[PODCAST] US Open Rundown 10th September 2021
- European equities (Stoxx 600 +0.3%) trade on a marginally firmer footing with the Stoxx 600 attempting to recoup some of the week's losses
- US equity futures are modestly firmer across the board with mild outperformance in the RTY
- US President Biden and Chinese President Xi had a broad and strategic discussion
- Senate Democrats are floating plans to impose taxes on share buybacks and tightening rules around business partnerships, according to NYT
- Looking ahead, highlights include CBR rate decision, US PPI, Canadian Labour Market Report, Fed's Daly, Mester
UK is poised to administer "mix and match" COVID vaccines for its booster programme; according to senior government officials cited by the FT. (FT)
Asian stocks approached the weekend with a brightened mood as the region nursed some of the recent losses and shrugged off the cautious performance stateside where sentiment was constrained by recent bearish macro themes and amid concerns of high valuations ahead of looming policy normalisation. ASX 200 (+0.5%) was kept afloat by outperformance in mining names in which aluminium-related stocks led the gains after underlying prices extended on decade highs, although upside in the index was capped by losses in healthcare and property, as well as the ongoing Delta concerns. Nikkei 225 (+1.3%) was among the outperformers with a firmer footing above 30k and with the index unfazed by the recent currency strength, as attention reverts to the Suga-succession race and with M&A newsflow also spurring risk appetite resulting to a glut of buy orders for Shinsei Bank on reports SBI Holdings is expected to launch a tender offer. Hang Seng (+1.9%) and Shanghai Comp. (+0.3%) were positive amid several encouraging headlines including reports the PBoC called for average loan rates for SMEs be around 5.5% as it aims to lower cost of financing to SMEs and will be issuing an additional CNY 300bln for small business relending. There was also optimism from news that China is to allow Evergrande to reset debt terms for renegotiation, while reports of a Biden-Xi phone call was only marginally supportive in which the leaders were said to have discussed where interests converged and diverged, with the US side also somewhat tempering expectations and noted that the call was not seeking specific agreements or outcomes. Finally, 10yr JGBs were lacklustre with demand sapped by the improved risk tone and the lack of BoJ purchases in the government bond market, with the central bank instead seeking to purchase JPY 500bln in commercial paper from September 15th.
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 at 6.4566 vs exp. 6.4570 (prev. 6.4615)
US President Biden and Chinese President Xi had a broad and strategic discussion in which they discussed where interests converge and areas where interests, values and perspectives diverged, according to White House. US official said the call was a test of whether direct leader-level engagement can move relations forward and that low-level discussions have not been fruitful, while the call was not intended to discuss costs for Beijing's lack of cooperation and the US was not seeking specific agreements or outcomes, but broad strategic discussion about how to manage competition. Furthermore, the US will not trade away progress in transnational issues with China for something not in the US' interests and the call was said to have lasted 90 minutes in which the tone was familiar and candid, although the official also noted the US ability to change China may be limited. (Newswires)
Chinese President Xi said that US policy on China imposes great difficulties in relations and that they should push forward US-China relations to get back on right track. Furthermore, both sides agreed to maintain frequent contact through multiple means and agreed to ask working-level teams to step up communications, while Xi added that they will continue to cooperate in climate change. (Newswires)
Chinese government minister have held a meeting with platform firms including Meituan, Didi (DIDI), Tencent (700 HK/TCHEY) over labour issues. (Newswires)
Senate Democrats are floating plans to impose taxes on share buybacks and tightening rules around business partnerships, according to NYT. (NYT)
- UK GDP Estimate MM (Jul) 0.1% vs. Exp. 0.6% (Prev. 1.0%). (Newswires)
- UK GDP Estimate YY (Jul) 7.5
- UK GDP Estimate 3M/3M (Jul) 3.6% vs. Exp. 3.8% (Prev. 4.8%)
European Commission VP Sefcovic said the Northern Ireland protocol should be properly implemented and spirit of compromise must be neutral. (Newswires)
Support for the UK Conservative Party (33% vs. 35% Labour) has fallen to its lowest level since the election after the government announced plans to increase national insurance, according to polling by The Times . (Times)
ECB's Holzmann (hawk) said that PEPP should expire in 2022; Holzmann emphasizes that all the data so far indicate that "the economy is doing better than expected", with no signs of a slump in the economy. (WiWo)
EU's Economic Commissioner Gentiloni said the EU is looking for sustainable growth - which means supportive policies should be kept; should not allow investment to fall due to the pandemic
French Finance Minister Le Maire said now is the end of "whatever it costs" and the beginning of targeted help. French Finance Minister said the proposal to exclude green investments from deficit calculations is worth discussing (Newswires)
European equities (Stoxx 600 +0.3%) trade on a marginally firmer footing with the Stoxx 600 attempting to recoup some of the week's losses which currently amount to around 1%. Performance for Europe comes in the wake of a firmer APAC handover which saw the Nikkei 225 (+1.3%) gain a firmer footing above 30k and upside in Chinese bourses after the PBoC moved to lower financing costs for SMEs and Presidents Biden and Xi spoke for the first time in seven months. Stateside, US futures are showing gains (ES +0.4%) with some marginal outperformance in the RTY (+0.7%). Sectoral performance in Europe is somewhat mixed with outperformance in Tech names and cyclically-exposed names, whilst Telecom and Food & Beverage stocks sit in the red. In terms of stock specifics, the CAC reshuffle means Eurofins Scientific will replace Atos in the CAC 40, effective September 17th. LVMH (+2.1%) sits at the top of the CAC following a broker upgrade at HSBC with support also seen in other luxury names. Elsewhere, downgrades at Barclays and JP Morgan Chase have sent Fresenius Medical Care (-4.3%) to the bottom of the Stoxx 600 and subsequently weighed on the health care sector. Finally, airline names are suffering once again in Europe with yesterday's slew of downbeat updates from US airlines casting a shadow over the sector.
Tesla (TSLA) has discontinued its solar subscription service that it started offering in the US two years ago as the cheapest possible way to go solar. (Electrek)
DXY, CNH - The broader Dollar and Index has been drifting below 92.500 in early European trade in tandem with the mild pickup in risk sentiment and has been printing fresh incremental lows throughout the session thus far, currently clocking a 92.328-557 range. Fed speak has been plentiful post-NFP, with the general picture painted thus far being one of economic progress but caution. Fed's Daly (2021/24) and Mester (2022/24) are also expected to weigh later today, just before the US cash open. Meanwhile, from a technical standpoint, the index tested support at yesterday's 92.378 low, whilst the upside sees the 50 DMA (92.621) and 21 DMA (92.736) ahead of 93.00. Focus overnight fell on a call between President Biden and Chinese President Xi in which both sides agreed to maintain frequent contact through multiple means and agreed to ask working-level teams to step up communications. Despite little development, the proactive steps to avoid a further escalation (especially given the recent military noises out of the South China Sea) bolstered the CNH, with USD/CNH declining a current low of 6.4320 (vs high 6.4551).
NZD, AUD - The antipodeans are the main beneficiaries of the receding Dollar coupled with the firmer risk tone. NZD/USD is bid after topping its 200 DMA (0.7118) and overnight resistance of 0.7125, and yesterday's 0.7133 best, to a current high of around 0.7156, above Monday's 0.7153 peak. AUD/USD follows suit but to a slightly lesser extent as the AUD/NZD cross probing 1.0350 to the downside (vs 1.0381 high). AUD/USD meanwhile remains north of its 50 DMA (0.7362) and eyes 0.7400 to the upside.
CAD, NOK - Petro-G10s see tailwinds as crude prices retrace yesterday's losses with the aid of the broader risk environment. The Loonie saw commentary from BoC Governor Macklem yesterday, who struck somewhat of a neutral tone. USD/CAD has dipped back under its 21 DMA (1.2629) to encounter interim support around the 1.2618-20 mark (Wed/Thu lows). The NOK looks ahead to its elections next week, but before that, crude prices and above-forecast headline inflation (ex-core) have pressured EUR/NOK back under its 200 and 100 DMAs at 10.2637 and 10.2461, respectively.
GBP, EUR - Sterling has taken advantage of its high-beta property and outpaces the EUR as the cross remains sub-0.8550 post-ECB. This morning saw commentary from ECB hawk Holzmann, who noted that PEPP should expire in 2022 and emphasizes that all the data so far indicate that "the economy is doing better than expected", with no signs of a slump in the economy . EUR/USD has drifted higher towards yesterday's best levels of around 1.1840, with Wednesday's high overlapping with the 1.1850 mark to the upside, whilst the downside sees the 50 DMA at 1.800 on the nose. Options expiries are also abundant for the EUR/USD on either side of current levels, with EUR 1.2bln between 1.1800-10, and with EUR 1.6bln at strike 1.1850. Sterling, meanwhile, overlooked the overall sub-par GDP estimate metrics and inches closer 1.3900 after closing above its 200 DMA (1.3824) yesterday.
JPY - The JPY has failed to garner much impetus from the softer Dollar amid the more constructive risk tone. USD/JPY has moved back above its 100 DMA (109.79) and 21 DMA (109.83) as it attempts to convincingly breach the 50 DMA (109.96) and the 110.00 level with it.
In the fixed income space, Bunds trade on a softer footing with prices scaling back some of yesterday's ECB-inspired gains. After opening at 172.44 (vs. yesterday's best level of 172.48), prices have drifted lower throughout the session and briefly slipped beneath the 172.00 mark to print a low of 171.86, albeit remains firmly above yesterday's trough of 171.59. The fallout from yesterday's ECB meeting hasn't been deemed as too much of a gamechanger with analysts at ING noting "purchases in the last months of the year won't differ much from the €65bn/m realised in August". Instead, market participants will be more mindful of developments ahead of December, which is set to shed more light on what to expect from "life after PEPP". The retracement theme in Europe is most notable in Italy with the Italian 10yr yield wider to Germany by around 2bps for the session. Gilts are showing shallower losses with initial upside at the open proving to be fleeting as investors overlooked a mostly disappointing batch of data from the UK which saw growth in July of just 0.1% vs. exp. 0.6% and a deeper than expected trade deficit during the same month. The UK 10yr benchmark is on track to close the week out below its opening level as participants continue to ponder recent remarks from BoE Governor Bailey who signalled an unexpected split on the MPC over whether minimum necessary conditions were met to raise interest rates. Finally, USTs have conformed to the mostly softer tone in the fixed income space with the curve bear-steepening, with yields 0-3bps higher across the curve ahead of US PPI metrics and Fed speak from Daly and Mester.
WTI and Brent front month futures have maintained the upward trajectory in the retracement seen since the open of Chinese markets overnight and following yesterday's China-induced losses. Price action today is seemingly dictated by the broader risk sentiment. Aside from that, from a fundamental perspective, Iranian nuclear talks see minimal developments – with the Russian representative to the Vienna talks stating that Russia will vote against any draft resolution on Iran, "there is no need for a resolution which would be not only senseless but extremely detrimental". This follows source reports over the past week that EU diplomats are awaiting the outcome of consultations between Tehran and the IAEA before deciding on a draft resolution condemning Iran for little cooperation. From a technical standpoint, Brent Nov rebounded off its 21 DMA (70.90) after testing it two days in a row. Brent resides around USD 72.50 at the time of writing. WTI similarly tested but failed to breach its 21 DMA (67.67) and has reclaimed USD 69-status during the European morning. Elsewhere, precious metals have been gleaning support from the softening Buck. Spot gold as moved back above its 50 and 21 DMAs at USD 1,798/oz and USD 1,799/oz and trades on either side of 1,800/oz ahead of its 200 DMA at USD 1,808.88. Spot silver, meanwhile, was bolstered in early hours as it topped the USD 24/oz mark. Meanwhile, LME metals continue to gain, with LME copper back above USD 9,500/t vs a low of USD 9,387/oz. That being said, Dalian iron ore futures continue to be hit by measures taken by China to try stem factory-gate prices hitting margins and consumers.
US Department of Energy provided 1.5mln bbls of oil to Exxon (XOM) from the Strategic Petroleum Reserve after the Co. requested to borrow another 1.5mln bbls of oil amid slow resumption of operations at Gulf of Mexico post-Ida. (Newswires)
Kuwait set October KEC crude for Asia at Oman/Dubai + USD 1.25/bbl which is USD 1.10/bbl lower from the prior month. (Newswires)
Zambian President said will review mining policy framework with stakeholder. (Newswires)
Russia will vote against any draft resolution on Iran, " there is no need for a resolution which would be not only senseless but extremely detrimental", according to the Russian representative to the Vienna talks. (Twitter)