[PODCAST] US Open Rundown 9th November 2021
- European bourses and US futures are contained with fundamental updates minimal and data not moving the dial ahead of Fed speak, ES +0.1%
- FX has seen the DXY lose 94.00 to the modest benefit of peers across the board while core debt is firmer experiencing a grinding bid
- Fed's Brainard was interviewed by President Biden for the Fed Chair role last week, according to reports
- Looking ahead, highlights include US PPI, ECB's Panetta, Lagarde, Schnabel, Fed's Bullard, Powell, Daly, supply from the US
Australia's Therapeutic Goods Administration said it granted provisional determination to AstraZeneca (AZN LN) on COVID-19 treatment cocktail Evusheld on Nov. 4th with the treatment eligible to be considered to prevent COVID-19 in adults 18-years of age and above, but it is not intended to be a substitute for vaccination against COVID-19. (Newswires)
Hong Kong government adviser said Hong Kong will not open to the world until mid-next year. (Newswires)
Asia-Pac stocks traded indecisively as focus centred on earnings and despite the positive handover from Wall St where the S&P 500 notched an 8th consecutive record close amid a lack of catalysts to derail the momentum in stocks. ASX 200 (-0.2%) began marginally higher amid strength in the tech and mining sectors but with upside eventually reversed by losses in the top-weighted financial industry as NAB shares declined despite posting a 77% jump in FY cash earnings and its FY net more than doubled to AUD 6.4bln, although this was still short of some analysts’ forecasts and the Co. also noted that competitive pressures are expected to continue in FY22. Nikkei 225 (-0.7%) was choppy amid a slew of earnings releases with outperformance in SoftBank following its H1 results in which net income declined by more than 80%, but revenue increased and it confirmed a JPY 1tln share buyback. It was also reported that PM Kishida instructed COVID measures to be compiled this week and economic measures by next Friday, while a government panel recommended tax breaks for companies that increase wages, although Tokyo stocks have failed to benefit with early momentum offset by recent flows into the JPY. Hang Seng (-0.1%) and Shanghai Comp. (+0.2%) lacked firm direction amid mixed developer related headlines with Kaisa Group said to be taking several measures to solve liquidity issues and have pleaded for more time and patience from investors, while China Evergrande reportedly scraped together more cash by offloading a 5.7% stake in HengTen Networks for USD 145mln. Furthermore, the PBoC continued with its liquidity efforts but recent source reports noted that chances of a PBoC rate cut looks slim and that the PBoC is expected to be cautious in easing monetary policy amid stagflation concerns. Finally, 10yr JGBs were flat amid the indecisive mood in stocks and was only briefly supported from the improvement across most metrics at the latest 30yr JGB auction.
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 6.3903 vs exp. 6.3948 (prev. 6.3959)
US State Department said it is deeply concerned about the deteriorating health of detained Chinese citizen journalist Zhang Zhan, while reiterated calls to China for the immediate and unconditional release of Zhan. (Newswires)
China's State Council think tank conducted a meeting with property developers and banks in Shenzhen, while they were said to discuss market risks and tax, according to sources. It was also reported that the HKMA is said to have requested banks report exposure to China’s property market. (Newswires)
China Evergrande (3333 HK) reportedly scraped together more cash through stake sales in which it sold around 5.7% stake in HengTen Networks for USD 145mln, according to WSJ. In relevant news, Kaisa Group (1638 HK) is taking several measures to solve liquidity issues in which it is accelerating asset disposals in Shanghai and Shenzhen which is to be used for repayments and is speeding up sales of properties, while it pleaded for more time and patience from investors. Furthermore, it called for banks to appropriately extend loans and said it needs external help as it seeks to pay investors, workers and suppliers. (Newswires/WSJ/Twitter)
Japanese PM Kishida is said to have instructed for COVID measures to be compiled by this Friday and economic measures by next Friday, while it was also reported that the LDP and Komeito party agreed to an early JPY 50k cash handout to under-18s and agreed to offer JPY 100k to cash payouts to support low income households. (Newswires/Jiji)
Fed's Brainard was interviewed by President Biden for the Fed Chair role and sources described Brainard as a contender for the top Fed position. (Newswires)
Fed's Evans (2021,2023 voter) said they still have a way to go until inclusive full employment and that uncertainties on the outlook could lead the Fed to move up or delay rate increases, while he sees greater upside risk to inflation outlook than had seen last summer. Evans noted that the big question is how much of a mark current price pressures will leave on underlying inflation and that the economy is still very much tied to COVID with the path forward highly uncertain. Furthermore, Evans still sees the first rate hike in 2023 and stated that if inflation expectations increase a lot, it would make sense to think about a 2022 rate hike, while he noted that they have time to be patient and said the bar is 'reasonably high' for changing pace of Fed's taper. (Newswires)
German ZEW Economic Sentiment (Nov) 31.7 vs. Exp. 20.0 (Prev. 22.3); Current Conditions (Nov) 12.5 vs. Exp. 18.0 (Prev. 21.6)
- Financial market experts are more optimistic about the coming six months
- For Q1 2022, growth is expected to pick up again and inflation fall for both Germany & the Eurozone
UK BRC Retail Sales YY (Oct) -0.2% (Prev. -0.6%), BRC October Total Sales rose 1.3% Y/Y (Prev. 0.6%)
- UK Barclaycard UK October consumer spending rose 14.2% from October 2019 level
EU Commission officials and EU diplomats roundly dismissing the idea that there is a "package" of retaliation measures being prepared by Brussels against UK, particularly a pre-emptive strike over A16; No plan will be presented to EU envoys tomorrow or by Sefocvic to Frost on Fri. (FT) Follows earlier reports that such measures were to be considered by ambassadors on Wednesday
General Electric (GE) plans to form three public companies: Aviation, Healthcare, and Energy. (Newswires) GE +8.0% in the pre-market
PayPal Holdings Inc (PYPL) Q3 2021 (USD): Adj. EPS 1.11 (exp. 1.07), Revenue 6.18bln (exp. 6.23bln). Total Payment Volume (TPV) +26% Y/Y USD 310bln; 416mln active accounts, adding 13.3mln net new active accounts. Narrows FY guide for TPV, now sees +31-32% (prev. +33-35%), sees revenue growth of +17% (prev. +18.5%). Sees net new accounts at 55mln in Q4 (prior guidance was for 52-55mln). Announced Venmo deal with Amazon (AMZN); Venmo users in the US will be able to pay with Venmo on Amazon in 2022. -4.2% in the pre-market
After a soft open, European equities trade in close proximity to the unchanged mark (Eurostoxx 50 +0.1%) with incremental newsflow relatively light thus far with a mixed German ZEW report unable to shift the dial. The handover from the Asia-Pac session was a mixed one with the region unable to benefit from the positive tailwinds on Wall St. Stateside, futures are near-enough unchanged with participants tentative ahead of tomorrow’s US CPI release which is expected to see Y/Y CPI rise to 5.8% from 5.4%. For the Stoxx 600, UBS’ announced today that its end-2022 target is at 520 which would mark around 8% of upside from current levels. In terms of a regional breakdown, UBS upgraded Italy to overweight from underweight whilst holding Germany and the UK as overweight. Sectors in Europe are a mixed bag with Autos outperforming peers as Renault (+4.6%) sits at the top of the CAC in the wake of Nissan earnings, which the Co. says will have a positive impact on its Q3 earnings. Basic Resources, Retail and Media names are also faring well. To the downside, Insurance names are on a softer footing following earnings from Munich Re (-3.4%) with the Co. warning of further COVID-related losses, whilst results have also hampered the performance of Direct Line (-2.6%). Bayer (+2.6%) is one of the better performers in Germany after beating revenue and EBITDA expectations and guiding FY EPS higher. Associated British Foods (+6.5%) is the best performer in the Stoxx 600 after announcing a special dividend alongside results. Finally, other strong stocks in the UK include Rolls Royce (+5.4%) after confirming it has received funding for small modular nuclear reactors, whilst BT (+2.9%) is seen higher after being upgraded to buy from hold at Berenberg.
JPY/DXY - The Yen and Dollar are locked around the 113.00 mark after the former extended its mainly technical rally to around 112.73 before running out of steam, and this has given the Greenback in general some breathing space as the index claws back declines from a slightly deeper 93.872 post-NFP low to retest resistance at the psychological 94.000 level. However, Usd/Jpy and Yen crosses are still trending lower following clear breaches of several key chart supports that will now form upside barriers, such as Fibs in the headline pair spanning 113.20-30, while the Buck and DXY retain a bearish tone following their sharp retracement from a new y-t-d high in the case of the former last Friday. Ahead, US PPI data provides a timely inflation gauge for CPI on Wednesday, while there is another array of Fed speakers and more supply to absorb as Usd 39 bn 10 year notes are up for auction.
GBP - Sterling continues to regroup in wake of the BoE shock, with Cable cresting 1.3600 and even Eur/Gbp unwinding gains towards 0.8520 amidst ongoing Brexit angst that could reach another critical stage by the end of this week given reports that the EU is formulating a package of short/medium-term retaliatory measures which might be presented by Sefcovic to Frost on Friday, to dissuade the UK from triggering Article 16, according to Eurasia Group's Rahman. Note, however, the cross may be underpinned by decent option expiry interest at the 0.8500 strike (1 bn), if not mere sentimentality.
AUD/NZD - Some reasons for the Aussie to reverse recent underperformance vs the Kiwi down under, as NAB business confidence and conditions both improved markedly in October, while consumer sentiment ticked up as a counterweight to an acceleration in NZ electronic card consumption, with Aud/Usd firmly back on the 0.7400 handle, Aud/Nzd rebounding from sub-1.0350 and Nzd/Usd hovering midway between 0.7148-74 parameters.
CAD/EUR/CHF - All narrowly divergent vs their US counterpart, as the Loonie gleans traction from a Usd 1/brl rebound in WTI to bounce through 1.2450 and away from 1.1 bn option expiries at 1.2460 in advance of another speech from BoC Governor Macklem, while the Euro is weighing up a mixed ZEW survey against expectations in close proximity to 1.1600 and also ‘comfortably’ above 1.8 bn expiry interest down at 1.1550. Elsewhere, the Franc is keeping its head afloat of 0.9150 and 1.0600 vs the Euro awaiting remarks from the SNB via Maechler and Moser about the changing FX market and implications for the Swiss Central Bank on Thursday.
SCANDI/EM - The Nok and Sek are firmer following an upbeat Norges Bank FSR noting that economic recovery is strengthening financial stability, and Swedish data showing faster ip growth, but the Try has derived little comfort from the CBRT raising the reserve requirement ratio for FX deposits, or later reports noting that Lira-denominated required reserves are expected to increase by around Try 7.4 bn and foreign currency required reserves by an equivalent of around Usd 3.8 bn. Conversely, the Huf may get a belated boost from considerably stronger than anticipated Hungarian headline and core CPI reading and the NBH stating that household inflation expectations are in excess of the Bank’s target range, albeit more volatile than normal.
CBRT raised reserve requirement ratio for FX deposits, while reports later noted that the CBRT said TRY-denominated required reserves are expected to increase by around TRY 7.4bln and foreign currency required reserves are expected to increase by an equivalent of around USD 3.8bln. (Newswires)
Hardly any fallout from a supply angle as Germany’s Schatz sale was rather thinly covered, or sign of asset rotation from bonds to stocks even though the Dax has registered a new ATH, with Bunds clearing another chart hurdle in the form of the 171.00 level on the way to 171.10 (+41 ticks on the day vs -17 ticks at the Eurex low and now just 2 ticks shy of Monday’s best). Meanwhile, Gilts continue to lag in price, but have also breached a round number to trade at 127.24 (+27 ticks vs -13 ticks) and the 10 year T-note is tagging along amidst broad curve flattening irrespective of the looming US ppi data, Usd 39 bn issuance in the tenor plus another heavy slate of Central Bank orators.
WTI and Brent are firmer this morning though the benchmarks have drifted off earlier highs as we approach the entrance of US participants. At best, Brent has surpassed the USD 84.00/bbl mark, a figure which eluded it yesterday, and WTI has been within reach of the USD 83.00/bbl mark. Fresh newsflow explicitly for the complex has been slim but we are, more so than usual, looking to the EIA STEO due at 17:00GMT/12:00EST today. Heightened attention on this stems from US Energy Secretary Granholm commenting earlier in the week that President Biden may make an announcement in relation to crude and the SPR this week; as such, administration officials will be scrutinising the STEO report. For reference, the OPEC+ MOMR and IEA OMR are due on November 11th and 16th respectively. October’s STEO upgraded world 2021 oil demand growth forecasts by 90k but cut the 2022 view by 150k while highlighting that US crude output is to fall 260k vs prev. 200k fall in 2021. As usual, we do have the Private Inventory report due today as well with expectations set for a headline build of 1.9mln. Moving to metals, spot gold and silver are once again lacklustre and remain comfortably within overnight ranges and the upside seen in the metals at the tail-end of last week means we are circa, for spot gold, USD 30/oz from a cluster of DMAs. Elsewhere, base metals are firmer given the support for industrial names on the US infrastructure bill, but the likes of LME copper remain within familiar ranges.