Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.
EXECUTIVE SUMMARY:
- RISK AVERSION ON NEW COVID VARIANT ROILS MARKETS
- EU, U.K. MOVE TO HALT TRAVEL FROM SOUTHERN AFRICA ON VARIANT
- GERMANY'S SPAHN WARNS COVID WAVE MAY OVERWHELM HEALTH SYSTEM
- ISRAEL PM WARNS OF STATE OF EMERGENCY DUE TO NEW VARIANT
- PBOC WOULD CURB ONE-WAY BETS ON YUAN: GUAN TAO (MNI INTERVIEW)
Fig. 1: Oil Prices Drop Sharply On Covid Variant Concerns
Source: BBG, MNI
NEWS:
COVID (PTI): The World Health Organization is monitoring the new coronavirus variant B.1.1.529 first detected in South Africa and will hold a "special meeting" on Friday [1200 GENEVA TIME] to discuss if the heavily mutated strain will become a variant of interest or a variant of concern, a top official said. The latest variant is the most heavily mutated version discovered so far. First identified in South Africa at the start of this week, the strain has already spread to neighbouring countries, including Botswana, where it has been reportedly detected in fully vaccinated people.
EUROPE / COVID (BBG): The European Union is proposing to halt air travel from southern Africa over growing concern about a new Covid-19 variant spreading there, as the U.K. said it will also temporarily ban flights from the region.The emergence of the mutation has prompted a rapid response by governments, who don't want to either jeopardize progress made in the fight against the pandemic or make an already bad situation worse. Some countries in Europe are already back in lockdown due to a spike in cases.
EUROPE / COVID (BBG): European Commission President Ursula Von der Leyen said Friday morning in a tweet that the bloc "will propose, in close coordination with Member States, to activate the emergency brake to stop air travel from the southern African region."Shortly after that, German Health Minister Jens Spahn said that starting Friday night only German citizens will be allowed to fly back from South Africa, and anyone arriving from there will have to go into quarantine for 14 days, even if they're vaccinated.
UK / COVID (BBG): The U.K.'s travel restrictions go into effect at noon Friday and are a precautionary measure to keep the spread of the new variant in check, Health Secretary Sajid Javid said. The six African countries -- South Africa, Botswana, Eswatini, Lesotho, Namibia and Zimbabwe -- will be placed on the U.K.'s red list, requiring travelers to quarantine in hotels upon arrival.
SOUTH AFRICA (RTRS): South African President Cyril Ramaphosa will convene the National Coronavirus Command Council on Sunday, a government statement said, after scientists detected a new COVID-19 variant in the country. Decisions taken by the council inform the government's stance on the COVID-19 pandemic, including the level of lockdown restrictions.
GERMANY/COVID (BBG): German health authorities warned that the wave of Covid-19 cases sweeping over the country threatens to swamp the health-care system if residents don't act quickly to reduce their contacts. "We need to stop this wave now," Health Minister Jens Spahn said in a press conference on Friday. "Otherwise we will experience the thing we always wanted to prevent: the health system becoming overwhelmed." Germany is facing a one-two pandemic punch: many of its hospitals are staggering under a rising wave of Covid cases, even as it joins the European Union in moving quickly to limit travel from southern Africa over concerns about a new variant that has arisen there.
GERMANY / COVID (DPA): Bavarian Premier Markus Soeder has demanded that compulsory vaccination against the coronavirus be implemented across Germany from the start of the new year."We need an effective national containment strategy," said Soeder, who has become an influential voice on the pandemic and is the head of a large and economically important state.
ISRAEL / COVID (RTRS): Israeli Prime Minister Naftali Bennett met health experts on Friday to discuss how best to respond to a new variant of the coronavirus that has been detected in South Africa that he said was more contagious than the Delta strain. "We are currently on the verge of a state of emergency," Bennett said, according to a statement from his office. "Our main principle is to act fast, strong and now."
CHINA / PBOC / YUAN (MNI INTERVIEW): The People's Bank of China would take measures to curb any one-way market bets on the yuan, but it seems likely that the current strength of the currency will moderate in the new year as export growth slows and the Fed tightens monetary policy, a former senior official at the country's foreign exchange administration told MNI. For full article contact sales@marketnews.com
UK-EU: Relations between London and Paris continue to deteriorate this morning, with the British Home Secretary Priti Patel uninvited to a ministers meeting in France that was due to discuss the migrant situation on the English Channel. This comes after UK PM Boris Johnson openly published a letter he had sent toFrench President Emmanuel Macron outlining five proposed steps he wanted tosee implemented to alleviate the situation. 27 migrants died on Wednesdaywhen an inflatable boat carrying them sank in the Channel.* The ill-will between the two nations is not only due to the migrant crisisbut a myriad of issues related to Brexit
DATA:
FIXED INCOME: Nu Variant Propelling Bonds
The only talking point for fixed income markets this morning has been the new B.1.1.529 Covid-19 variant (which is likely to be given the name "nu" by the WHO). Core fixed income is off its highs of the day but still up substantially on the day. We know that the variant is the most mutated so far from the original Covid-19 strain and we know a number of these mutations are on the spike protein that the vaccines target, but we know little about real-world transmissibility or vaccine efficacy. Data on these would take "several weeks" according to the WHO. This has brought up questions of whether the Fed will slow its tapering, the BOE delay hikes further and whether the ECB's post-PEPP programme will still be confirmed in December (or whether it will be less watered down than full PEPP).
- TY1 futures are up 1-02+ today at 130-29 with 10y UST yields down -10.6bp at 1.531% and 2y yields down -11.4bp at 0.529%.
- Bund futures are up 0.80 today at 171.78 with 10y Bund yields down -5.2bp at -0.305% and Schatz yields up 0.6bp at -0.808%.
- Gilt futures are up 1.07 today at 125.96 with 10y yields down -10.8bp at 0.858% and 2y yields down -9.7bp at 0.464%.
FOREX: Nu Variant Adds to COVID Pressures, Puts EUR/CHF at New Lows
- Concerns surrounding a new variant uncovered in South Africa have unsettled markets in style this morning, with commodities, equities and government bond yields all slipping sharply. The discovery of the new variant has already prompted new travel restrictions to be laid on countries across southern Africa, and has raised concerns that nations already on the cusp of a broad lockdown - namely Germany - could be tipped into tighter COVID counter-measures.
- The German health minister Spahn has already spoken, warning that social contacts will need to be reduced and that the healthcare system could be overwhelmed.
- Haven currencies are faring well, with CHF and JPY rallying and pressuring EUR/CHF to fresh multi-year lows.
- Oil- and commodity-tied currencies have been hardest hit, with the likes of NOK, AUD and CAD falling against most others in G10 as WTI and Brent crude prices follow equities lower. WTI trades at levels last seen in mid-September, with key support at the 100-dma giving way at $74.44/bbl.
- With the early US close, data and speakers are few and far between Friday, keeping focus on further developments on the continent.
EQUITIES: Stocks Hit Hard By New Covid Variant Fears
- Japan's NIKKEI down 747.66 pts or at 28751.62 and the TOPIX down 40.71 pts or at 1984.98. China's SHANGHAI closed down 20.09 pts or -0.56% at 3564.089 and the HANG SENG ended 659.64 pts lower or -2.67% at 24080.52
- European equities are lower, with the German Dax down 441.43 pts or -2.77% at 15464.46, FTSE 100 down 213.56 pts or -2.92% at 7091.03, CAC 40 down 269.56 pts or -3.81% at 6802.54 and Euro Stoxx 50 down 135.3 pts or -3.15% at 4154.79.
- U.S. futures are lower (tech is outperforming, mirroring the pattern seen at recent points of pandemic concerns) with the Dow Jones mini down 789 pts or -2.21% at 34960, S&P 500 mini down 86 pts or -1.83% at 4613, NASDAQ mini down 206 pts or -1.26% at 16160.
COMMODITIES: Crude Crashes On Covid Concerns
- WTI Crude down $5.72 or -7.3% at $73.03
- Natural Gas up $0.06 or +1.18% at $5.128
- Gold spot up $16.32 or +0.91% at $1805.02
- Copper down $14.25 or -3.19% at $433.2
- Silver down $0.12 or -0.49% at $23.472
- Platinum down $24.04 or -2.41% at $973.31
LOOK AHEAD:
Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.