Original insights into market moving news

[PODCAST] European Open Rundown 24th November 2021

  • Asia-Pac equity indices were mixed following the choppy performance of their US counterparts
  • In FX, the DXY continues to hover around the 96.50 mark, NZD lags
  • RBNZ hiked the OCR by 25bps to 0.75% as expected and vowed to take a steady approach going forward
  • Oil prices held on to the prior day's gains after Brent and WTI crude futures rallied by more than 3% and 2% respectively
  • Looking ahead, highlights include German IFO, US GDP, PCE and Core PCE, Durable Goods, Initial Jobless Claims, Uni. of Michigan (Final), New Home Sales, DoEs, FOMC Minutes, ECB's Panetta, Schnabel


NIH's Fauci said the vast majority of vaccinated Americans should get boosters and noted that the definition of fully vaccinated could change to three doses of the Pfizer (PFE) or Moderna (MRNA) vaccines and two doses for the Johnson & Johnson (JNJ) vaccine. (Newswires)

AstraZeneca's (AZN LN) COVID-19 vaccine could be providing longer protection than other vaccines and could be the reason the UK has avoided a new virus wave, according to scientists. (The Telegraph)

EMA said Merck (MRK) is seeking EU approval for its COVID pill and a decision will come within weeks. (AFP)

New Zealand COVID-19 response minister said fully vaccinated New Zealanders and other travellers from Australia can enter New Zealand from January 16th, while fully vaccinated foreign travellers can enter from April 30th in a staged way. (Newswires)

South Korea reported a record 4,116 new COVID-19 cases and stated that the coronavirus situation in Seoul area is a serious situation. (Newswires/Yonhap)


Asia-Pac equity indices were mixed following the choppy performance of their US counterparts where energy rallied despite the SPR announcement and tech lagged as yields continued to gain, with the latest RBNZ rate hike, as well as looming FOMC Minutes and US data releases adding to the tentative mood. ASX 200 (-0.2%) was rangebound with the index subdued by losses in tech and gold miners which suffered from the rising yield environment, but with downside cushioned by strength in the largest weighted financials sector and with outperformance in energy after oil prices rallied in the aftermath of the widely anticipated SPR announcement. The strength in oil was attributed to several reasons including a “sell the rumour/buy the news” play and expectations of a response from OPEC+, while an administration official kept the prospect of an oil export ban on the table which is seen as bullish as it would remove US supply from the global market. Nikkei 225 (-1.5%) was the laggard on return from holiday amid flows into the local currency and with reports also suggesting the BoJ is considering tweaking its pandemic relief program. Hang Seng (+0.7%) and Shanghai Comp. (+0.3%) swung between gains and losses with early indecision due to the broad tech weakness tech which was not helped by reports that Chinese cyberspace regulators and police summoned Alibaba (9988 HK) and Baidu’s (9888 HK) cloud unit for telecoms network fraud, although the losses for Chinese bourses were eventually reversed amid gains in the energy heavyweights and after a mild PBoC liquidity injection. Finally, 10yr JGBs opened lower on spillover selling from global peers but gradually pared some of the losses after rebounding from support at 151.50 and with the BoJ in the market for nearly JPY 1.5tln of JGBs with up to 10yr maturities.

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 6.3903 vs exp. 6.3903 (prev. 6.3929)

China reportedly blocked public access to shipping location data due to national security concerns. (FT)

Japan and Australia are preparing to sign a long-debated agreement next year that would make it easier for each country's forces to enter the other for joint exercises. (Nikkei)

  • Singapore GDP QQ (Q3 F) 1.3% (prelim. 0.8%)
  • Singapore GDP YY (Q3 F) 7.1% (prelim. 6.5%)


BoE Governor Bailey said he does not think the MPC will go back to a hard form of guidance and stated that it is not off the table that they give no guidance at all on rates. Bailey also stated that decisions are made meeting by meeting and that they have a very tight labour market. (Newswires)

A Conservative whip stated that it was now an assumption that some unhappy MPs have submitted no confidence letters in PM Johnson to the 1922 committee. (Telegraph)

EU's Sefcovic said EU-UK talks on Northern Ireland trade rules will probably drag into 2022. (Politico) Separately it was reported that French Trawlermen were putting together plans to blockage cross-Channel trade amid the ongoing Brexit dispute. (Telegraph)

The European Commission is preparing new COVID travel recommendations for the whole of the EU. Measures could be announced as soon as Thursday. (Politico)


In FX markets, the DXY traded flat around the 96.50 level as it took a breather from the recent rally amid light newsflow while participants look ahead to the looming FOMC Minutes and busy data calendar later today. EUR/USD was lacklustre with ongoing COVID fears offsetting the bloc’s strong PMI data and after recent commentary from central bankers. GBP/USD traded sideways and failed to benefit from the recent encouraging UK PMI data. USD/JPY eventually gave up 115.00 status and JPY-crosses were pressured amid the risk aversion in Japan, while antipodeans also weakened with NZD/USD the underperformer despite the RBNZ delivering a second consecutive 25bps rate hike, as an increase had been fully priced in and there were also outside calls for a larger magnitude 50bps move. Furthermore, the RBNZ reiterated that a further removal of monetary policy stimulus is expected over time and that conditional on the economy evolving as anticipated, the OCR would likely need to be increased to above its neutral rate, although it also noted ongoing COVID health uncertainties and Governor Orr stated at the press conference that they are taking cautious steps on the cash rate with steady steps of 25bps seen as a balanced approach this time.

RBNZ hiked the OCR by 25bps to 0.75%, as expected. RBNZ committee noted that a further removal of monetary policy stimulus is expected over time and that it is appropriate to continue reducing monetary stimulus, while it judged that considered steps in the OCR were the most appropriate way to reduce stimulus for now and expects OCR would need to be progressively increased. RBNZ added that conditional on the economy evolving as anticipated, the OCR would likely need to be increased to above its neutral rate and that headline CPI is expected to increase to above 5% in the near term before returning towards 2% mid-point in the next two years. Furthermore, it stated that household spending and business investment will be dampened in the near-term by ongoing COVID health uncertainties and that capacity pressures continued to tighten, although it upped its forecast with the OCR seen at 0.94% in March 2022 (prev. 0.86%) and at 2.14% in December 2022 (prev. 1.62%), while the OCR is forecast at 2.30% in March 2023 (prev. 1.77%) and at 2.61% in December 2024. (Newswires)

RBNZ Governor Orr said that the border reopening does not impact their policy outlook and that a 25bps hike gives more optionality, while he added that they can take their time at this point and had considered a 50bps rate hike today amid a range of options. Furthermore, Orr said they are taking cautious steps with the cash rate and sees steady steps of 25bps as a balanced approach this time. (Newswires)


Commodities were rangebound with oil prices holding on to the prior day's gains after Brent and WTI crude futures rallied by more than 3% and 2%, respectively, despite the US announcement to release oil from the SPR totalling 50mln bbls and which was in coordination with other countries. The upside in oil was attributed to several factors including the 'sell the rumour/buy the news' phenomena and after a senior US official noted that all options remained on the table when questioned about a US oil export ban which analysts argued would deprive international markets of US oil supply and would therefore be bullish for prices. Furthermore, the 50mln bbls total release for the US comprised of 18mln bbls that was already authorised by Congress and 32mln which will be exchanged over the next several months. Goldman Sachs also suggested that a total release of release of 70mln-80mln bbls was a 'drop in the ocean' and below what markets had priced, while participants also await the OPEC+ response. Gold was lacklustre and remained beneath the 1800/oz level after suffering from recent USD strength and gains in yields, while copper was choppy alongside the mixed risk tone.

US Private Inventories (bbls): Crude +2.3mln (exp. -0.5mln), Distillates -1.5mln (exp. -1mln), and Gasoline +0.6mln (exp. -0.5mln). (Newswires)

US President Biden said the US still faces challenges contributing to higher prices but will take action on these problems and hopefully deal with recent price spikes in energy faster than they have dealt with previous price spikes. President Biden also said that China may do more on oil reserve release and that the SPR release will provide the supply needed, while he added they will do what is needed to help reduce prices at the pump, as well as noted that oil producers are not ramping up supply quickly enough and that it is unacceptable for gasoline firms to pocket gains. There were also comments from the White House that said it will not rule out options when questioned regarding if it would rule out a further release from the SPR. (Newswires)

US Energy Secretary Granholm said energy prices at the pump and at home are too high and the administration is looking at all tools to help shield families from rising energy prices, while she added that oil reserves will not be released all at once and it will be done over time. Furthermore, Granholm stated the effects of the SPR release is to show in the next couple of months and that reducing gasoline taxes is a tool for President Biden and states. There were also separate reports that the US expects OPEC+ to continue with easing production cuts by 400k, according to Energy Intel. (Newswires/Twitter)

Goldman Sachs said the US-led oil reserves release is a drop in the ocean and a release of 70mln-80mln bbls is smaller than what the market had been pricing. Goldman suggested the release is worth less than USD 2/bbl and significantly less than the USD 8/bbl decline since late October, while it added that Brent also priced in excessive concerns over EU demand from the virus wave. (Newswires)

International Energy Forum said oil prices will probably decline for the rest of the year and OPEC+ will be cautious in reacting to the SPR oil release. (Newswires)

Dubai set official crude differential to DME Oman at USD 0.20/bbl discount for February. (Newswires)

Indonesian President Widodo said they must halt exports of raw materials in the future and may halt bauxite exports next year, copper in 2023 and tin in 2024. (Newswires)


Ukrainian Air Force carried out practice drills which included air strikes, while it was separately reported that the heads of US and Russian General Army staff discussed international security by phone. (Newswires/Interfax)

IAEA Chief Grossi cancelled a news conference planned on Tuesday evening upon return from Iran. (Newswires)

Taiwan is said to be considering an entry ban on senior Chinese officials. (Newswires)


Treasuries bear steepened Tuesday as the curve reversed some of the post-Powell flattening with short-end notes and the belly supported after a strong 7yr auction. At settlement, 2s -2.2bps at 0.608%, 3s -0.2bps at 0.937%, 5s +0.9bps at 1.333%, 7s +2.6bps at 1.576%, 10s +4.2bps at 1.667%, 20s +5.1bps at 2.076%, 30s +4.6bps at 2.024%. 5yr TIPS -0.8bps at -1.692%, 10yr TIPS +4.1bps at -0.961%, 30yr TIPS +5.7bps at -0.357%. 2s5s -0.6bps at 72.9bps, 2s10s +2.0bps at 103.7bps, 2s30s +4.0bps at 137.4bps, 5s10s +2.7bps at 30.5bps, 5s30s +4.7bps at 64.2bps, 10s30s +2.0bps at 33.5bps. Volume was above average. The move lower in Treasuries started out of Europe after remarks from ECB's Schnabel noted that inflation risks are skewed to the upside and that she sees diminishing returns and increasing side effects of QE. The comments, alongside better than expected flash PMI's out of the bloc for November, saw a hit to Bunds which also filtered through to the US. It is worth noting although the commentary was rather hawkish, Schnabel has recently stated it is very unlikely to see the ECB raise rates next year and the ECB/Fed policy divergence is still notable. With the curve bear steepening, desks highlighted two block buys, a 7k and 9k block, in the 2yr that helped cash 2yr notes turn positive. Out the curve, however, there were more two way flows. On technicals, desks highlight that algos sold 10s on a break above 1.64% and 1.99% in 30s. Data on Tuesday saw Richmond Fed and US Markit PMI data, where both saw an uptick in manufacturing but services declined while the composite also fell in both data points, albeit, had little impact on Treasuries. Focus turns to a plethora of data tomorrow (GDP, PCE, Personal Income, Jobless Claims, Housing data, Inventories, Durable Goods, UoM) ahead of the FOMC Minutes, where a full preview of the minutes is available here. Liquidity will likely die out thereafter as markets head for holiday over the Thanksgiving period, the full Newsquawk thanksgiving schedule is available here. T-note (Z1) futures settled 7 ticks lower at 129-25.

US banking regulators are to provide greater clarity in 2022 regarding what cryptocurrency activities are legally permissible for banks. (Newswires)