[PODCAST] US Open Rundown 30th August 2021
- European equity bourses and US futures are modestly firmer but near unchanged levels in minimal newsflow; ES +0.1%, RTY +0.3%
- USD is bid but the index remains sub-93.00 as antipodeans and CHF take the brunt of the downside while core debt is marginally firmer
- China has unveiled new restrictions on young people playing online games, Xinhua; separately, China is said to ask brokers to increase supervision of margin trading
- Oil producers in the Gulf of Mexico shut in around 96% of crude output and about 94% of natgas production due to Hurricane Ida
- Looking ahead, highlights include national German CPI (Prelim.), ECB's Schnabel. Note, UK markets are closed on account of the Bank Holiday
Italy has scrapped the five-day COVID-19 quarantine for travellers from the UK that are fully vaccinated and that provide a negative test result. Elsewhere, the German state of Baden-Wuerttemberg is mulling a ban on unvaccinated people from visiting restaurants and concerts as pressure increases on authorities to act. (Bild am Sonntag)
Moderna (MRNA) and Takeda (4502 JT) issued a joint statement and had notified the deaths of two people that received the Moderna’s COVID-19 vaccine in Japan although stated that they do not have evidence at this time that the deaths were caused by the vaccine, while Moderna noted it had suspended three lots of the vaccine last week after foreign particles were found in the vaccine. (Newswires)
New Zealand PM Arden confirmed that Auckland will remain on level 4 for another two weeks and all areas outside of Auckland will move to level 3 from a level 4 lockdown with the level 3 to be in effect for a week. There were also separate reports that a New Zealand woman died with myocarditis after receiving the Pfizer (PFE) COVID-19 vaccine, while China reportedly failed to approve the Pfizer (PFE)/BioNTech (BNTX) COVID-19 vaccine despite its wide use in western countries. (Newswires)
Asia-Pac stocks were mostly positive with the region mildly taking impetus from last Friday's gains on Wall St where the S&P 500 and Nasdaq extended on record highs as all focus centred on Fed Chair Powell's Jackson Hole speech. However, the gains across Asian bourses were only mild as participants in Asia also digested a slew of earnings and with US equity futures contained heading into month-end and this week’s risk events including Friday’s US jobs numbers. ASX 200 (+0.2%) was kept afloat by strength in mining names which benefitted from early advances in underlying commodity prices and with shares in Fortescue Metals boosted after it announced record profits and dividends, although the tailwinds for the index were offset by the losses in tech and the largest-weighted financials sector, as well as cautiousness from another record increase in daily COVID-19 cases impacting New South Wales. Nikkei 225 (+0.5%) traded with a slightly positive bias after better-than-expected Retail Sales data from Japan but with price action capped by an indecisive currency. Hang Seng (+0.5%) and Shanghai Comp. (+0.2) were choppy amid an overload of earnings releases including China’s largest banks ICBC and CCB which failed to benefit despite printing improved full year results, while regulatory concerns lingered with planning to propose new rules banning companies with large amounts of sensitive consumer data from undertaking US IPOs and after China began a two-month campaign to crack down on commercial platforms and social media accounts that post finance-related information deemed harmful to its economy. Finally, 10yr JGBs were higher as they tracked the continued upside in T-note futures which approached just shy of the 134.00 level in the aftermath of the dovishly-perceived commentary from Fed Chair Powell, while the BoJ were also present in the market today for just over JPY 1tln of JGBs mostly concentrated in 3yr-10yr maturities.
PBoC injected CNY 50bln via 7-day reverse repos with the rate at 2.20% for a CNY 40bln net daily injection. (Newswires) PBoC set USD/CNY mid-point at 6.4677 vs exp. 6.4654 (prev. 6.4863)
US Secretary of State Blinken held a phone call with Chinese Foreign Minister Wang in which they discussed Afghanistan and US-China relations, while Wang stated that China will engage with the US based on its attitude towards China. In relevant news, it was also reported that a senior Pentagon official held a discussion last week with the Chinese military for the first time under the Biden administration. (Newswires)
China began a two-month campaign to crack down on commercial platforms and social media accounts that post finance-related information deemed harmful to its economy. Furthermore, WeChat, Douyin, Kuaishou and Sina Weibo will begin rectifying irregular practices involving publishing financial information on their platforms in response to the latest crackdown by Beijing. (Newswires/Global Times)
China is said to ask brokers to increase supervision of margin trading. In other news, China is reportedly tightening mortgage approvals in major cities amid a stricter approach to screening qualifications, while certain Chinese cities are said to have made changes to auction rules to slow price increases. (Newswires/China Securities Journal)
Japan's ruling party's (LDP) influential member Nikai has called for bold spending on emergency budget reserves as part of a stimulus package; Japan faces difficulty in reviving the economy given the dire fiscal situation; PM Suga has instructed Nikai to compile a stimulus package. (Newswires)
- Japanese Retail Sales MM (Jul) 1.1% vs. Exp. 0.4% (Prev. 30.1%)
- Japanese Retail Sales YY (Jul) 2.4% vs. Exp. 2.1% (Prev. 0.1%)
UK Trade Minister Truss said they aim to conclude discussions to join the trans-Pacific trade group by end-2022 and hopes the US can be persuaded to rejoin the group. (FT)
UK Federation of Small Businesses warned the government that the business rates system is regressive and outdated which could hamper the recovery. (Yahoo Finance)
INSA poll showed German SPD extended its lead with support at 24%, while German Chancellor Merkel’s conservatives were at 21% and Greens at 17%, Additionally, a Forsa poll showed that SPD’s Olaf was viewed as the winner of Sunday’s debate by 36% of those surveyed, while Greens candidate Baerbock was seen to have won by 30% of surveyed and conservatives’ Laschet at 25%. (Newswires)
EU Consumer Confidence Final (Aug) -5.3 vs. Exp. -5.3 (Prev. -5.3, Rev. -4.4)
- Economic Sentiment (Aug) 117.5 vs. Exp. 117.9 (Prev. 119.0)
- Industrial Sentiment (Aug) 13.7 vs. Exp. 13.4 (Prev. 14.6, Rev. 14.5)
- Services Sentiment (Aug) 16.8 vs. Exp. 18.8 (Prev. 19.3, Rev. 18.9)
ECB's Villeroy says that France and the EZ should be back to pre-COVID levels in early 2022 or maybe before this. PEPP will remain until at least March 2022; not urgent to decide on it at the September gathering. (Newswires)
US military struck back against IS on Saturday in which it bombed an IS member in Afghanistan and US military also launched a drone strike on Sunday which killed an Islamic State member suspected to be planning a suicide attack on Kabul airport. In relevant news, President Biden had warned that another attack was highly likely in the next 24-36 hours and military officials told US President Biden on Friday that the next few days of the mission in Afghanistan will be the most dangerous period to date, while there were reports overnight that as many as five rockets were fired at Kabul airport which were intercepted by a US anti-missile system. (Newswires/CNBC)
US National Security Adviser Sullivan said the Taliban privately stated that they will allow safe passage of Americans, US residents and Afghan allies after the August 31st deadline. Sullivan stated the US will not have an embassy presence in Afghanistan from September 1st but added that the US is capable of suppressing the terrorism threat in Afghanistan without permanent military presence on the ground, while he also noted that the US will consider further strikes and other operations against ISIS-K plotters. (Newswires)
Taliban official said they are aiming for a swift handover of Kabul airport from the US and are waiting for the final nod from Americans to secure full control of the airport, while other reports noted that Turkey is nearing an agreement with the Taliban regarding Kabul airport which would maintain Turkish presence in Afghanistan to secure commercial and political interests. In relevant news, the Taliban agreed that all foreign nationals and Afghans with travel authorisation will be able to leave and it was separately reported that two Pakistani soldiers were killed by militant fire across the border in Afghanistan. (Newswires)
US President Biden will welcome Ukrainian President Zelenskiy to the White House on September 1st, while visit will affirm unwavering US support for Ukraine sovereignty and territorial integrity in the face of ongoing Russian aggression, according to the White House. (Newswires)
A Houthi strike against a Yemen military base on Sunday killed at least two people and injured more than a dozen, according to medical sources. Separately, Saudi Coalition has intercepted and destroyed a ballistic missile launched by the Houthis towards Jazan, via Al Jazeera. (Newswires/Twitter)
North Korea reportedly appears to have resumed operations at the Yongbyon nuclear reactor which produces plutonium. (Newswires)
European equities (Stoxx 600 +0.1%) are predominantly posting marginal gains in what has been a slow start to the week in the absence of UK participants. The Asia-Pac handover was mostly firmer with the region benefiting via some of the tailwinds from Wall Street on Friday which saw the S&P 500 and Nasdaq extend on record highs post-Powell. In China, bourses were able to overlook further crackdowns in the nation with regulators commencing a two-month campaign to pressure commercial platforms and social media accounts that post finance-related information deemed harmful to its economy. During early European hours, China unveiled new gaming restrictions for younger players and triggered some downside Ubisoft (-1.6%) shares alongside Activision Blizzard (-2% pre-market). Futures stateside are a touch firmer (ES Unch) with marginal outperformance in the RTY (+0.2%). Given the slew of Fed speak last week placing the emphasis on labour market conditions when assessing the tapering decision/timeline, it’s hard to see how much conviction markets will place into the equity space as markets await Friday’s NFP print. As it stands, the street looks for 728k nonfarm payrolls to be added to the US economy in August; that would be cooler than the previous three-month average pace (currently 832k/month), but above the six-month average pace (currently 681k/month). Back to Europe, sectors trade mostly firmer but with little in the way of breadth across the market. Chemicals, Technology and Retail outperform peers, whilst Insurance, Banks and Health Care lag. The latter saw some modest pressure at the open amid losses in Roche (-0.3%) after announcing it would voluntarily withdraw its US accelerated approval for Tecentriq. However, losses have been trimmed as the session progressed with individual movers in the region few and far between.
Agricultural Bank of China (1288 HK) H1 net CNY 122.8bln, NIM 2.12% at end-June and NPL ratio at 1.50% in the same period.
Bank of China (3988 HK) HY profits 112.813bln vs prev. CNY 100.917bln. NII CNY 208.773bln vs prev. CNY 205.413bln.
China has unveiled new restrictions on young people playing online games, Xinhua reports; Online gaming names are to only allow minors one hour of play on Friday's, weekends and holidays. (Newswires)
AUD, NZD, CAD - The non-US Dollars initially experienced some mild underperformance, albeit antipodeans have since clambered off lows, and the Loonie has gained some composure after the APAC session. The Aussie and Kiwi are subdued as their domestic COVID situations remain dire, with the former reporting record cases and the latter extending its Auckland lockdown. AUD/USD trades on either side of its 21 DMA, which overlaps with the 0.7300 psychological mark. NZD/USD found support at its 50 DMA (0.6984) and probes 0.7000 at the time of writing. CAD sees mild gains despite unfavourable crude prices, with USD/CAD finding support around Friday’s 1.2600 low ahead of its 21 DMA at 1.2595, and the 200 and 100 DMAs further below around 1.2539, and 1.2525 respectively.
DXY, EUR, GBP - The Dollar index has nursed its overnight losses but remains within a tight 92.595-724 intraday band thus far. Fresh fundamentals have remained light post-Powell, although month-end flows could dictate in the absence of concrete catalysts and heading into Friday’s jobs report. From a technical perspective, the DXY is sandwiched between its 50 DMA (92.548) and 21 DMA (92.805). Looking ahead, the State-side docket remains light. Meanwhile, the EUR and GBP have remained quiet since the resumption of trade with little to report from a performance standpoint. Although, in the run-up to the German elections later this month – the SPD continues to make further gains in the latest polling data, with Scholz coming out on top in the latest debate. Desks also highlight the numerous coalition configurations possible from the rise of the SPD and the fall of the CDU/CSU. However, coalition negotiations will likely be prolonged, and Chancellor Merkel will still hold her spot until a coalition is made. EUR/USD eased off its 50 DMA (1.1811) after an overnight test of the level and resides on either side of 1.1800 at the time of writing (vs 1.1792 at worst). GBP/USD remains flat on the day in a narrow 1.3752-75 range – with UK participants observing Bank Holiday.
CHF, JPY - The traditional safe havens vary with USD/JPY caged but still north of its 100 DMA (109.65) and sub-110.00. Meanwhile, the CHF experiences some weakness despite a lack of fresh catalysts, and as the weekly Swiss Sight Deposits printed yet another uptick. EUR/CHF has mounted its 21 DMA (1.0758) and looks for resistance at Friday’s 1.0797 high ahead of the round number.
NOK, SEK - The Scandis see a divergence as with the NOK the clear G10 outperformer – despite tailwinds from oil. Fundamental catalysts for the NOK remain light, but there could be technical factors at play. EUR/NOK declined from its 10.3000 high, and losses were exacerbated after a dip below the 100 DMA (10.2786) to a low sub-1.2500 ahead of its 100 DMA at 10.2259. The SEK is weighed on by the NOK/SEK cross reclaiming 0.99-status and climbing above 100 DMA (0.9921) on its way to parity.
- Australian Business Inventories (Q2) 0.2% vs. Exp. 1.3% (Prev. 2.1%, Rev. 2.4%)
- Australian Gross Company Profits (Q2) 7.1% vs. Exp. 3.0% (Prev. -0.3%, Rev. -0.6%)
Modestly firmer performance in a continuation of the overnight bid in APAC bonds which took their lead from USTs post-Powell. News flow this morning has been very minimal with nothing arising to alter the broader macro narrative; additionally, UK participants are away on account of the Bank Holiday. Thus far, USTs have been firmer by a handful of ticks at best but haven’t strayed too far from the unchanged mark this morning, though they do continue to retain a slight underlying bid; the current session peak is 133.13 and there is no resistance of note before 134.00. Turning to EGBs, where action is similarly modestly firmer but contained for core counterparts while BTPs are a touch softer but holding around the 154.00 mark. Bunds are currently between two support/resistance marks at 175.62 and 176.87 which represent the low/high from July 26th and August 25th respectively. For Germany, regional CPIs have been relatively in-fitting with expectations for the prelim. mainland figure due later today and thus passed without event while unscheduled speak from ECB’s Villeroy didn’t provide much fresh impetus as participants await Schnabel later today. Finally, for the week ahead it is worth noting that EGB supply is expected to come in around the EUR 26bln mark substantially up from last week’s EUR 6bln figure and could influence action over the next few sessions.
WTI and Brent front month futures are softer on the day following the aftermath of the landfall of Hurricane Ida, which hit as a Category 4 in Louisiana, although has since weakened to a Tropical Storm and is poised to devolve into a Tropical Depression later this evening. In terms of price action, futures popped higher at the re-open of electronic trade as some 95% of GoM production was shuttered, but prices have since waned. The contracts also experienced somewhat of divergence since the APAC session, and despite overall global supply being hit, the pause in economic activity in the region alongside the inactivity of Gulf of Mexico refiners has weighed on the demand for US crude. Moving on, OPEC+ will be the next major catalyst for crude markets as participants tackle the demand dent from Delta alongside US pressure to ramp up output. Further, the impact from Hurricane Ida provides OPEC+ with more room for manoeuvre, at least in September. Subsequently, sources suggested that producers are likely to maintain the current plan to increase output by 400k BPD, although the Kuwaiti oil minister floated the idea of deferring the planned hike – no discussions have yet taken place – further source reports are expected to drip down in the run-up to the main event. WTI Oct resides just north of USD 68/bbl (vs high USD 69.64/bbl) while its Brent counterpart meanders around of USD 72.50/bbl (vs high 73.69/bbl). Elsewhere, spot gold and silver trade flat around USD 1,815/oz and USD 24/oz as catalysts remain light and risk evens loom as the week goes on. As a reminder, LME markets are closed today due to the UK bank holiday. Meanwhile, Chinese steel rebar and hot-rolled coils rose overnight with traders citing a decline in inventory and a pickup in downstream demand.
Oil producers have shut-in 95.65% of US Gulf of Mexico crude output totalling 1.74mln bpd and 93.75% of natgas production, while the Colonial Pipeline announced it will temporarily shut fuel lines from Houston, Texas to Greensboro, North Carolina and Marathon Petroleum's Garyville, Louisiana refinery (556k bpd) was also shut down over the weekend. US President Biden said Hurricane Ida is life threatening with the devastation likely to be immense and beyond the coasts, while he added they are planning for the worst from the hurricane and that it would take weeks for some places to restore power following the hurricane. Furthermore, President Biden later declared a major disaster for Louisiana and Entergy announced that all of New Orleans had lost power due to catastrophic transmission damage from Hurricane Ida. (Newswires)
OPEC+ is likely to roll over its output policies this week, with a planned 400k BPD hike from September, according to sources; the recent rise in oil prices was temporary and deemed USD 70/bbl oil prices as "okay". (Newswires)
UAE's ADNOC lowered crude allocation by 5% to term customers for November which is a steady reduction from October. (Newswires)
Indian government notes that the NTPC is arranging coal at states where stock is critical; government will be increasing coal production from all captive mines of the NTPC. (Newswires)