Original insights into market moving news

[PODCAST] European Open Rundown 21st October 2021

  • Asia-Pac indices traded somewhat mixed after the similar performance stateside
  • The S&P 500 briefly approached within 5 points of its all-time peak, whilst the Nasdaq lagged
  • Tesla shares were seen lower by 1.6% in after-hours trade despite reporting a beat on top and bottom lines
  • The DXY remains subdued but north of 93.50 with price action in the FX space relatively contained
  • Looking ahead, highlights include CBRT rate decision, US Initial Jobless Claims, Philadelphia Fed Business Index, Existing Home Sales, EZ Consumer Confidence, EU Council Meeting, Fed's Daly, Waller, RBA's Lowe, supply from Spain and France
  • Earnings: AT&T, Intel, American Airlines, Southwest Airlines, ABB, L'Oreal, Vivendi, Hermes, Pernod Ricard, Barclays, Unilever


Moderna (MRNA) and Johnson & Johnson (JNJ) received FDA emergency use authorisation for their COVID-19 vaccine booster doses and the FDA also permitted the mixing and matching of booster doses, while FDA official Marks said lowering the eligibility age for vaccine boosters may make sense in the future. (Newswires)

UK Health Secretary Javid said COVID cases could go as high as 100k a day and they will do what it takes to stop the NHS becoming overwhelmed but will not be implementing Plan B now. Furthermore, they have identified a new version of the delta variant which is spreading, but added there is no reason to believe the delta variant poses a greater threat and they do not believe the pressures the NHS is facing are unsustainable, while they will act if the pressure becomes unsustainable. (Newswires)

Britain secured 480k courses of Merck's (MRK) Molnupiravir COVID-19 drug and 250k courses of Pfizer's (PFE) oral antiviral COVID drug. (Newswires)


Asia-Pac indices traded somewhat mixed after the similar performance stateside where the broader market extended on gains in which the DJIA touched a fresh record high and the S&P 500 also briefly approached within 5 points of its all-time peak as attention remained on earnings, although the Nasdaq lagged with tech and duration-sensitive stocks pressured by higher longer-term yields. ASX 200 (+0.1%) was positive as Victoria state approaches the end of the lockdown at midnight and with the index led by outperformance in mining stocks and real estate. However, gains were capped amid weakness in energy as shares in Woodside Petroleum and Santos were pressured following their quarterly production results in which both posted a decline in output from a year ago, albeit with a jump in revenue due to the rampant energy prices, while Woodside also flagged a 27% drop in Wheatstone gas reserves. Nikkei 225 (-1.5%) felt the pressure from the pullback in USD/JPY and with focus shifting to upcoming elections whereby election consulting firm J.A.G Japan sees the LDP losing 40 seats but win enough to maintain a majority with a projected 236 seats at the 465-strong Lower House. Hang Seng (-0.4%) and Shanghai Comp. (+0.5%) were varied despite another respectable PBoC liquidity effort with the mood slightly clouded as Evergrande concerns persisted with Co. shares suffering double-digit percentage losses after it resumed trade for the first time in three weeks and after its deal to sell a stake in Evergrande Property Services fell through, while reports that Modern Land China cancelled its USD 250mln bond repayment plan on liquidity issues added to the ongoing default concerns although it was later reported that Evergrande secured a three-month extension on USD 260mln Jumbo Fortune bond which matured on October 3rd. Finally, 10yr JGBs traded flat with the underperformance in Japanese stocks helping government bonds overlook the pressure in global counterparts and continued losses in T-note futures following the weak 20yr auction stateside, although demand for JGBs was limited by the absence of BoJ purchases.

PBoC injected CNY 100bln via 7-day reverse repos with the rate at 2.20% for a CNY 90bln net injection. (Newswires) PBoC set USD/CNY mid-point at 6.3890 vs exp. 6.3884 (prev. 6.4069)

Evergrande (3333 HK) secured a three-month extension on USD 260mln Jumbo Fortune bond which matured on October 3rd. (Newswires)

South Korea October 1st-20th Trade Balance at a provisional deficit of USD 2.49bln, Exports rose 36.1% Y/Y and Imports rose 48.0% Y/Y. (Newswires)


UK government announced they have reached an agreement in principle with New Zealand on a free trade deal and New Zealand stated that the FTA removes all tariffs on exports to the UK over time. There were also separate reports that UK Foreign Secretary Truss is using her visit to the Gulf to discuss new partnerships to invest in infrastructure in Africa and Asia. (Newswires)

UK Chancellor Sunak is reportedly planning an extension of the COVID loan guarantee scheme in a move to help support businesses next year amid signs that the UK's economic recovery is slowing. (Times)

ECB is reportedly pushing for banks to bolster their post-Brexit operations by adding hundreds of additional staff and billions of additional capital into operations in continental Europe. (FT)


In FX markets, the DXY remained subdued and briefly declined to the 93.50 level with price action indecisive amid the choppy risk tone. In terms of the latest Fed rhetoric, Fed’s Quarles noted that it was clear they have met the test for taper and backs a November meeting decision to begin reducing asset purchases for a mid-2022 conclusion, while Mester also stated that they have met the test for tapering and that as asset purchases wind down, they will have time to assess inflation and employment. EUR/USD marginally extended on the prior day’s rebound although the advances were later faded. GBP/USD was flat with price action now calm following yesterday’s whipsawing and with opposing forces from increasing COVID-19 concerns and reports that Chancellor Sunak is set to extend the UK business loan programme by six months. USD/JPY pulled back from its best levels in nearly four years to test 114.00 to the downside, while antipodeans were initially kept afloat by the mostly positive risk tone and further strengthening of the CNY-reference rate by the PBoC before succumbing to a late reversal that was spearheaded by declines in JPY-crosses.

  • Australian NAB Quarterly Business Confidence -1 (Prev. 17, Rev. 18)


Commodities were rangebound amid the tentative overnight risk mood with WTI crude futures unchanged after pulling back from resistance near the USD 84/bbl level although oil prices still hold on to most of the prior day's gains that were spurred by the surprise draw in headline EIA crude inventories. There were also notable comments from Saudi Energy Minister who suggested OPEC+ was limited in its ability to mitigate rising oil prices and that the gas-to-oil switch could be 500k-600k BPD, while Iraq's Oil Minister said that OPEC+ is now discussing ways to balance oil prices although there is no decision yet to add more production above the agreed levels. Gold prices were also contained overnight amid the flimsy risk appetite and uneventful greenback, which also kept copper on a sideway trajectory.

Saudi Finance Minister said that 'a low oil price would cripple investments and cause a serious energy crisis”', via a CNBC interview. (Newswires/Twitter/CNBC)


US Special Envoy for Iran is to meet British, French, German senior diplomats in Paris on Friday to discuss the Iran nuclear program, via diplomatic sources. (Newswires)

Britain is in talks with Ukraine to sell the nation weapons for the first time amid fears that Russia could use the gas crisis as an opportunity to seize the country. (Telegraph)


The Treasury curve steepened again on Wednesday and was exacerbated by a dismal 20yr auction and corporate supply, alongside profit taking from the recent flattening. By settlement, 2s -1.8bps at 0.375%, 3s -0.8bps at 0.702%, 5s -0.8bps at 1.147%, 7s -0.9bps at 1.455%, 10s +0.2bps at 1.636%, 20s +1.5bps at 2.082%, 30s +2.5bps at 2.111%. 5yr TIPS -9.5bps at -1.713%. 10yr TIPS +1.1bps at -0.946%. 30yr TIPS +6.3bps at -0.273%. 2s5s +0.8bps at 76.3bps. 2s10s +2.1bps at 123.8bps. 2s30s +4.8bps at 168.6bps. 5s10s +1.4bps at 47.3bps. 5s30s +3.9bps at 92.1bps. 10s30s +2.9bps at 44.4bps. Treasury steepening continued Wednesday and was only exacerbated by the weak 20yr auction and corporate supply alongside profit taking from the recent flattening. The short end and belly were slightly firmer while the 10yr was flat around 1.63%. The longer end (20 and 30yr) was weighed on by US supply after a dismal auction where the US sold USD 24bln in 20yr bonds which saw a 2.5bps tail, the largest in history as it was let down by domestic demand. Corporate issuance is also in focus as earnings season gets underway with the latest supply from Taiwan Semiconductor (TSM) coming to market with a USD 4.5bln four parter in 5, 10, 20 and 30yr paper. Bank of New York Mellon (BK) also launched their USD 1.5bln 3 parter, although this was concentrated in the short end and belly. Citigroup (C) launched USD 1bln at 4.15%. Analysts at ING write suggest there "is little out there to materially force market rates lower right now". The desk sites one-sided data, renewed risk- on after September risk off. ING also note that "China CDS has eased lower again, and high yield generally is on a re-tightening trend". However, "earnings season does present a risk, as it feels like we are going into it on quite an optimistic footing. But until that optimism is actually negated, it does feel like market rates can continue to drift higher". Elsewhere, Europe has been active with the "green bonds"; Orders are in excess of EUR 48bln for Italy's Green BTP Bond, although Germany sold EUR 1.649bln in top-up of the 0% 10yr green bund, beneath the expected EUR 3bln. In the UK, CPI was cooler than expected which eased some of the recent rate hike pricing from the BoE. T-note (Z1) futures settled 2+ ticks higher at 130-20+.

Fed's Beige Book stated economic activity grew at a modest to moderate rate, according to the majority of districts although several noted that the pace of growth slowed this period, constrained by supply chain disruptions, labour shortages and delta concerns. A majority of districts indicated positive growth in consumer spending but auto sales were widely reported as declining due to low inventory levels and rising prices. Furthermore, employment increased at a modest to moderate rate in recent weeks, as demand for workers was high, but labour growth was dampened by a low supply of workers, while most districts reported significantly elevated prices, fuelled by rising demand for goods and raw materials. (Newswires)

Fed’s Quarles (voter) said it is clear they have met the test for taper and he supports decision at November meeting to reduce Fed's asset purchases and end taper by mid-2022. Quarles added the Fed remains patient to allow more recovery in jobs and that the Fed is not behind the curve on the inflation fight, while inflation likely will fall next year but the upside risks are significant. (Newswires)

Fed's Mester (2022, 2024 voter) said interest rate hikes are not coming any time soon and that as asset purchases wind down, they will have time to assess inflation and employment, while she added that a lot of inflation increase is tied to COVID, whether tied to demand or supply and she expects bottlenecks to last longer than originally expected. Furthermore, Mester stated that they have met the test for taper, while she added policy is well calibrated to the outlook and is is very comfortable where policy is right now. (Newswires)

White House advised Democratic lawmakers that the plan to raise corporate tax rate is unlikely to be included in the reconciliation bill, according to a congressional source. (Newswires)

US Democrats are still haggling over a number of issues including climate change, Medicare expansion, revenue raisers, increasing the SALT deduction and paid family leave, according to CNN citing sources. In relevant news, 160 US GOP lawmakers called for the Biden administration to address supply chain issues before considering new spending on social platforms, in a letter to President Biden. (Newswires)

US moderate Democrat Senator Manchin won't say if he’ll back USD 1.9tln price tag and noted that everyone is throwing things back and forth, while he added that they are considering everything and trying to find a pathway forward, according to CNN's Manu Raju. It was also initially reported that US Senator Manchin has told associates that he is considering leaving the Democratic Party if President Biden and Democrats do not agree to his demand to cut the size of the social infrastructure bill from USD 3.5tln to 1.75tln, according to Mother Jones citing sources. However, Manchin later said he has "no control over rumours" when asked about reports he could leave the Democratic Party and denied the story to CNN. (Mother Jones/CNN)

US Democrat Senator Sinema’s opposition to tax increases is causing Senate Democrats to look at financing their social policy and climate package without raising tax rates on businesses, high-income individuals or capital gains, according to WSJ citing sources. Furthermore, Senator Sinema was reported to have told lobbyists that she is opposed to any increase in those rates and her stance is now pushing Democrats to more seriously plan for a bill that doesn’t include those major revenue increases. (WSJ)

Tesla Inc (TSLA) - Q3 2021 (USD): Adj. EPS 1.86 (exp. 1.58), Revenue 13.76bln (exp. 13.62bln). Ebit margin 14.6% and free cash glow USD 1.33bln. Automotive gross margin +30.5% (exp. 28.4%). Cash and cash equivalents USD 16.07 (exp. 16.88bln). Saw a continuation of global supply chain, transportation and other manufacturing challenges in Q3. Continue to ramp up Gigafactory Shanghai and build new capacity in Texas and Berlin. (businesswire) Shares fell 1.6% after-market