Original insights into market moving news

[PODCAST] European Open Rundown 31st August 2021

  • The S&P 500 and Nasdaq extended on record highs led by growth and tech
  • Asian equity markets traded cautiously as participants digested disappointing Chinese PMI data
  • Chinese Manufacturing PMI missed estimates, while Non-Manufacturing and Composite PMI both showed a contraction for the first time in 16 months
  • The DXY remains subdued just above 92.50, EUR/USD has traded on either side of 1.18, NZD outperforms after reclaiming 0.7000
  • Looking ahead, highlights include German Labour Market Report, EZ CPI, Canadian GDP, US Chicago PMI, Consumer Confidence, ECB's Lane, supply from Italy


US CDC advisers unanimously voted in favour of recommending the Pfizer (PFE) and BioNTech (BNTX) COVID-19 vaccine in individuals 16 and over. (Newswires)

US FDA stated Moderna (MRNA) COVID-19 vaccine fact sheet has been updated in which post-marketing data demonstrated higher risks of myocarditis and pericarditis, particularly within seven days after the second dose, while it has observed risk is greater among males under 40 years of age than among females and older males. (Newswires)

The EU voted to approve fresh restrictions on US travellers coming into the bloc. US State Department raised the travel alert for Germany and Canada to level 3, while the US also issued COVID-19 "Do Not Travel" advisories for Switzerland and Estonia. (Newswires)

Australia's capital of Canberra will extend its lockdown through September 17th. There were separate comments from Australia's Victoria State Premier Andrews that it is too soon to open up from the COVID-19 lockdown and they would need a low number of cases to ease restrictions, while he added that the reopening plan is to be announced tomorrow but it is not freedom day with only modest changes. (Newswires)


Asian equity markets traded cautiously as participants digested disappointing Chinese PMI data and with a non-committal tone seen at month-end following the mixed handover from US, where the S&P 500 and Nasdaq extended on record highs led by growth and tech although cyclicals and financials lagged amid a lower yield environment. ASX 200 (+0.6%) was kept afloat by outperformance in tech and health care but with upside limited by soft domestic data releases, as well as ongoing virus restrictions that have been extended in the capital and with Australia's Victoria State Premier also noting it is too soon to open up from the lockdown. Nikkei 225 (+1.2%) was subdued for most of the session after somewhat varied data releases including a surprise decline in the Unemployment Rate and with Industrial Production back in negative territory albeit at a narrower than expected decline, before staging a late rally to reclaim the 28k level. Hang Seng (-1.3%) and Shanghai Comp. (-0.8%) were lower after the miss on key Chinese data in which the headline Manufacturing PMI missed estimates at 50.1 vs exp. 50.2, while Non-Manufacturing and Composite PMI both showed a contraction for the first time in 16 months. The losses in Hong Kong were exacerbated by regulatory concerns with Ping An Insurance the worst hit amid reports China’s banking and insurance regulator is probing the Co.’s property market investments and Tencent is also pressured after China unveiled new restrictions on young people playing online games whereby gaming names are to only allow minors a total of three hours of play for the week. Finally, 10yr JGBs were choppy with initial support amid the continued strength in T-notes as Fed Chair Powell’s dovish virtual Jackson Hole appearance continued to reverberate across US treasuries and amid roll activity, although JGBs later gave up their earlier gains as the risk appetite in Japan eventually improved and despite firmer results at this month's 2yr JGB auction.

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 6.4679 vs. exp. 6.4666 (prev. 6.4677)

China's securities regulator is planning to impose more control regarding private equity funds and will not permit public offerings masked as private equity, while China is also reportedly to curb unordered capital expansion in entertainment. (Newswires)

  • Chinese NBS Manufacturing PMI (Aug) 50.1 vs. Exp. 50.2 (Prev. 50.4)
  • Chinese Non-Manufacturing PMI (Aug) 47.5 vs. Exp. 52.0 (Prev. 53.3)
  • Chinese Composite PMI (Aug) 48.8 (Prev. 52.4)


UK launched a fund valued at GBP 450mln for energy network innovation which is aimed at speeding up the decarbonisation of energy networks. (FT)

ECB's Holzmann said he expects inflation to decline for 2021 and 2022, while he also expects a marginal impact from the fourth COVID-19 wave. (Newswires)

  • UK Lloyds Business Barometer (Aug) 36 (Prev. 30)


In FX markets, the DXY was subdued and eventually declined to near 92.50 after yesterday’s rangebound performance heading into month-end. There were also recent comments from Fed’s Mester who stated the inflation criteria for an interest rate hike has not been met yet and the US labour market was not at maximum employment, but also suggested that the economy is 'basically there' in terms of substantial further progress and reiterated the Fed should begin tapering purchases this year, as well as complete the purchases by the middle of next year. EUR/USD traded on both sides of the 1.1800 level with price action initially contained after the recent mostly inline German CPI and mixed EU sentiment surveys but then edged higher as the greenback later gave way, while GBP/USD was kept afloat by support at 1.3750 and nearby 50-HMA as price action began to pick up from Monday's bank holiday closure. USD/JPY mirrored the tentative mood which also followed a recent failed approach towards the 110.00 handle and antipodeans were initially mixed with AUD/USD constrained after weak Chinese PMIs and soft domestic data readings heading into tomorrow’s Australian GDP release before finding support from renewed USD-selling, while NZD/USD briefly spiked higher after it reclaimed the 0.7000 handle and AUD/NZD nose-dived below 1.0400 despite a lack of news catalysts, although the majority of the moves were eventually retraced.

  • Australian Building Approvals (Jul) -8.6% vs. Exp. -5.0% (Prev. -6.7%, Rev. -5.5%)
  • Australian Current Account Balance (AUD)(Q2) 20.5B vs. Exp. 21.0B (Prev. 18.3B)
  • Australian Net Exports Contribution to GDP (Q2) -1.0% vs. Exp. -1.0% (Prev. -0.6%)
  • New Zealand NBNZ Business Outlook (Aug) -14.2% (Prev. -3.8%)
  • New Zealand NBNZ Own Activity (Aug) 19.2% (Prev. 26.3%)


Commodities were mixed in which WTI crude futures resumed yesterday's choppy price action around the USD 69/bbl level with participants cautious amid the disruption from Ida, which has since been downgraded to a tropical storm and with producers starting their post-hurricane assessments, while the Colonial Pipeline had also eyed a return of affected service lines on Monday evening. Furthermore, the attention for the complex now shifts to OPEC with the JTC meeting scheduled later ahead of the JMMC and OPEC+ meeting on Wednesday as sources noted that OPEC+ is likely to roll over its output policies this week with a planned 400k BPD hike from September. Gold prices were relatively steady above the USD 1800/oz level with only minimal support from the late pressure in the greenback, while copper dwindled throughout the session in the aftermath of the disappointing Chinese PMI data.

BSEE Gulf of Mexico production shut-in 94.60% or 1.722mln BOPD (prev. 95.65% or 1.740mln BOPD on Sunday), while the White House stated that it has not seen any issues with fuel shortages from Ida, as of yet. (Newswires)

Colonial Pipeline said it expects to return lines 1 and 2 to service Monday evening, In relevant news, there were comments from BP (BP/ LN) that it will not restart offshore operations until pipeline companies confirm systems are working properly. (Newswires)

Exxon Mobil (XOM) said it began post-hurricane assessment after Ida to determine if offshore and onshore facilities were affected, while it noted that the Baytown and Beaumont refineries in Texas are operating normally. Furthermore, it said the Baton Rouge refinery and chemical complex did not sustain any significant damage but it shut down units to stabilize operations and it is expected to return to normal ops after access to feedstocks and third-party utilities are obtained. (Newswires)


US Central Command Commander General McKenzie said the US military has completed its withdrawal of forces from Afghanistan which marks an end to the nearly 20-year mission in Afghanistan and that the last American left Kabul about 12 hours ago, while he believes there could be in the ‘very low hundreds’ of US civilian citizens still in Afghanistan. (Newswires)

US President Biden is to address Americans regarding Afghanistan on Tuesday and has asked Secretary of State Blinken to lead the coordination with international partners to ensure safe passage to those that want to leave Afghanistan, while he added that the world will hold the Taliban to its commitment regarding safe passage. There were also comments from Secretary of State Blinken that the US will continue relentless efforts to help Americans, Afghans and others to leave Afghanistan if they choose to and that under 200 Americans are believed to have remained in Afghanistan. (Newswires)


Treasuries were bid on Monday as the belly continued to lead the rally in continuation from Powell's walk back on rate hike expectations at Jackson Hole, while month-end looms. By settlement, 2s -1.2bps at 0.205%, 3s -1.6bps at 0.404%, 5s -2.6bps at 0.774%, 7s -2.7bps at 1.072%, 10s -2.5bps at 1.287%, 20s -2.1bps at 1.826%, 30s -1.6bps at 1.903%; TYZ1 volumes were lower than recent sessions amid declining roll activity. 5yr TIPS -9.1bps at -1.821%, 10yr TIPS +0.0bps at -1.084%, 30yr TIPS +1.1bps at -0.341%. EFFR fell to 8bps from 9bps ahead of month-end and abundant liquidity in money markets. SOFR remains unchanged at 5bps. The entry of US participants saw activity pick-up on Monday, with the belly of the curve extending its gains from Friday, with analysts citing the well-communicated divorcement of rate hikes from tapering in Powell's Jackson Hole speech. Traders have lifted the offer on the belly of the curve the most as rate hike probabilities get pared back. A surprise decline in July Pending Home Sales also added fuel to the bid, which carried through into the European close – with T-Notes printing highs of 133-18 – then trading sideways into the futures settlement. One desk observes some bullish activity in the options space too, where December 136 calls, which target around 1% in the 10yr yield, currently have about 38K open interest and are leading all calls for that expiration, with 14K traded Friday and a similar amount traded Monday. Meanwhile, it's worth highlighting also that there could be some front-running of expected month-end buying, where 0.12yr of duration extension is expected. Traders are now looking to this week's data highlight on Friday, the US jobs report, although Consumer Confidence and ISM Mfg. on Tuesday and Wednesday, respectively, are also looming in lack of Treasury supply this week. T-note (Z1) futures settled 7 ticks higher at 133-17.

Fed's Mester (2022 voter) stated inflation criteria for interest rate hike has not been met yet and the US labour market is not yet at maximum employment, while she noted upside risks to inflation and that the Fed must be very attuned to that. Mester said she expects some of the high inflation readings noticed this year to modify next year as supply chain challenges are settled but some may last longer and is focused on whether price raises are being set in as higher inflation expectations. Mester believes growth will remain strong, but the large risk is how the economy is going to respond to the COVID Delta variant and noted the US economy is 'basically there' in terms of substantial further progress required in employment and inflation to taper asset purchases. Furthermore, she reiterated the Fed should begin tapering purchases this year and complete the purchases by the middle of next year, while monetary policy will remain accommodative after the Fed begins tapering asset purchases. (Newswires)

US House Democrats AOC, Tlaib and Pressley called for US President Biden to replace Fed Chair Powell. (Politico)