Original insights into market moving news

[PODCAST] European Open Rundown 15th November 2021

  • Asian equity markets began the week with a lack of firm direction as the region digested varied tier-1 economic data
  • Releases included better than expected Chinese activity data and a miss on Japanese GDP
  • DXY heads into the European session around the 95.00 mark. Antipodeans lead gains vs. the USD
  • White House said it is looking at every tool in its arsenal to address the rise in gas prices
  • Looking ahead, highlights include US NY Fed Manufacturing, ECB's Lagarde, de Guindos


US Democrats reportedly urged President Biden to mandate a COVID shot or test for US flights. (Newswires)

Britain is expected to widen its COVID-19 booster programme to under 50s. (The Times)

Dutch PM Rutte announced renewed social distancing measures from Saturday including imposing a limit of a maximum of four visitors at home, while supermarkets, bars and restaurants are to close at 20:00 and non-essential stores to close at 18:00. (Newswires)

Australian Chancellor Shallenberg announced a national lockdown will be imposed on those that are not fully vaccinated from Monday. (Newswires)


Asian equity markets began the week with a lack of firm direction as the region digested varied tier-1 economic releases including better than expected Chinese activity data and miss on Japanese GDP, with attention also on a slew of earnings results and corporate updates. ASX 200 (+0.4%) and Nikkei 225 (+0.5%) both opened higher and took impetus from last Friday’s gains on Wall Street but with upside in Australia capped as financials and energy lagged, while Japanese participants weathered the weak GDP data which showed a wider than expected quarterly contraction during Q3, when the economy was still mired by widespread state of emergency declarations in key areas including Tokyo and its surrounding prefectures. Nonetheless, Japanese stocks have taken the disappointing economic growth within their strides as it justifies the incoming stimulus package which was said to have been increased to over JPY 40tln in fiscal spending and with Japan reportedly to resume its Go To Travel campaign in mid-January. Conversely, Hang Seng (-0.2%) and Shanghai Comp. (-0.1%) were subdued despite stronger than forecast Industrial Production and Retail Sales data from China, as well as the PBoC’s CNY 1tln MLF announcement which matched this month’s expiring MLF loans and further dampened prospects of PBoC easing. Today also saw the launch of the Beijing Stock Exchange which aims to help SMEs raise capital and included 81 companies in the first batch of listings, while participants await the Biden-Xi virtual meeting which is set to take place Monday evening at 19:45EST or Tuesday morning in Asia and with US Treasury Secretary Yellen and Secretary of State Blinken set to join in on the call. Finally, 10yr JGBs are higher as they tracked a marginal rebound in T-notes and following the disappointing Japanese GDP release, but with gains capped as stocks in Tokyo remained afloat and amid the absence of BoJ purchases in the market today.

PBoC announced to conduct CNY 1tln of 1-year MLF lending vs. CNY 1tln maturing with the rate kept at 2.95%, while it also injected CNY 10bln via 7-day reverse repos with the rate at 2.20% for a net daily drain of CNY 90bln. (Newswires) PBoC set USD/CNY mid-point at 6.3896 vs exp. 6.3930 (prev. 6.4065)

US President Biden’s administration was highly critical of and opposed Intel’s (INTC) plan to boost semiconductor output in China due to security concerns. In relevant news, the Chinese embassy in Washington D.C. is reportedly lobbying US firms and executives to oppose the China sanctions bill, while it was also reported that China accused the EU of threatening global trade by throwing up regulatory and trade hurdles for foreign businesses, according to FT. (Newswires/FT)

Hong Kong is preparing a high-level cooperation mechanism with the mainland’s Hubei province which would be the first province in the central region of China to establish a cooperation plan with Hong Kong. (Global Times)

US President Biden’s administration is moving to ease import tariffs on Japanese steel and aluminium in the latest step by the White House to reset trade relations with allies, while the Japanese Industry Ministry confirmed that US and Japan agreed to start discussions to solve the Section 232 tariffs on steel and aluminium imports. (Newswires)

  • Chinese Industrial Production YY (Oct) 3.5% vs. Exp. 3.0% (Prev. 3.1%)
  • Chinese Retail Sales YY (Oct) 4.9% vs. Exp. 3.5% (Prev. 4.4%)
  • Chinese House Prices YY (Oct) 3.4% (Prev. 3.8%)
  • Japanese GDP QQ (Q3) -0.8% vs. Exp. -0.2% (Prev. 0.5%, Rev. 0.4%)
  • Japanese GDP Annualised (Q3) -3.0% vs. Exp. -0.8% (Prev. 1.9%, Rev. 1.5%)


UK PM Johnson said the global accord to speed up action to contain climate change was historic and beginning of an end to coal power but added the deal was ‘tinged with disappointment’ after a failure to secure an agreement from all countries to phase out hydrocarbons, while there were also comments from COP26 President Sharma who stated that they have kept the 1.5 degrees within reach although its pulse is weak and that this was a fragile win. (Newswires/Barron’s)

UK ministers are to announce a new annual export target of GBP 1tln by 2030, although the report added that prior Tory governments had failed to reach that target by 2020. (FT)

Private sector employers in Britain expect to raise staff pay by an average of 2.5% during the next 12 months, according to the latest quarterly survey by the Chartered Institute of Personnel and Development. It was also reported that a study conducted by the London School of Economics and the Resolution Foundation think tank suggested that the main reasons behind a large productivity shortfall in Britain was due to low business investment, weak management and a lack of innovation/commercial patents. (Newswires)

  • UK Rightmove House Price Index MM (Nov) -0.6% (Prev. 1.8%)
  • UK Rightmove House Price Index YY (Nov) 6.3% (Prev. 6.5%)


In FX markets, the DXY began the week lacklustre and briefly declined beneath 95.00 after the recent inflation-spurred momentum eventually petered out on Friday. In terms of the latest commentary, Fed’s Kashkari noted that he sees higher inflation continuing over the next few months and suggested that families were suffering the pain from current high prices but suggested to not overreact to temporary factors and reiterated a transitory view, while Treasury Secretary Yellen stated labour force participation was quite depressed in comparison with pre-pandemic levels and that inflation will stay high until the virus is brought under control. EUR/USD traded marginally higher and attempted to break out from Friday’s tight range although the gains in the single currency were only mild compared to last week’s slump. GBP/USD slightly firmed and extended above the recently reclaimed 1.3400 handle as attention remains on Brexit negotiations with UK Brexit Minister Frost and EU Commission VP Sefcovic to conduct intensified talks this week. USD/JPY and JPY-crosses lacked commitment amid the somewhat mixed risk mood for the Asia-Pac region and after weaker than expected GDP data from Japan, while antipodeans were little changed and have largely ignored the Chinese activity data.


Commodities were subdued overnight with mild pressure seen in oil futures following reports the US is looking tools to address the increase in gas prices and has engaged OPEC on increasing oil supply, while US Senate Majority Leader Schumer also called for the Biden administration to utilise the SPR to lower gas prices. This saw WTI crude test the USD 80/bbl level to the downside where support held and there were also notable comments on energy from Goldman Sachs which stated that despite the recent rise in Russian supply, the scale of the remaining shortfall warrants USD 5 upside to USD 30/mmbtu for Dutch TTF gas prices and that global LNG markets will stay in a bullish cycle until 2025 when the next wave of supply projects begin. Gold marginally pulled back from recent advances although remained above the USD 1850/oz with downside stemmed by a lacklustre greenback and with the Head of Energy Research at Goldman Sachs predicting the precious metal is set for a boom to the USD 2k level, while copper prices were subdued amid underperformance in its largest purchaser China and with selling seen across Chinese commodities prices from the open of Shanghai metals trade.

US Baker Hughes Rig Count (w/e Nov 12th) stated Oil +4 at 454, Nat Gas +2 at 102, and Total +6 at 556. (Newswires)

White House said it is looking at every tool in its arsenal to address the rise in gas prices and has engaged OPEC on increasing oil supply. There were also comments from US President Biden that supplies of petroleum are sufficient to allow "significant" reduction of amount purchased from Iran. (Newswires)

US Senate Majority Leader Schumer called for the Biden administration to utilise emergency reserves to reduce gas prices, while he stated that utilising the SPR could ease prices ahead of the holidays and is a tool worth using. (Newswires)

Russian gas flows towards Germany via the Yamal-Europe pipeline increased during the weekend, according to preliminary data from German network operator Gascade. There were also separate comments from Russia's Rosneft that it plans to produce 21 BCM at Rospan gas field after the launch of a second production line and will launch the Kharampur gas project in Q3 2022 with annual production plan of 11 BCM. (Newswires)


Russia Foreign Minister Lavrov said NATO has recently been aggressive towards Russia and that the Russian delegation proposed to start looking for ways out of a dead-end in Russia-EU relations at talks with France. There were also reports that Russia's Kremlin reportedly sent a warning to NATO on providing support to Ukraine. (Newswires/Ria)

US Secretary of State Blinken reaffirmed US support during a call with the Polish Foreign Minister regarding Belarus’ migrant actions which he stated threatens security, sows division and aims to distract from Russia’s activities on the border with Ukraine. Furthermore, Blinken stated that US, Poland and allies are united in imposing significant costs on Moscow for its military aggression in the region. (Newswires)


Treasuries bear-steepened on Friday amid heavy flattener unwinds, while traders balanced a dismal UoM survey and drop in JOLTS. TYZ1 volumes were below average. By settlement, 2s +1.8bps at 0.522%, 3s +2.1bps at 0.856%, 5s +2.3bps at 1.236%, 7s +2.5bps at 1.472%, 10s +2.4bps at 1.582%, 20s +2.2bps at 1.984%, 30s +3.4bps at 1.952%. 5yr TIPS -0.7bps at -1.877%, 10yr TIPS +0.0bps at -1.156%, 30yr TIPS +1.5bps at -0.507%. Eurodollars saw strength amid touted heavy short-covering. As US trade got underway, bidders emerged across the curve, but more so at the front-end, with traders citing heavy short-covering of flatteners into the weekend and a light calendar next week. The steepening caught additional tailwinds after the 10yr low in the headline Uni of Michigan sentiment survey and the fall in JOLTS job openings, with further unwinds of flatteners helping the 5s30s spread rise back above 70bp. The NY Fed's month-ahead purchase calendar confirmed the USD 10bln taper as previously announced, although interestingly, it kept its 20yr sector buyback amount unchanged amid the well documented relative underperformance at that part of the curve; 20s30s narrowed its inversion by a bp to -3bps in wake of the announcement. T-note (Z1) futures settled 6+ ticks higher at 130-17.

Fed's Williams (voter) said people on fixed incomes are less protected against inflation and that segments of the labour force are more protected against inflation than others. (Newswires)

Fed’s Kashkari (2023 voter) stated the Fed has taken appropriate steps in the face of inflation and sees higher inflation continuing over the next few months but suggested to not overreact to temporary factors. Kashkari also stated that families are experiencing high prices and pain right now but reiterated it is transitory. (Newswires)

US Treasury Secretary Yellen stated that labour force participation was quite depressed in comparison with pre-pandemic levels although thinks it will normalise when they really get COVID-19 under control, while Yellen also stated that inflation will stay high until the virus is brought under control. (Newswires/FT)

White House Economic Adviser Deese said the Biden infrastructure plan will reduce costs and help reduce inflation, while he added that there is an urgency to act on President Biden’s domestic spending plan to assist with inflation. Deese also stated that the US government is monitoring gas prices and working against gouging although does not think it is wrong to say that inflation would be short term. Furthermore, he said inflation is linked to the pandemic with prices increasing globally and that there is no doubt inflation is currently high but added that the US economy is showing signs of a recovery. (Newswires)

US Democrats are said to be uncertain where Senator Manchin will come down, although are far more reassured that Senator Sinema will ultimately back the Build Back Better bill, based on her public and private statements, according to CNN's Raju. (Twitter)

Index that measures costs of used tractors and farming equipment reportedly matched a record high which suggested further inflation in that key sector of the economy. (Newswires)

Logjam of container ships outside ports of LA and Long Beach in California increased to a new record in which the queue of ships rose to 83 on Friday. (Newswires)