EMISSIONS: EU Mid-Day Carbon Summary: EUAs/UKAs Rise On EU Equities, Gas Gains
May-02 15:06
{EUAs/UKAs Dec25 are rising to one-month high and highest since June 2024 respectively, tracking EU equities’ ninth winning streak and gas gains on the day following global rally fueled by the prospects of trade talks between China and the US.
- EUA DEC 25 up 2.61% at 68.77 EUR/t CO2e
- UKA DEC 25 up 2.73% at 49.27 GBP/t CO2e
- TTF Gas JUN 25 up 3% at 33.11 EUR/MWh
- NBP Gas JUN 25 up 4.1% at 80.39 GBp/therm
- Estoxx 50 up 2.4% at 5232
- Correlation between EUA/TTF for 30-day period tightened to 0.6 from the 0.56 on the previous day.
- Correlation between EUA/UKA for 30-day period remained high at 0.74.
- Correlation between EUA/STOXX remained high at 0.53.
- Correlation between UKA/FTSE remained high at 0.61.
- The EUA Dec25 premium to the UK equivalent remained at a similar level at €11.04/t CO2e.
- ICE EUA futures remain in consolidation mode. The trend is bearish and the latest recovery is considered corrective. Recent fresh cycle lows reinforce a bearish theme. The sell-off early April resulted in a breach of €61.98, the Oct 9 ‘24 low. Clearance of this level confirmed a resumption of the downtrend and opens €56.76, a Fibonacci projection. The 20-day EMA has been pierced. Resistance at the 50-day EMA is at €68.49.
- TTF is rising today, supported by a dip in US export terminal feedgas due to maintenance at Cameron LNG alongside Norwegian maintenance. Healthy gas storage injections and stable LNG supply are limiting upside.
- EUA Dec25 implied volatility fall to one-week low as of 1 May as tension eased off previously; however, the volatility is expected to rise today amid the prospects of trade talks between China and the US. EUAs Dec25 are tracking nearly 3.7% in weekly gains, while the EU equities are up 1.3%.
- The IMO carbon levy is set at €100/t, while BNEF stated that a price above €400/t is needed to drive a significant shift to clean fuel.
- International shipping could reduce emissions by over 95% by 2050 versus 2018 level, if strong decarbonisation policies are enacted soon, according to a new study commissioned by the UK Department for Transport.
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US: Senator McConnell To Vote Yes On Democratic Tariff Resolution - NBC
Apr-02 15:01
Senator Tim Kaine (D-VT) said that former Senate Republican Leader Mitch McConnell (R-KY) indicated that he will vote yes on a Democratic resolution that would "undo" President Donald Trump's tariffs on Canada by challenging the national security justification for their imposition, according to NBC News' Frank Thorpe on X. The resolution is seen as a message exercise as House Speaker Mike Johnson (R-LA) would kill the bill in the House, should it pass the Senate.
- For the resolution to pass, Democrats will need at least four Republican votes. Senator Rand Paul (R-KY) and moderate Senators Susan Collins (R-ME) and Thom Tillis (R-NC) have indicated they will vote yes.
- The vote, which will come later today after being punted from yesterday's schedule by Senator Corey Booker's (D-NJ) marathon speech, will put Republicans representing farm and manufacturing states in a challenging position, with polling suggesting that voters are sceptical of Trump's tariffs.
- Republican Senators may feel slightly more emboldened to oppose Trump's agenda after elections in Florida and Wisconsin yesterday provided warning signs that Independents and moderate Republicans are unconvinced by the early period of Trump's administration and the influence of advisor Elon Musk.
- Recognising that a significant Senate Republican rebellion could undermine his 'Liberation Day' announcement, Trump has issued two lengthy statements on Truth Social directly calling on Republicans to oppose the resolution.
TARIFFS: Deutsche Bank Expect Any Relief Rally Will be Short-Lived for Equities
Apr-02 14:59
- On today's market outcomes from the tariffs announcement, Deutsche Bank write that it is hard to see an outcome where we see material and sustained upside for equities.
- They write that even if tariffs are perceived to be on the lenient side, there remains a high degree of uncertainty over how various counties will respond and whether Trump will be more aggressive over time.
- Deutsche Bank see the broader USD reaction as likely to be led by equities and therefore see greater downside risks for the USD, led by the JPY and gold.
SWAPS: Long End ASWs Weaker Alongside Outright Bunds
Apr-02 14:54
Long end ASWs a little weaker on the day alongside the sell off in outright bonds detailed recently.
- Bund & Buxl ASWs have failed to push meaningfully above levels that prevailed ahead of the “whatever it takes” German fiscal moment, while Bund yields haven’t broken below the lows witnessed since the German fiscal loosening was table, pointing to new ranges being established as Germany moves to a new fiscal framework.
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