Morning Report – Thursday 18 March 2021

Jon Robson, Head of Trading

“It is all eyes on the Bank of England today and market participants expect the central bank to leave monetary policy unchanged. Bailey will likely seek to balance optimism over the UK’s vaccination success and hopes of a rapid recovery with the reality that the country remains in a third lockdown with vaccine supply uncertain.”

Main Headlines

The Federal Reserve yesterday raised growth forecasts while holding steady on interest rates and bond purchases. As easy-money policies remain in place, Fed Chairman Jerome Powell announced at a press conference concluding a two-day policy meeting that “we will continue to provide the economy the support that it needs for as long as it takes” until the US economy recovers from the impact of the pandemic. Growth forecasts were raised sharply in acknowledgement of the stimulus programme and vaccination rollout and officials expect a maintenance of ultralow interest rates until 2023.

The NHS has warned of a “significant reduction” in vaccine supplies in a set back to the UK’s rapid inoculation drive. Health Secretary Matt Hancock has played down the reduction in manufacturing supply, stating that “vaccine supply is always lumpy” and reiterating that the UK remains on course to have vaccinated priority groups by April 15 and all adults by the end of July.

GBP

Sterling is mostly unchanged against the dollar and higher versus the euro this morning. A white paper is set to unveil government proposals on dividend and bonus payments in the wake of accounting scandals at companies such as Carillion and BHS. The reforms are expected to bar large companies from paying shareholder dividends and executive bonuses if they have insufficient cash reserves. Meanwhile, Foreign Secretary Dominic Rabb accused the European Commission of acting like a dictatorship after threats to vaccine supply.

EUR

The euro is lower against most majors in the early morning trade. The European Medicines Agency is set to deliver updated guidance on the safety of the AstraZeneca virus. The decision comes after the WHO backed the vaccine and it will prove pivotal in rolling back suspensions by several countries as the EU continues to lag in inoculation efforts. Ursula von der Leyen, President of the European Commission threatened to limit vaccine exports to countries with higher vaccination rates than Europe, escalating tensions with the UK. Elsewhere, Dutch PM Mark Rutte won a clear election victory yesterday, securing a fourth term in office.

USD

The dollar is weaker overnight. Top US officials are due to meet with Chinese counterparts today in Alaska for high-level talks as President Biden lays out a shift in US policy on Beijing, which is expected to challenge China’s foreign policy objectives and ensure that America is competitive in relation to critical technologies. Sources suggest that China may request a roll back on Trump’s policies and that both Biden and Xi are keen to focus on efforts to tackle climate change. Yesterday, President Biden also branded Vladimir Putin a “killer” as intelligence officials warned that he likely authorised efforts to influence the US election.

Markets

Asian stocks climbed Thursday on the Federal Reserve’s projections for interest rates to remain near-zero through 2023. U.S. Treasury yields edged higher. Japan’s Topix jumped past the 2,000 mark for the first time since 1991. The S&P 500 hit a record as Fed Chairman Jerome Powell stressed the central bank won’t raise interest rates until the U.S. economy shows tangible evidence it has fully healed from Covid-19. U.S. and European equity futures were modestly higher. Elsewhere, Gold rose and oil slipped after U.S. crude stockpiles topped half a billion barrels and the International Energy Agency said global supplies are plentiful. Bitcoin traded around $59,000.

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

9:00 a.m.: ECB’s Lagarde speaks

10:00 a.m.: Norway rate decision

10:30 a.m.: Spain sells bonds

10:50 a.m.: France sells bonds

11:00 a.m.: Euro-Area Jan. trade balance

11:30 a.m.: ECB TLTRO3 operation results

12:00 p.m.: Turkey rate decision

12:00 p.m.: BOE’s Cunliffe, ECB’s Lagarde speak

1:00 p.m.: BOE rate decision

1:30 p.m.: BOE’s Haldane speaks

1:30 p.m.: U.S. initial jobless claims

2:00 p.m.: ECB’s Guindos speaks

7:00 p.m.: ECB’s Schnabel speaks

U.S. Secretary of State Antony Blinken and Biden’s national security adviser, Jake Sullivan, meet with China’s top foreign policy official Yang Jiechi, and foreign minister Wang Yi, in Anchorage

Corporate Events

Earnings include Enel, Hapag-Lloyd, Ocado, Nike, FedEx

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