Morning Report – Monday 1 February

Jon Robson, Head of Trading

“Risk sentiment continues to provide temporary support to the dollar at the start of a new week. Market participants are still showing caution over the size of President Joe Biden’s fiscal stimulus package and delays to vaccine rollout. The Wall Street battle between hedge funds and retail investors further fuels investor concerns, although it remains to be seen whether it will lead to a market correction.”

 

Main Headlines

President Joe Biden and Democratic congressional leaders must decide whether to break the administration’s $1.9 trillion Covid-19 relief proposal into pieces after a scaled-down Republican plan emerged. The $600 billion GOP proposal offered to the president by 10 Republican senators on Sunday provides the potential to move a bipartisan bill that includes components from the Biden proposal, including funding for coronavirus vaccines and testing, and unemployment assistance.

 

The Bank of England is preparing to take a significant step into the debate on whether negative interest rates should be used to stimulate the coronavirus-stricken U.K. economy. The central bank this week is due to publish the results of 160 detailed responses to a consultation about how borrowing costs could be pushed below zero for the first time since it was founded in 1694.

 

GBP

Sterling is stronger against most major currencies overnight. The U.K. is set to confirm that residents at every eligible care home in England have been offered a Covid-19 vaccine, even as a dispute over exports from Europe raises concern over supplies. The country’s biggest business lobby group, the Confederation of British Industry said in a letter to Business Secretary Kwasi Kwarteng that the U.K. should work with businesses to create a clear and effective roadmap for the reopening of the economy.

 

EUR

The euro is little changed against most majors in the early morning trade. AstraZeneca will deliver 9 million additional vaccine doses to the European Union in the first quarter of this year, lifting optimism that the rollout will slowly allow business and travel to return to normal. European Central Bank officials have reportedly agreed to talk up potential deposit rate cuts.

 

USD

The dollar edged lower against most majors this morning. U.S. President Joe Biden is about to get his first U.S. jobs report. Economists are expecting the January report to show a stagnant and still elevated unemployment rate, at nearly double the level before the pandemic struck early last year.

 

Markets

A gauge of Asian stocks rose by the most in about three weeks. S&P 500 contracts reversed an earlier slide to trade higher with European futures. The mood brightened from Friday, when U.S. shares tumbled as traders fretted about the impact of short-squeezes stirred up on internet forums. Silver futures advanced 7% after the metal became the latest focus of such chatter. The yield on 10-year Treasuries ticked higher. Oil gained and silver futures surged.

 

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

7:00 a.m.: Russia Jan. Manufacturing PMI

8:00 a.m.: Germany Dec. Retail Sales

8:00 a.m.: Turkey Jan. Manufacturing PMI

9:15 a.m.: Spain Jan. Manufacturing PMI

9:45 a.m.: Italy Jan. Manufacturing PMI

9:50 a.m.: France Jan. Manufacturing PMI

9:55 a.m.: Germany Jan. Manufacturing PMI

10:00 a.m.: Euro-Area Jan. Manufacturing PMI

10:00 a.m.: Italy Dec. Unemployment

10:30 a.m.: U.K. Dec. Mortgage Approvals, Jan. Manufacturing PMI

11:00 a.m.: Euro-Area Dec. Unemployment

11:30 a.m.: Germany sells bills

2:50 p.m.: France sells bills

3:45 p.m.: U.S. Jan. Manufacturing PMI

5:00 p.m.: Russia 2020 GDP

 

Corporate Events

Earnings include Siemens Healthineers, Hargreaves Lansdown, Sabadell, NXP Semiconductor

 

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