Morning Report – Monday 22 February

Jon Robson, Head of Trading

“Sterling rose to its highest level against the dollar in nearly three years overnight. The fast pace of inoculations, combined with the passage of a Brexit deal at the end of last year, has led some investors to reassess their expectations of U.K. assets, despite the economy recording its biggest contraction in more than three centuries last year.”

Main Headlines

Democrats begin the final push for President Joe Biden’s $1.9 trillion stimulus bill this week, dropping any pretence of bipartisanship to quickly pass the package before an earlier round of benefits runs out. This will be the first real test for Democrats’ full control of government since former President Donald Trump’s impeachment trial, with implications for the rest of Biden’s agenda and the pandemic-battered economy. The House plans to vote as soon as Friday on Democrats’ stimulus package, setting up a Senate vote as soon as next week.

UK Prime Minister Boris Johnson will announce today that all schools in England will return on March 8 along with relaxed one-to-one outdoor socialising, as part of his long-awaited “cautious” road map for ending the coronavirus lockdown. The next stages of the easing will focus on reopening non-essential shops and universities, but the full reopening of pubs and restaurants for indoor serving may not happen until May, one Whitehall official suggested.

GBP

Sterling is well bid against most majors this morning. The effects of the UK’s rapid rollout of coronavirus vaccines have begun to show up in the official figures on infections, hospitalisations and deaths: improvements in the data for the vaccinated over-80s population are outpacing those for younger people. Meanwhile, UK flower growers have warned that millions of blooms will go unharvested this year after the multibillion-pound sector was not included in a scheme to admit overseas farm workers after Brexit.

EUR

The euro is lower against the dollar and pound overnight. Josep Borrell, EU foreign policy high representative, will lead a session of the Union’s Foreign Affairs Council today. It will be the council’s first meeting since Borrell’s troubled trip to Moscow and his rough treatment by the Kremlin. Diplomats expect member states to move towards imposing targeted financial and economic countermeasures on Moscow, as the EU may make its first use of a human rights sanctions regime adopted in December.

USD

The dollar is stronger against most majors in early morning trading. Mortgage rates for US homebuyers had their biggest jump in more than a year, as higher Treasury yields and a rise in inflation expectations begin to feed through to the real economy. Following the winter storm that brought Texas power generation to a standstill, the wholesale price of electricity exploded 10,000 per cent, with the financial consequences being felt from individual households to huge European energy companies.

Markets

Benchmark 10-year Treasury yields climbed to the highest in about a year. A gauge of Asian stocks edged lower, erasing earlier gains amid a surge in metals that could fan price pressures. Japanese shares outperformed while other key markets lagged. S&P 500 and European futures dipped after the U.S. index slipped Friday. Copper hit the highest in more than nine years in a sign of optimism about the global recovery. Crude oil climbed to $60 a barrel as the market assessed the fallout from the big freeze across Texas. Gold rose in early Asian trade.

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

10:00 a.m.: Germany Feb. Ifo Survey

11:30 a.m.: Germany sells bills

12:00 p.m.: Israel sells bonds

1:00 p.m.: Turkey sells bonds

2:45 p.m.: ECB’s Lagarde speaks

2:50 p.m.: France sells bills

3:00 p.m.: Israel rate decision

U.K. government due to publish road map for ending its third lockdown

S&P Global Platts Virtual London Energy Forum 2021

EU foreign ministers consider new sanctions on Russia

Corporate Events

Earnings include Discovery, SBA Communications, Williams Cos, Occidental Petroleum, Marathon Oil, ZoomInfo Technologies, Ingersoll-Rand, Dish Network, Royal Caribbean Cruises, KBR

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