Morning Report – Monday 8th June

Main Headlines

AstraZeneca approached Gilead about what would be the biggest health care deal in history. AstraZeneca contacted its rival last month and didn’t propose terms, people familiar said. Gilead has discussed the idea with advisers, but hasn’t decided how to proceed, and the companies aren’t in formal talks. Gilead was worth $96 billion at Friday’s close and is the creator of coronavirus treatment remdesivir.

Asian stocks and U.S. futures rose as American employment data and China export figures added to signs of an economic recovery. A rally for oil also boosted sentiment, with WTI breaching the $40-a-barrel mark. New Zealand shares and the kiwi surged after the nation eradicated the pathogen. European stock index contracts fell.

The Australian dollar’s relentless rally is prolonging the pain for hedge funds that have been betting against it all along the advance. The currency, which is a proxy for risk appetite, has rallied as much as 27% against the greenback from a 18-year low in mid-March amid expectations of a global economic recovery on easing lockdowns. The Reserve Bank of Australia refrained from talking down the currency last week, fuelling further gains.

GBP

The pound rose to three month highs against the dollar last week and posted its largest weekly gain since the end of March, due to the Bank of England playing down the prospect of negative rates soon, and dollar weakness. The currency has recently been weighed down by the Britain’s high COVID-19 death toll, as well as Brexit-related risks, the prospect of negative interest rates and the country’s growing debt pile.

EUR

The euro consolidated at the end of last week to make it a third straight week of gains. It received a boost when the ECB announced mid week that it was expanding its stimulus programme. The ECB increased its emergency bond purchase scheme to 1.35 trillion euros and extended it to mid-2021 which should give the currency some support.

USD

The U.S. dollar fell for the eighth straight day against most currencies after surprising improvement in U.S. labour market data bolstered expectations for economic recovery, which subsequently reduced safe harbour demand for the greenback. In contrast, the U.S. dollar traded near its highest in more than two months against the yen, supported by recent gains in long-term Treasury yields as investors await the outcome of a U.S. Federal Reserve meeting.

CHF

The Swiss franc is back close to five month lows versus the euro as recent moves away from so called safe haven currencies give the market a breather from recent strength. Further movement will largely be led by risk appetite as economies reopen.

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

7:00 a.m.: Germany April industrial production
10:30 p.m.: Germany sells bills
1:50 p.m.: France sells bills
2:45 p.m.: ECB’s Lagarde in European Parliament hearing

World Bank releases Global Economic Prospects report