Original insights into market moving news

[PODCAST] US Open Rundown 14th January 2022

  • European bourses are softer, Euro Stoxx 50 -0.9%, with newsflow minimal though benchmarks are off lows led by Oil & Gas given benchmark pricing
  • US futures are contained/rangebound, ES +0.1%, ahead of US Retail Sales and Fed's Williams as the last scheduled pre-blackout speaker
  • DXY remains pressured but fairly contained with peers mixed while debt dips lifting yields; however, US/German 10yr yields remain shy of recent peaks
  • Chinese trade figures showed weaker than expected Imports although Exports topped estimates
  • China has agreed with the US to release crude oil reserves around Lunar New Year (February 1st), according to Reuters sources
  • Looking ahead, highlights include US Retail Sales, Import & Export Prices, Industrial Production, Uni. of Michigan, ECB's Lagarde, Fed's Williams. Earnings from Citi, JPMorgan and Wells Fargo


US CDC's COVID-19 guidance for cruise ships will be optional beginning on Saturday when the current framework expires as the CDC will switch to a voluntary risk mitigation program for cruise lines in US seas, according to Axios. In other news, NYC Mayor Adams is to consider 'temporary' remote option for schools. (Newswires)

UK is expected to end COVID-19 passes later this month, according to The Times. (The Times)

Tokyo daily COVID cases 4051 (vs yesterday's 3124). (Newswires)


Asian equity markets weakened amid headwinds from the US where all major indices declined led by losses in tech and consumer discretionary amid a slew of hawkish Fed speak, while mixed Chinese trade data added to the cautiousness in the region. ASX 200 (-1.1%) traded lower as tech and consumer stocks mirrored the underperformance of stateside peers and with nearly all industries on the back foot aside from utilities and gold miners. Nikkei 225 (-1.3%) briefly gave up the 28k level amid a firmer currency and source reports that BoJ policy makers are said to debate how soon they can begin signalling a rate hike. In terms of the notable movers, Fast Retailing was the biggest gainer after it reported a record Q1 net, followed by Seven & I Holdings which also benefitted post-earnings, while Hitachi Construction was at the other end of the spectrum after news that parent Hitachi will offload half its majority stake. KOSPI (-1.4%) eventually underperformed after the Bank of Korea hiked rates by 25bps for a third time in the current tightening cycle to 1.25%, as expected. BoK also noted that CPI is to stay in the 3% range for a while and BoK Governor Lee made it clear that rates will continue to be adjusted which has fuelled speculation of similar action at next month’s meeting. Hang Seng (-0.2%) and Shanghai Comp. (-1.0%) were also pressured with participants digesting the latest trade figures which showed weaker than expected Imports although Exports topped estimates. Nonetheless, the downside was somewhat limited amid ongoing expectations for PBoC easing to support the economy as the Fed moves closer towards a rate lift off and with some encouragement after Evergrande averted its first onshore debt default whereby bondholders approved a six-month postponement of bond redemption and coupon payments. Finally, 10yr JGBs retreated beneath the 151.00 level following the source report that suggested debate within the BoJ on how soon a rate increase can be signalled which could occur ahead of the 2% price target, while this coincided with an increase in the 5yr yield to a 6-year high and a weaker than previous 20yr JGB auction.

PBoC injected CNY 10bln 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 6.3677 vs exp. 6.3611 (prev. 6.3542)

  • Chinese Trade Balance (USD)(Dec) 94.46B vs. Exp. 74.5B (Prev. 71.72B)
  • Chinese Exports YY (USD)(Dec) 20.9% vs. Exp. 20.0% (Prev. 22.0%)
  • Chinese Imports YY (USD)(Dec) 19.5% vs. Exp. 26.3% (Prev. 31.7%)
  • Chinese Trade Balance (CNY)(Dec) 604.7B vs. Exp. 453.7B (Prev. 460.7B)
  • Chinese Exports (CNY)(Dec) 17.3% vs. Exp. 16.3% (Prev. 16.6%)
  • Chinese Imports (CNY)(Dec) 16.0% vs. Exp. 23.6% (Prev. 26.0%)

BoJ policymakers are said to be debating how soon they can begin telegraphing a rate increase which could occur before the central bank reaches the 2% target although an actual hike may not occur until late 2023, according to Reuters sources. (Newswires)

  • BoJ makes its first ETF purchase since October 1st with a purchase amount of JPY 70.1bln.

Bank of Korea raised the 7-Day Repo Rate by 25bps to 1.25%, as expected, with the decision not unanimous as board member Joo Sang-Yong dissented. BoK said South Korea's economic growth path is inline with its projection, exports growth will sustain favourable momentum and that private consumption improvement will strengthen. Furthermore, it is to monitor policy changes abroad, the build up of financial imbalances, COVID developments, as well as pace of growth and inflation, while it added that consumer inflation is to exceed the previously expected path for some time and will run above mid-2% this year with CPI to stay in the 3% range for a while. There were also comments from BoK Governor Lee that the current policy rate is still accommodative which still needs to be further adjusted and that reaching a 1.5% policy rate still cannot be viewed as tightened. (Newswires)


Fed's Waller (voter) said he sees three hikes as a good baseline and the case could be made for 4 or 5 hikes if high inflation persists, although he suggested that if inflation goes down it could mean a pause and less than three hikes, while he added that they will have to see what inflation looks like. Waller commented that they could begin shrinking the balance sheet by summer but added that the Fed could additionally allow the balance sheet to run off earlier and stated that if they start running off the balance sheet and long-term rates increase, that could mean less need for raising short-term rates. Waller also noted that he favours a March hike but doesn't expect it to be a 50bps increase in March and noted that if inflation remains above 3%, they will need to do more and possibly rethink their strategy, but added that he sees inflation around 2.5% by year-end and that rapid rate hikes would no longer be needed once inflation is down to 2.5%. (Newswires)

Fed's Harker (2023 voter) said the Fed should think about balance sheet normalisation after the interest rates are sufficiently above zero and he is not concerned the Fed is behind on inflation but action is required. Harker also reiterated that he pencilled in three hikes for 2022 although four is not out of the question, while he added the US economy is at maximum employment in his eyes and the balance sheet run off should be steeper than it was before but not dramatically so. (Newswires)

Fed's Daly (2024 voter) said raising rates in March is quite reasonable and it is misguided to call the number of hikes needed which will depend on data, while she added that ending bond buying earlier than planned would not be worth the potential market dislocations. Fed's Daly also stated that she doesn't want to raise rates while still buying bonds and that they could start reducing the balance sheet after one or two rate hikes and certainly by end of the year, while she noted that pace of balance sheet reduction can be faster than last time although should be predictable and not meeting by meeting. Furthermore, she expects inflation to remain high for most of the year but will moderate and said the labour market is roaring aside from labour force participation. (Newswires)

US President Biden reportedly nominates economists Lisa Cook and Philip Jefferson as Fed Governors, while he nominates Sarah Bloom Raskin as Fed Vice Chair for Supervision, according to Reuters sources. (Newswires)

US Democrat Senators Manchin and Sinema met with President Biden on voting rights. (Newswires/Fox/Washington Post)


UK Tory MP and prominent Brexiteer Andrew Bridgen became the fifth Tory MP to submit a no confidence letter against PM Johnson this week and called for the PM to resign amid the Downing Street lockdown party scandal. Furthermore, reports suggest that as many as 30 letters of no confidence have been submitted by Conservatives, while 15% of the party's lawmakers (54 MPs) are needed to submit letters for a vote on the leadership. (Telegraph)

EU Commission will, very shortly, be sending a letter to Poland that it is set to withhold over EUR 100mln of funds from EU payments in order to cover unpaid fines. Poland has subsequently requested that the Commission refrains from doing this, as more time is needed to alter the judiciary. (FT/Newswires)

UK Foreign Secretary Truss says that officials have agreed to intensify talks when meeting next week; EU's Sefcovic says now is the time to begin taking issues off the table; what he hears from UK's Truss is a preference towards a negotiated solution. (Newswires)

UK GDP Estimate MM (Nov) 0.9% vs. Exp. 0.4% (Prev. 0.1%); 3M/3M (Nov) 1.1% vs. Exp. 0.8% (Prev. 0.9%)

  • ONS says GDP in November was 0.7% above the pre-COVID level.


US Senate bill to impose sanctions on Nord Stream 2 was unsuccessful in getting enough support to pass. (Newswires)

North Korea stated that its missile developments are a legitimate right to self-defence and its recent weapons development was not targeting a specific nation or did not threaten its neighbours. North Korea also stated that US is intentionally escalating the situation with sanctions and that US accusations regarding weapons are evident provocation and gangster-like logic, while it warned it will be forced to take stronger action if US adopts a confrontational stance. Furthermore, it was reported that the US urged North Korea to refrain from provocation after earlier North Korean warning, while North Korea was later reported to have fired another projectile eastward. (KCNA/Yonhap)

  • Projectile fired by North Korea overnight was a ballistic missile, according to News 1
  • North Korean Missile landed outside Japan's Exclusive Economic Zone (EEZ)

Ukraine's Foreign Minister says it is too early to draw conclusions on cyber attacks, but there is a long record of such activity from Russia. Subsequently, EU's Borrell has condemned the cyber-attack on Ukraine, calling an emergency EU meeting in response. (Newswires)

Russian Foreign Minister says that all communication channels with the EU are closed. Adding that a military hardware deployment is one of the potential response from Moscow if talks fail. (Newswires)


The major cash equity indices in Europe remain subdued but off worst levels (Euro Stoxx 50 -0.7%; Stoxx 600 -0.6%) as the downbeat APAC mood reverberated into the region amid a slew of hawkish Fed speak, while the mixed Chinese trade data added to the concerns of a slowdown ahead of next week’s GDP metrics. Newsflow had overall been quiet during the European session ahead of the start of US earnings season, but geopolitical tensions remain hot on the radar after North Korea fired its third missile of the year (albeit landing outside Japan’s EEZ), whilst Russia closed all communication channels with the EU and exerted some time-pressure on Washington with regards to Moscow’s security demands. Back to trade, a divergence is seen between Europe and the US as the former catches up to the late accelerated sell-off on Wall Street yesterday; US equity futures have been consolidating with mild broad-based gains seen across the ES (+0.2%), YM (+0.2%), NQ (+0.2%) whilst the RTY (Unch) narrowly lags. Delving into Europe, the UK’s FTSE 100 (-0.1%) is cushioned by gains across its Oil & Gas and Financial sectors as crude oil prices and yields clamber off intraday lows, whilst the SMI (-0.3%) sees some losses countered by its heavyweight healthcare sector. Sectors in Europe are mostly in the red with a slight defensive tilt, although Oil & Gas stands as the top gainer and the only sector in the green. The downside meanwhile sees Tech following a similar sectorial underperformance seen on Wall Street and APAC overnight. In terms of individual movers, DAX-heavyweight SAP (-0.3%) conforms to the losses across tech after initially rising as a result of upgraded guidance and the announcement of a share buyback programme of up to EUR 1bln. The most notable mover of the day has been EDF (-17.5%) as the Co. withdrew guidance after noting the impact of new French price cap measures is forecast to be around EUR 8.4bln on FY22 EBITDA.

Macau is reportedly planning a maximum of six gaming licenses, ranging up to 13 years, according to reports via Bloomberg; looking to increase local ownership within casinos to 15% from 10%. (Newswires)


DXY - Another lower low off a lower high does not bode well for the index and Buck more broadly, but some technicians will be encouraged by the fact that chart supports in the form of a Fib retracement and 100 DMA have only been breached briefly. Meanwhile, Friday may provide the Greenback with a prop via pre-weekend position squaring and US data could lend a hand if upbeat or better than expected at the very least. For now, the DXY is restrained between 94.887-626 confines, with the upside capped by a major trendline that falls just below 95.000 around 94.980, and the Dollar also hampered by pressure emanating outside the basket from the likes of the Yuan, crude oil and other commodities.

CAD/JPY/GBP - The Loonie has reclaimed 1.2500+ status in line with a rebound in WTI towards Usd 83/brl, but still faces stiff trendline resistance vs its US counterpart at 1.2451 and probably conscious that several multi-billion option expiries roll off either side of the 1.2500 level today. Conversely, the Yen has cleared the psychological 114.00 hurdle with some fundamental impetus coming from hawkish BoJ source reports contending that policy-setters are contemplating how soon the Bank can telegraph a rate hike that is likely to be delivered prior to inflation reaching its 2% target. Elsewhere, Sterling remains elevated above 1.3700, though unable to scale 1.3750 even with tailwinds from stronger than forecast UK GDP and IP or a narrower than feared trade gap amidst ongoing political uncertainty.

CHF/EUR/NZD/AUD - All narrowly divergent and contained against their US rival, with the Franc straddling 0.9100 and Euro holding within a 1.1483-51 range and immersed in hefty option expiry interest spanning 1.1395 to 1.1485 (see 7.01GMT post on the Headline Feed for details). On the flip-side, the Aussie and Kiwi have both lost a bit more momentum after probing 0.7300 and approaching 0.6900 respectively yesterday, and Aud/Usd appears to have shrugged off robust housing finance data in the run up to China’s trade balance revealing sub-consensus imports.

SCANDI/EM - Firmer than anticipated Swedish CPI and CPIF metrics have not offered the Sek much support, as the stripped down core ex-energy print was in line and bang on the Riksbank’s own projection. However, the Huf has been underpinned by hot Hungarian inflation and the Cnh/Cny in wake of the aforementioned Chinese trade data showing a record surplus for December and 2021 overall. In Turkey, the Try is flattish following the latest CBRT survey that predicts a weaker year-end Lira from current levels, but above record lows and still well above target CPI, while in Russia the Rub is benefiting from Brent’s rise above Usd 85.50/brl (in keeping with the Nok) against the backdrop of geopolitical and diplomatic strains as the country’s Foreign Minister declares that all lines of communication with the EU have ended.

Major FX Expiries, NY Cut:

  • EUR/USD: 1.1270-80 (2.06BN), 1.1285-90 (1.3BN), 1.1300-10 (1.3BLN), 1.1320-25 (590M), 1.1345-50 (550M), 1.1360-75 (1.8BLN), 1.1395-05 (1.4BN), 1.1410-15 (563M), 1.1420-25 (2.37BN), 1.1460-70 (1.38BN), 1.1485 (2.1BN), 1.1620-30 (1.3BLN), 1.1650-55 (710M)
  • USD/CAD: 1.2485-90 (1.4BN), 1.2495-00 (1.52BN), 1.2510 (664M), 1.2520-30 (1.76BN), 1.2540-50 (822M), 1.2600-05 (395M), 1.2650 (685M), 1.2675-85 (1.05BN), 1.2740-50 (900M)


It may be somewhat premature to say that bonds have exhausted their reserves of energy in terms of recovering losses from lows posted earlier in the week, but price formation supports that theory and the latest rally in oil will no doubt fuel more upside inflation vibes in context of risk and reflation trades. On top of that, technical tides may be turning again after Bunds fell just 5 ticks shy of matching Thursday’s Eurex best, at 170.95 vs 171.00, and subsequently breached near term support around 170.50 to post a deeper 170.31 intraday low (40 ticks below par). Similarly, Gilts unwound all and more of their early Liffe gains within a 123.75-34 band compared to yesterday’s 123.65 close and the 10 year T-note is currently towards the bottom of its 128-24+/128-13 overnight extremes in advance of US retail sales, import/export prices, ip and prelim Michigan sentiment that is all flanked by speeches from ECB President Lagarde and Fed’s Williams who may well have the last word prior to the official blackout period for this month’s FOMC gathering.


WTI and Brent front-month futures have been on an upward trajectory since the Wall Street close, with the former now above USD 83/bbl (vs 81.58/bbl low) and the latter north of USD 85.50/bbl (vs 83.99/bbl low) in European hours. Overall market sentiment has been a non-committal one amid a lack of fresh macro catalysts, however, geopolitical updates have been abundant: namely with Russia’s punchy rhetoric surrounding its security demand from NATO and Washington, whilst North Korea fired what is said to be ballistic missiles which landed just outside Japan’s Exclusive Economic Zone (EEZ). On the demand side of the equation, eyes remain on China’s economic and COVID situations, with the import figures indicating China's annual crude oil imports drop for the first time in 20 years, whilst the nation grounded further flights between the US due to its zero-COVID policy. On the supply side, reports suggested that China will release oil stockpiles in the run-up to the Lunar New Year (dubbed as the largest human migration). The release is part of a coordinated plan with the US and other major consumers, according to the reports, which cited sources suggesting China will likely ramp up its releases if prices top USD 85/bbl. Turning to metals, spot gold is trading sideways and prices waned after again hitting the resistance zone around USD 1,830/oz flagged earlier this week. LME copper meanwhile remains under USD 10,000/t – subdued by the sharp slowdown in Chinese imports suggesting weaker demand, albeit annual imports of copper concentrate hit a historic high in 2021. The trade data also indicated a fall in iron ore imports as a factor of the steel production curbs imposed last year to tackle pollution and high iron ore prices.

China has agreed with the US to release crude oil reserves around Lunar New Year (February 1st), according to Reuters sources. (Newswires)