Morning Report – Friday 29th January

Jon Robson, Head of Trading

“The dollar is finding some temporary support and is set for its biggest weekly gain since October. Longer-term, its structural weakness remains, along with scrutiny on how U.S. fiscal policy could affect interest rates.”

Main Headlines

Robinhood, the online brokerage at the centre of wild trading in equities this week, has raised more than $1bn from its existing investors and tapped credit lines from banks to shore up its financial position after a turbulent four days. The trading app said it will today loosen curbs on buying a set of stocks that have been caught up in a crowd-driven campaign to force short squeezes, after the limitations had sparked outrage on Thursday, even prompting displays of rarely-seen U.S. bipartisanship.

The U.K.’s five main business lobby groups said British companies face “substantial” post-Brexit difficulties in trading with the European Union after holding a call with Cabinet Minister Michael Gove. The so-called B5 warned after their call with Michael Gove that “further problems might appear”, ranging from higher costs to challenges navigating red tape as volumes begin to increase once stockpiled supplies. The expiry in coming months of grace periods meant to allow time for adapting to new rules also poses risks.

GBP

Sterling is slightly lower against the dollar overnight. The UK will formally open a new route to citizenship for up to 3m Hong Kong residents from Sunday as the Home Office revealed it had already allowed 7,000 people from the former British colony to settle ahead of the scheme’s launch. Prime Minister Boris Johnson estimates about 300,000 Hong Kong citizens will take advantage of a new visa route to leave the former British colony and settle in the U.K. Meanwhile, the government is shying away from a wholesale scrapping of EU regulations after ministers cancelled a post-Brexit review of workers’ rights in the face of fierce Labour opposition.

EUR

The euro is weaker against the dollar in the early morning trade. A production problem at a single AstraZeneca factory in Belgium has delayed tens of millions of doses destined for Europe, endangering the continent’s already-slow inoculation drive. Advisors to the German government warned on Thursday that AstraZeneca’s vaccine shouldn’t be given to people over the age of 64 because of a lack of data about its efficacy in this group. The European Union will tighten rules on the export of Covid-19 vaccines today, risking a major escalation in the global battle to secure access to the life-saving shots.

USD

The dollar is higher against most majors this morning. A coordinated assault on hedge fund short positions in the United States is disrupting equity markets and boosting demand for safe-haven assets. The number of workers seeking unemployment benefits in the U.S. fell last week, indicating a recent easing in the pace of layoffs though the labour market remains mired in a winter slowdown. Sentiment in the U.S. was also boosted by strong earnings from the likes of Mastercard Inc. and Comcast Corp.

Markets

Global stocks retreated amid concerns about a cash squeeze in China and volatile retail-trader speculation in the U.S. Losses in Seoul deepened in the afternoon as South Korea bore the brunt of broad-based losses across Asia. European equity contracts sank and S&P 500 futures lost more than 1% after the U.S. gauge rebounded from its worse loss since October. Treasuries were steady. Oil retained a decline as the spread of new Covid-19 variants and tighter lockdown measures weigh on nascent hopes of a demand recovery. Gold was higher.

Main Economic Data/Central Banks/Government (All times CET)

8:45 a.m.: France Dec. PPI

9:00 a.m.: Spain 4Q GDP, Dec. Retail Sales, Jan. CPI

9:55 a.m.: Germany Jan. Unemployment

10:00 a.m.: Germany 4Q GDP

10:00 a.m.: Euro-Area Dec. M3 Money Supply

12:00 p.m.: U.K. sells bills

7:00 p.m.: Baker Hughes U.S. Rig Count

Corporate Events

Earnings include BBVA, Ericsson, H&M, SAP, Atlas Copco, CaixaBank, Eli Lilly, Chevron, Honeywell