Original insights into market moving news

[PODCAST] European Open Rundown 18th November 2021

  • Asia-Pac stocks traded mostly negative with sentiment in the region subdued; Hong Kong lagged
  • In FX, the DXY pulled back modestly from the 96.00 level whilst NZD/USD outperformed
  • US and China reportedly agreed after the Biden-Xi meeting to embrace frequent interactions in the next 3-4 months
  • China National Food and Strategic Reserves Administration stated that it was working on the release of crude reserves
  • UK and EU are reportedly near an agreement on Northern Ireland medical supplies, which would be their first deal to break the deadlock in talks over the NI Protocol
  • Looking ahead, highlights include US Initial/Continued Jobless Claims, Philadelphia Fed, CBRT, SARB policy announcements, Fed's Williams, Bostic, Daly, Evans, ECB's Lane, Panetta, supply from Spain and France
  • Earnings: ThyssenKrupp, Royal Mail, Halma


Pfizer (PFE), BioNTech (BNTX), Moderna (MRNA) and subcontractors will see funding from the White House of USD 1bln for further COVID vaccine doses. (Newswires) In-fitting with yesterday's reports

Moderna (MRNA) filed EUA for its COVID-19 booster vaccine at the 50mg dose level for all adults aged 18 and older with US FDA. (Newswires)

Australia's Victoria state Premier Andrews announced restrictions will be lifted in Victoria state from midnight in which there will be no density or capacity limits and no restrictions on the number of people visiting households. (Twitter)


Asia-Pac stocks traded mostly negative with sentiment in the region subdued amid a lack of significant macro drivers and following the uninspired lead from the US - where the major indices finished a choppy session in the red and the DJIA gave up the 36k status. Nonetheless, the ASX 200 (+0.1%) remained afloat with notable strength in gold miners, as well as some consumer stocks, although advances in the index were limited by losses in the financial and energy sectors after similar underperformance stateside amid a decline in yields and oil prices. The Nikkei 225 (-0.3%) was initially dragged lower by unfavourable currency inflows which overshadowed reports that Japan wants to enhance tax breaks for corporations that raise wages, while shares in Eisai were hit after EU regulators placed doubts regarding the approval of Co. and Biogen’s co-developed Alzheimer’s drug and SoftBank also declined after the US regulator raised concerns regarding Nvidia’s acquisition of Arm. However, the index then briefly returned flat in late trade on reports that the Japanese stimulus package is to require JPY 55.7tln of fiscal spending which is higher than the previously speculated of around JPY 40tln. The Hang Seng (-1.5%) and Shanghai Comp. (-0.2%) weakened after another liquidity drain by the PBoC and with the declines in Hong Kong exacerbated by tech selling, while the losses in the mainland were to a lesser extent with China said to be mulling additional industrial policies aimed to support growth and SGH Macro sources suggested the US and China agreed there would be some substantial progress on trade such as the removal of some punitive tariffs by the US and increased purchases of US products by China, although the report highlighted that it was unclear if this would be from a high-profile announcement or a discrete relaxing of tariffs. Finally, 10yr JGBs were initially flat as prices failed to benefit from the subdued risk appetite in Japan and rebound in global peers, while firmer metrics at the 20yr JGB bond auction provided a mild tailwind in late trade although the support was only brief and prices were then pressured on news of the potentially larger than anticipated fiscal spending in PM Kishida's stimulus package.

  • PBoC injected CNY 50bln via 7-day reverse repos with the rate at 2.20% for a CNY 50bln net daily drain. (Newswires)
  • PBoC set USD/CNY mid-point at 6.3803 vs exp. 6.3785 (prev. 6.3935)

US and China reportedly agreed after the Biden-Xi meeting to embrace frequent interactions in the next 3-4 months, that there would be some substantial progress on trade such as the removal of some punitive tariffs by the US and increased purchases of US products by China, while the two militaries would carry out positive contacts on the South China Sea issue as military activities in the region may result in confrontation. However, SGH Macro highlighted that it is unclear whether the potential tariff relief will come from a high-profile announcement of the outright lifting of tariffs, or through a more politically discrete relaxation of tariffs. (SGH Macro)

Japan stimulus package will require fiscal spending of JPY 55.7tln, according to Nikkei. (Nikkei)


UK and EU are reportedly near an agreement on Northern Ireland medical supplies, which would be their first deal to break the deadlock in talks over the NI Protocol as Brussels recedes from threats of retaliation over Article 16, while it was noted that with hopes increasing for a breakthrough as soon as Friday, Lord Frost signalled that a new agreement on Northern Ireland could be reached before Christmas. (The Telegraph)

UK PM Johnson is to unveil a new GBP 96bln Integrated Rail Plan today, although he risks anger from northern MPs due to the watered down investment plan. (FT)

EU lawmakers agreed on regulations to target big tech and plan to introduce curbs on companies such as Apple (AAPL) and Google (GOOG) in 2022. (FT)


In FX, the DXY continued to retrace its gains following yesterday’s brief incursion to the 96.00 territory - with the retracement coinciding with an easing of yields. The recent rhetoric from the Fed did little to spur the currency. EUR/USD continued to partially nurse losses after having reclaimed the 1.1300 handle, but with upside limited following inline HICP inflation data and relatively balanced comments from ECB's Schnabel. GBP/USD held on to the prior day’s spoils in the aftermath of the firmer than expected UK CPI data, although further upside has since been stalled by resistance at 1.3500. USD/JPY languished near 114.00 after a recent pullback and amid a subdued risk tone but was later underpinned on reports that Japan's stimulus package will require fiscal spending of JPY 55.7tln which is higher than the previous speculation of around JPY 40tln. Antipodeans were varied with AUD/USD flat and outperformance in NZD/USD after higher inflation expectations survey which further backs the case for another rate increase at next week’s RBNZ policy meeting where OIS had already priced in a 100% likelihood of a 25bps hike to the OCR even before the data release. TRY extended on record lows against the greenback in which USD/TRY advanced by around 3% and approached the 11.000 handle which was a continuation of recent price action and after comments from Turkish President Erdogan yesterday who blamed inflation on interest rates and stated they will lift the interest rate burden from people, as well as continue the battle with interest rates and inflation until the end; ahead of today's policy announcement.

  • New Zealand 2yr Inflation Expectations (Q4) 2.96% (Prev. 2.27%). (Newswires)


An extension of the weakness in oil prices dragged Brent and WTI crude futures to beneath the USD 80/bbl and USD 78/bbl levels respectively. The pressure had stemmed from US trade on news that US President Biden asked the FTC to investigate potential illegal conduct from energy companies citing 'mounting evidence' of anti-consumer behaviour and with the US also reported to have asked other countries to coordinate release of strategic oil reserves, while China later announced that it was working on the release of crude reserves. Gold prices were little changed overnight despite recent pullback in the USD and copper was subdued amid the uninspired risk appetite.

US President Biden and Chinese President Xi reportedly exchanged views on oil but did not make any decisions, although the China National Food and Strategic Reserves Administration later stated that it was working on the release of crude reserves. There were also prior source reports that the US was said to have asked other countries to coordinate a release of strategic oil reserves and raised the oil reserve release request with Japan and China. Furthermore, the US tapping of the SPR could be either in the form of a sale and/or loan from the reserve and the release from the reserve needs to be more than 20mln-30mln bbls to get the message to OPEC, while a source added that the US asked India, South Korea and large oil-consuming countries, but not European countries, to consider oil reserve releases after pleas to OPEC failed. (Newswires)

Canada's Trans Mountain Oil Pipeline remains shut down due to flooding, but it is working on plans to restart the pipeline and completed an initial assessment of the affected areas by air. In related news, British Columbia declared a State of Emergency amid the floods and will impose travel restrictions but is confident supply chains can be restored quickly, while Canadian PM Trudeau said thousands of troops are on standby to help British Columbia with floods. (Newswires)


US Defense Secretary Austin said they continue to see troubling behaviour from Russia like the build up near Ukraine and the ASAT test, while Austin said he is unsure what Russian President Putin is up to near Ukraine and called on Russia to act more responsibly. (Newswires)

US National security adviser Jake Sullivan raised with his Israeli counterpart the idea of an interim agreement with Iran to buy more time for nuclear negotiations, according to sources. However, two American sources familiar with the call said the officials were just "brainstorming" and that Sullivan passed along an idea put forward by a European ally. (Axios)

Saudi-led coalition said it conducted military operation on targets in Yemen's Sanaa, Dhamar, Saada and Al-Jawf provinces. (Newswires)


Treasuries bull-steepened as earlier long-end auction concession was overpowered from strength up the curve. Futures volumes were below averages. At settlement, 2s -1.6bps at 0.504%, 3s -2.1bps at 0.853%, 5s -2.6bps at 1.241%, 7s -3.0bps at 1.490%, 10s -2.8bps at 1.606%, 20s -1.3bps at 2.047%, 30s -1.9bps at 1.999%. 5yr TIPS +1.9bps at -1.918%, 10yr TIPS +4.3bps at -1.113%, 30yr TIPS +6.0bps at -0.422%. 5yr BEI -3.5bps at 3.231%, 10yr BEI -3.6bps at 2.680%, 30yr BEI -1.8bps at 2.437%. As US trade got underway sellers emerged, particular out the curve, where classic and ultra bond futures had been making session lows and cash 20s weakest on the curve with set-up into the 20yr auction. A miss on Housing Starts and a beat on Building Permits didn't have any noticeable effect on the rates complex. Lows were made for the long-end heading into the NYSE stock open, with cash 30s printing a high of 2.049% before the strength/short-covering seen at the front-end had made its way out the curve. Those moves were accentuated after ECB's Schnabel gave dovish remarks, seeing spillover from the EGB space, particularly at the 5yr tenor, with IFR noting a chunky hedge fund buy. T-Notes went into the 20yr auction at session highs, where the headline 1.4bp tail saw initial knee-jerk selling, but that soon reversed and T-Notes rose to session highs of 130-16+, with cash 10s finding support just above 1.60%. The move was being led by the decline in inflation breakevens too, taking impulse from the move to the lowest levels since early October in the oil benchmarks. Traders now look to Thursday's Philly Fed survey as an early indicator into November activity data, while the Treasury is to sell USD 14bln of 10yr TIPS. T-note (Z1) futures settled 9 ticks higher at 130-14+.

Fed's Evans (2021, 2023 voter) said he had expected a more resilient supply chain than what has been seen and is looking for inflationary pressures to recede, while he will be monitoring them well into the middle of next year and would not be surprised if the unemployment rate is 4.5% by year-end. Evans added that it will take until the middle of next year to complete taper and at that point, they will be thinking about when to raise rates, while he is optimistic there will be a vibrant labour market next year. (Newswires)

Fed's Waller (voter) said stablecoins should not necessarily be subject to the full banking rulebook which is geared in par toward lending activities not payments. Waller added he has no objection to the idea of bank issuing both payment stablecoins and bank deposits, given the economic similarities between them, while he disagrees with the notion that stablecoin issuance can or should only be conducted by banks due to the nature of the liability. (Newswires)

Top Wall Street executives said they're betting on Powell's reappointment as Fed chair and that it is likely Brainard would be offered another position inside the Fed in order to appease progressives, according to FBN's Gasparino. (Twitter)

US President Biden said it is good news that jobs and wages are increasing, while he added that the federal fleet will be converted to EVs and new infrastructure law will help jumpstart EVs but noted China has been leading the EV race. (Newswires)