate/sudden pressure on OPEC+, following the earlier statements. This morning, the main event has been the IEA MOMR which looks for oil demand to rise by 5.3mln BPD in 2021 and by an additional 3.2mln BPD in 2022; however, they reduced their demand outlook for the remainder of 2021 due to the worsening COVID-19 situation. No price reaction on the release. Separately, at 11:50BST today the equivalent report from OPEC is scheduled for release. Moving to metals, spot gold and silver print modest divergence but ranges are minimal and fresh newsflow for the complex has been very slim; the schedule ahead has the US PPI release which will be scrutinised for any further inflation updates after yesterday’s CPI release. Elsewhere, copper prices are supported but near familiar levels as we continue to await BHP/Escondida updates after yesterday’s prelim. wage agreement; however, this still needs to be ratified by the unions members to remove the risk of strike action.
Texas Governor Abbott tweeted that Texas can easily produce the oil that the White House is calling for from OPEC+. (Twitter)
OPEC members have not collectively discussed output increases beyond the agreed 400k BPD monthly additions following the White House statement, according to an OPEC source cited by EnergyIntel. (Twitter)
IEA Monthly Oil Market Report: oil demand is set to rise by 5.3mln BPD in 2021 and by an additional 3.2mln BPD in 2022; lowers oil demand outlook for the remainder of 2021 amid the worsening of the pandemic. Oil supply set to increase by 600k BPD in 2021 and 1.7mln BPD in 2022; 60% of growth from the US. The oil market could move into surplus in 2022 if OPEC+ continues to unwind cuts and other producers increase output. (Newswires)
Tropical Storm Fred has weakened into a Tropical Depression near Haiti and the Dominican Republic; slow re-intensification is forecast to begin on Thursday night. (Newswires)