Original insights into market moving news

[PODCAST] European Open Rundown 13th October 2021

  • Asia-Pac stocks were mixed following the choppy performance stateside with sentiment also hampered by an update from Apple
  • Apple is reportedly set to slash iPhone production due to the chip crunch
  • Chinese trade data saw exports top estimates but imports disappointed
  • Hong Kong markets were kept shut amid a typhoon warning
  • The DXY heads into the European open on the backfoot, GBP leads in the G10 space after reclaiming 1.36 status
  • Looking ahead, highlights include UK GDP Estimate, EZ Industrial Production, US CPI, FOMC Minutes, EIA STEO, OPEC MOMR, Fed's Bowman, George, Brainard, ECB's de Cos, BoE's Cunliffe, supply from Italy, Germany, and the US


US will allow fully vaccinated travellers from Canada and Mexico to enter the US through land borders and ferry crossings beginning early next month, while it plans to announce the precise date for restrictions to be lifted on vaccinated air and land travellers to the US very soon. (Newswires)


Asia-Pac stocks were mixed following the choppy performance stateside with global risk appetite cautious amid the rate hike bets in US and heading into key events including US CPI and FOMC Minutes, while there were also mild headwinds for US equity futures after the closing bell on reports that Apple is set to reduce output of iPhones by 10mln from what was initially planned amid the chip shortage. ASX 200 (unch.) was little changed as gains in gold miners, energy and tech were offset by losses in financials and the broader mining sector, with softer Westpac Consumer Confidence also limiting upside in the index. Nikkei 225 (-0.2%) was pressured at the open as participants digested mixed Machinery Orders data which showed the largest M/M contraction since February 2018 and prompted the government to cut its assessment on machinery orders, although the benchmark index gradually retraced most its losses after finding support around the 28k level and amid the recent favourable currency moves. Shanghai Comp. (-0.4%) also declined as participants digested mixed Chinese trade data in which exports topped estimates but imports disappointed and with Hong Kong markets kept shut due to a typhoon warning. Finally, 10yr JGBs were steady with price action contained after the curve flattening stateside and tentative mood heading to upcoming risk events, although prices were kept afloat amid the BoJ’s purchases in the market for around JPY 1tln of JGBs predominantly focused on 1-3yr and 5-10yr maturities.

PBoC injected CNY 10bln via 7-day reverse repos with the rate at 2.20% for a CNY 90bln net daily drain. (Newswires) PBoC set USD/CNY mid-point at 6.4612 vs exp. 6.4613 (prev. 6.4447)

US State Department senior official said Secretary of State Blinken will be candid in the meeting with Israel's Foreign Minister today regarding risks to shared national security interests from close cooperation with China. (Newswires)

China Taiwan Affairs Office said PLA exercises and training are aimed at Taiwan independence and interference by external forces, while it added that Taiwan's hyping of military threat is a bogus accusation. It was later reported that Taiwan warned of a tougher response if Chinese military jet flights approach too close. (Newswires)

China Customs said trade still faces many uncertain and unstable factors but China's measures to stabilise foreign trade are showing results, while it added that foreign trade will soften in Q4 due to a high base although relatively fast growth is still expected for whole year trade. (Newswires)

  • Chinese Trade Balance (USD)(Sep) 66.76B vs. Exp. 46.8B (Prev. 58.34B)
  • Chinese Exports YY (USD) (Sep) 28.1% vs. Exp. 21.0% (Prev. 25.6%)
  • Chinese Imports YY (USD)(Sep) 17.6% vs. Exp. 20.0% (Prev. 33.1%)
  • Chinese Trade Balance (CNY)(Sep) 433.2B vs. Exp. 386B (Prev. 376.3B)
  • Chinese Exports YY (CNY)(Sep) 19.9% vs. Exp. 17.1% (Prev. 15.7%)
  • Chinese Imports YY (CNY)(Sep) 10.1% vs. Exp. 22.3% (Prev. 23.1%)
  • Japanese Machinery Orders MM (Aug) -2.4% vs. Exp. 1.7% (Prev. 0.9%)
  • Japanese Machinery Orders YY (Aug) 17.0% vs. Exp. 14.7% (Prev. 11.1%)


EU officials are set to announce that they can significantly reduce the number of checks on British goods exported to Northern Ireland if they are given access to UK trade databases. However, the bloc is to reject calls to remove the role of the ECJ in the Brexit deal. (Telegraph)

UK energy watchdog Ofgem is braced for a fresh wave of supplier collapses with at least four in talks about entering its supplier of last resort system. (Sky News)

ECB's Kazimir (Slovakia) has been charged with bribery, while he stated that he does not feel guilty of any crime. (Newswires)


In FX markets, the DXY reversed the prior gains that had been spurred by the flimsy risk tone stateside and amid curve flattening as rate hike bets pushed 3yr and 5yr yields to their highest levels in 19 months, with the latest Fed commentary continuing to favour a looming taper including from Fed’s Bostic. Fed's Bullard supports beginning tapering in November with a preference to complete it in Q1 next year to be in place to react to higher inflation, while Fed’s Clarida said the bar for taper is more than met on inflation and all but met for employment. Nonetheless, there hasn’t been a specific catalyst behind the retreat in the dollar which coincided with a recovery in its transatlantic counterparts and despite the House passing the debt ceiling extension bill, with focus now shifting to the US CPI data and FOMC Minutes due later today. EUR/USD reverted to the 1.1550 focal point and atoned for Tuesday’s weak performance. GBP/USD also rebounded although price action was inline with the recent oscillations through 1.3600 and with upside also capped amid the ongoing Article 16 threat from the UK if there are no changes to the Northern Ireland protocol. USD/JPY slightly pulled back from its recent rally but retained a firm footing above the 113.00 level and antipodeans lacked firm direction after the mixed China trade figures and somewhat uninspiring sentiment surveys from both sides of the Tasman.

Australian Treasurer Frydenberg said he expects GDP to contract by at least 3% in Q3 but is confident the economy will rebounded strongly, while he stated that companies and households have built up AUD 250mln on balance sheets. (Newswires)

  • Australian Westpac Consumer Confidence Index (Sep) 104.6 (Prev. 106.2)
  • New Zealand ANZ Business Confidence (Oct P) -8.6 (Prev. -7.2)
  • New Zealand ANZ Activity Outlook (Oct P) 26.2 (Prev. 18.2)


Commodities were rangebound with WTI crude futures choppy around the USD 80.50/bbl level amid the cautious risk tone and with the latest inventory reports delayed owing to Columbus Day. In terms of the pertinent newsflow, Gazprom began tapping its inventories to pump more natural gas into its pipeline network in an effort to stabilise prices and Algeria stated it will fulfil its natgas contractual obligations to partners in Europe, as well as boost supply to Spain in December, although there was also a report from the IEA which warned of the possibility of further instability to global energy markets. Gold traded steadily and failed to take advantage of the pullback in the dollar as looming US inflation data and FOMC Minutes kept prices restrained, while copper was indecisive owing to the overall tentative mood across riskier assets and mixed Chinese trade data.

IEA warned of higher oil prices if demand doesn't subside and a looming possibility of additional instability for global energy markets, while it added that global energy consumption in 2021 is expected to reclaim all ground lost the year before and predicts natgas consumption to increase 15% from 2020 levels by 2030 but won't peak until 2050. (Newswires)


US State Department said there will be another round of discussions between US and Russian officials. (Newswires)


Treasuries saw pronounced flattening (2s30s -9bps) with the front-end sold amid further hike pricing and sloppy 3s auction, while the long-end rally was aided by a strong 10yr auction. By settlement, 2s +3.0bps at 0.348%, 3s +3.3bps at 0.613%, 5s +2.6bps at 1.074%, 7s +0.1bps at 1.388%, 10s -2.5bps at 1.580%, 20s -5.0bps at 2.056%, 30s -5.4bps at 2.106%; TYZ1 volumes were average. 5yr TIPS +3.2bps at -1.650%, 10yr TIPS -1.0bps at -0.908%, 30yr TIPS -3.3bps at -0.236%. 5yr BEI -3.6bps at 2.758%, 10yr BEI -2.5bps at 2.469%, 30yr BEI -3.2bps at 2.353%. The demand for the long-end managed to sustain throughout the session, finding benefit from the decent 10yr note auction, which bodes well for Wednesday's 30yr offering. Some also cited positioning into Wednesday's CPI report and FOMC minutes, with one desk adding that Clarida's and Bostic's affirmed transitory inflation comments added to the inflation breakeven-led move lower in long-end yields. Similarly, both the officials' affirmations for the conditions being met for tapering supported the front-end cheapening. The move higher in front-end yields saw little demand to soften the blow at the 3yr note auction from the Treasury either. It's also worth noting that the August JOLTS job openings released today showed the first decline since last year, an incremental sign of improvement in the labour market imbalance, which could have also added to the decline in inflation breakevens. T-note (Z1) futures settled 9 ticks higher at 131-04+.

Fed's Bostic (2021, 2024 voter) said underlying inflation is indeed above its 2% objective and the caveat is that severe and pervasive supply chain issues will probably last longer than initially expected. Furthermore, he is not seeing signs that current inflation is doing the kind of harm to the economy that would call Fed's policy stance into question and that he still has a lower for longer approach in his head. (Newswires)

Fed's Bullard (2022 voter) said he backs beginning a taper in November and wants to finish it in Q1 next year to be in place to react to higher inflation, while he noted that the economy is still in great shape despite the setback in Q3 from the Delta variant. Bullard added that the unemployment rate could be back to pre-pandemic levels by next spring and that he wants to be in a position to hike rates if required by spring or summer next year. (Newswires)

Fed announced Vice Chair for Supervisions Quarles will no longer chair the supervision and regulation committee as vice chair term expires this Wednesday, while committee will meet on an un-chaired basis and will advance regulatory matters when there is broad consensus. (Newswires)

US Treasury Secretary Yellen reiterated the transitory inflation view and sees isolated shortages of goods in the approaching months, while she also noted it is absolutely necessary to lift the debt limit. (Newswires)

US House voted 219-206 for the final passage with vote of the debt limit increase bill which extends the debt limit to early December which just requires President Biden to sign into law. (Newswires)

US House Speaker Pelosi was urged by more than 100 US lawmakers on Tuesday to keep the USD 4,500 tax credit incentive for union-built EVs in the social spending bill which would provide a significant boost to Detroit's three automakers General Motors (GM), Ford (F) and Chrysler-parent Stellantis (STLA). (Newswires)

US Progressive Senator Bernie Sanders said they are prepared to negotiate on the domestic investment bill and that time is long overdue for moderate senators to tell rest of Democrats what they want. There were also comments from progressive US representative Jayapal that moderate Democrats still have not made a counter-proposal to the USD 3.5tln bill to expand social programs and address climate change, while a majority of progressive caucus in congress supports keeping all proposed programs in the reconciliation bill but authorised for a shorter period of time to keep costs down. (Newswires)

Apple (AAPL) is reportedly set to slash iPhone production due to the chip crunch and expects to produce 10mln fewer iPhones than initially planned, with suppliers Broadcom (AVGO) and Texas Instruments (TXN) said to be struggling to deliver enough chips, according to sources. It was also reported that Apple added China's BOE Technology (000725 CH) to its supplier list for premium displays for its iPhone 13. (Newswires/Nikkei)