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[PODCAST] European Open Rundown 23rd December 2021

  • Asia-Pac equities traded modestly higher amid some tailwinds from Wall Street
  • US equity futures resumed trade relatively flat with an upside bias
  • In FX, DXY held onto 96.000, EUR/USD narrowly outperformed, TRY saw later strength
  • UK and Scottish studies suggested the risk of hospitalisation from the Omicron variant is much lower than the Delta variant
  • Overnight focus was on Tencent declaring an interim dividend payable in JD.com shares
  • Looking ahead, highlights include US Personal Income, Consumption, PCE Price Index, Durable Goods, New Home Sales

CORONAVIRUS UPDATE

UK Imperial College study said the risk of hospitalisation from the Omicron variant of COVID-19 is 40-45% lower than the Delta variant. A separate Scottish study noted the risk of hospitalisation from the Omicron variant is two-thirds lower than the Delta variant. (Newswires) Scientists cautioned more data is needed and the studies observed different groups. (Politico) Senior UK government sources have said Britain should not be subjected to further COVID restrictions. (Telegraph)

UK is reportedly mulling a fourth round of vaccinations against COVID. (Telegraph)

Novavax (NVAX) development of Omicron-specific vaccine is on track for initiation of GMP manufacturing in early January; two-dose demonstrated cross-reactive immune response against Omicron and other variants. (Newswires)

FDA issued an Emergency Use Authorization for Pfizer's (PFE) Paxlovid, ready to start delivery immediately, plans to file for full approval in 2022. (Newswires)

White House warned the Pfizer (PFE) COVID pill will not be widely available for months. (FT)

France cancelled orders for Merck (MRK) COVID vaccines amid efficacy fears - orders were replaced by Pfizer (PFE). (FT)

Canadian Finance Minister said new Government measures to tackle Omicron will cost CAD 4bln, and will be covered by contingency already put aside in the fiscal update. (Newswires)

Spain will require face masks outdoors again, according to AFP. (AFP)

The US Supreme Court agreed to hear legal challenges to the Biden administration’s mandates that employees of large companies and health-care workers be vaccinated against COVID. (CNBC)

China reports 100 COVID cases in Mainland on Dec 22nd vs 77 the prior day. (Newswires)

ASIA

Asia-Pac equities traded modestly higher amid some tailwinds from Wall Street in holiday-thinned trade and the absence of fresh catalysts. The US majors closed in the green across the board, with the S&P 500 and Nasdaq propelled higher by Tesla shares which jumped 7.5% to regain USD 1tln market cap. US equity futures resumed trade relatively flat with an upside bias. In APAC, the ASX 200 (+0.3%) was supported by its gold miners following the recent gains in the yellow metal. Japan’s Nikkei 225 (+0.6%) was underpinned by its mining names, while South Korea’s KOSPI (+0.2%) saw gains in Tech mostly offset by losses in Autos. The Hang Seng (+0.3%) and Shanghai Comp (+0.2%) quickly dipped at the open into modest negative territory but later recovered. The overnight focus was on Tencent declaring an interim dividend payable in JD.com shares – which would reduce Tencent's holding of JD to about 2.3% vs prev. nearly 17% reported earlier this month. JD.com shares extended downside in early trade to losses of over 10%, whilst Tencent rose over 3%. US 10yr Treasury futures traded with no firm direction overnight despite the mild positivity seen across APAC stocks, with the debt now looking ahead to the November PCE report.

  • PBoC set USD/CNY mid-point at 6.3651 vs exp. 6.3570 (prev. 6. 3703)
  • PBoC injected CNY 10bln via 7-day reverse repo and CNY 10bln via 14-day for a net neutral daily injection of CNY 10bln, at maintained rates of 2.20% and 2.35% respectively

Tencent (700 HK) declared an interim dividend payable in JD.com shares (9618 HK), to pay one Class A of JD.com for every 21 shares held. (Newswires) Tencent's shareholding of JD will be about 2.3% (vs prev. nearly 17% stake, according to S&P Capital IQ)

Japan cuts issuance of 2yr JGBs by JPY 2.4tln; to boost issuance of 10yr and 40yr JGBs; Maintains issuance of 5yr, 20yr, 30yr and 10yr I/L JGBs - Reuters source state. (Newswires)

Japan raised FY22 real GDP growth forecast to 3.2% from 2.2% seen previously; cut FY21 forecast to 2.6% from 3.7%, according to the Cabinet Office. (Newswires)

CENTRAL BANKS

BoJ Governor Kuroda said FX rates must move in a stable fashion and reflect economic fundamentals; Negative impact of weak JPY on Japanese household income may be increasing, benefits of weak JPY exceeds demerits. (Newswires)

ECB President Lagarde said the outlook for economic growth looks strong; not quite there yet on meeting the ECB inflation goal and energy prices are a headwind to recovery. (Newswires)

White House said there is no update on Fed picks. (Newswires)

South Korean Central Bank to join US Fed's Foreign and International Monetary Authorities (FIMA) Repo Facility. (Newswires)

UK/EU

UK DUP party will reportedly mount Pressure on Foreign Minister Truss to trigger Article 16 of the Northern Ireland protocol next year. (Telegraph)

FX

In FX, DXY held onto the prior day’s losses which took the index under its 21 DMA (96.24) before it found support around 96.02 for a second straight day. G10 peers were flat across the board with EUR and GBP the better performers. EUR/USD retested yesterday’s 1.1342 high ahead of a couple December daily peaks on the way to 1.1400, and thereafter the 50 DMA at 1.1416. GBP/USD meanwhile sees two December weekly highs at 1.3370 and 1.3374 ahead of 1.3400, whilst the downside sees its 100 WMA at 1.3298. USD/JPY found support just above 114.00 and edges higher and sentiment seems supportive. AUD/USD and NZD/USD were flat just above 0.7200 and 0.6800. From a technical standpoint, AUD/USD sees its 50 and 100 DMAs at 0.7283 and 0.7294 respectively. The CNH was unfazed by the softer-than-expected CNY fix. Elsewhere, TRY saw some strength in the run-up to the European open, with USD/TRY accelerating downside after breaching 12.00.

COMMODITIES

The oil complex mimicked the mild gains seen across stocks. WTI Feb traded on either side of USD 73/bbl as prices brace themselves for headline risks regarding potential end-of-year restrictions as COVID cases surge – with particular focus on China after the nation yesterday ordered a city of 13mln residents to stay at home due to a COVID outbreak. Over to metals, spots gold reclaimed USD 1,800/oz-status amid the recent softness in the Dollar, albeit with the overnight range narrow. LME copper saw modest gains - in line with other risk assets.

China has set up a national rare earth group, according to state media. (Newswires)

Japan Q1 2022 crude steel output seen +1.9% Y/Y; -1.4% Q/Q; Q1 2022 steel product demand incl. exports seen +1.9% Y/Y; steel product exports seen -1.4% Y/Y. (Newswires)

South Korea is to release oil reserves (details light). (Newswires)

GEOPOLITICAL

US National Security Adviser Sullivan said they are discussing with allies "time frames" for exhausting Iran nuclear talks; there is only "weeks" left before nuclear talks with Iran may no longer be viable. (Newswires)

White House said there is an open line of diplomatic engagement with Russia that it expects to continue; US has no aggressive intent with regards to Russia. (Newswires)

US

Treasuries bull flattened with the curve reversing some of the recent selling pressure as we head to the holidays. There had been some selling pressure in the morning however to see the 10yr T-Note hit a low of 130-17 following a spillover effect from Bunds after remarks from ECB's Holzmann who said in an extreme case the ECB could hike next year while also noting that an end of bond purchases would suggest a rate hike is imminent from the ECB (in the following two quarters). The move lower was eventually pared heading into US data which saw GDP revised higher to 2.3% for Q3 while Core PCE Prices also saw a marginal revision higher to 4.6%. Note the more timely November PCE report will be released today. The 1500GMT/1000EST Consumer Confidence was very strong, topping analyst expectations. The revision higher to GDP and strong Consumer Confidence weighed on Treasuries once again to match the session low of 130-17. Nonetheless, dip buyers emerged once again to take Treasuries off the lows. Desks also highlighted that profit taking also took place yesterday, particularly in some of the more profitable steepeners. T-notes futures (H2) settled 5+ ticks higher at 130-23+.

Amazon's (AMZN) Cloud Unit has drawn antitrust scrutiny from the FTC led by Khan, according to Bloomberg Law. (Newswires)

Tesla (TSLA) CEO Musk tweeted 'when the 10bln preprogrammed sales complete. There are still a few tranches left, but almost done', in regards to reaching his prior target of selling around 10% of his shares. (Newswires) CEO Musk exercised 2.1mln options at USD 6.24/contract and sold 934k shares for a total of USD 928.6mln, according to a filing. (Newswires) Musk has sold around 14.76mln Tesla shares since November 8, according to a tracker, equating to 86.62% of his target.

White House said there is a broad agreement within Democrats on the requirement to move Build Back Better forward; conversations with Manchin's office are ongoing. (Newswires)

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