[PODCAST] US Open Rundown 13th August 2021
- European bourses and US futures have a minimal positive bias but ultimately haven't deviated much from unchanged levels
- USD is downbeat but remains within reach of 93.00 with peers firmer but ultimately rangebound; debt sees USTs firmer while EGBs lost impetus after an initial flurry higher
- Tokyo daily COVID cases set a new record high and Japan's total exceed 20k for the first time while Australia's New South Wales reported record new cases
- US FDA has allowed immunocompromised individuals to receive certain COVID booster shots, and said others do not need one at this point
- Looking ahead, highlights include US Export/Import Prices & University of Michigan Sentiment (Prelim.)
US FDA has allowed immunocompromised individuals to receive a booster shot of the Pfizer (PFE) and Moderna (MRNA) COVID vaccines; says others who are fully vaccinated do not need an additional dose right now. (Newswires) This was flagged earlier this week by NBC and WSJ sources.
The head of the WHO's investigation says that a Chinese Scientist might have started the pandemic after being infected with the coronavirus while collecting bat samples. (Telegraph)
South Korea's PM has asked the public to stay home over Liberation Day holiday, and warned of stern measures against illegal street rallies. (Yonhap)
Australia's New South Wales reported 390 (vs prev. 345) new locally-acquired COVID-19 cases - a new record; Premier says the upward trend will continue for "at least the next few days". (Newswires)
Tokyo COVID-19 cases 5,773 vs prev. record of 5,042; Japanese COVID cases are set to exceed 20k for the first time vs. yesterday's 18,953, NHK. (Newswires)
German government has declared the US, Turkey and Israel has high-risk COVID-19 areas, triggering quarantine requirements for the unvaccinated, via Funke. (Newswires)
San Francisco will become the second US city to require proof of vaccination for many indoor activities, such as bars, restaurants and gyms. (SF Chronicle)
Malaysia lowered its 2021 economic growth forecast for a second time amid the pandemic, with the growth rate now seen between 3-4% from 6-7.5%. (Newswires)
Asia-Pac stocks traded mostly lower as the region largely shrugged off the mild positive lead from Wall Street, which saw the SPX notch new ATHs above the 4,450 mark (Russell 2000 closed with modest losses). The index was bolstered by the tech and growth sectors, while energy, industrials, and materials were the worst performers. Back to APAC, the ASX 200 (+0.5%) hit a fresh record high with financials leading the gains and offsetting losses in the mining sector. The Nikkei 225 (+0.1%) was indecisive on either side of the 28k mark throughout the night, whilst the KOSPI (-1.2%) underperformed as the nation faces threats from rising COVID cases – which triggered a weekend stay-at-home order – alongside tough rhetoric from nuclear-savvy North Korea. Elsewhere, the Hang Seng (-0.5%) solidified a downside bias as the region tackles crackdown jitters, with Hong Kong extending on losses throughout the session with Alibaba and Tencent posting losses of 3% apiece. The Shanghai Comp (-0.3%) meanwhile was choppy but traded in the red for the most part as Mainland China faces rising COVID cases which in turn is expected to slow growth momentum.
China will submit a draft law on protecting personal information to NPC Standing Committee. "The law will standardize phenomenon such as apps' collection of personal information and price discrimination", according to an NPC spokesperson. (Global Times)
China is to reduce fees for bond futures and stock index trading, according to the exchange. (Newswires)
- PBoC injected CNY 10bln via 7-day reverse repos at a maintained rate of 2.20% for a net neutral daily and weekly position. (Newswires)
- PBoC set USD/CNY mid-point at 6.4799 vs exp. 6.4807 (prev. 6.4754)
Tech policy groups reportedly plan to ask Apple (AAPL) to suspend customer devices' scanning plans amid rate internal criticism, sources stated. (Newswires)
Boeing's (BA) Starliner space capsule launch could be delayed several months due to repairs, WSJ sources note. (WSJ)
Germany Economy Ministry says a sustained increase in the inflation rate is not expected; no evidence of a wage-spiral that could lead to permanently high inflation. Expects positive underlying momentum of the overall economy persisting and driving the recovery. (Newswires)
The UK, US and Canada are sending troops to Afghanistan to help evacuate their diplomats, soldiers and citizens as the Taliban advance. (Newswires)
US Trade Representative and the South Korean Trade Minister spoke above supply chain resiliency and the importance of a strong US-SK bilateral trade relationship with open dialogue. (Newswires)
Arab Coalition intercepted an armed Houthi drone targeting Khamis Mushait, Saudi Arabia. (Saudi Gazette)
A large-scale joint military drill between China and Russia will kick off Friday at a training base in China. This drill will focus on counterterrorism and security training, and more than 10,000 troops will participate. (Global Times)
European equities (Eurostoxx 50 +0.2%) trade with little in the way of firm direction as macro newsflow remains light and markets remain in “holiday mode”. The Stoxx 600 is on course to finish the week with gains of around 1% having printed several record highs along the way and extending its rally seen since the start of the month. Overnight, Asia-Pacific trade was predominantly softer with underperformance in Chinese bourses alongside a backdrop of increased regulation and mounting COVID concerns. Stateside, futures are little changed with some minor underperformance in the RTY (-0.1%) relative to the ES (+0.1%) with the latter currently at record highs. Commentary from JP Morgan notes that “the trends in prospective EPS growth forecasts, seasonality in earnings expectations, and recent changes in sector EPS revisions, all suggest a more cautious approach may be warranted”. JP Morgan goes on to state that it believes “there are increasing opportunities to support Staples and Health Care as we progress through H2”. Sectoral performance in Europe is relatively mixed and narrow in terms of breadth as Travel & Leisure and Retail names lead, whilst Tech and Basic Resources lag. In terms of stock specifics, Adidas (+2.1%) sits at the top of the DAX following the sale of Reebok to Authentic Brands for EUR 2.1bln. GEA Group (+3.1%) sits near the top of the Stoxx 600 after announcing a EUR 300mln share buyback programme. To the downside, Ipsen (-11.7%) is the clear laggard after announcing that, following FDA discussions it has withdrawn the NDA for palovarotene.
Walt Disney Co (DIS) Q3 2021 (USD): Adj. EPS 0.80 (exp. 0.55), Revenue 17.0bln (exp. 16.76bln). Disney+ subscribers 116.0mln (exp. 113.1mln); Hulu paid subscribers 42.8mln. Media and entertainment distribution revenue 12.68bln (exp. 12.90bln). Parks, experiences and products revenue 4.34bln (exp. 4.05bln). +5.1% in pre-market trade
DXY - It’s been a particularly quiet start for trade in the FX space with the DXY confined to particularly tight parameters around the 93.00 mark (range of 92.913-93.012). If the index manages to stage a more meaningful breach of 93.00 to the upside, this will bring yesterday’s high of 93.037 into play with this week’s peak of 93.195 thereafter. Beyond that an approach of the 31st March YTD high of 93.439 could be a tall order with a particularly barren data docket asides from the prelim. Uni. Of Michigan release at 15:00BST. Prelim. data for August is expected to show a pick-up for headline consumer sentiment, to 82.0 from 81.2. The inflation components will also by eyed by market participants in the context of this week’s CPI and PPI metrics in which, the former calmed 'runaway inflation' fears and emboldened those who argued that inflation is of a transitory nature. All else equal, markets continue to remain fixated on the Jackson Hole Symposium at the end of the month.
EUR/GBP - EUR has managed to eke out gains against the USD and is currently straddling the 1.1750 mark. Fundamental catalysts are very much lacking and therefore a retake of the 1.18 handle does not look on the cards with the pair still unable to claw back losses seen in the wake of last Friday’s US jobs report. That said, EUR bulls will take some solace from the fact that EUR/USD just about managed to avoid slipping below its YTD low at 1.1702 with this week’s trough for the pair standing at 1.1704. If EUR/USD does make its way on to a 1.16 handle, potential support could be provided at 1.1694 which marks the 38.2% Fib of the 2020-21 move. For EUR/GBP, focus is on the 0.85 mark with the cross recently breaching this level. If the cross is able to pick up further traction to the upside, technicians eye the 21 DMA (0.8530), 50 DMA (0.8554), and 100 DMA (0.8590). GBP is marginally softer vs. the USD with support at 1.38 giving way in recent trade.
JPY/AUD/NZD - Price action for other majors against the USD is near-enough non-existent. The JPY is faring mildly better than most peers and sub-110.50 vs. the greenback after peaking at 110.79 on Wednesday. If the pair continues to head south, this could bring Monday’s low into play at 110.01, which of course rests just above the psychological 110.00 mark. If this level does give way, technicians note the 21 DMA at 109.97 and 100 DMA at 109.69. From a fundamental perspective, news that Tokyo’s COVID cases have surpassed the previous record of 5,042 has done very little to sway prices. Antipodeans are eking minor gains vs. the USD with AUD/USD on track to see the week out pretty much where it started. Given the COVID situation in the nation which has seen increasing restrictions and record cases in many regions, this is arguably somewhat impressive with the pair able to recover from its 0.7314 low set on Tuesday. Across the Tasman, NZD/USD has fluctuated on either side of the 0.7000 mark – sandwiched between its 50 and 21 DMAs at 0.7022 and 0.6990 respectively and looking ahead to next week’s RBNZ policy announcement, which is expected to mark the first G10 central bank interest rate hike since the pandemic.
A contained and uneventful start to the last session of the week for debt as Bunds are pivoting the unchanged mark in-spite of an early flurry higher; albeit, one that didn’t threaten yesterday’s 176.77 peak which lies ahead of noted resistance at 83 and 95. In a similar fashion, Gilts are also pivoting the unchanged mark in a sub-25 tick range thus far. Fresh drivers have been minimal thus far and the docket doesn’t provide much to look forward too aside from prelim. Michigan data for another reading into the inflation situation Stateside. Data aside, the speaker schedule is also empty and as we are deep into Summer-conditions is unlikely to be bothered by unscheduled remarks before Powell next Tuesday and Fed minutes thereafter. More so for USTs than EGBs, we do have a short-end Fed operation due later today which is expected above the 12bln mark within the 0-2.25yr sector and could well spur some action in quiet conditions. Continuing with USTs, the US benchmark is currently outpacing its European peers posting gains of circa 5-ticks; although, is similarly off-highs and directionally in-fitting with the broader complex and hasn’t managed to lift too far from the current week’s trough of 133.09+. As such, the yield environment is portraying slight bull-flattening but is, again, well within the week’s range.
A slightly choppy European morning for the crude benchmarks as they struggle to settle on a clear direction in an absence of specific, or even macro, newsflow. As it stands, WTI and Brent are near the unchanged mark for today but are set to conclude the week with gains of around USD 1/bbl from Monday’s sub-USD 68/bbl open in WTI, for instance. Attention resides firmly on the geopolitical front in Afghanistan as the Taliban continue to capture more territory, including the 2nd largest city of Kandahar. Though this is not, currently, dictating price action. Elsewhere, OPEC related updates after the US’ call to ramp up production have been minimal; but, on this, Goldman Sachs writes that this call is unlikely to materialise given the COVID-19 Delta variant, among other factors. The session ahead has little explicitly for the complex, aside from weekly rig count data via Baker Hughes – last week’s total print was +3 at 491. For metals, spot gold and silver are similarly contained though have a mild upward-bias benefitting from a softer USD and lower rates. Elsewhere, copper is firmer but again around familiar levels as we await confirmation of sources that BHP and Escondida, Chile workers have agreed on a new contract.
Workers at BHP's (BHP LN/AT) Escondida copper mine have approved the new contract with the company, according to a source. (Newswires)
Goldman Sachs believes the White House call for OPEC+ to boost output is unlikely to materialise given the Delta variant threat, adding that an additional hike in OPEC+ quotas appears increasingly likely given the recent global supply disappointment. GS maintained its USD 80/bbl year-end target, and notes spare capacity will be completely nomalised by Spring 2022. (Newswires)
South Korean and Chinese Refiners have purchased at least 5mln barrels of US Mars crude loading in September due to lower prices, sources stated. (Newswires)