Morning Report – Tuesday 6 April

Jon Robson, Head of Trading

“After the encouraging US jobs and service-sector data sent the Dow and S&P 500 to all-time highs, haven currencies like the dollar and yen are seeing reduced demand. The dollar stabilised near a two-week low this morning, signalling room for a break in the greenback’s recent rebound from multi year lows.”

Main Headlines

Janet Yellen, the US Treasury Secretary, has called on other countries to join Washington in setting a global minimum tax for companies as she vowed to reassert America’s leadership in international economic policy. Such a move could spur “innovation, growth and prosperity,” the U.S. Treasury Secretary said on the eve of the spring meetings of the IMF and the World Bank. Yellen’s comes as the Biden administration puts a crackdown on tax avoidance and tax shelters at the heart of its economic agenda.

Boris Johnson confirmed on Monday that the roadmap for lifting the lockdown is on track and that the restaurants, pubs and non-essential shops will reopen next week. From April 9, everyone in England will be able to access free twice-a-week coronavirus tests. International travel, however, may remain banned for longer, with the earliest date for resuming non-essential international travel being May 17. The government told Britons to hold off on planning foreign holidays this summer, deflating the hopes of an airline industry desperate to get flying again before another high season slips by.

GBP

Sterling is higher against other major currencies this morning. Boris Johnson is heading for a showdown with his own MPs after throwing his weight behind domestic “Covid passports”, with the government saying it was “right” to provide a way for people to prove their virus status and reassure business. Meanwhile, the UK government faces legal action for allegedly directing public funds towards areas of the country that vote for the ruling Conservative party.

EUR

The euro is stronger versus the dollar and weaker against the pound overnight. Italian and French banks’ exposure to the sovereign debt of their own countries has hit record highs since the pandemic started, reviving fears about the sector’s links to increasingly indebted governments. Domestic government securities and loans held by eurozone banks rose more than €140bn to just over €2.1tn in the year to February.

USD

The dollar is higher against the euro and lower against the pound in the early morning trade. In what has been described as “Biden backlash”, republican-led state capitols are considering bills that would undermine the green revamp of the US electricity system by promoting fossil fuels or piling costs on to renewable energy. The proposed legislation reverses a dynamic that played out over the past four years, when lawmakers in states controlled by Democrats moved to counteract Donald Trump’s climate rollbacks.

Markets

A rally in global stocks paused near a record this morning as concern China is curtailing loan growth curbed optimism stoked by the U.S. economic rebound. An Asia-Pacific share gauge dipped for the first day in four, led by losses in Japan. S&P 500 equity futures were slightly in the red, while European contracts pointed higher. The U.S. Index rallied Monday with most of its major groups advancing. Large U.S. technology stocks rose, including a surge by Facebook Inc. to a new peak as the Nasdaq 100 jumped 2%. In China, the central bank asked the nation’s major lenders to curtail loan growth for the rest of this year, according to people familiar with the matter. Australia’s monetary authority left its key policy settings unchanged and said it’s monitoring trends in housing borrowing as home prices rise. Oil steadied, gold advanced.

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

9:00 a.m.: Spain March unemployment

10:00 a.m.: Italy Feb. unemployment

10:30 a.m.: Euro-Area April investor confidence

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

11:00 a.m.: Italy sells bills

11:30 a.m.: Germany sells bills

12:30 p.m.: ESM sells bills

2:50 p.m.: France sells bills

6:00 p.m.: Russia March CPI, 1Q consumer confidence

IMF releases World Economic Outlook

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