Original insights into market moving news

[PODCAST] European Open Rundown 12th November 2021

  • Asian equity markets traded mostly higher following a mixed session in the US
  • Stateside, SPX closed flat, DJIA lower, NDX bid, and RUT outperformed
  • The DXY has extended on gains above 95.00, adding further pressure to major counterparts
  • Mexican Central Bank raised its interest rate by 25bps to 5.0%, as expected
  • Looking ahead, highlights include Eurozone Industrial Production, US JOLTS, Uni. of Michigan, ECB's Lane, Fed's Williams


Mainland China reported 98 new COVID-19 cases for November 11th vs 62 cases the day before and 79 new locally transmitted cases vs 47 the day before, while other reports noted that there were 52 new locally transmitted cases in Dalian. (Newswires)


Asian equity markets traded mostly higher heading into the weekend as the region attempted to build on the somewhat mixed performance stateside, where price action was contained amid Veterans Day and with US equity futures also slightly picking up from the quasi-holiday conditions. ASX 200 (+0.8%) was lifted in which mining stocks and the tech industry spearheaded the broad gains across sectors aside from healthcare as Ramsay Health Care remained pressured after it recently announced a near-40% decline in Q1 net profit. Nikkei 225 (+1.1%) was underpinned with Japanese exporters benefitting from recent favourable currency flows and with the biggest stock movers influenced by a deluge of earnings. Hang Seng (+0.1%) and Shanghai Comp. (+0.2%) were indecisive with Hong Kong tech stocks encouraged after e-commerce retailers Alibaba and posted record Singles Day sales, despite a deceleration in revenue growth from the shopping festival to its slowest annual pace since its conception in 2009 amid a toned-down event due to Beijing’s tech crackdown and emphasis on common prosperity. Conversely, mainland bourses were indecisive following a neutral liquidity operation by the PBoC and after US President Biden recently signed the Secure Equipment Act which prevents companies deemed as security threats from receiving new equipment licences from US regulators, which comes ahead of Monday’s potential Biden-Xi virtual meeting. Finally, 10yr JGBs were lower due to a lack of momentum from US treasuries as cash bond markets were closed for the federal holiday, with demand for JGBs also hampered by the gains in stocks and lack of BoJ purchases in the government debt market.

PBoC injected CNY 100bln 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 6.4065 vs exp. 6.4094 (prev. 6.4145)

US President Biden signed the Secure Equipment Act which prevents companies deemed security threats such as Huawei and ZTE (763 HK) from receiving new equipment licences from US regulators. (Newswires)

China Communist Party official said President Xi is helmsman of China's rejuvenation, while an official also commented that they cannot achieve common prosperity even if gross national income was divided equally and stated that China should increase the share of direct taxes. (Newswires)

Japan's stimulus draft refrained from mentioning the size of spending and stated that the government will include a package of steps to cushion the impact on companies from higher oil prices, while there were earlier comments from Japanese Economic Minister Yamagiwa that new COVID-19 measures will seek to prevent the spread of the virus, as well as keep economic and social activities going. (Newswires)


UK Chief Brexit Negotiator Frost is to tell EU's Sefcovic that the UK will renew efforts to get an agreement on the Northern Ireland protocol and will enter intensive discussions during the next few weeks. Frost will also assure Brussels that UK PM Johnson does not wish to trigger Article 16. (The Times)


In FX markets, the DXY extended on its post-CPI surge to above the 95.00 level with a lack of fresh catalysts to derail the momentum and amid recent quasi-holiday conditions for Veterans Day. EUR/USD was pressured by the gains in the greenback and with newsflow from the bloc extremely light. GBP/USD languished at the 1.3300 handle after the recent weaker than expected UK GDP and Industrial Output data, with focus turning to the talks between UK chief Brexit negotiator Frost and EU’s Sefcovic later and UK PM Johnson is also set to meet with French President Macron in Paris today. USD/JPY extended above 114.00 as it received support from the USD strength and positive mood in Japanese stocks, while antipodeans were lacklustre with AUD/USD at a sub-0.7300 status and NZD/USD testing support at the 0.7000 level amid the stronger USD and quiet overnight calendar. USD/MXN was underpinned after the Mexican central bank hiked rates by 25bps to 5.0% which was inline with expectations, although some analysts had been calling for a greater increase of 50bps and the central bank also noted key global risks associated with the pandemic, inflationary pressures, as well as adjustments in monetary and financial conditions.

Mexican Central Bank raised its interest rate by 25bps to 5.0%, as expected, with the decision made by 4-1 vote in which Esquivel voted to maintain the rate at 4.75%. Mexican Central Bank stated that among the key global risks are those associated with the pandemic, inflationary pressures, as well as adjustments in monetary and financial conditions. It also stated that preliminary information indicates that the Mexican economy contracted during the third quarter, although it is expected to resume its recovery starting in the fourth quarter. Furthermore, it noted that for the next monetary policy decisions, the Governing Board will assess thoroughly the behaviour of inflationary pressures and of all factors that have an incidence on the foreseen trajectory for inflation and its expectations. (Newswires)

SNB's Maechler wants the maximum impact when deploying FX reserves and has an eye on structural changes underway in the FX market such as using algorithms for FX reserves. Maechler added that inflation has remained modest in Switzerland which takes away some pressure on the CHF but added they are still in a territory where the currency is high and is unsure where it will go. (Newswires)


Commodities were uneventful in which WTI crude futures traded rangebound and just about retained the USD 81.00/bbl level following yesterday's choppy price action with headwinds stemming from a firmer greenback and downward revisions to this year's world oil demand growth forecasts in the latest OPEC MOMR, while there were also recent comments from Iraq's Oil Minister that OPEC+ is expected to keep its policy of gradual output raise of 400k BPD unchanged at next month's meeting. Gold traded sideways as the steadfast greenback put a halt on the precious metal's inflationary spurred advances and copper prices lacked direction due to cautiousness in its largest purchaser China amid sporadic COVID-19 outbreaks with the latest impacting the port city of Dalian.

Scotland is in talks with a Europe-dominated alliance seeking to end oil and gas production that has been snubbed by the UK. (FT)


Iran said talks with UK officials were a step in the right direction and they hope to resolve the debt dispute with the UK soon, while Britain was reported to press Iran's Deputy Foreign Minister regarding detained dual nationals. (Newswires)

US warned Europe that Russian troops could plan an invasion of Ukraine although the reports noted that the brief came without showing the particular information behind the warning. (Newswires)

US State Department is reportedly mulling the sale of armed drones to Indonesia, but concerns over human rights abuses and the country’s past purchases of Russian equipment have set off debate, according to Politico citing sources. (Politico)


White House team that is reportedly weighing the Fed sees no issue with Fed Chair Powell’s trades although some Brainard advocates have questioned a stock fund sale. (Twitter)