[PODCAST] US Open Rundown 8th September 2021
- Bourses in Europe saw losses intensify shortly after the cash open; US equity futures followed suit but have since regained composure
- In FX, the DXY sits further above 92.50, EUR/USD and GBP/USD trade on 1.18 and 1.37 handles respectively
- Fed's Bullard (2022 voter) said the Fed should proceed with tapering despite the weak US jobs data
- US Democrat Senator Manchin privately warned he would only support as little as USD 1.0tln of Biden's spending plans
- House Democrats are privately clashing with their Senate Democratic counterparts and the White House over new spending on health care programs included in the reconciliation package
- Looking ahead, highlights include EIA STEO, Fed Beige Book, US Crude Private Inventories, BoC Policy Decision, BoE's Bailey, Ramsden, Broadbent, Tenreyro, Fed's Williams, Kaplan and supply from the US
AstraZeneca (AZN LN) CEO Soriot said there is no need to rush needlessly into COVID-19 booster shots and that booster jabs may not be needed for everyone in the UK, while rushing into a nationwide rollout of third doses risks piling extra pressure on the NHS. (Telegraph)
Japanese government is to extend COVID emergency measures to the end of this month but will gradually ease COVID-19 restrictions beginning in October, according to local press. There were later comments from Japanese Chief Cabinet Secretary Kato that the government is considering specific plans how to relax restrictions on activities amid COVID, while Economic Minister Nishimura said experts agreed to focus on the medical situation when deciding whether to lift restrictions. (Newswires)
Asia-Pac equity markets followed suit from the lacklustre performance in the US where sentiment was subdued on return from the Labor Day weekend with weakness seen in cyclicals. ASX 200 (-0.2%) traded negative as the ongoing COVID-19 disruptions continued to take their toll on the nation’s stock markets and with gold miners frontrunning the declines after the precious metal recently slipped beneath the 1800/oz level, although losses for the index were stemmed with the top-weighted financial sector underpinned by the higher yield environment. Nikkei 225 (+0.9%) recovered from opening losses, helped by stronger than expected GDP revisions for Q2 and although the government is likely to extend COVID emergency measures to the end of this month, reports added that it will gradually ease COVID-19 restrictions beginning in October. Furthermore, SoftBank was the biggest gainer in the Japanese benchmark with its shares briefly higher by double-digit percentages after the recent share-swap agreement with Deutsche Telekom fuelled speculation it could lead to a share buyback. Hang Seng (-0.1%) and Shanghai Comp. (Unch) traded indecisively amid ongoing regulatory and debt concerns with reports noting that China will increase transparency of policies and will crackdown to better support companies in competition, while Evergrande shares were choppy after Fitch downgraded its credit rating from CCC+ to CC which reflects the view that a default of some type seems probable. Finally, 10yr JGBs declined following the bear steepening in US where bonds were also pressured by increased issuer activity and with demand dented by the GDP-uplifted mood in Japanese stocks, although the pressure in JGBs was cushioned by the BoJ's presence in the market for more than JPY 1tln of government bonds.
PBoC injected CNY 10bln via 7-day reverse repos with the rate at 2.20% for a net neutral daily position. (Newswires)PBoC set USD/CNY mid-point to 6.4674 vs exp. 6.4685 (prev. 6.4533)
China's Evergrande (3333 HK) is to delay loan interest payments to banks and have suspended wealth management product payments, according to Financial intelligence provider REDD. (Newswires)
China has banned private tutors from offering courses via online platforms. (Newswires) China's Banking and Insurance regulator (CBIRC) has published draft rules to manage liquidity risks of wealth management products. (Newswires) China will increase transparency of policies and will crackdown to better support companies in competition. (People's Daily)
China's Foreign Ministry could provide a negative list on foreign investment by year-end, according to the spokesperson. (Newswires)
Blackrock (BLK) initiates Chinese government debt with an overweight rating. (Newswires)
US House Panel will reportedly conduct a hearing regarding the South China Sea dynamic on September 14th. (Newswires)
Japan's PM-candidate Takaichi says he would mobilise monetary easing, crisis prevention and fiscal spending to achieve 2% inflation goal. (Newswires)
- Japanese GDP Revised QQ (Q2) 0.5% vs. Exp. 0.4% (Prev. 0.3%)
- Japanese GDP Rev QQ Annualised (Q2) 1.9% vs. Exp. 1.6% (Prev. 1.3%)
- Japanese GDP Cap Ex Rev QQ (Q2) 2.3% vs. Exp. 2.0% (Prev. 1.7%)
Fed's Bullard (2022 voter) said the Fed should proceed with tapering despite the weak US jobs data, while he dismissed concerns the rebound in the labour market was faltering and said there is plenty of demand for workers. (FT)
ECB's Vasle said the ECB is still in need of 'highly accommodative" monetary policy and new waves of the pandemic could slow the recovery. (Newswires)
ECB's Holzmann sees potential upside risks to inflation, and might be able to normalise policy sooner than thought. (Newswires)
ECB Supervisory Board Member Enria says there are signs that asset quality deterioration cause by COVID may not have yet peaked. (Newswires)
BoJ will continue to take a persistent stance when it comes to monetary easing, even after the COVID-19 pandemic abates, until the 2% inflation target is reached, via a Nikkei interview. (Nikkei)
US Democrat Senator Manchin privately warned the White House and congressional leaders he would only support as little as USD 1.0tln of President Biden's spending plans and up to a maximum USD 1.5tln, according to sources. (Axios)
House Democrats are privately clashing with their Senate Democratic counterparts and the White House over new spending on health care programs included in the USD 3.5trl reconciliation package, Punchbowl source state. Several key House committees are slated to begin marking up the package tomorrow. (Punchbowl News)
Chances of a snap UK cabinet reshuffle tomorrow are receding, but a pre-conference shake up still possible, but it is more likely PM Johnson will do it later in the autumn, according to Daily Mail's Groves. (Newswires)
Bourses in Europe saw losses intensify shortly after the cash open and have since trickled lower and stabilised near lows. (Euro Stoxx 50 -0.7%; Stoxx 600 -0.8%). The downside across Europe also reverberated across the pond but to a lesser extent and with the effects fleeting. The ES (-0.1%) briefly dipped below 4,500, the YM (-0.1%) fell below 35k, whilst the RTY (-0.1%) initially narrowly underperformed, and the NQ (-0.1%) is cushioned by yields. There is no discernible catalyst behind the losses across equities, and as to why sentiment deteriorated from the lacklustre APAC handover. That being said, the rest of the week is packed with central bank updates, including tomorrow’s ECB (full previous in the Newsquawk Research Suite), but before that, several Fed speakers. On that note, Fed’s Bullard (2022 voter) was the first official to speak post-NFP and held onto his hawkish stance by stating the Fed should proceed with tapering despite the weak US jobs data, while he also dismissed concerns about the rebound in the labour market was faltering and said there is plenty of demand for workers – it will be interesting to see how aligned other Fed officials are to this view. Back to Europe, the majors see broad-based losses with no standout performer. Sectors are all in the red and do not portray a clear theme nor bias. Travel & Leisure is among one of the better performers, with some downside potentially alleviated by reports that the UK travel traffic light system could be tweaked under plans drawn up by ministers, which could mean the red category will still require hotel quarantine, but amber and green categories will disappear, and travel will be determined by vaccination status as opposed to country, according to the Telegraph. Further for travel, Ryanair (+1.7%) CEO noted the Co. will be operating at 90% of pre-covid volumes by the Christmas period but will have lower pricing, whilst summer 2022 is expected to be “very strong”. Ryanair also guided 90-100mln passengers for FY 2022, and added that the trend is moving towards to upper end of that range. Moving on, Auto & Parts, alongside Banks, reside at the foot of the bunch, the former weighed on by the ongoing chip shortage and Stellantis’ (-2.3%) losses after Dongfeng filed to sell a 1.15% stake in the Franco-Italian carmaker. Autos may also feel headwinds from the Chinese retail passenger vehicle sales declining almost 15% Y/Y, although Tesla (Unch pre-market) Chinese-made cars sales rose 34.3% in the period. In terms of individual movers and shakers, Smiths Group (+2.1%) resides as one of the winners after divesting Smiths Medical for USD 2.7bln.
DXY - The Dollar index has extended its recovery from post-NFP lows after a shallower a brief retreat to 92.472 and is now targeting loftier upside chart levels ahead of last Wednesday’s 92.790 peak from a 92.732 high, thus far. Latest gains are broad based, but not universal as the Greenback’s main safe-haven rivals are in demand against the backdrop of deteriorating risk sentiment in equities especially. However, the Buck is also up independently or with some fundamental impetus following comments from Fed’s Bullard as the first official to respond to the disappointing headline payrolls number, and discounting the big miss on grounds that there is ample demand for staff, so tapering should go ahead. The impending JOLTS data may well back him up, while Williams and Kaplan are scheduled either side of the Beige Book.
JPY/CHF - As noted above, the Yen and Franc are ‘benefiting’ from risk-off positioning to a degree, as Usd/Jpy eases back towards the low 110.00 area from around 110.45 and Usd/Chf from just over 0.9200, while Eur/Jpy and Eur/Chf retreat from overnight peaks as well in classic safety flight fashion, albeit not extreme.
CAD/AUD - The major casualties amidst aversion and relative strength in their US peer, but the Loonie also looking increasingly nervous ahead of the BoC policy meeting that might err on the side of caution given the spread of the Delta variant. Usd/Cad is hovering near the top of a 1.2707-1.2626 range as implied volatility picks up to price in a 68 pip break-even for the event that coincides with August’s Ivey Canadian PMIs - full BoC preview available via the Research Suite and to be posted on the Headline Feed before 15.00BST. Elsewhere, the Aussie is now more than a full big figure under Tuesday's post-RBA apex against the backdrop of weak underlying commodities, but keeping its head just over 0.7350.
EUR/GBP/NZD - All conceding more ground as the Greenback revival gathers momentum, with the Euro currently in the bottom half of approximate 1.1800-1.1900 m-t-d extremes and looking for fresh guidance from the ECB on Thursday, while the Pound remains depressed close to 1.3750 having lost 1.3800+ status yesterday following confirmation of higher taxes to fund NHS spending from UK PM Johnson and now awaiting BoE speakers at the TSC for any fresh policy insight. Back down under, the Kiwi has Q2 NZ manufacturing sales on the radar as its pivots 0.7100 and 1.0400 vs its US and Antipodean counterparts respectively.
SCANDI/EM - The Nok and Sek are both softer as the general market tone sours, but the latter is holding above 10.2000 and does not seem likely to trigger decent option expiry interest at the 10.2500 strike (1 bn) against the Eur at this stage. Conversely, the Try appears in danger of further depreciation and a test of 8.5000 vs the increasingly buoyant Usd after candid remarks from the CBRT Governor who conceded that there is room for improvement in terms of Turkey’s inflation rate, reserves situation and overall risk premium, rather than his contention that policy is tight enough to reduce inflation in Q4. On that note, CPI is now 25 bp higher than the benchmark rate, at 19.25%.
CBRT governor notes there is room for improvement in the Turkish economy in terns of inflation reserves and risk premium. (Newswires)
For Bunds it may have been partly technical, but also due to some anxiety given the much later than normal release of German auction results that were ultimately tepid in terms of the barely covered 10 year sale and low retention countered to some extent by the smaller than usual offer size. Meanwhile, EU bourses have bounced from worst levels as well and could be sapping strength from bonds, as the Eurex benchmark drifts down from just 3 ticks shy of Fib resistance at 171.89, Gilts ease back from 128.28 and the T-note from 133-06+, but all still treading water. Ahead, US JOLTS and IBD/TIPPS, the BoC, BoE speakers, Fed commentary and the latest Beige Book.
WTI and Brent front-month futures have been consolidating throughout most of the European morning following the prior session’s losses, and on balance, the benchmarks did not see much follow-through from this morning’s losses across stocks, although WTI Oct and Brent Nov have subsequently been gaining heading into the US open, with the former back above USD 69/bbl and the later inching closer towards USD 72.50/bbl. News flow for the complex has been light, but over in the Gulf of Mexico, participants are cognizant of a potential cyclone formation in the next 48 hours for a system located over the south-central GoM, just as the BSEE reports the slow resumption of oil and gas operations, with the latest metrics suggesting 79% of offshore production still shuttered (vs 84% D/D). Over to the demand side, Qatar narrowed its price differentials to Oman/Dubai for Marine Crude and Land Crude in lockstep with Saudi’s lowering of its Asia OSPs. Elsewhere, the Ryanair CEO hit the wires today and suggested its volumes will be around 90% of pre-pandemic levels around Christmas, whilst holding a robust outlook for next year, and separate reports also stated that the UK traffic light system would be tweaked whereby the “amber” and “green” categories will shift to a vaccination-based system – which in turn feeds into jet fuel demand. Ahead, the weekly Private Inventories will be released alter today on account of Monday's US Labor Day Holiday, with the DoEs released tomorrow. Over to metals, spot gold and silver trade flat and remain contained to APAC ranges in the absence of a fresh macro catalyst and ahead of a slew of central bank updates. Spot gold, during European trade, remained under USD 1,800/oz and sandwiched between its 50 and 21 DMAs at USD 1,797.70/oz and USD 1,1795/oz. Meanwhile, LME copper has remained subdued around the USD 9,250/t mark, with China’s economic slowdown and base metal crackdown cited by traders. Elsewhere, China’s coke futures and coking coal swung between gains and losses after the market regulators announced an increase in transaction fees for actively -traded contracts.
Port of New Orleans said container vessel operations have resumed following over a week-long shut down from Hurricane Ida, while terminals and industrial real estate properties sustained no major damage. (Newswires)
BP (BP/ LN) said it is in the process of resuming Gulf of Mexico operations post-Ida and is safely resuming operations at Atlantis and Mad Dog, while it expects to resume Thunder Horse and Na Kika in the approaching days. Furthermore, repairs are underway at BP's onshore assets in Houma and Port Fourchon, while PBF is planning to restart its Chalmette, Louisiana refinery (185k bpd) this week and to have most of the refinery online next week. (Newswires)
NHC said there is a 50% chance of a cyclone formation in the next 48 hours for a system located over the south-central Gulf of Mexico. (Newswires)
US State Department said Special Envoy Malley will visit Moscow and Paris between September 7th-10th for discussions regarding Iran's nuclear program, while an official noted the US wants to consult with partners regarding the best path forward given that is does not know when indirect nuclear talks with Iran will resume. Furthermore, Malley will not visit China during the upcoming trip but the US remains in contact with China regarding the Iran issue and Malley's talks will brush upon the upcoming IAEA Board of Governors meeting although the focus will be on nuclear diplomacy with Iran. (Newswires)
US President Biden said he is sure China will try to do something with the Taliban when asked if he is worried that China will fund the Taliban. There were also comments from a US State Department spokesperson that they are concerned by the affiliations and track records of some of the people named in the Taliban government, while the US reiterated its expectation that the Taliban ensure Afghan soil is not used to threaten other countries. (Newswires)
Standard Chartered (STAN LN) structurally values Bitcoin (BTC) in a USD 50k-175k range; sees cyclical peak of USD 100k in late 2021; values Ethereum (ETH) between USD 26k-35k. (Newswires)
Coinshare is to list physically-backed crypto ETPS on Euronext Paris and Amsterdam. (Newswires)
Coinbase (COIN) is investigating delayed internet computer (ICP) withdrawals issues. (Newswires)