Futures Crater On Mutant Virus Panic, Energy Tumbles On UK Quarantine

A quick look at global markets courtesy of Newsquawk

Asia-Pac equities traded mostly lower following a similar downbeat lead from Wall St where US equities pulled back from fresh record intraday highs in what was a volatile Friday session ahead of Tesla's S&P debut today. State-side, futures opened firmer but thereafter trimmed gains upon Senate Majority Leader McConnell's announcement of a bipartisan COVID relief bill, with some participants citing "sell the news" play. Meanwhile, equity futures across Europe saw more pronounced losses as a Brexit trade deal is yet to be reached whilst the region tackles the new COVID-19 variant seemingly emanating from Britain - with DAX Mar'21 futures extending downside after falling below 13,500. Back to APAC, the ASX 200 (-0.1%) was pressured by its financial and travel & leisure sectors as COVID-related restrictions were tightened for the Greater Sydney area, whilst Nikkei 225 (-0.2%) initially traded with gains and rose to the highest since April 1991 before pulling back from best levels just shy of 27,000 as it conformed to the broader losses across the region. South Korea's KOSPI (+0.2) was initially hampered by the rising COVID-cases with the country reporting over 1,000 cases for a fifth consecutive day, but the index later pared losses. Elsewhere, Shanghai Comp (+0.8%) outperformed despite the PBoC maintaining its LPR setting as expected, as China said it will continue to implement proactive fiscal policy and maintain the sustainability, stability, and continuity of macro policies, whilst sources suggested China's leadership plans to set its real economic growth target at about 8% for 2021. Conversely, the Hang Seng (-0.7%) saw a lacklustre session as heavyweight oil and banking names traded with losses, with Alibaba also pressured by source reports that Jack Ma in early November offered to hand over parts of Ant Group to the Chinese government. Finally, 10yr JGB futures traded with modest gains in tandem with the broader gains across the fixed-income complex amidst the downbeat risk tone, whilst the long-end of the curve saw some pressure as the Japanese Ministry of Finance announced that 40yr JGB issuance is poised to increase by JPY 100bln per auction starting April.

Top Asian News

  • Thailand May Widen Lockdowns as Food Workers Hit; Shares Drop
  • Taiwan Export Orders Surge Most Since 2010 on Demand for Tech
  • Asian Stocks Drop for the Second Day as Virus Concerns Hit Sentiment
  • Indonesia Sees Up to 2.2% GDP Drop in 2020, 5% Growth 2021

European equities trade notably lower (Eurostoxx 50 -3.9%) as the twin threats of a more transmissible COVID strain and increasing likelihood of a no-deal Brexit weighs on prices. On the former, various European nations have imposed travel bans on the UK after PM Johnson imposed tighter lockdown restrictions on London and parts of the South East amid fears over a more transmissible strain of COVID; accordingly, the travel & leisure sector is getting hit hard today with IAG (-12.0%), EasyJet (-11.3%), Carnival (-11.4%) and Ryanair (-6.8%) all suffering. Furthermore, from a UK perspective, the passing of another Brexit “deadline” yesterday after MEPs demands for a deal by Sunday (in order to have enough time to vote on the matter) were not met has made the prospect of a no-deal outcome more likely. The subsequent softening of the GBP has provided some mild reprieve for the less-domestically-focused FTSE 100 (-3.0%) and is actually outperforming peers; albeit, still substantially pressured. Stateside, losses were initially less pronounced as participants took some solace from the stimulus updates in which Congress is expected to vote on a COVID relief package today after a compromise was struck in discussions. However, as the session progressed, the selling contagion spread to the US with the e-mini S&P lower by 2.5% and heading towards 3600 with the e-mini Russell lower by 3.7% and e-mini Nasdaq down 1.7%. An anti-cyclical bias can be seen in Europe with heavy losses seen in oil & gas, travel & leisure, banks, and auto names as part of a typical lockdown play. Within the oil & gas space, Shell (-6.7%) are a noteworthy laggard alongside softer oil price and announcing that it will have to write down the value of some of its assets by USD 3.5-4.5bln after a series of impairments. With a bulk of the price action being swayed by broader macro themes, rather than stock-specific developments, individual movers that fall outside of this category are on the light side. That said, against the trend of the market, Danske Bank (+0.4%) are firmer on the session after the US Treasury Department's Office of Foreign Asset Control has closed the investigation regarding the Co. and Estonia with no action to be taken.

Top European News

  • Shell Points to an Another Bleak Quarter for Big Oil
  • Ruble Drops Most in Nine Months on Tumbling Oil, Sanctions Woes
  • Travel Pain Spreads as Europe Blocks U.K. Flights on Virus Fears: U.K. Travel, Retail Stocks Tumble on New Virus Curbs

In FX, the Pound was already back pedaling before reports about a fresh and more fast-spreading form of the coronavirus that has subsequently forced PM Johnson into tightening restrictions in London and the South East to Tier 4, while also prompting a change in the more relaxed rules for Xmas. However, Sterling has subsequently retreated further as other nations take preventative action by closing borders with Britain in an attempt stop the aggressive mutation from entering, all while the UK and EU remain at loggerheads over fisheries beyond the deadline set by Brussels to get a deal ratified. Cable has now fallen through 10 and 21 DMAs on the way down to circa 1.3190 from around 1.3478 and 1.3625 or so last Thursday when a trade pact seemed close if not quite imminent, while Eur/Gbp is probing 0.9200 compared to sub-0.8900 at one stage. Technically, the 50 DMA at 1.3209 has now given way, so further declines in Cable cannot be ruled out.

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