Morning Report – Thursday 8 April

Jon Robson, Head of Trading

“Sterling has taken a hit over the past 48 hours due to unsubstantiated negative reporting on the AstraZeneca vaccine and a recent study on its efficiency. This is likely to be temporary as the UK continues to benefit from its rapid vaccine roll out.”

Main Headlines

The US President said he is open to compromise on his $2tn infrastructure plan amid a backlash from businesses over a proposed $2.5tn increase in corporate taxes to fund it. This economic package seeks to plough huge sums of government investment into the US economy, paid for largely by the tax rises on America’s biggest businesses. Earlier yesterday, US Treasury secretary, Janet Yellen, called on corporate America to embrace these tax increases, saying Biden’s $2tn plan would deliver a 1.6 per cent boost to gross domestic product by 2024.

The NHS and ministers face multiple challenges as they try to keep the UK’s vaccination rollout on track, after regulators advised that adults under the age of 30 should be offered alternatives to Oxford/AstraZeneca. Their jab is the most widely used in the UK’s vaccination programme, so curtailing its use and lining up alternative supplies for young adults could have an impact on the supply chain. Further publicity about a link between rare blood disorders and the jab can also increase vaccine hesitancy in the UK, where people have been notably more receptive to vaccination than in most other European countries.

GBP

Sterling is slightly higher against the euro and dollar this morning. The UK labour market is starting to thaw, with recruiters reporting the strongest rebound in permanent hiring for six years in March as businesses prepared for the lifting of lockdown measures. A monthly survey by IHS Markit pointed to the first upturn in permanent staff appointments since December, with the highest proportion of recruiters since April 2015 reporting month-on-month growth. The survey is one of the strongest signals so far that businesses are becoming upbeat enough to take on new staff now that the government has laid out a road map for reopening the economy from lockdown.

EUR

The euro is well bid against the dollar but lower than the pound overnight. Italy drew robust demand for its first new 50-year bond in five years after the country cautiously priced the deal during a time when extra-long term debt has sustained heavy selling pressure. The deal marks only the second time Italy has offered a new half-century bond as it seeks to lock in favourable borrowing costs to fund a big Covid recovery spending programme. The offering follows similar issuance by eurozone peers including Spain and France earlier this year. Countries have moved to take advantage of low borrowing costs during a time when rising optimism over the global economic outlook has already begun pushing yields markedly higher.

USD

The dollar is lower against most majors in early morning trade. Federal Reserve officials said the danger of unexpectedly high inflation was roughly equal to that of unexpectedly sluggish inflation, shrugging off fears of a rapidly overheating economy in the wake of the US President’s $1.9tn fiscal stimulus. “Most participants noted that they viewed the risks to the outlook for inflation as broadly balanced,” according to minutes of the Federal Open Market Committee’s meeting in March. At that meeting, the Fed revised sharply higher its forecasts for growth and inflation. According to the minutes, however, officials signalled no urgency to begin pulling back their ultra-accommodative monetary support, which includes asset purchases of $120bn per month and a main interest rate close to zero.

Markets

Asian stocks were steady Thursday and U.S. equity futures gained after the S&P 500 notched up another record on further evidence of the Federal Reserve’s commitment to supportive policy. Japanese shares slipped amid concerns Tokyo is planning stricter steps to curb rising virus infections, while Australia and Hong Kong outperformed. U.S. and European equity futures climbed following modest gains in the S&P 500 Index amid dwindling volume on U.S. exchanges. Tech giants including Apple Inc. helped push up the Nasdaq 100. The dollar headed for its fifth decline in six sessions, while Treasuries stabilized. Gold rose 0.3% to $1,742.05 an ounce.

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

8:00 a.m.: Germany Feb. factory orders

8:45 a.m.: France Feb. trade balance

9:30 a.m.: Germany March construction PMI

10:30 a.m.: U.K. March construction PMI

10:30 a.m.: Spain sells bonds

10:50 a.m.: France sells bonds

11:00 a.m.: U.K. sells bonds

11:00 a.m.: Euro-Area Feb. PPI

1:30 p.m.: ECB minutes

2:30 p.m.: U.S. initial jobless claims

Corporate Events

Earnings include ASOS, Bang & Olufsen, Constellation Brands

 

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