Morning Report – Wednesday 10 March

Jon Robson, Head of Trading

“The dollar has started to give up some of its recent gains in the last few sessions. As yields normalise, the bearish consensus which kicked off 2021 could again become prevalent.”

Main Headlines

US President Joe Biden’s $1.9tn stimulus programme will boost the economic recovery from the coronavirus pandemic around the world, the OECD said on Tuesday, as it upgraded its outlook for global growth. Laurence Boone, the OECD’s chief economist, predicted the scale of the Biden plan will add about 1 percentage point to global economic growth in 2021. It expects a stronger rebound from last year’s historic recession than forecast in December, mainly because of the rapid rollout of Covid-19 vaccination programmes in many countries and the increase in US stimulus spending. As a result, the global economy will expand by 5.6 per cent this year, the OECD forecast, an upgrade of 1.4 percentage points from its December forecast.

Another wave of coronavirus infections will hit the UK at some point later this year, top government scientific and medical advisers warned MPs on Tuesday, as they cautioned against speeding up the planned relaxation of the lockdown restrictions in England. Chris Whitty, England’s chief medical officer said, “a lot of people may think it’s all over, but I would encourage them to look at continental Europe right now. It is easy to forget how quickly things can turn bad if you don’t keep an eye on them.” Whitty and Sir Patrick Vallance, the government’s chief scientist, told the Commons science and technology committee that infections would inevitably surge again at some point later this year when social interactions intensify.

GBP

Sterling is higher against most majors this morning. Boris Johnson is set to authorise a cut in the levy paid by airlines for domestic flights to help revive the beleaguered industry in the wake of the Covid-19 pandemic. The prime minister will announce a review of air passenger duty with a view to halving the current level, according to senior Whitehall figures. The recommendation will form part of a wider Union Connectivity Review by Sir Peter Hendy, the chairman of Network Rail, to be published on Wednesday, proposing a new “UK Strategic Transport Network” to oversee British transport priorities.

EUR

The euro was bid lower versus other majors overnight. EU nations have thrown their weight behind Brussels’ plan to launch legal action against the UK over its decision to take unilateral steps to ease the impact of Brexit on Northern Irish businesses. France and other states backed plans outlined by EU Brexit chief Maros Sefcovic at a closed-door meeting of ambassadors in Brussels on Tuesday, according to several diplomats present. One said that the overall message from governments that intervened was that Brussels needed to be “calm and firm” in pushing back against the UK’s announcement that it would go it alone in extending grace periods on post-Brexit rules.

USD

The dollar made gains on other major currencies in early morning trading. Washington and Beijing are hammering out the details of the first high-level meeting between the rival powers since President Joe Biden took office, according to four people familiar with the talks. The negotiations could lead to Antony Blinken, secretary of state, and Jake Sullivan, national security adviser, meeting their Chinese counterparts.

Markets

Asian equities are mixed in mid-week trading. Treasury yields have held overnight losses. Benchmark indices in South Korea saw modest gains while those in Japan are fluctuating. A rebound in growth shares saw the Nasdaq see its biggest single-day gain since November last year. Oil prices were around the $64 per barrel mark while Bitcoin traded above $55,000.

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

8:00 a.m.: Turkey Dec. unemployment

8:00 a.m.: Norway Feb. CPI

8:45 a.m.: France Jan. industrial production

11:00 a.m.: Italy Jan. PPI

11:00 a.m.: U.K. sells linkers; Italy, Greece sell bills; Sweden sells bonds

11:15 a.m.: Switzerland sells bonds

11:30 a.m.: Germany sells bonds

12:00 p.m.: Israel 4Q GDP, Feb. consumer confidence

1:00 p.m.: Russia sells bonds

2:30 p.m.: U.S. Feb. CPI

4:30 p.m.: EIA Crude Oil Inventory Report

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