Original insights into market moving news

[PODCAST] European Open Rundown 13th September 2021

  • Asia-Pac stocks began the week cautiously; US equity futures faded their earlier mild gains
  • In FX, the DXY was steady, EUR/USD and GBP/USD were subdued and USD/JPY traded choppy
  • Global Times Editor warned Taiwan of "full scale" sanctions and military patrols following the proposal to rename Taiwan’s US office
  • North Korea test fired long-range missiles on Saturday and Sunday which allegedly hit targets 1,500km away
  • UK ministers are said to be mulling further delays to border checks on EU goods amid fears of supply disruptions before Christmas
  • House Democrats expect to propose hiking corporate tax to 26.5% from 21.0%; US House Speaker Pelosi said details on the House tax proposal will come next week
  • Looking ahead, ECB's Schnabel, Riksbank's Skingsley and Norwegian Elections


US President Biden will announce new COVID-19 steps ahead of the UN General Assembly and said there will be more actions that they will continue to work on, especially on the global front. (Newswires)

UK PM Johnson will announce they are dropping plans that would have required COVID-19 vaccine passports for entry to nightclubs, cinemas and sports venues. In relevant news, UK government is to announce plans this week for COVID-19 vaccinations for 12- to 15-year-olds with a mass inoculation programme beginning in schools within two weeks. (Telegraph/Observer)

UK Health Minister Javid stated the PM will set out plans this week to manage COVID during the approaching months, while Javid wants to scrap PCR tests for travel as soon as he can and said they will end the temporary increase in universal credit at month-end. (Newswires)

China’s National Health Commission sent a special team to a city in eastern China’s Fujian province after COVID-19 cases were reported, while it was later reported that the city of Putian was paced under lockdown to contain the Delta variant COVID-19 outbreak. (Newswires/CGTN)

New Zealand PM Ardern said there is no widespread transmission of COVID-19 in Auckland but added that there are still mystery cases coming through. PM Ardern announced that the Auckland lockdown will be extended for a week and move to alert level 3 on September 22nd, while the rest of the country will stay on alert level 2 until September 22nd. (Newswires)


Asia-Pac stocks began the week cautiously following last week's five-day losing streak on Wall Street and ongoing regulatory tightening by Beijing, with participants also digesting the latest missile launches by North Korea over the weekend. US equity futures overnight posted mild gains which later faded. The ASX 200 (+0.1%) eked marginal gains amid continued strength in the commodity-related sectors following recent upside in oil and base metals, but with advances capped by underperformance in tech and the current virus situation. Nikkei 225 (-0.3%) lacked firm direction amid a choppy currency and with autos pressured after US House Democrats proposed increasing EV tax credits to as much as USD 12.5k per vehicle for union-made zero-emission models assembled in the US - which would essentially penalize non-union made EVs such as Toyota and Tesla. The KOSPI (-0.3%) was negative after North Korea test-fired new long-range missiles which allegedly hit targets 1,500km away. The Hang Seng (-2.1%) and Shanghai Comp. (+0.1%) were varied with Hong Kong weighed heavily by losses in real estate and tech after China's industry ministry told technology companies including Tencent and Alibaba to stop blocking each other's website links from their platform, with the latter also pressured by news that Beijing wants to break up Ant Group's Alipay and create a separate app for its loan business. There were also hefty declines for SOHO China which fell nearly 40% after Blackstone abandoned its USD 3bln takeover of the property developer, while the mainland showed some resilience with the Shanghai bourse cushioned despite the US weighing a trade probe in a bid to pressure China and the disruptions in Shanghai due to an approaching typhoon. Finally, 10yr JGBs were flat amid the cautiousness in the region and recent treasury selling in the US, while demand was also sapped by the lack of BoJ purchases in the market today.

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 6.4497 vs exp. 6.4507 (Prev. 6.4566)

PBoC Adviser said Beijing should curb tech monopolies to ensure growth. (Newswires)

China's industry ministry told technology companies including Alibaba (9988 HK) and Tencent (700 HK) to stop blocking each other's website links from their platforms and that it will take measures against enterprises that fully fail to rectify. Furthermore, the industry ministry said China is supportive of M&A in the EV market and that China has too many EV start ups. (Newswires)

Beijing reportedly wants to break up Ant Group's Alipay and create a separate app for the Co.'s highly profitable loan business. (FT)

South Korea September 1st-10th Trade Balance at a provisional deficit of USD 1.46bln, Exports rose 30.7% Y/Y and Imports rose 60.6% Y/Y. (Newswires)


UK PM Johnson’s manifesto-breaking tax increases could cost dozens of Tory MPs their seats at the next general election and reverse the party gains made in Red Wall seats at the last election, according to the Telegraph citing a poll. In relevant news, UK ministers fear that council tax bills will have to increase for millions of households next year to pay for social care despite PM Johnson's tax raid. (Telegraph)

UK Chancellor Sunak told Treasury officials to hold more talks with the insurance industry to encourage the early launch of new products enabling people to fund future social care costs in England, while he wants insurers to cover expenses up to GBP 86k per adult social care costs before the government steps in. (FT)

UK ministers are said to be mulling further delays to border checks on EU goods amid fears of supply disruptions before Christmas. Sources said no final decision has been made. Senior UK officials cited by The Telegraph said a delay is highly likely, with a range of options considered including a delay of six months or more. (Times/Telegraph)

German SPD’s Chancellor candidate Scholz was viewed to be the most convincing candidate during the first half of the prime television debate on Sunday, two weeks prior to the election, according to a snap poll. In relevant news, support for Germany’s Social Democrats increased 1 point to 26%, while CDU/CSU remained at 20% and the Green party declined 1 point to 15%, according to the latest INSA poll which showed the widest lead for the SPD. (Newswires)

EU's Dombrovskis said the EU will assess whether its debt reduction rule needs to be overhauled given the surge in public debt burdens during the COVID-19 crisis. (FT)

US and EU have moved forward on talks to preserve data transfers. (WSJ)


In FX, the DXY was steady and held on to Friday’s gains which were helped by the lacklustre risk tone, firmer than expected PPI data and recent taper talk. Overnight, Fed’s Harker noted that he is in favour of moving towards tapering sooner rather than later, while there were also reports that US House Democrats expect to include hiking corporate tax to 26.5% from 21.0% and raising the top capital gains tax rate to 28.8% from 23.8% among their tax hike plans. EUR/USD was subdued by the firmer greenback and breached 1.1800 to the downside. GBP/USD was also lacklustre after Friday’s fluctuations and mixed data, with a recent poll also showing PM Johnson’s manifesto-breaking tax increases could cost dozens of Tory MPs their seats at the next general election. USD/JPY and JPY-crosses traded choppy amid the indecisive risk mood.

SNB's Zurbruegg said negative rates are still needed to prevent a rising CHF, while he added that the currency would appreciate markedly and economic growth would slow if they were to hike rates now. (Newswires)


WTI crude futures were underpinned and climbed above the USD 70/bbl level in an extension of Friday's gains despite the recent USD-strength and cautious risk tone, while there were renewed bullish comments from Goldman Sachs that said the global oil market is set to rally significantly citing increasing scarcity. Nonetheless, the gains were capped with Gulf of Mexico production continuing to return post-Ida although Tropical Storm Nicholas, which is headed for Texas, had also prompted a state of emergency declaration for Louisiana, while on the geopolitical front, the IAEA reached an agreement with Iran on Sunday on nuclear monitoring which raised hopes for a return to nuclear talks with the US. Elsewhere, gold prices were rangebound beneath the USD 1800/oz level as effects of a firmer greenback were offset by the cautious mood and with participants awaiting tomorrow's US CPI data, while copper pared some of its recent gains owing to the dampened sentiment.

US Baker Hughes Rig Count (w/e Sept 10th): Oil +7 at 401, Nat Gas -1 at 101, and Total +6 at 503. (Newswires)

BSEE estimates that approximately 48.6% of the current oil production in the Gulf of Mexico is shut in (prev. 61.6%) and approximately 54.4% percent of the gas production (prev. 60.7%). (Newswires)

Chevron (CVX) said there was no damage to its Gulf of Mexico platforms as a result of Hurricane Ida, while it redeployed essential personnel and restored partial production at Jack St. Malo and Blind Faith platforms. Furthermore, other facilities that were shut-in for Ida are ready to produce once pipeline export routes resume operations. (Newswires)

Marathon (MPC) Garyville Louisiana refinery (578k BPD) returns to operation after shutdown due to Hurricane Ida, while Phillips 66 (PSX) Alliance, Louisiana refinery (255k BPD) likely faces a shutdown of several months for repairs, according to sources. (Newswires)

Louisiana Governor declared a state of emergency ahead of Tropical Storm Nicholas in the Gulf of Mexico. (Newswires)

US State Department Energy Envoy Hochstein said the US is concerned about a possible winter gas crunch in Europe and stated that Europe must better prepare. (Newswires)


Reports noted that Washington risks Beijing anger regarding proposal to rename Taiwan’s US office, while China’s Global Times editor tweeted that if this were to occur, China will at least recall its ambassador to the US and will shift from preferential policies for Taiwan to full scale sanctions. Furthermore, the editor added that Chinese fighter jets would surely fly over the island and begin to patrol Taiwan. (FT/Twitter)

China Global Times tweeted that the US should stop exerting extreme pressure on China and especially refrain from provocations at China’s doorstep, while it added US warships repeatedly broke into 12 nm of Chinese islands, which is particularly dangerous. (Twitter)

China’s Global Times tweeted that Japan made a publicity stunt on Sunday by hyping speculations on recent submarine activities from China near Japanese territorial waters and experts say Japan wants to create more “China threats” so it has an excuse to break its pacifist constitution. (Twitter)

UK PM Johnson and US President Biden are expected to hold bilateral talks on September 21st in the US. (Times)

Iran will allow IAEA service nuclear monitoring cameras following discussions on Sunday with IAEA chief Grossi, according to Iran’s nuclear chief Eslami who described the talks as constructive and noted that Grossi will visit Tehran again soon. There were also comments from Grossi that the most pressing issue with Iran was solved by reaching an agreement for the overdue servicing of monitoring equipment, creating room for broader diplomatic efforts. (Newswires)

Yemeni Houthi rebels stated that the districts of Rahaba and Mahliyah in the oil-rich province of Marib have been recaptured from government forces. (Newswires)

North Korea test fired long-range missiles on Saturday and Sunday which allegedly hit targets 1,500km away, while the Pentagon later noted that North Korea's missile test poses a threat to its neighbours. (KCNA)

Belarusian President Lukashenko held talks with Russian President Putin over the supply of S-400 missile defense systems. (Newswires)


The 10yr led the whole Treasury curve lower on Friday amid stock pressure, taper-friendly Mester, and strong PPI, with the benchmark yield now flat on the week at 1.34%. 2s +0.1bps at 0.217%, 3s +0.8bps at 0.446%, 5s +2.7bps at 0.814%, 7s +3.7bps at 1.118%, 10s +3.9bps at 1.339%, 20s +3.5bps at 1.858%, 30s +3.3bps at 1.932%; TYZ1 volumes were below average. 5yr TIPS -3.7bps at -1.836%, 10yr TIPS +1.0bps at -1.070%, 30yr TIPS +0.3bps at -0.354%. SOFR and EFFR both unchanged at 5bps and 8bps, respectively. Eurodollars reflected the Treasury curve's steepening on light volumes, with Sept '22 contracts the most active. Yields began to cheapen as Europe arrived, coinciding with a bid for European stock indices. The 10yr cash yield struggled to break above 1.33% in the NY morning. However, selling momentum picked up after a firmer than expected PPI print and as Fed's Mester expressed an appetite for tapering this year and completed by mid-2022. The stock and bond slide picked up after the NYSE stock open, with not much clear cut explanations, although many were pointing to Mester's "hawkish". The selling for T-Notes hit its most acute on the back of the slide lower in Apple shares (post-Epic Games judge ruling), hitting lows of 133-03, or 1.36% 10yr yield high, before tracking sideways into the settlement. T-note (Z1) futures settled 11 ticks lower at 133-05.

Fed's Harker (2023 voter) said he is in favour of moving towards tapering sooner rather than later and suggested that inflation could be long-lasting. (Nikkei)

US House Speaker Pelosi said details on House tax proposal will come next week. It was later reported that US House Democrats expect to propose hiking corporate tax to 26.5% from 21.0% and imposing a 3 percentage-point surtax on individual income of more than USD 5mln, while they are also mulling rise in minimum tax on US companies' foreign earnings to 16.5% from 10.5% and raising the top capital gains tax rate to 28.8% from 23.8%, according to a congressional aide. (Newswires/WSJ)

US Democrat Senator Manchin said lawmakers were unlikely to finalize their massive spending package by the congressional leaders’ September 27th deadline for the budget bill, while Manchin separately commented that he will not support the USD 3.5tln headline number on the budget bill and refused to provide an amount for the budget bill. (Newswires)

US Democrats are looking for a stopgap funding measure through until December 20th and plan to pass a stopgap spending bill during the week of September 20th to wave off the threat of a government shutdown at month-end. (Politico)

US Treasury officials met with financial industry executives last week to discuss cryptocurrency stablecoins. In separate news, US President Biden administration’s senior officials are alarmed Facebook’s (FB) potentially enormous crypto proposal could threaten US financial stability despite a flurry of FB revisions and lobbying, while a decision is expected in weeks. (Newswires/Washington Post)