[PODCAST] US Open Rundown 1st September 2021
- European bourses/US futures are firmer but off highs after a cautious APAC handover following Chinese PMIs and before Tier 1 US data; ES +0.3%
- Chinese Caixin PMI slipped into contractionary territory for the first time since April last year
- The morning's OPEC related sources indicate that they will continue with current policy i.e. +400k BPD
- DXY is downbeat with peers mixed as USD/JPY rises with UST yields, though these are off best levels
- Looking ahead, highlights include US Manufacturing PMIs (final), US ISM Manufacturing, ADP, OPEC JMMC and OPEC+ meeting, Fed's Bostic & ECB's Weidmann
World Health Organization said it is monitoring a new coronavirus variant known as "Mu" that was first discovered in Colombia at the start of the year and known as B.1.621, while it has been classified as a "variant of interest". (France 24)
Australia's New South Wales reported 1,116 locally transmitted COVID-19 cases and Victoria state reported 120 locally transmitted COVID-19 cases. Furthermore, Victoria state Premier Andrews said they cannot ease COVID-19 restrictions today and that they will experience an increase in cases, while they are unlikely to ease lockdown restrictions until September 23rd. (Newswires)
Tokyo COVID-19 cases 3168 vs prev. 2909. (Newswires)
Asian stocks traded somewhat cautiously after further disappointing Chinese PMI data and following a soft handover from the US where sentiment was mired by disappointing Chicago PMI and US Consumer Confidence data, although the losses on Wall Street were only marginal and all major indices registered a seventh consecutive monthly gain for August. ASX 200 (-0.1%) was pressured as daily COVID-19 infections continued to ramp up in Australia’s most-populous states and with better-than-expected GDP doing little to brighten the mood, given that the strong economic growth for Q2 was made somewhat stale by the lockdowns throughout the entirety of Q3 so far. Nikkei 225 (+1.3%) outperformed amid reports PM Suga is to order the compiling of an economic package and additional budget within the week, while data also showed Japanese companies' recurring profits nearly doubled Y/Y during the prior quarter. Hang Seng (+0.6%) and Shanghai Comp. (+0.7%) eventually weathered the miss on Chinese Caixin PMI data which slipped into contraction territory for the first time since April last year and effectively supported the argument for PBoC easing. However, price action was choppy as crackdown concerns also lingered amid the continued tightening of Beijing’s regulatory grip with China to curb overly fast growth in medicine expenses and the PBoC is to implement new disclosure measures for Chinese non-bank payment apps when they make new products or conduct foreign stock market listings. Finally, 10yr JGBs declined amid spillover selling from global counterparts including the bear steepening stateside and pressure in European bonds following the firm Eurozone inflation data, while the outperformance in Japanese stocks and lack of BoJ purchases in the market today also contributed to the headwinds for JGBs.
PBoC injected CNY 10bln via 7-day reverse repos with the rate at 2.20% for a net drain of CNY 40bln. (Newswires) PBoC set USD/CNY mid-point at 6.4680 vs exp. 6.4668 (prev. 6.4679)
China will reportedly curb overly fast growth in medicine expenses. (Nikkei)
Japanese PM Suga said the date of the election will be decided by the ruling LDP and that they cannot dissolve parliament in the current situation, while he added there is no change that COVID countermeasures take priority over the general election. (Newswires)
- Chinese Caixin Manufacturing PMI (Aug) 49.2 vs. Exp. 50.2 (Prev. 50.3)
White House said US President Biden's administration will announce steps for building and selling 100k more affordable homes during the approaching three years, which will be through existing authorities and targets boosting home-buying by individuals and non-profits. (Newswires)
ECB's de Guindos stated "In September we will also have to decide on the volume of purchases for the last quarter of this year. If inflation and the economy recover, then there will logically be a gradual normalisation of monetary policy, and of fiscal policy too". (On Delta) "What we are seeing is that it is not having as great an impact as we projected four months ago". (ECB)
ECB's Stournaras notes that the EZ inflation jump is temporary and the ECB should be cautious; adds that wages are not yet following the course of inflation. (Newswires)
Japanese Economic Minister Nishimura said CPTPP member nations agreed to hold the first meeting with UK regarding its inclusion to the pact in around a month, while Nishimura believes the CPTPP is a significant contributor for coming back better from the impact of the virus. (Newswires)
EU Markit Manufacturing Final PMI (Aug) 61.4 vs. Exp. 61.5 (Prev. 61.5)
- German Markit/BME Manufacturing PMI (Aug) 62.6 vs. Exp. 62.7 (Prev. 62.7)
- French Markit Manufacturing PMI (Aug) 57.5 vs. Exp. 57.3 (Prev. 57.3)
EU Unemployment Rate (Jul) 7.6% vs. Exp. 7.6% (Prev. 7.7%, Rev. 7.8%)
UK Markit/CIPS Manufacturing PMI Final (Aug) 60.3 vs. Exp. 60.1 (Prev. 60.1)
UK BRC Shop Price Index YY (Aug) -0.8% (Prev. -1.2%)
Stocks in Europe trade with respectable gains across the board (Euro Stoxx 50 +1.2%; Stoxx 600 +0.9%), despite a somewhat mixed APAC lead and with little in terms of fresh fundamentals to sour risk appetite. US equity futures see gains of a lesser magnitude and have been waning off best levels, with the RTY (+0.6%) outpacing the ES (+0.3%), YM (+0.3%) and NQ (+0.2%), ahead of the ADP and ISM Manufacturing PMI later today before Friday’s pivotal jobs report. Back to Europe and sticking with PMIs where we have had the manufacturing finals across Europe – with the resonating theme being ongoing supply chain issues. The DAX (+0.7%) narrowly underperforms the region after the German manufacturing metric was slightly revised lower, deviating from the revision higher seen in France and the forecast beats printed in Italy and Spain – with the IBEX (+2.2%) the clear European outperformer at the time of writing, although more-so on the back of solid sectorial performances seen in Retail, Travel & Leisure and Banks. Sectors across Europe are predominantly in the green, with the only laggards the Basic Resources and Chemicals sectors. Sectors do not portray a clear theme nor bias. In terms of individual movers, Pernod Ricard (+3.5%) is firmer post-earnings where it announced the resumption of its EUR 500mln share buyback programme. Carrefour meanwhile trades at the foot of the Stoxx 600 after Billionaire Bernard Arnault's Agache group announced the sale of its 5.7% stake in the Co. via accelerated bookbuilding. Meanwhile, Stoxx will announce the results of its annual review of the Euro Stoxx 50 Index at the close of business on 1 September, to be effective Friday, 17 September – JPM expects BBVA (+2.2%) and Stellantis (+0.3%) to replace Engie (+2.0%) and Amadeus (+2.6%).
JPY/CHF/XAU/DXY - A marked change in fortunes for the Yen following its fleeting breach of 100 DMA resistance vs the Dollar yesterday, as Usd/Jpy rebounds sharply through 110.00 and the 50 DMA (110.10) towards 110.50 alongside US Treasury yields amidst further bear-steepening and renewed risk appetite. The Yen may also be factoring in reports that Japanese PM Suga is preparing an economic package and supplementary budget, plus pretty dovish/downbeat from BoJ’s Wakatabe, and the same could be said for the Franc in wake of SNB’s Zurbruegg saying that he expects low global interest rates will remain unchanged for some time to come, while noting vulnerabilities on the Swiss mortgage and real estate markets currently at a high level. Furthermore, the Bank sees clear signs of unsustainable mortgage lending on the one hand and heightened risks of a price correction on the other. Usd/Chf is back in the high 0.9100 area following its flirt with the round number on Monday, and with little downside reaction to a firmer Swiss manufacturing PMI. Conversely, Gold is coping relatively well with the rise in UST yields and risk-on environment on the Usd 1800/oz handle, albeit back below 100 and 200 DMAs after hurdling both and closing above yesterday, as the Greenback grinds higher and DXY attempts to form a base beyond 92.500 having bounced from a 92.395 low on Tuesday. The index is now hovering within a 92.790-640 band awaiting ADP, Markit’s final US manufacturing PMI, ISM and comments from Fed’s Bostic.
AUD/NZD/CAD - All firmer against their US counterpart, with the Aussie establishing a firmer platform over 0.7300 to stage another assault on 0.7350. Better than expected Q2 GDP did not really boost Aud/Usd overnight as COVID lockdowns have subsequently scuppered the economic recovery and China’s Caixin manufacturing PMI fell below the 50.0 growth/contraction threshold. However, the technical backdrop looks more constructive above a Fib retracement level at 0.7319 and Aud/Nzd crosswinds have turned in the run up to NZ terms of trade, import and export prices on a further bounce from 1.0350 to top 1.0400 again. Nevertheless, the Kiwi has reclaimed 0.7050+ status vs its US peer and the Loonie is paring more post-Canadian GDP declines with some traction from crude in advance of Markit’s manufacturing PMI, JMMC and OPEC+ meetings, with Usd/Cad probing 1.2600 compared to peaks just above 1.2650 yesterday.
EUR/GBP - Both narrowly mixed against the Greenback, but the Euro marginally outpacing the Pound as Eur/Gbp eyes 0.8600 irrespective of final Eurozone and UK manufacturing PMIs that were somewhat contrasting, but probably all too close to consensus or preliminary prints to prompt much reaction. Eur/Usd has regained 1.1800+ status, while Cable is straddling 1.3750.
SCANDI/EM - Somewhat tentative and rangy trade with no big response to slowdowns in Norwegian or Swedish manufacturing PMIs and reports that Sweden’s Finance Minister plans to ease the tax burden in the upcoming Autumn Budget (due September 20) to the tune of circa Sek 10 bn. Elsewhere, some softening in the Cnh/Cny on the aforementioned contractionary Chinese Caixin manufacturing PMI in contrast to ongoing strength in the Try and Zar following a U-turn by SA’s Social Development Minister who has withdrawn a green paper that would have cost employers and employees up to 12% of their earnings to set up a National Social Security Fund.
- Australian Real GDP QQ SA (Q2) 0.7% vs. Exp. 0.5% (Prev. 1.8%)
- Australian Real GDP YY SA (Q2) 9.6% vs. Exp. 9.2% (Prev. 1.1%, Rev. 1.3%)
A spirited if not exactly strong recovery in bonds as books build for Greek 5 and German 30 year syndications, while 2029 and 2026 conventional auctions in the UK and Germany were amply covered, all things considered. Moreover, Bunds, Gilts and US Treasuries may be paying heed to equities that have lost some positive momentum, and the former also acknowledging comments from ECB’s Stournaras urging caution on inflation rather than a hasty response to the rise in pressures as wages are still lagging behind. However, the 10 year UK benchmark appeared to lead the latest recovery rally to a 128.34 Liffe peak (+10 ticks vs -13 ticks at worst), with Bunds not quite reaching their post-retail sales high (175.50 vs 175.16 at the low) and the 10 year T-note still just shy of parity between 133-07/13+ extremes awaiting a busy pm agenda and remarks from Fed’s Bostic.
Books for the 5yr issuance from Greece are in excess of EUR 6.6bln with pricing tightening to midswaps +38bps, according to leads. While Greece has opened books for its 5yr and 30yr reopenings. (Newswires)
Crude futures have largely retraced their overnight gains, with WTI and Brent both back towards the bottom end of today’s ranges. The choppiness comes in the run-up to the JMMC meeting at 15:00BST/10:00EDT and the decision-making OPEC+ confab at 16:00BST/11:00EDT – subject to delays. Expectations have solidified around a 400k BPD hike, i.e., a continuation of the current plan, with all sources thus far pointing in that direction. That being said, it’s worth keeping in mind that OPEC+ has a tendency to massage expectations and then surprise markets. The full Newsquawk preview can be accessed here, and the exclusive Twitterdeck is available here. Elsewhere, spot gold and silver are uneventful and contained to recent ranges awaiting Tier 1 US data. Industrial metals are slightly more interesting following later-confirmed reports that China is releasing a third batch of metals totalling 150k tonnes, comprised of 30k tonnes of copper (prev. 30k), 70k tonnes of aluminium (prev. 90k) and 50k tonnes of zinc (prev. 50k). LME copper slumped back under USD 9,500/t and resides near session lows at the time of writing – with the disappointing Chinese Caixin manufacturing PMI also weighing on the red metal.
US Private Energy Inventory Data (bbls): Crude -4.1mln (exp. -3.1mln), Cushing +2.1mln, Gasoline +2.7mln (exp. -1.6mln), Distillate -2.0mln (exp. -0.7mln). (Newswires)
An informed source has intimated that considering the outcome of the JTC meeting yesterday, it appears that OPEC+ today will continue its previous policy; i.e. an increase of 400k BPD, via Energy Journalist Zandi. Subsequently, reported that the OPEC+ focus remains on an increase of 400k BPD despite the upward revision to demand forecast, according to four sources. (Twitter/Newswires)
Phillips 66 Alliance, Louisiana refinery (250k bpd) remains shut with timelines for an operational restart largely dependent on the impact assessment, as well as access to electricity and other utilities in the region. (Newswires)
Total's (FP FP) 185k BPD Port Arthur, Texas refinery has reported flaring, according to a community line. (Newswires)
China confirms it has released 150k tonnes of copper, aluminium and zinc from state reserves; China will continue to release metal reserves based on market conditions, according to the National Reserves Admin. (Newswires)