Morning Report – Wednesday 20th May

Main Headlines

Donald Trump is betting on an economic rebound to rebuff the need for more stimulus. He expects “a really great third quarter. The Congressional Budget Office isn’t as hopeful. It says the U.S. economy will expand more in 2021 than previously projected but the pandemic’s fallout will linger. Unemployment is seen averaging 11.5% this year.

U.S. futures rose with Asian equities, shaking off Moderna’s return to reality on Wall Street as large players such as BlackRock kept the faith with equities. A weaker yen fuelled gains in Tokyo. Oil rose, with WTI crude moving back above $32. Treasuries were steady. The kiwi rallied after central bank governor Adrian Orr suggested any move to bring interest rates below zero remain some way off. Gold climbed.

The Moderna news that caused an equity sell off yesterday came from Stat, which claimed the company withheld key information about its coronavirus vaccine tests. The health and biotech focused site noted the lack of a press release from the government agency working with Moderna, as well as missing information needed to interpret the data. The company – which still managed to push through its share sale – said additional information will be disclosed at a later date.

GBP

BOE Governor Andrew Bailey will have a fresh batch of price data to discuss when he speaks today. Britain’s inflation rate sank in April to its lowest since August 2016 as the coronavirus pandemic pushed down global oil prices and clothing retailers cut prices, while power tariffs also slid. The consumer price index dropped to an annual rate of 0.8% in April from 1.5% in March, official data showed this morning. Consumer prices fell by 0.2% in April alone. The Bank of England says inflation could fall below 1% in the next few months. BoE Deputy Governor Ben Broadbent said it might go below zero around the end of 2020 although he did not think that would mark the start of a long period of deflation.

EUR

As the gulf between EU-block countries was starting to become insurmountable, Germany and France have created the potential impetus for a breakthrough via their latest stimulus proposal. Merkel agreed that German taxpayers will underwrite as much as 135 billion euros of aid to help the hardest hit countries rebuild their economies after Covid-19. Moreover, she has demonstrated that the EU’s most powerful country is prepared to bankroll and share the financial burden of the other 26 countries. The euro has posted gains ahead of inflation data today. The final April CPI reading for the euro area is expected to show inflation decelerated to just 0.4%, with the core gauge at 0.9%.

USD

The dollar retreated yesterday as comments from Boston Fed’s Rosengren propelled the Nasdaq Composite its highest level in nearly three months as he suggested more fiscal and monetary support is needed due to “extraordinary” economic pain. The minutes of the April 28-29 FOMC meeting will show that policy makers were worried about downside risks and their bias was toward more easing. Remarks in today’s minutes related to the labour market and inflation will be dated, but anything on the risk assessment will be relevant.

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

• 7:00 a.m.: U.K. April CPI, PPI, RPI
• 9:00 a.m.: ECB, Italy March Current Account
• 9:30 a.m.: U.K. March House Price Index
• 9:55 a.m.: Iceland Rate Decision
• 10:00 a.m.: Euro-Area April CPI
• 2:30 p.m.: BOE’s Bailey, Broadbent, Cunliffe speak
• 3:00 p.m.: Euro-Area May Consumer Confidence
• 7:00 p.m.: FOMC Minutes

Corporate Events

• Earnings include Experian, Altice Europe, Lowe’s, Target