Original insights into market moving news

[PODCAST] European Open Rundown 6th September 2021

  • Asia-Pac stocks were mostly positive but with gains somewhat limited post-NFP
  • Nikkei 225 (+1.8%) continued the outperformance that was spurred by the approaching leadership change in Japan
  • US equity futures were contained amid the Labor Day holiday
  • In FX, the DXY has attempted to claw back recent losses. EUR/USD has been unable to hold onto 1.19 status
  • UK PM Johnson is facing a tough battle to persuade the Conservative party to support plans for an overhaul in UK social care
  • Looking ahead, highlights include German Industrial Orders, EZ & UK Construction PMIs, EZ Sentix Index. US Markets are closed for Labor Day
  • The desk will open as usual at 22:00BST/17:00EDT on Sunday 5th September and run until 18:00BST/13:00EDT on Monday 6th September, upon which the desk will close and then re-open at 22:00BST/17:00EDT the same day due to US market closures


The White House has proposed a USD 65bln plan to combat future pandemics. (WSJ)

Pfizer (PFE) booster COVID-19 vaccine shot is on schedule for a possible September 20th rollout, according to a source. It was separately reported that Moderna (MRNA) booster submission to the US FDA requires stronger data from the Co. and the process is likely to take a few weeks behind Pfizer (PFE). (Newswires)

Alberta, Canada is to impose mask requirements for indoor places, restrict crowd sizes for the unvaccinated and will stop alcohol sales by 10pm, while it urged firms to allow employees to work from home. (Newswires)

UK vaccines minister Zahawi said large indoor venues in England will introduce the use of vaccine passports in the autumn in an effort to avert another lockdown. (FT)

Australian PM Morrison doubled down on his plan to end COVID-19 lockdowns and state border closures by Christmas, despite the ongoing rise in daily infections which is increasing the pressure on Sydney’s healthcare system. (Newswires)

New Zealand PM Ardern announced the COVID-19 lockdown is to be eased for all regions outside of Auckland to alert level 2 from Tuesday. (Newswires)

Japan is preparing to extend its COVID-19 state of emergency for Tokyo and three surrounding prefectures by another two weeks, while six other prefectures will also be considered for extensions. In related news, the Japanese government will issue online COVID-19 vaccine certificates from December. (Newswires/Nikkei)


Asia-Pac stocks were mostly positive but with gains somewhat limited ahead of this week’s busy central bank schedule and as the region digested the recent disappointing NFP jobs data, with US equity futures also contained as North American markets will remain shut on Monday due to holiday closures for Labor Day. Conversely, ASX 200 (-0.3%) was the laggard amid underperformance in the commodity-related sectors with energy the worst hit after a pullback in oil prices and with miners discouraged by the double-digit declines in shares of the world’s fourth-largest iron ore producer Fortescue Metals on ex-dividend day, while Westpac also recently cut its 2021 GDP forecast for Australia to 0% from 2.4%. Nikkei 225 (+1.8%) continued the outperformance that was spurred by the approaching leadership change in Japan where the Minister for Administrative Reform and Regulatory Reform and vaccine programme chief Toro Kono has emerged as the front runner with the backing of outgoing PM Suga and after having topped opinion polls over the weekend. Hang Seng (+0.4%) and Shanghai Comp. (+1.0%) were kept afloat amid hopes for supportive measures after Chinese Vice Premier Liu He vowed China will continue to support the private sector and with a Chinese researcher suggesting room for a cut to RRR or interest rates in H2. There were also notable gains in Aluminum Corp of China amid uncertainty following a coup attempt in Guinea which has the world’s largest proven bauxite reserves, although the price action across the broader Chinese market was slow to start amid ongoing regulatory concerns with China to tighten supervision on the financial services industry and on electric vehicles, while the securities regulator is also seeking to improve regulations for companies seeking overseas listings. Finally, 10yr JGBs were lacklustre amid the outperformance in Japanese stocks and following the indecision in T-notes post-jobs data which raised doubts regarding the timing for Fed tapering, while the absence of BoJ purchases from the market today adds to the weak demand for Japanese government paper. Finally, 10yr JGBs were lacklustre amid the outperformance in Japanese stocks and following the indecision in T-notes post-jobs data which raised doubts regarding the timing for Fed tapering, while the absence of BoJ purchases from the market today added to the weak demand for Japanese government paper.

PBoC injected CNY 10bln via 7-day reverse repos with the rate at 2.20% for a CNY 40bln net drain. (Newswires) PBoC set USD/CNY mid-point at 6.4529 vs exp. 6.4516 (prev. 6.4577)

PBoC Vice Governor Chen said China will continue improving its monetary policy controls and prudent macroeconomic policy framework, while it will develop an early-warning system to monitor and assess financial risks. Furthermore, Chen said the PBoC will close loopholes in its financial technology regulations and include all types of financial institutions, services and products in its prudential supervision framework. (Newswires)

Chinese Vice Premier Liu He vowed that China will support the private sector and said they must stick to market economy reforms. In other news, China is planning to boost cooperation between Macau and Guangdong over Hengqin Island and is aiming for a large increase in Macau residents living and working on the zone by 2024, while it was separately reported that Didi denied that Beijing city was coordinating companies to invest in Didi. (Newswires/Xinhua)

Chinese regulators are to tighten supervision on the financial services industry and electric vehicles. It was also reported that a China MIIT official said the country needs to adapt regulatory measures to guard against internet and data security risks associated with the development of intelligent vehicles, such as the unauthorized collection of personal information. (Newswires)

China is to specify operational rules for the Beijing stock exchange. In relevant news, CSRC Vice Chairman Fang said they will improve regulations for companies seeking overseas listings and enhance channels for foreign investors to take part in China's onshore futures market. (Newswires)

China told US climate envoy John Kerry that it will follow its own climate road map, while the two sides failed to reach an agreement and China has its own plans on climate matters, according to sources. (SCMP)

Taiwan scrambled jets and deployed missile systems to monitor an incursion into its air defence identification zone by 19 Chinese military aircraft including nuclear-capable bombers. (Straits Times)


UK PM Johnson is facing one of the toughest battles of the current Parliament to persuade the Conservative party to support plans for this generation’s largest overhaul for UK social care including an increase in the National Insurance to fund the plans, while it was also reported that senior Conservatives were threatening open warfare over the planned tax increase on Saturday night. (FT/Telegraph)

UK Brexit Minister Frost said the UK does not want to "sweep away" the Northern Ireland Protocol although the deal risks creating "cold mistrust" with the EU. (BBC)

The UK’s CBI has warned that labour supply problems affecting UK industries could last for up to two years. (FT)

European Commission's Gentiloni warned that tighter monetary policy by the ECB would be a mistake citing consensus that current inflation is a temporary phenomenon. (Newswires)

Italian Economy Ministry said the country’s GDP growth could surpass 5.8% estimated by the budget watchdog for 2021, while Economic Minister Franco stated the country is committed to reducing income tax and tax wedge through planned fiscal reform. Furthermore, he noted that budget policy will remain expansionary next year to assist the economic recovery from the pandemic. (Newswires)

French Finance Minister Le Maire said the country is to push for an agreement regarding the technical parameters for tax reform at the next G20 meeting. (Newswires)

INSA poll showed the support for the SPD at 25% (prev. 25%), CDU/CSU at 20% (prev. 21%) and Green at 16% (prev. 16.5%), while it was also reported SPD's Scholz indicated he could be interested in a coalition with the Greens. (Newswires)

German index DAX was expanded to 40 (prev. 30) constituents effective on September 20th, while the additions are Airbus (AIR FP), Zalando (ZAL GY), Siemens Healthineers (SHL GY), Symrise (SY1 GY), HelloFresh (HFG GY), Sartorius (SRT GY), Porsche Automobil Holding (PAH3 GY), Brenntag (BNR GY), Puma (PUM GY) and Qiagen (QIA GY). (Newswires)

S&P affirmed Cyprus at BBB-; Outlook Revised to Positive due to solid economic prospects. (Newswires)


In FX markets, the DXY weakened following the disappointing US jobs data on Friday and then spent most of Asia-Pac trade clawing back the post-NFP losses although price action was contained by holiday-thinned conditions. EUR/USD wiped out all of Friday’s gains after a failed incursion into 1.1900 territory as traders await the latest policy announcement from the ECB on Thursday. GBP/USD was kept steady around the 1.3850 as attention turns to politics with UK PM Johnson facing a tough battle to persuade the Conservative party to support plans for an overhaul in UK social care including an increase in the National Insurance and with some senior Conservatives having threatened open warfare over the planned tax increase. USD/JPY and JPY-crosses were kept afloat amid the outperformance in Japan and antipodeans were lacklustre amid weakness in oil prices and tentativeness heading into tomorrow’s RBA meeting where there are mixed views on whether the central bank will maintain or delay its tapering plans, while there were also recent source reports that Chinese major state-owned banks were seen buying USD in the onshore spot market late on Friday. (Newswires)


Commodities were mixed in which WTI crude futures were pressured and gave up the USD 70/bbl level after US jobs data on Friday and with the energy complex not helped by a gradual resumption of Gulf of Mexico output, as well as Saudi cutting prices for Asia customers with its OSP to its main market lowered to a premium of USD 1.70/bbl from USD 3.00/bbl compared with Oman/Dubai prices. Elsewhere, gold was steady and held on to a majority of the gains after the disappointing NFP, while copper was subdued amid the tentative gains in stocks and aluminium prices extended on decade highs following a coup in Guinea which has the world’s largest proven bauxite reserves used for production of aluminium.

US Baker Hughes Rig Count (w/e Sept 3rd): Oil -16 at 394, Nat Gas +5 at 102, Total -11 at 497. (Newswires)

BSEE estimates approximately 88.3% of oil production in the Gulf of Mexico has been shut in (prev. 92.5%) and approximately 82.7% of the gas production in the Gulf of Mexico has been shut in (prev. 85.9%), while a total of 104 oil and gas production platforms remain evacuated. It was also reported that US Department of Energy said four oil refineries in Louisiana initiated processes to restart following Hurricane Ida and five have yet to resume operations. (Newswires)

Saudi lowered OSP to Asia for October to Oman/Dubai USD +1.70/bbl vs prev. premium of USD 3.00/bbl, while the price differential to northwest Europe was kept at a discount of USD 1.70/bbl vs. ICE Brent crude and prices to US was also maintained at a premium of USD 1.35/bbl vs. ASCI. (Newswires)

Iraq and Total (FP FP) signed a USD 27bln agreement to build four mega energy projects in the south with Total to begin investing USD 10bln in the projects and will start the projects by year-end. (Newswires)

Libya’s National Oil Corp. said it agreed to hire all employees from a rival company set up by military commander Haftar in eastern Libya, to end a rift between the companies. (Newswires)

Elite soldiers in Guinea (world’s largest proven bauxite reserves) claimed they have seized power from the President in a coup, although the Defence Ministry said that the attack was put down. (Newswires/Guardian)


US Treasury announced new Iran sanctions in which four Iranian intelligence operatives were sanctioned who had targeted an American citizen in the US and Iranian dissidents in other countries. (Newswires)

Saudi air defences intercepted a missile launched towards Najran. (Newswires)


Treasuries bear-steepened into the long weekend as traders took the weak NFP report with a pinch of salt amid technical factors/strong prior while making way for next week's supply deluge. 2s -0.5bps at 0.208%, 3s -0.3bps at 0.407%, 5s +1.1bps at 0.787%, 7s +2.3bps at 1.097%, 10s +3.2bps at 1.326%, 20s +3.5bps at 1.867%, 30s +4.0bps at 1.947%; TYZ1 volumes were above average as a result of close to 500k traded in the 30min window post-NFP. Front-end inflation breakevens were a touch firmer after the report. 5yr TIPS +0.5bps at -1.770%, 10yr TIPS +2.6bps at -1.012%, 30yr TIPS +3.2bps at -0.276%. Eurodollars saw some marginal strength in the reds/greens, with cheapening further out. SOFR and EFFR both unch. at 5bps and 8bps. 3m USD Libor made a new record low. The kneejerk reaction to the below forecast range US jobs added (235k vs exp. 750k) was a haven bid for Treasuries to highs of 133-28, with a 1.27% low for cash 10yr yield. However, as the dust settled and details were scoured over, duration reversed its strength to session lows. A few factors were touted with many pointing to next week's chunky supply schedule (details below) creating concession early given Labor Day on Monday. Furthermore, analysts pointed to the "transitory" nature of the NFP miss given that much of the weakness stemmed from the Delta-hit Holiday/leisure sector, while the strong gains in earnings and decline in unemployment were supportive of long-end sales. Flows were chunky, with one desk noting that sellers were dominant from the 5yr out with central banks adding to the Real Money offer, on top of Dealers making concession. T-Notes hit lows of 133-08, with cash 10yr yield peaking at 1.34%, before paring slightly into the NY afternoon as volumes thinned out. T-note (Z1) futures settle 4+ ticks lower at 133-12+.

Senior White House officials have attempted to dispel fears that President Biden’s USD 3.5tln spending plans will be hindered by increasing divisions among Democrats with White House Chief of Staff Klain noting that the package continues to advance and that they will work together to find a path forward to put together a plan that can pass in Congress and be signed by the President. (Newswires)

NHC said Hurricane Larry is located about 1,285 miles southeast of Bermuda with maximum sustained winds of 125 mph and is expected to cause dangerous surf and rip currents along western Atlantic shores later in the week. (Newswires)