[PODCAST] US Open Rundown 10th November 2021
- European bourses & US futures are rangebound and directionless ahead of US data, with IJC also due given Veteran's day
- DXY is bolstered having reclaimed 94.00 with peers subdued across the board and NZD lagging on data
- Core debt is subdued pre-CPI with ECB-related updates and another poor German issuance factoring
- Chinese consumer prices registered their fastest increase in more than a year and factory gate prices rose at a fresh record pace
- A virtual meeting between US President Biden and Chinese President Xi is reportedly planned for as soon as next week
- Looking ahead, highlights include US CPI, Initial Jobless Claims, DoEs, supply from the US
- Earnings: Disney
German Vaccine Committee head Stiko recommends those 30 and under only get vaccinated with the Pfizer (PFE)/BioNTech (BNTX) option, due to higher number of heart inflammations in those vaccinated with Moderna (MRNA)
Asian equity markets traded negatively after a lacklustre handover from Wall Street where the major indices took a break from recent advances and the S&P 500 snapped an eight-day win streak ahead of looming US inflation data. ASX 200 (-0.1%) was rangebound with early strength in financials gradually offset by losses in the commodity-related sectors and with the improvement in Westpac Consumer Sentiment data doing little to spur risk appetite. Nikkei 225 (-0.6%) was subdued with exporters pressured by unfavourable currency inflows and with the list of biggest movers in the index dominated by companies that recently announced their earnings, although Nissan and NTT Data Corp were among the success stories on improved results including a surprise return to quarterly profit for the automaker. Hang Seng (+0.7%) and Shanghai Comp. (-0.4%) initially underperformed amid ongoing developer default concerns as Evergrande has reportedly failed to pay coupon payments at the end of its 30-day grace period. Rating agencies have also downgraded a couple of developers and Fantasia Holdings shares fell as much as 50% on resumption from a one-month trading halt after it missed bond payments due early last month. Furthermore, tensions continued to brew on the Taiwan Strait after US lawmakers made a surprise visit to Taiwan and with China conducting combat readiness patrols in the area ahead of a potential Biden-Xi virtual meeting that could occur next week, which potentially lifted sentiment, while participants also reflected on the firmer than expected inflation data from China which showed consumer prices registered their fastest increase in more than a year and factory gate prices rose at a fresh record pace. Finally, 10yr JGBs traded marginally higher amid the lacklustre mood in stocks and presence of the BoJ in the market for over JPY 1.3tln of JGBs with 1yr-10yr maturities, although gains were capped by resistance ahead of the 152.00 focal point and a pull-back in T-notes.
PBoC injected CNY 100bln via 7-day reverse repos with the rate at 2.20% for a CNY 50bln net injection. (Newswires) PBoC set USD/CNY mid-point at 6.3948 vs exp. 6.3952 (prev. 6.3903)
A virtual meeting between US President Biden and Chinese President Xi is planned for as soon as next week, according to a person briefed on the matter. There were later comments from Chinese President Xi that China stands ready to work with the US on regional and international issues, as well as properly manage issues. (Newswires)
White House said the US continues a national emergency regarding the threat from securities investment that finance certain Chinese companies. (Newswires)
Chinese CPI MM (Oct) 0.7% vs. Exp. 0.7% (Prev. 0.0%); YY (Oct) 1.5% vs. Exp. 1.4% (Prev. 0.7%); fastest pace of increase since September 2020
- Chinese PPI YY (Oct) 13.5% vs. Exp. 12.4% (Prev. 10.7%); fresh record pace of increase
Some bond holders of Evergrande (3333 HK) have not received coupon payments by the end of the 30-day grace period on Wednesday's close of Asia business, according to sources. (NEWSWIRES)
Some Chinese state-owned firms have told regulators to look at tweaking their "three red lines" on lending restrictions to property developed for M&A, according to sources. (Newswires)
Fed's Bullard (2022 voter) said he expects the Fed to hike rates twice next year after the completion of its tapering, although cautioned that this could change in either direction during H1 next year and he also noted that the Fed have a two-pronged strategy on containing inflation. (CNBC)
US Treasury Secretary Yellen said infrastructure and the social spending/climate bills will boost the size of the US labour force and expand productive capacity. (Newswires)
White House Economic Advisor Brian Deese anticipates a vote in the House next week on the larger social infrastructure package and said some House members will receive more information this week regarding the bill not adding to the debt, according to Fox Business' Edward Lawrence. (Twitter)
Punchbowl reports that CBO data on BBB is likely to be limited if released this week with several sources noting that it may not produce data on the prescription drug provision or immigration language. (Punchbowl)
European Commission VP Šefčovič will sound out EU nations on how they think they should react if the UK triggers Article 16. However, diplomats note "we are not yet talking about a sanctions package” at today’s meeting. (Politico)
UK Brexit Minister Frost is to make a statement on Brexit in the House of Lords at 11:30GMT today, as the Commons is on a mini-recess, Guardian's Stewart. (Twitter)
German government advisers say that the economy could be harmed if the ECB fails to react in a timely manner. As such, the Bank should put forward a normalisation strategy. (Newswires)
European equities (Eurostoxx 50 -0.1%) have traded with little in the way of firm direction as a slew of earnings dictate the state of play amid a lack of fresh macro impulses. The handover from Asia was mostly a downbeat one with focus on firmer than expected CPI and PPI prints out of China and ongoing developer default concerns as Evergrande bond holders have reportedly not received coupon payments by the end of today's Asia-close grace period, in reference to missed coupon payments totalling USD 148.1mln. Stateside, futures are a touch softer (ES -0.2%) after cash markets saw the S&P 500 snap its eight-day winning streak during yesterday’s session. Ahead, the main event for the US will be the CPI release at 13:30GMT whilst the earnings docket continues to slow down with Disney the main standout after-hours. Back to Europe, sectors are mixed with Oil & Gas outperforming peers alongside price action in the crude complex. Banking names saw initial gains trimmed after earnings from Credit Agricole (-1.1%) and ABN AMRO (+1.9%) were unable to provide sustained support for the sector despite the former exceeding profit expectations. The retail sector has been provided a boost by Marks & Spencer (+11.4%) after the Co. reported stellar earnings and raised guidance. Elsewhere in the UK, ITV (+12.0%) sits at the top of the FTSE 100 after printing solid revenue metrics and a bullish revenue outlook. To the downside, Personal and Household goods lag in the wake of earnings from Adidas (-6.0%) which saw the Co.’s performance hampered by factory closures in Vietnam and product boycotts in China. Finally, Alstom (+9.6%) sits at the top of the CAC post-earnings with the Co. stating that supply chain shortages had no material impact on H1 sales.
UK Supreme Court has handed down a judgment in favour of Alphabet's Google (GOOG); iPhone users affected by covert data collection will not be entitled to class-action style compensation; separately, the EU Court has upheld a USD 2.8bln antitrust fine against Alphabet's Google (GOOG) in the shopping case. (Newswires)
DXY - The Greenback remains relatively firm in the run up to US inflation data having turned a corner of sorts on Tuesday, with the index extending beyond 94.000 following its rebound from 93.872 and inching closer to the current 94.380 w-t-d peak, at 94.221, thus far. Interestingly, the Buck has regained momentum irrespective of the benign Treasury (and global) yield backdrop, softer than forecast elements in the PPI release and most Fed officials maintaining a distance between the end of tapering and tightening. However, risk sentiment if wavering to the benefit of the Dollar more than others and the aforementioned CPI readings may be supportive if in line or above consensus. Note, initial claims are also scheduled due to tomorrow’s Veteran’s Day holiday and the final leg of supply comes via Usd 25 bn long bonds.
NZD/JPY - Ironically perhaps, the Kiwi is struggling to keep sight of 0.7100 vs its US peer on the very day that COVID-19 restrictions were eased in Auckland, and a further deterioration in NZ business sentiment alongside a fall in the activity outlook may be the catalyst, while the Yen has run into resistance again above 113.00 and is now relying on decent option expiry interest between the round number and 113.05 (1.1 bn) to keep its bull run going.
GBP/EUR/AUD/CHF - All softer against the Greenback, as Cable hovers below 1.3550, the Euro pivots 1.1575, Aussie meanders within a range just above 0.7350 amidst favourable Aud/Nzd crossflows and an improvement in Westpac consumer sentiment, and the Franc treads water inside 0.9150-00 parameters. However, Eur/Usd appears to be underpinned by heavier option expiries on the downside than upside rather than ostensibly hawkish ECB promptings from Germany’s Government advisors given 2.1 bn between 1.1575-65 and a further 1.2 bn from 1.1555-50 vs 1.5 bn at the 1.1600 strike.
CAD - The Loonie is outperforming or holding up better than other majors near 1.2400 vs its US rival even though WTI has backed off from best levels just shy of Usd 85/brl, but Usd/Cad could still be drawn to expiry interest starting at 1.2450 and stretching some way over 1.2500 in the absence of anything Canadian specific, and pending US inflation data of course.
SCANDI/EM - Much softer than anticipated Norwegian CPI readings have taken the edge off the Nok in stark contrast to the Czk in wake of Czech inflation metrics that have propelled the currency towards 3 year highs, while the Cnh and Cny are retaining a firm tone in line with Chinese CPI and PPI topping expectations and hitting new record peaks respectively. Conversely, no respite for the Try via a decline in Turkey’s jobless rate as the Lira lurches through 9.8300 vs its 9.8485 record low.
Australian Westpac Consumer Sentiment Index (Oct) 105.3 (Prev. 104.6)
- New Zealand Preliminary Business Confidence (Nov) -18.1 (Prev. -13.4)
- New Zealand Preliminary Activity Outlook (Nov) 15.6 (Prev. 21.1)
Notable FX Expiries, NY Cut:
- EUR/USD: 1.1550-55 (1.2BLN), 1.1565-75 (2.1BLN), 1.1580-85 (466M), 1.1600 (1.5BLN), 1.1610-20 (743M)
- USD/CAD: 1.2450-55 (1BLN), 1.2500 (1.1BLN), 1.2525-35 (1BLN)
- USD/JPY: 113.00-05 (1.1BLN), 113.30 (287M), 113.65 (300M), 113.80 (470M), 114.00 (1.4BLN)
Bunds had another look at support close to 171.00 in wake of another technically uncovered German auction having already tested a Fib level amidst hawkish noises from German Government advisors that want the ECB to devise a timely exit strategy, but Gilts are still the weakest core bond link following a deeper reversal from yesterday’s lofty highs to a 126.71 low (48 ticks under par). Meanwhile, US Treasuries are weaker and the curve is steeper pre-CPI, IJC and the 30 year auction that along with details of next week’s 20 year and 10 year TIPS issuance comprise a busier midweek agenda due to Veteran’s Day tomorrow.
WTI and Brent have been somewhat choppy this morning, but remain within reach of overnight ranges and well within yesterday’s parameters as fresh newsflow has been light; a performance that is similar to the morning’s directionless equity trade. Focus has been on last nights/yesterday's events after the EIA’s STEO release seemingly lessened the likelihood of a SPR release followed by the weekly private inventory report, which printed a headline draw of 2.485M against the expected build of 2.1mln – reaction was minimal. Later today, we get the DoE equivalent for which expectations remain at a headline build of 2.13mln, but the components are expected to post draws of around 1mln. Elsewhere, spot gold and silver are a touch softer on the session with the US Dollar and yields perhaps weighing, though the previous metals have once again not deviated too far from overnight parameters. On copper, prices were hampered by the Chinese inflation data though LME copper has staged a marginal recovery as the session has progressed.
US Private Energy Inventories (bbls): Crude -2.5mln (exp. +2.1mln). (Newswires)