Morning Report – Tuesday 20 April

Jon Robson, Head of Trading

“An improving outlook for Europe’s beleaguered vaccination program has seen the euro rally in early morning trading while the greenback continues to lose traction in the wake of retreating US bond yields. Dollar weakness will persist unless escalating geopolitical concerns trigger renewed interest in safe-haven currencies.”

Main Headlines

Ahead of the upcoming White House climate summit, Antony Blinken, the US Secretary of State, outlined renewable energy investment as pivotal in America’s geopolitical rivalry with China. He warned that “it is difficult to imagine the United States winning the long-term strategic competition with China if we cannot lead the renewable energy revolution.” His comments come as the US seeks to reassert influence on climate policy and Blinken noted that China is the world’s largest producer and exporter of solar panels, electric vehicles and batteries, and also hold nearly one third of the world’s renewable energy patents. Meanwhile the CDC has announced that everyone in the US older than 16 is now eligible for vaccination.

Plans from a collective of the world’s largest football clubs to start a new European Super League (ESL) have dominated UK headlines and prompted significant backlash. The Culture Secretary, Oliver Dowden pledged to “put everything on the table to prevent this from happening” and the Government is reported to be considering legal action to prevent the league forming. Boris Johnson has described the plans as “ludicrous” and is set to host a meeting today of officials from the FA and Premier League.

GBP

Sterling is stronger against the dollar and weaker against the euro overnight. The latest Government figures indicate that over 10 million people in the UK have received a second dose of a Covid-19 vaccine, meaning that over 19% of UK adults are now fully vaccinated. Boris Johnson heralded the news as a “remarkable milestone”. The UK is expected this week to commit to steeper reductions in carbon emissions ahead of hosting the COP26 Climate summit later in this year. Those briefed on the plan suggest that Boris Johnson will pledge to reduce emissions by 78% by 2035.

EUR

The euro is stronger against most major currencies in the early morning trade. As the battle to succeed Angela Merkel as Germany’s chancellor intensifies ahead of elections in September, Armin Laschet won a vote among the CDU’s leadership and revived his prospects in the contest against Markus Soeder, who remains more popular with voters. Meanwhile, Germany’s Green party, which is polling just four points behind the CDU, has nominated Annalena Baerbock as its first ever nominee for chancellor.

USD

The dollar is lower against most majors this morning. The US State Department announced yesterday that it will roll out “Do Not Travel” guidance to around 80% of countries worldwide as a result of Covid-19, implying the addition of almost 130 countries. Elsewhere, the US braces as the jury begins deliberations ahead of a verdict in the high-profile murder trial of former police officer Derek Chauvin, who is charged with killing George Floyd and whose actions sparked widespread protest last year.

Markets

Asia stocks were mixed Tuesday after weakness in the technology sector pulled U.S. indexes from all-time peaks, with investors weighing corporate earnings and recent spikes in virus cases. The yen hit its strongest levels since early March. Shares slid in Japan and Australia, and climbed in China. U.S. futures also advanced, after the tech-heavy Nasdaq 100 Index underperformed in the U.S. session, while the S&P 500 Index also fell. Treasury yields traded around 1.61%, well off recent highs. West Texas Intermediate crude rose 1% to $64 a barrel and Gold was 0.1% higher.

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

10:30 a.m.: Spain sells bills

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

11:30 a.m.: Germany sells bonds

12:30 p.m.: ESM sells bills

1:00 p.m.: Turkey sells bonds

2:50 p.m.: ECB’s de Cos speaks

6:00 p.m.: Russia March unemployment, retail sales

What Comes After Reflation: Q&A with El-Erian & Authers

Corporate Events

Apple’s Spring Loaded product event

Earnings and sales updates include J&J, P&G, Netflix, Abbott, Philip Morris, Lockheed, Danone, Kering, Rio Tinto, AB Foods, Investor AB, Sandvik, Temenos

 

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