Original insights into market moving news

[PODCAST] European Open Rundown 23rd November 2021

  • Asia-Pac stocks traded mixed following a similar performance in the US where the Nasdaq underperformed alongside firmer yields
  • In FX, the DXY made further YTD highs, placing additional pressure on major counterparts
  • A source report noted that the US Energy Department will announce a loan of oil from the SPR on Tuesday
  • US President Biden's administration is reportedly mulling sending military advisers and new weapons to Ukraine
  • Looking ahead, highlights include Eurozone, UK & US flash PMIs, BoE's Haskel, Bailey, ECB's de Guindos, US 7 yr supply


White House COVID-19 response coordinator Zients said the US is administering 1mln booster shots per day and the federal government has achieved 95% compliance with vaccine mandate, while he added that they are not headed in that direction regarding a lockdown. (Newswires)

US CDC raised its COVID-19 travel warnings for Germany and Denmark. (Newswires)

French PM Castex tested positive for COVID-19. (AFP)


Asia-Pac stocks traded mixed following a similar performance in the US where participants digested President Biden’s decision to nominate Fed Chair Powell for a second term and Fed’s Brainard for the Vice Chair role. This resulted in bear flattening for the US curve and underpinned the greenback, while the major indices were choppy but with late selling heading into the close in which the S&P 500 slipped beneath the 4,700 level and the Nasdaq underperformed as tech suffered the brunt of the higher yields. ASX 200 (+0.8%) was positive with sentiment encouraged after stronger PMI data and M&A developments including BHP’s signing of a binding agreement to merge its oil and gas portfolio with Woodside Petroleum to create a global top 10 independent energy company and the largest listed energy company in Australia, which spurred outperformance for the mining and energy related sectors. KOSPI (-0.6%) was lacklustre and retreated below the 3k level amid broad weakness in tech which was not helped by concerns that South Korea could take another aim at large tech through a platform bill and with the government said to be mulling strengthening social distancing measures. Hang Seng (-1.4%) and Shanghai Comp. (+0.1%) continued to diverge amid a neutral liquidity effort by the PBoC and with the Hong Kong benchmark conforming to the tech woes, while the mainland was kept afloat after the State Council pledged to strengthen assistance to smaller firms and with Global Times noting that China will likely adopt another RRR cut before year-end to cope with an economic slowdown. Finally, Japanese participants were absent from the market as they observed Labor Thanksgiving Day, while yields in Australia were higher as they tracked global counterparts and following a Treasury Indexed bond offering in the long-end.

PBoC injected CNY 50bln 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 6.3929 vs exp. 6.3860 (prev. 6.3952)

China will likely adopt another RRR cut before year-end to cope with an economic slowdown, although the LPR is unlikely to change, according to Global Times citing experts. In relevant news, a separate Chinese press report noted that the PBoC is less likely to reduce MLF rate this year. (Newswires/Global Times)

US bipartisan group of House lawmakers wrote to the US trade chief suggesting that the US should seek digital trade deals in the Indo-Pacific. (Newswires)


ECB's Knot said there is no indication inflation will keep exceeding expectations. (Newswires)

Brexit Minister Frost has called for Britain to lower taxes and reduce regulation or Brexit will fail (Telegraph)


In FX markets, the DXY extended on gains to fresh YTD highs above 96.50 following the White House decision to renominate Fed Chair Powell for a second term. EUR/USD weakened on the greenback’s advances and retreated beneath 1.1250 with the single currency also hampered by ongoing COVID fears and after the latest rhetoric from ECB officials continued to echo the transitory inflation view including ECB’s Knot who stated there is no indication inflation will keep exceeding expectations. GBP/USD retreated beneath 1.3400 amid the bets for quicker Fed policy tightening stateside and as clouds brew on the political front for UK PM Johnson with a senior Downing Street source noting there is a lot of concern about the PM and that the Cabinet needs to demand serious changes. USD/JPY climbed above 115.00 to print its highest level since March 2017 owing to the USD strength and widening yield differentials with Japanese markets closed for holiday, while antipodeans were subdued amid the mixed risk tone with NZD/USD hampered by a contraction in quarterly retail sales and as focus remained on tomorrow’s RBNZ meeting, although the downside in AUD/USD was stemmed on cross-related flows and a surge in iron ore prices.

  • New Zealand Retail Sales QQ (Q3) -8.1% (Prev. 3.3%)
  • New Zealand Retail Sales YY (Q3) -5.2% (Prev. 33.3%)


Commodities were mixed with WTI crude futures subdued after the recent indecisiveness as source reports continued to suggest the US will announce a release from the Strategic Petroleum Reserve today which is to be coordinated with several countries, although the White House has denied that a decision was made and US lawmakers also pushed back against tapping into the SPR, while the recent increased SPR speculation prompted a response from OPEC+ with a delegate noting that they may adjust plans if nations release oil reserves. Gold prices languished at the prior day's lows after prices were hit by Fed Chair Powell's renomination which spurred yields and the greenback. Copper gradually returned flat amid the mixed risk appetite although was boosted in early trade amid a surge in iron ore prices which rose by 10% amid expectations of greater demand from the property sector after Chinese financial regulators told some banks to issue more loans for property projects.

White House Press Secretary Psaki stated the US is still considering oil options and will continue pressing OPEC and oil companies on supply and prices of oil. Furthermore, a White House official stated no decision has been made on the release of oil reserves, although there was another source report that the US Energy Department will announce a loan of oil from the SPR on Tuesday and that the SPR release is to be coordinated with several countries. (Newswires)

Kazakhstan output in October was at 1.599mln bpd which exceeds its OPEC+ quota of 1.524mln, according to the Energy Ministry. (Newswires)

Russia's Gazprom told Moldova it will suspend gas supplies in 48 hours if it doesn't receive payments from November 22nd, while there were later comments from the head of Moldovagaz that they are working to resolve the issue of payments to Gazprom. (Newswires)

Nigeria raised December Bonny Crude official selling price to +0.33/bbl (vs. dated brent); raises Qua Iboe official selling price to +0.40/bbl (vs. dated Brent). (Newswires)


US President Biden's administration is reportedly mulling sending military advisers and new weapons to Ukraine as Russia builds up forces near the border and US officials are preparing allies for the possibility of another Russian invasion, according to CNN. Furthermore, the US is concerned the Belarus migrant situation is diverting attention away from the Russian military build-up on the border of Ukraine and it was also reported that a key Democrat is urging US President Biden to work with allies to address Russia. (Newswires/CNN)

US said Russia is 'close' to using energy as weapon in Europe, while it imposed further sanctions related to Nord Stream 2 with sanctions imposed on a Russian-linked entity and its vessel, according to the State Department. (Newswires)

Saudi-led coalition announced to conduct airstrikes on military targets in Yemen's Sanaa and asked civilians to not gather or approach the target sites. (Newswires)


Treasuries bear flattened Monday on Biden’s re-nomination of Fed Chair Powell while dismal 2 and 5yr auctions only added to the pressure in the short-end and belly. At settlement, 2s +7.9bps at 0.584%, 3s +9.3bps at 0.939%, 5s +11.1bps at 1.314%, 7s +11.3bps at 1.551%, 10s +9.3bps at 1.629%, 20s +9.0bps at 2.030%, 30s +7.5bps at 1.982%. 5yr TIPS +15.5bps at -1.681%, 10yr TIPS +13.8bps at -0.998%, 30yr TIPS +11.5bps at -0.412%. 2s5s +1.8bps at 71.0bps, 2s10s +0.8bps at 103.5bps, 2s30s -0.2bps at 139.8bps, 5s10s -1.0bps at 32.3bps, 5s30s -2.0bps at 68.6bps, 10s30s -0.9bps at 36.0bps. Overall, the reaction was hawkish with money markets now pricing in the first 25bps hike from the Fed by next June, compared to July seen at the tail end of last week, while yields in the belly saw the greatest gains with both 5 and 7yr yields rising over 10bps by settlement with the move perhaps extended on any unwind of Brainard bets. With Powell still as Fed chair, some suggested it is more likely that Powell will be open to an accelerating of the taper pace which could lead to earlier rate hikes. Although Brainard didn’t receive the Fed Chair role, she was nominated as Vice-Chair and looks set to take over from current vice-chair Clarida, providing both Powell and Brainard receive support in the Senate, which is expected. Given Clarida is to be replaced, his remarks that the tapering process may have to be sped up in December should not be taken lightly given he will still hold the position until the end of January and the influence he has on the Fed, but we will continue to look for other clues from Fed Governors ahead of the Dec. meeting, given Waller and Clarida are the only Governors who have spoke on the subject since tapering began. The belly of the curve was smashed on the Fed chair announcement while downside only extended after dismal 2 & 5yr auctions. T-note (Z1) futures settled 28 ticks lower at 130-00.

Fed Chair Powell said strong policy actions and vaccines have set the stage for a strong recovery, while he knows high inflation takes its toll on families and stated the economy carries promise of returning to maximum employment. There were also comments from Fed's Brainard (Voter) that she is committed to getting inflation down at a time people are worried about how far their pay checks will go. (Newswires)

Fed's Bostic (2021, 2024 voter) said Fed Chair Powell's nomination takes uncertainty out of the Fed which is helpful and that President Biden made a fine choice in Powell and Brainard. Bostic stated that the Fed should consider how fast to execute the taper and that a faster taper would provide more optionality, while he also noted there are good arguments to be made to consider a faster taper. Furthermore, he expects the inflation number to continue coming in strong and could be open to bringing forward another rate hike in his dot plot for next year if appropriate, but is also open to pushing them back depending on how the pandemic plays out. (Newswires)

US President Biden said that after years of flat wages, they are now seeing higher wages and the economy is creating lots of new businesses although noted they still face serious challenges and it is tough for families to keep up with inflation on everyday essentials. President Biden also stated that they have to deal with issues of rising costs but have the skills to get it under control and that so much of the economy is doing well, while he added that they will attack inflation. Furthermore, he commented that Fed Chair Powell will play an active role in financial regulation including nonbank regulation and cryptocurrencies, and it was later reported that President Biden is hoping to make a decision soon on the three open positions at the Fed. (Newswires)

US Treasury Secretary Yellen said both Powell and Brainard should have broad support in the US Senate, while she suggested that the US must be concerned about inflation and that over the longer-run, the Fed needs to play an important role to ensure inflation does not become an "endemic". Furthermore, Yellen sees the US economy on a strong growth spurt at the moment and reiterated that she expects inflation pressures to diminish in H2 next year with monthly inflation seen at 0.2% and 0.3% in H2 next year. (Newswires)

US Senator Warren said she will vote against Fed Chair Powell's nomination but will support Brainard as Vice Chair, while it was separately reported that Senate Minority Leader McConnell is expected to support Powell’s nomination and Republican Senator Collins said she will vote in favour of Powell for Fed Chair and Brainard for Vice Chair. (Newswires/Punchbowl)

White House is to raise federal contractor pay to USD 15/hr as cemented by a new Department of Labor rule. (Newswires)