Morning report – Monday, 15 March

Jon Robson, Head of Trading

“The temporary rebound in the dollar was mainly due to the hope that the U.S. government’s stimulus measures will catapult the economy out of low growth and low inflation. Market participants are betting on a faster normalisation of U.S. monetary policy than the Fed currently assumes. However, inflation is unlikely to sustainably exceed the Fed’s 2% target before 2023 so interest rates will not rise before 2024.”

Main Headlines

Joe Biden said every US adult would be eligible for a coronavirus vaccination by May 1, as he touted “some real progress” in America’s fight against the pandemic and set the July 4 Independence Day holiday as a target for a return to some normality. The goals were announced by the president during his first televised primetime address to the nation. Biden’s remarks came on the 50th day of his presidency, the anniversary of the first coronavirus lockdowns, and just hours after he signed a $1.9tn economic stimulus package into law in the Oval Office.

Prime Minister Boris Johnson has hailed the UK’s coronavirus vaccination programme as a demonstration of the power of the union ahead of Scottish elections in May that could provide a new platform for independence. Polls suggest the Scottish National party is on course to win elections to the parliament in Edinburgh on May 6.

GBP

Sterling is stronger against most major currencies overnight. About €100bn of Irish securities moved from London to Brussels over the weekend as UK and EU markets deepen their split following Britain’s departure from the single market. Holdings for 50 companies listed on the Irish stock exchange moved from the securities depository of the London operation of Euroclear, one of the world’s largest settlement houses, to its Belgium-based unit.

EUR

The euro is weaker against other majors this morning. Angela Merkel’s Christian Democratic Union slumped to its worst ever results in two former strongholds as voters, angered by government missteps over coronavirus and a flurry of corruption allegations against CDU MPs, deserted the party in droves. The results could harm CDU leader Armin Laschet’s ambitions of running as the centre-right’s candidate for chancellor in September’s Bundestag elections. Many conservatives would prefer Markus Söder, leader of the CDU’s Bavarian sister party the CSU, to run instead.

USD

The dollar was bid higher against the euro and lower against the pound in early morning trading. Joe Biden has chosen Gene Sperling, a senior economic adviser in the Clinton and Obama administrations, to oversee the implementation of his $1.9tn fiscal stimulus plan. The US president’s decision highlights the pressure on the White House to efficiently roll out the sprawling spending package to help millions of US households and bolster the recovery.

Markets

Asian stocks dipped while U.S. and European equity futures were mixed Monday, as liquidity concerns weighed on Chinese shares and benchmark Treasury yields traded around a one-year high. Chinese shares extended declines on concern the nation’s economic recovery portends less accommodative monetary policy. Japan eked out a modest gain. S&P 500 and Nasdaq 100 futures fluctuated, while European contracts pointed higher. The S&P 500 closed up Friday, aided by rallies in financial and industrial shares. The Nasdaq 100 slid amid the rotation to value equities. Ten-year Treasury yields stayed above 1.6% as vaccinations and the $1.9 trillion U.S. fiscal stimulus keep the spotlight on inflation risk in a recovering economy. Australian and New Zealand 10-year rates rose. In Hong Kong, Xiaomi Corp. surged after a temporary halt to a U.S. ban, while Tencent Holdings Ltd. fell on expectations that it faces increased regulatory supervision. Elsewhere, oil climbed and Bitcoin traded around $60,000 after surpassing $61,000 on the weekend in a meteoric rise.

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

7:00 a.m.: Saudi Arabia Feb. CPI

8:00 a.m.: Saudi Arabia sells sukuks

8:00 a.m.: Germany Feb. Wholesale Price Index

9:30 a.m.: Sweden Feb. CPI

11:30 a.m.: Germany sells bills

1:00 p.m.: Turkey sells bonds

2:50 p.m.: France sells bills

3:00 p.m.: ECB’s Centeno speaks

5:30 p.m.: Israel Feb. CPI

Euro-Area finance ministers meet

The WHO may release its report on the origins of the virus

Corporate Events

H&M’s sales update

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