[PODCAST] US Open Rundown 13th September 2021
- Risk sentiment turned constructive shrugging off a mixed APAC handover, Euro Stoxx 50 +0.6%, ES +0.5%
- USD is firmer, though G10 peers are mixed as antipodeans outperform while safe-havens lag
- 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
- 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
- UK ministers are said to be mulling further delays to border checks on EU goods amid fears of supply disruptions before Christmas
- Looking ahead 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 (+0.3%) 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 (+0.2%) 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 (+0.1%) was negative after North Korea test-fired new long-range missiles which allegedly hit targets 1,500km away. The Hang Seng (-1.5%) and Shanghai Comp. (+0.3%) 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)
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 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. (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 Treasury officials met with financial industry executives last week to discuss cryptocurrency stablecoins. (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 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)
ECB’s Schnabel says “inflation will noticeably decrease as soon as next year… should inflation sustainably reach our target of 2% unexpectedly soon, we will act equally quickly and resolutely.” Adds that there are good reasons to assume that the current constellation of fiscal and monetary policy in the euro area may finally chart the path out of the low interest rate environment. (ECB)
US and EU have moved forward on talks to preserve data transfers. (WSJ)
German Economy Ministry looks for domestic growth to pick up significantly in Q3 after 1.6% GDP Q/Q in Q2; GDP growth likely to normalise in Q4. (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. Subsequently, Iran's Foreign Ministry says all sanctions that are contrary to the spirit of the JCPOA should be removed, retain the same position on Vienna talks. However, will resume nuclear discussions in the near future, Tehran Times (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)
Bourses in Europe have adopted a more constructive risk bias (Euro Stoxx 50 +0.6%; Stoxx 600 +0.5%) following the mixed trade/indecision seen in APAC, with news flow also exceptionally light in early European hours. US equity futures have piggy-backed on the mild gains seen across Europe, with the calendar today especially light ahead of US CPI tomorrow – whilst the NQ (+0.3%) narrowly lags vs the more cyclically exposed RTY (+0.8%) and YM (+0.5%) and ES (+0.5%). Back to Europe, sectors are mostly higher with clear outperformance in Oil & Gas following the advances in crude overnight and during early European hours, whilst Retail and Travel & Leisure reside as the laggards – with easyJet (-13%) plumbing the depts after the Ryanair (+1.3%) CEO said easyJet would essentially have to merge with WizzAir to survive – a bid that easyJet rejected according to sources last week. Elsewhere, Autos were bolstered at the cash open with Daimler (+1.2%) and BMW (+1.2%) spearheading the gains following reports the Co. intends to limit the supply of premium models shipped even when the chip shortage eases in a bid to secure the 'hefty' price increases attained during COVID-19. In terms of individual movers, Valneva (-35%) slumped over 40% at the open after the UK Government terminated its COVID-19 vaccine supply agreement with the Co., alleging that the Co. is in breach of its obligations under the agreement.
India is looking to tax cryptocurrency trades, ecosystem in the country. "Govt feels any activity that generates income must pay tax in India. Cabinet to soon take up bill on cryptocurrency.", according to ET's Bhatia. (Twitter)
Dutch court has ruled that Uber (UBER) drivers are employees and not independent contractors, according to FD. (Newswires)
DXY - The Dollar index has rebounded from overnight lows to post a marginal new peak beyond last week’s apex, at 92.880 amidst broad gains, but not all round as high beta and commodity counterparts resist the Greenback’s advances on a combination of upbeat risk sentiment and firm underlying prices. However, the Buck is deriving momentum from the latest Fed official advocating a slowdown in the pace of QE sooner rather than later, as Harker believes that inflation might be long lasting rather than transitory, and presumably is not overly concerned by the fact that the last BLS report did not meet consensus on the headline front. Meanwhile, the DXY is also underpinned ahead of US inflation data on Tuesday following firmer than forecast PPI last Friday.
CHF/EUR/JPY - All softer vs the Dollar, and the Franc back below 0.9200 irrespective of a dip in weekly Swiss sight deposits at domestic banks after more verbal SNB intervention from Zurbruegg who reiterated that negative rates are still needed to prevent the Chf from rising, while adding that it would appreciate markedly and economic growth would slow if the Bank was to hike now. Meanwhile, the Euro has lost grip of the 1.1800 handle amidst reports of stop-selling and the Yen has slipped under 110.00 again regardless of an encouraging improvement in Japan’s Q3 business survey index.
AUD/NZD/CAD - As noted earlier, the so called activity and petro currencies are outperforming or managing to outpace the Greenback on specific supportive factors, with the Aussie also benefiting from repositioning off a net short base as CFTC data as at September 7 showed the most oversold levels in 3 years. Aud/Usd is hovering near the top of a 0.7368-36 range, with Nzd/Usd mostly above 0.7100 even though NZ PM Ardern announced that Auckland’s lockdown will be extended for a week and move to alert level 3 on September 22nd due to the ongoing occurrence of ‘mystery’ COVID-19 cases, while the rest of the country will stay on alert level 2 until the same date. Elsewhere, the Loonie is keeping afloat of 1.2700 in advance of Canadian manufacturing sales tomorrow and last Friday’s solid jobs update against the backdrop of a rebound in WTI from circa Usd 69.50/brl to just 4 cents shy of Usd 70.50 at best.
GBP - Sterling is somewhat betwixt and between due to its cyclical characteristics, but having stopped short of 1.3850 and reversing through the 200 DMA (around 1.3826), Cable saw a few sell orders triggered at 1.3800, but managed to contain losses to only a 2-3 pips, while the Pound remains elevated against the Euro as the cross sits beneath 0.8550 and hardly reacts to comments from ECB’s Schnabel on the subject of inflation. In short, she thinks inflation will noticeably decrease as soon as next year, but if it sustainably reaches the 2% target unexpectedly soon, the Bank will act equally quickly and resolutely.
SCANDI/EM - No sign of Norwegian election jitters whatsoever, as Eur/Nok trades south of 10.2000 with fuel coming from Brent’s revival to top Usd 73.50/brl, while Eur/Huf is also lower following the NBH’s decision to offer extra Euro liquidity via a 2 week FX swap tender on Wednesday. Conversely, the Try is being hampered by the higher cost of oil, considerably weaker than expected Turkish ip and a wider than anticipated current account deficit.
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)
It’s a close call, but US Treasuries are probably shading it by virtue of the fact that they are or have been in positive territory and the curve is fractionally flatter compared to flat Gilts and Bunds still not quite closing the Eurex gap. However, core bonds are all above intraday lows within 133-02+/133-08, 127.78-128.02 and 171.62-87 respective bands before the return of US participants and a very light pm agenda even for a Monday.
WTI and Brent front month futures are choppy but ultimately on a firmer footing, with the former back holding ground above USD 70/bbl and the latter around USD 73.50/bbl. There have been several developments over the weekend on both the supply and demand sides of the equation. Demand continues to be threatened by the Delta variant, with the Chinese city of Putian placed under lockdown to contain the Delta variant COVID-19 outbreak and New Zealand's Auckland extending its lockdown for a week. That being said, the UK will announce they are dropping plans that would have required COVID-19 vaccine passports for entry to nightclubs, cinemas and sports venues, whilst the UK health minister is looking to end PCR tests for travel as soon as possible. Meanwhile, on the supply side, US Gulf of Mexico production is slowly coming back online. However, traders must be cognisant of Tropical Storm Nicholas – which is expected to strengthen to a tropical storm later today and resides on the west Gulf Coast. Elsewhere, there have been some developments in Iranian talks whereby Tehran will permit IAEA monitoring and resume JCPOA talks – however, Iran has not budged from its earlier stance regarding nuclear negotiations. In terms of banking commentary, BofA said a cold winter could lead to USD 100/bbl oil sooner than expected. Turning to precious metals, spot gold and silver trade with modest losses with news flow also light. Citi projects a lower trading band for gold, around the USD 1,700/oz, albeit with low conviction; dovish surprise at the September FOMC meeting could allow a break higher towards USD 1,900/oz. Over to base metals, copper gave up earlier gains but remains caged, with LME metals now all posting losses. There were also reports earlier in the session that the Yunnan province in China ordered green aluminium producers to hold monthly output for September-December at levels no higher than August, according to a document and have ordered the cement industry to reduce September production by over 80% from August levels – with iron and aluminium part of the cement manufacturing process.
OPEC MOMR to be released at 13:20BST/08:20EDT. (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)
Louisiana Governor declared a state of emergency ahead of Tropical Storm Nicholas in the Gulf of Mexico. (Newswires)
BofA says a cold winter could lead to USD 100/bbl oil sooner than expected. (Newswires)