Safe-haven cash flows dominate as concerns spread over virus variant


Remarks / Observations

– The risk aversion theme is creeping in as a variant of the virus found in South Africa could spread worldwide and thwart the global recovery.

– Bets on rate hikes in the United States fall due to concerns about the new variant of covid (postponed from July to September 2022).

– The price index for imports from Germany in October recorded its highest annual rate since January 1980 (Y / Y: 21.7% against 19.6% e).

Asia

– Japan Nov Tokyo CPI Y / Y: 0.5% v 0.4% e; CPI (excluding fresh food) Y / Y: 0.3% against 0.3% e.

– Australia Oct Retail sales M / M: 4.9% v 2.2% e.

– BOJ board member Nakagawa reiterated his stance of maintaining ultra-accommodative monetary policy to meet the 2% inflation target, said the “weak” yen had both positive and negative aspects.

– Japanese Prime Minister Kishida has confirmed that he wants at least 3% wage increases during spring union negotiations.

– Moody’s confirmed Japan’s sovereign rating A1, outlook stable.

Coronavirus

– The UK has issued a temporary flight ban on six African countries, including South Africa. New variant found in Botswana, Hong Kong and Israel among travelers from South Africa.

Europe

– BOE Governor Bailey reiterated that supply problems are causing inflation and should be temporary; the risk was for inflation expectations to take hold, noted the UK labor market was very tight.

Speakers / Fixed income / FX / Commodities / Erratum

Actions

Indices [Stoxx600 -2.60% at 469.20, FTSE -2.86% at 7,100.96, DAX -2.84% at 15,465.95, CAC-40 -3.61% at 6,820.65, IBEX-35 -3.54% at 8,527.50, FTSE MIB -3.08% at 26,263.00, SMI -1.66% at 12,243.52, S&P 500 Futures -1.99%].

Market focal points / Key themes:

Actions

European indices open significantly lower across the board and remained deeply in the red as the session progressed amid growing concerns over the new variant of COVID-19 which was reportedly named Nu by the WHO and first detected in South Africa, carrying more mutations than any other variant in the past; sectors leading to the downside include energy, industrials and financials as traders reassess their expectations for rate hikes around the world; on the corporate side, shares of Airbus and almost all European airlines fell by more than 10%; Royal Dutch Shell is trading up to 5% in Amsterdam as oil prices fall; German tech firm Software AG trades higher amid potential speculation over acquisition talks; earnings expected for the next US session include Pinduoduo.

Consumer discretionary: Airbus [AIR.FR] -ten%, Lufthansa [LHA.DE] -ten%, Air France [AF.FR] -9%, AGI [IAG.UK] -10% (travel bans to South Africa due to new variant concerns), ScS Group [SCS.UK] -14% (commercial update).

Energy: Royal Dutch Shell [RDSA.NL] -5% (oil down on variant issues).

Health: Novacyt [ALNOV.FR] + 12% (UK test approval).

Technology: Software AG [SOW.DE] + 6% (considers the sale).

Loudspeakers

ECB Visco (Italy) said the health situation in the EU region was again a cause for concern and the consequences were difficult to predict. The measures to end the pandemic should be gradual.

The President of the European Commission, Von Der Leyen said he would offer to activate the emergency brake to stop air travel from the southern African region due to the worrying variant B.1.1.529.

Central Bank of Sweden (Riksbank) Dep Gov Ohlsson expressed confidence in its current inflation forecast. New Repo Rate Path was a clear signal of direction.

German health spahn reiterated the government’s position that the current virus situation is more serious than in the past; The heads of state will meet in the coming weeks. The current wave will hit all of Germany; the number of people-to-people contacts should be reduced.

Official Baerbock of the German Greens said that did not rule out a lockdown in Germany.

Union of Fishermen of Francem reportedly intends to block the Channel Tunnel and ports to protest the lack of licenses issued by the UK.

Currency / Fixed Income

– Safe-haven cash flows dominated the session as concerns escalated over the discovery of a new variant of the coronavirus that could withstand current vaccines.

– The USD was weaker as some bets on the Fed’s rate hike were recalibrated. Dealers noted that covid trends in Europe and the United States have gained increased attention lately and reports of a new variant which, along with an ability to evade vaccine immunity, have increased uncertainty. of the global recovery. Bets on rate hikes in the United States are declining amid concerns over the new variant of covid (postponed from July to September 2022).

– EUR / USD rebounded after a recent massive selloff lasting several weeks. Pair probing 1.1270 after testing below 1.12 earlier in the week.

– JPY currency was the main beneficiary of safe haven flows with USD / JPY testing 113.65 during the session.

Economic data

– (DE) Germany Oct. Import price index M / M: 3.8% vs. 1.9% e; Y / Y: 21.7% vs. 19.6% e.

– (NO) Norway Oct. Retail sales M / M: 1.0% vs. 0.3% e.

– (CN) Shanghai weekly copper inventories (SHFE): 41.9,000 against 34.9 tonnes previously.

– (FR) France Nov Consumer confidence: 99 v 98th.

(CH) Swiss GDP Q3 Q / Q: 1.7% vs. 1.6% e; Y / Y: 4.1% against 2.9% e.

– (SE) Sweden Nov. Consumer confidence: 99.7 v 102.0e; Manufacturing confidence: 126.6 against 128.4 previously; Economic Trends Survey: 118.0 v 119.9 before.

– (UK) Russia, narrow money supply with November 19 (RUB): 14.35 T against 14.33 T before.

– (TW) Taiwan Oct Monitoring Indicator: 39 v 38 before.

– (TW) Taiwan’s final GDP Q3 Y / Y: 3.7% vs. 3.8% e.

– (SE) Sweden Oct Retail sales M / M: + 0.4% vs. -0.2% previously; Y / Y: 5.2% against 4.9% previously.

– (EU) Euro zone Oct M3 Money supply Y / Y: 7.7% against 7.4% e.

– (AT) Austria November Manufacturing PMI: 58.1 against 60.6 before (17th consecutive expansion).

– (IT) Consumer confidence index in Italy in November: 117.5 v 117.0e; Manufacturing Confidence: 116.0v 114.0e; Economic sentiment: 115.1 v 115.1 before.

Issue of fixed income securities

– (IN) India total sold INR240B against INR240B indicated in bonds 2023, 2026, 2035 and 2051.

– (ZA) South Africa sold total ZAR against ZAR1.2B indicated in obligations I / L 2033, 2046 and 2050.

– (THIS) Italian Debt Agency (Tesoro) sold € 5.0bn against € 5.0bn indicated in 6-month invoices; Average return: -0.563% vs. -0.550%; Bid-to-cover: 1.43xv 1.27x front.

Look ahead

– (BR) Brazil Oct Total creation of formal jobs: +260.0 K against 313.9 K previously.

– 5:25 am (EU) Daily liquidity statistics from the ECB.

– 6 a.m. (UK) DMO to sell £ 2.0bn in 1-month, 3-month and 6-month bills (£ 0.5bn, £ 0.5bn and £ 1.0bn respectively) .

– 06:30 (IN) Weekly Forex reserve in India with November 19: no estimate against 640.1 billion dollars previously.

– 6:45 am (US) Correction of the daily Libor.

– 07h00 (IN) India announces the next issue of invoices (Wednesday).

– 07h00 (MX) Mexico October Trade balance: -2.0 $ against -2.4 M $ before.

– 07:30 (BR) Brazil Oct. Total loans in progress (BRL): 4.491 Te against 4.429 T previously; M / M: 1.4% ev 2.0% before; Default rate for personal loans: none is v 4.2% before.

– 08h00 (UK) Daily Baltic Dry Bulk Index.

– 08:00 (UK) BOE’s Pill (Chief Economist).

– 8:30 am (IE) BCE’s Lane (Ireland, chief economist).

– 8:30 a.m. (US) USDA Weekly Net Export Sales.

– 10:15 am (ES) De Guindos of the ECB (Spain).

– 10:15 am (ES) BCE of Cos (Spain).

– 11h00 (EU) Potential for sovereign ratings after European close (Moody’s on Belgium and Switzerland; S&P on the sovereign rating of Ireland; DBRS on the sovereign rating of Poland).

– 20:30 (CN) China Oct. Industrial profits Y / Y: None is against 16.3% before.

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