Original insights into market moving news

[PODCAST] US Open Rundown 5th January 2022

  • European bourses are mixed and fairly contained while US futures faded a brief moved into positive territory amid minimal newsflow; ES -0.10%, NQ -0.4% currently lags
  • DXY is downbeat but is yet to test 96.00 to the downside with G10 peers, ex-CAD given crude, buoyed and JPY outperforming after yesterday's pressure
  • US lawmakers have commenced early discussions regarding another round of COVID stimulus spending, via Washington Post
  • North Korea fired a projectile which landed outside of Japan's Exclusive Economic Zone (EEZ)
  • Looking ahead, highlights include US Composite/Services PMI (Final), US ADP & FOMC minutes


UK official Vallance said there is no evidence Omicron has peaked in London yet. (Newswires) UK COVID testing rules will be relaxed in a bid to shorten isolation period and alleviate staffing shortages, according to reports. (Telegraph) UK travel industry groups have called for all remaining Covid restrictions on travellers to be removed. (BBC)

US CDC said individuals should isolate for five days. At the end of 5-day isolation, if an antigen test shows negative then isolation can end, if positive then isolation should be carried out until day 10. (Newswires)

US lawmakers have commenced early discussions regarding another round of COVID stimulus spending, via WaPo; early efforts are mostly focused on business that are most impacted by the latest wave (Washington Post)

Japan's Okinawa saw a daily doubling of COVID-19 cases and officials are said to be considering emergency steps. (Newswires)

  • Tokyo could impose emergency measures amid the increases in COVID cases, according to Sankei; daily COVID cases estimated at 390 (vs yesterday's 151), according to NTV.

Hong Kong leader Lam says they are on the verge of another outbreak of COVID, case increase is drastic, placing strain on hospitals; from January 8th start banning flights from eight countries, including Australia, Canada, France, UK and US. Major events to be cancelled between January 7th and 20th; entertainment venues, gyms, bars and night clubs to close from the 7th. (Newswires)

IMF is to delay the release of the World Economic Outlook (WOO) to Jan 25th to include the latest COVID developments. (Newswires)


Asia-Pac equities traded mostly in the red following the mixed handover from Wall Street, where the US majors maintained a cyclical bias and the NDX bore the brunt of another sizeable Treasury curve bear-steepener. Overnight, US equity futures resumed trade with mild losses and have since been subdued, with participants now gearing up for the FOMC minutes (full Newsquawk preview available in the Research Suite) ahead of Friday’s US jobs report and several scheduled Fed speakers. In APAC, the ASX 200 (-0.3%) was pressured by its tech sector, although the upside in financials cushioned some losses. The Nikkei 225 (+0.1%) was kept afloat by the recent JPY weakness, whilst Sony Group rose some 4% after its chairman announced EV ambitions. The KOSPI (-1.2%) was dealt a blow as North Korea fired a projectile that appeared to be a ballistic missile, but this landed outside of Japan’s Exclusive Economic Zone (EEZ). The Hang Seng (-1.6%) saw its losses accelerate with the Hang Seng Tech Index tumbling over 4% as the sector tackled headwinds from Wall Street alongside domestic crackdowns. China Huarong Asset Management slumped over 50% as it resumed trade following a nine-month halt after its financial failure. The Shanghai Comp. (-1.0%) conformed to the mostly negative tone after again seeing a hefty liquidity drain by the PBoC. In the debt complex, the US T-note futures held a mild upside bias since the resumption of trade, and the US curve was somewhat steady. Participants also highlighted large short-covering heading into yesterday’s US close ahead of the FOMC minutes.

A unit of China Evergrande (3333 HK) will hold meetings with bondholders between Jan 7-10th, according to a filing; reports suggest Evergrande unit proposes delaying Yuan bond repayment. (Newswires)

China's market regulator imposed fines on several transactions involving Bilibili (9626 HK), Alibaba (9988 HK) and some units of Tencent (700 HK); the market regulator says Cos failed to report some deals. Tencent has been fined CNY 4.5mln, Alibaba CNY 1mln, and Bilibili CNY 500k. (Newswires)

China's market regulator has issued draft rules on mobile apps; providers must not take part in activities that threaten national security. (Newswires)

Sony Group (6758 JT) chairman said the Co. is to establish an EV company this Spring. (Newswires)

  • Australian ANZ Job Advertisements M/M (Dec): -5.5% (Prev. 7.4%, Rev. 9.9%)


Senate Banking Committee said Fed Governor Brainard's nomination hearing for Fed Vice Chair will be on Thursday January 13th. (Newswires)

PBoC will likely step up cash injections through open market operations into the banking system from the second half of the month to meet rising demand for cash, according to China's Securities Journal. (Newswires)

BoJ is expected to slightly revise higher its inflation forecast for the next fiscal year, according to Reuters sources; likely to downgrade the GDP outlook for the year ending in March, according to Bloomberg sources. (Newswires)


EU Markit Composite Final PMI (Dec) 53.3 vs. Exp. 53.4 (Prev. 53.4); Services Final PMI (Dec) 53.1 vs. Exp. 53.3 (Prev. 53.3)

  • German Markit Composite Final PMI (Dec) 49.9 vs. Exp. 50 (Prev. 50); Services PMI (Dec) 48.7 vs. Exp. 48.4 (Prev. 48.4)


North Korea fired what appeared to be a ballistic missile towards the East Sea. The projectile landed outside of Japan's Exclusive Economic Zone (EEZ). (Newswires/Yonhap/NHK)

Air raid sirens sounded in Baghdad, Iraq, amid reports of strikes toward a US base. Subsequently, a rocket attack has hit a military base in proximity to the Baghdad airport which hosts US forces, according to Reuters citing sources. (Sputnik/Newswires)

Saudi-led coalition diverted a fuel tanker to a Saudi port the was heading towards Hodeidah, according to Houthi TV. (Newswires)


European equities (Stoxx 600 +0.1%) trade mixed in what has been a relatively quiet session thus far with the final readings of Eurozone services and composite PMIs providing little in the way of fresh impetus for prices. The handover from the APAC region was predominantly a soft one with Chinese bourses lagging once again with the Hang Seng Tech Index tumbling over 4% as the sector tackled headwinds from Wall Street alongside domestic crackdowns. Meanwhile, the Shanghai Comp. (-1%) conformed to the mostly negative tone after again seeing a hefty liquidity drain by the PBoC. Stateside, the ES and RTY are flat whilst the NQ lags once again after yesterday bearing the brunt of another sizeable treasury curve bear-steepener. In terms of house views, analysts at Barclays expect “2022 to be a more normal yet positive year for equities, looking for high single-digit upside and a broader leadership”. Barclays adds that it remains “pro-cyclical (Industrials, Autos, Leisure, reopening plays and Energy OW), and prefer Value to Growth”. Elsewhere, analysts at Citi stated that “monetary tightening may push up longer-dated nominal/real bond yields, threatening highly rated sectors such as IT or Luxury Goods. Alternatively, higher yields could help traditional value trades such as UK equities and Pan-European Financials”. Sectors in Europe are mostly higher, with auto names leading as Renault (+3.4%) sits at the top of the CAC, whilst Stellantis (+0.6%) has seen some support following the announcement that it is planning for a full battery-electric portfolio by 2028. Elsewhere, support has also been seen for Chemicals, Oil & Gas and Banking names with the latter continuing to be supported by the current favourable yield environment. To the downside, Food and Beverage is the clear laggard amid losses in Nestle (-2.6%) following a broker downgrade at Jefferies. Ocado (+5.5%) sits at the top of the Stoxx 600 after being upgraded to buy at Berenberg with analysts expecting the Co. to sign further deals with new and existing grocery e-commerce partners this year. Finally, Uniper (-2.4%) sits near the bottom of the Stoxx 600 after securing credit facilities totalling EUR 10bln from Fortum and KfW.

Citi raises its 2022 year-end S&P 500 price target to 5,100 (current level 4,793 and therefore implies 6.4% upside). (Newswires)


DXY - Notwithstanding, Tuesday’s somewhat mixed US manufacturing ISM survey and relatively hawkish remarks from Fed’s Kashkari, the week (and year) in terms of data and events really begins today with the release of ADP as a guide for NFP and minutes of the December FOMC that confirmed a faster pace of tapering and more hawkish dot plots. As such, it may not be surprising to see the Buck meandering broadly and index settling into a range inside yesterday’s parameters with less impetus from Treasuries that have flipped from a severe if not extreme bear-steepening incline. Looking at DXY price action in more detail, 96.337 marks the top and 96.053 the bottom at present, and from a purely technical perspective, 96.098 remains significant as a key Fib retracement level.

JPY/EUR/AUD/GBP/NZD - All taking advantage of the aforementioned Greenback fade, and with the Yen more eager than others to claw back lost ground given recent underperformance. Hence, Usd/Jpy has retreated further from multi-year highs and through 116.00 to expose more downside potential irrespective of latest reports via newswire sources suggesting the BoJ is expected to slightly revise higher its inflation forecast for the next fiscal year and downgrade the GDP outlook for the year ending in March. Similarly, the Euro is having another look above 1.1300 even though EZ services and composite PMIs were mostly below consensus or preliminary readings and German new car registrations fell sharply, while the Aussie is retesting resistance around 0.7250 and its 50 DMA with some assistance from firm copper prices, Cable remains underpinned near 1.3550 and the 100 DMA and the Kiwi is holding mainly above 0.6800 in the face of stronger Aud/Nzd headwinds. Indeed, the cross is approaching 1.0650 in contrast to Eur/Gbp that is showing signs of changing course following several bounces off circa 0.8333 that equates to 1.2000 as a reciprocal.

CHF/CAD - The Franc and Loonie appear a bit less eager to pounce on their US peer’s retrenchment, as the former pivots 0.9150 and latter straddles 1.2700 amidst a downturn in crude pre-Canadian building permits and new house prices.

SCANDI/EM - Little sign of any fallout from a slowdown in Sweden’s services PMI as overall risk sentiment remains supportive for the Sek either side of 10.2600 vs the Eur, but the Nok is veering back down towards 10.0000 in line with slippage in Brent from Usd 80+/brl peaks reached on Tuesday. Elsewhere, the Zar is shrugging off a sub-50 SA PMI as Gold strengthens its grip on the Usd 1800/oz handle and the Cnh/Cny are still underpinned after another PBoC liquidity drain and firmer than previous midpoint fix on hopes that cash injections might be forthcoming through open market operations into the banking system from the second half of January to meet rising demand for cash, according to China's Securities Journal. Conversely, the Try has not derived any real comfort from comments by Turkey’s Finance Minister underscoring its shift away from orthodox policies, or insistence that budget discipline will not be compromised.


Debt futures have not managed to reach or really threaten Tuesday’s recovery highs, but price action and evolution is considerably less bearish than of late, and especially on the opening day of the new week and year when bouts of selling were intense with little strength in depth on the downside to cushion the slide. However, Bunds have taken the new 2032 German benchmark launch largely in stride between 170.59-93 parameters and the Eurozone periphery has also absorbed somewhat mixed auctions quite well, aside from further long end concession in Italy. Meanwhile, Gilts carved out a very minor new recovery high at 124.09, but are now nudging a slightly deeper 123.88 Liffe low and US Treasuries are sitting tight amidst a fractionally flatter/level curve profile in the run up to ADP and Fed minutes.

Italy has received EUR 43bln in demand for its 30yr offering with the spread set a 6bps over the outstanding Sept 2051 bond, according to the lead manager. (Newswires)


Crude benchmarks are currently little changed but have been somewhat choppy within a range shy of USD 1/bbl in European hours, in-spite of limited fresh newsflow occurring. For reference, WTI and Brent reside within USD 77.26-76.53/bbl and USD 80.25-79.56/bbl parameters respectively. Updates for the complex so far include Cascade data reporting that gas flows via the Russian Yamal-Europe pipeline in an eastward direction have reduced. As a reminder, the pipeline drew scrutiny in the run up to the holiday period given reverse mode action, an undertaking the Kremlin described as ‘operational’ and due to a lack of requests being placed. Separately, last nights private inventories were a larger than expected draw, however, the internals all printed builds which surpassed expectations. Today’s EIA release is similar expected to show a headline draw and builds amongst the internals. Elsewhere, and more broadly, geopolitics remain in focus with Reuters sources reporting that a rocket attack has hit a military base in proximity to the Baghdad airport which hosts US forces. Moving to metals, spot gold and silver are once again fairly contained though the yellow metal retains the upside it derived around this point yesterday, hovering just below the USD 1820/oz mark.

Barclays maintains its 2022 Brent forecast at USD 80/bbl. (Newswires)

US Private Inventories (bbls): Crude -6.43mln (exp. -3.3mln), Cushing +2.27mln, Gasoline +7.06mln (exp. +1.8mln), Distillate +4.34mln (exp. +1.5mln). (Newswires)

Gas flows Eastward via the Russian Yamal pipeline have dropped, according to Gascade data. (Newswires)